RETURN TO RESTRICTED REPIORTS DESK FL l~~ Report No. PA-61a WITHIN FILE COPY, ONE WEEK 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 The report may not be published nor may it be quoted as representing their views.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 BEEF CATTLE PROJECT GUYANA November 9, 1970 Agriculture Projects Department CURRENCY Guyanese dollars (G$) US$1 = G$2.0 G$l - US$0.50 G$1,000,000 = US$500,000 WEIGHTS AND MASURES (British System) 1 pound. (lb) = 0.453 kilogram (2,2h0 pounds 1= long ton (ton) 5 (1.016 metric ton 1 short ton (sh ton) - (2,000 pounds (0.907 metric ton 1 mile (mi) 1.609 kilometers 1 acre (ac) = 0.h05 hectare (640 acres 1 square mile (sq mi) = (2.590 square kilometers (258.99 hectares 1 Imperial gallon (4Mg)= h.7 liters ABBREVIATIONS FM1D - Foot and Mouth DiseasA GDP - Gross DDmestic Prodact IDA - International Development Association LAC - Livestock Advisory Committee LDCo - Livestock Development Company LDF - Livestock Development Fund LPD - Livestock Projects Division UK - United Kingdom GUYANA BEEF CATTLE PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ......................... i I. INTRODUCTION ........ ............................ 1 II. BACKGROUND .......... ............................ 2 A. General ....... .......................... 1 B. The Agricultural Sector .... ............. 3 C. The Beef Cattle Sub-Sector .... .......... 4 III. THE PROJECT ............................ 6 A. General Description ..... ................ 6 B. Project Areas and Land Tenure .... ....... 7 C. Detailed Features ...... ................. 8 D. Organization and Management .... ......... 11 E. Cost Estimates .......................... 12 F. Financing ....... ........................ 14 G. Procurement ...... ....................... 14 H. Disbursement ...... ...................... 15 I. Accounts and Audit ..... ................. 15 J. Lending Operations ..... ................. 16 IV. MARKETS, PRICES AND PRODUCER BENEFITS .... ....... 17 V. ECONOMIC BENEFITS AND JUSTIFICATION .... ......... 19 VI. RECOMMENDATIONS ....... .......................... 19 This report ts based on the findings of an IDA appraisal mission to Guyana In February/March 1970, composed of Messrs P.G. Nelson, R. Milford (IDA), C. Amorin (Consultant Economist) and H. Kelly (Cooperative and Marketing Consultant). ANNEXES 1. Banking and Credit 2. The Guyana Beef Cattle Industry 3. Beef Cattle Marketing 4. Types of Enterprise and Cooperative Group Ranches 5. Coastal and LDCo Coastal Ranches - On-Ranch Investment 6. Coastal Ranches (7,500 ac) - Herd Projection 7. - Sales, Purchases, Expenses and Net Revenue 8. - Financial Projection 9. Rupununi Commercial, Amerindian and LDCo Ranches - On-Ranch InvestTment 10. Rupununi Commercial and Amerindian Ranches (64,000 4c) - Herd Projection 11. - Sales, Purchases, Expenses and Net Revenue 12. - Financial Projection 13. LDCo Coastal Ranch (20,000 ac) - Herd PrqJections 14. LDCo Rupununi Ranch (200,000 ac) - Herd Projection 15. LDCo - Sales, Purchases, Expenses and Net Revenue 16. LDCo - Financial Projection 17. Cost of Technical Services 18. Draft Terms of Reference for Project Director and Deputy Project Directors 19. Project Cost 20. Livestock Development Fund - Cash Flow 21. Estimated Quarterly Disbursement of IDA Credit 22. Rate of Return to the Economy CHART - Project Organization MAP GUYANA BEEF CATTLE PROJECT SUMMARY AND CONCLUSIONS i. This report is on the appraisal of a Project for a first stage in the planned development of Guyana's beef cattle industry. Guyana had a small beef export trade, but the industry has been declining, largely because of poor management and the slaughter of young stock, and Guyana now imports beef. It has been hampered also by absence of long term land title, shortage of long term credit, and lack of experience in modern ranching methods. Local cattle are available for ranch development, if they can be mobilized; and large areas are suitable for ranching. Some of these areas could be used for sugar or rice, the two principal agricultural products; but market prospects for these products are doubtful and large sums would need to be spent on drainage and irrigation to prepare the land for them. Ranch development is the more attractive immediate use. ii. About 70% of Guyana's 260,000 cattle are in the Coastal Savanna. A special and important feature of the Project is the mobilizing of coastal cattle owners and their stock into commercial ranching enterprises on new land under skilled management. At least 10 coastal groups, each comprising 10-50 cattle owners, say they would definitely participate and many others are interested. Without the Project, it is very unlikely that they would come together, and the cattle industry would not progress. A cautious approach is proposed, however, and only an estimated 25 private ranches, 15 coastal and 10 elsewhere, would be included in this first phase. They would be owned by individuals, partnerships, companies or cooperatives. In addition, two ranches owned by the newly formed Livestock Development Co Ltd (LDCo - Government and commercial partners) would be included. iii. The proposed IDA credit of US$2.2 million would be about 50% of the estimated US$4.4 million equivalent project cost. US$1.8 million, or about 82% of the credit, would finance the foreign exchange component (40% of total cost). The balance of US$0.4 million, 18% of the credit, would finance local currency expenditures. Government would contribute about 14%; ranches (and land clearing contractors) and commercial banks about 18% each. This would be the Bank Group's first direct lending for Guyana agriculture though a Bank loan was made to the Credit Corporation (which does some agricultural lending) in 1961 and repaid in 1969, and a US$5 million loan was approved in 1968 for Sea Defense, which essentially protects agricultural production. ii iv. The credit would be made to the Government of Guyana, which would bear the foreign exchange risk. Government would set up a Livestock Development Fund (LDF), Lo be administered by the Bank of Guyana as Trustee, and transfer to it the funds needed to rediscount commercial bank loans and run the project. v. Commercial banks would lend to project ranches for 12 years, including 4 years' grace, at 9 1/2% per year, of which 1/2% would he passed on as service fee to the Bonk of Guyana by way of contribution to the costs of its Livestock Projects Division (LPD). They woulld also lend to clearing contractors (for purchase of imported machinery) for 5 years, including 1 year's grace, at 9%. These rates compare with the 1969 average for all lending in Guyana, mostly short term, of 8 1/2%. Commercial banks would rediscount 75% of their project loans with LDF at 6%; and IDA would reimburse to LDF the amounts so rediscounted (82% of the proposed credit). IDA would also finance the foreign exchange cost of LPD (13% of the credit) and of studies for further development of the livestock industry (5%). vi. Loans to project ranches would be used to finance fencing, water, pasture establishment-, agricultural. machinery, ranch buildings and other investment items, wheld would nost 1-7 'e bought through existing commercial channels. Internatiornal competltive bidding would not be appropriate because the scale cf-i individual investmenit is too small, and the variety too great, for bhilk procurement. vii. The Project would lead to improvenment and upgrading of Guyana's beef cattle industry and ;give it important stimulus, both by example and through the supply of surplus breeding and fattening stock. It would involve the commercial banks for the first time in long term lending for agriculture. It would increase net beef production after about three years, saving imports and possibly leading to exports. viii. Returns on incremental investment would be satisfactory, both to ranching enterprises (13% to 21% depending on location and type) and to the economy of Guyana (21%). Subject to assurances, the Project is suitable for an IDA Credit of US$2.2 million. GUYANA BEEF CATILE PROJECT 1. INTRODUCTION 1.01 The Governmenxt of Guyana seeks IDA finance for a beef cattle project, a first stage in the planned development of the industry. Prospects for beef cattle development were recognized by a Bank economic mission in October/Navew)er 1966. 1/ An FAO livestock reconnaissance mission visited Guyana in June/July 1968. The Project was prepared in July/December 1969 by a Government Livestock Prepaiation Coamission headed by Mr. C. Chisholm, an international consultant, assisted from time to time by Bank staff. This report is based 6tt the findings of an IDA appraisal mission to Guyana in February/Marcb 1970, composed of Messrs P.G. Nelson, R. Milford (IDA), C. Arnorin (Consultant Economist) and H. Kelly (Cooperative and Marketing Consultant). 1.02 Government sought an IDA credit of US$4 million to finance a project estimated to cost US$7 iil1ion. The nroject ut.bmitted included investment in 24 coastal ranches averaging 10,000 ac, 3 Ititermedliate Savanna ranches, and a coastal ranch of 20,('100 ac to bp owned by a newly formed Livestock Development %oQmpany (LDCo), together with initial herds. It was agreed with Government that the equilent of about 15 coastal ranches of 10,000 ac, of which 7,500 ac (average) would be developed initially, would be a more realistic first phase target and that, in general, the Intermediate Savanna is not yet ready for development. It was also igreed that 10 private ranches (average 64,000 ac) and one LDCo ranch of 200,000 ac in the Rupununi Savanna (see Map) be included. The revised project is astimated to cost US$4.4 million. 11. BACr5GROUND A. General Geogaphy 2.01 Guyana is on the northeastern Atlantic cost of South America. Independent since 1966, it became a "Cooperative Repu' .e" withln the 1/ "An Appraisal of the Development Program of Guyana", WH-169, q:-il 21, 1967; PPt 6 and 14. - 2 - British Commonwealth In February 1970. Bounded by Veaezuela, Brazil and Surinam, its 83,000 sq mi. (about the same as UVi) divides Into foiur natural regions: (a) Coastal Savanna: 270 mi of narrow fertile coastal plain, mostly below sea level and seasonally flooded. Soils range from heavy black clay in lower areas to sandy loam in Islands of forest. About 95% of the population lives in this 2,500 sq mi (3% of the land area) producing 80% of Gross Domestic Produtct (GDP). The region has about 70% of the country's cattle; (b) Intermediate Savanna: a sandy clay belt, southwest of the coastal plain; of low fertility and sparsely populated; (c) The Guyana Mountains: a high range that runs NW/SE and extends into Surinam and French Guiana; and (d) Rupununi Savanna: in the southwest interior, with soils of generally low fertility and poor moisture retention. Ranch- ing is the main industry in this region and it has about 25% of the country's cattle. Climate 2.02 Coastal rainfall averages 80 in per year, is heavy from May to mid-August and light from November to February; temperature ranges from 750 to 80 F. Rupuntiunl Savanna rainfa.l averages from 50 to 60 in, almost all between May and Augulst; temperature ranges from 70° to 80° F. Population 2.03 Guyana's English speaking multi-racial population of about 700,000 is growing at a rate of 2.8% per year. Approximately 35% of the 1968 labor force of about 245,000 was employed in agriculture, mostly rice production; 2% in mining; 43% in Government, commerce, industry and services. 20% were officially unemployed. 1/ Annual per capita rural income in 1969 was about US$160. Foreign Trade 2.04 Guyana's trade balance showed an average annual surplus of US$29 million from 1961-64, a small deficit between 1965-67, and small surpluses again in 1968 and 1969. 1/ Economic Bulletin M3, Bank of Guyana, December 1969, and Bank economic mission early 1970. - 3 - 2.05 Of total 1969 exports worth US$130 million, 47% came from agriculture (sugar 35%; rice 7%; others 5%); 46% from mining, mainly bauxite and alumina; and 7% from the rest. Of total 1969 imports costing US$120 million, agricultural products made up approximately 17%; vehicles, cigarettes, beverages and other consumer goods 16%; fuels, lubricants, chemicals and machinery 39%; and semi-manufactures 28%.l/ B. The Agricultural Sector Contribution to the Economy 2.06 Guyana agriculture contributed about 21% of CDP in 1969. While GDP grew at 4% per year from 1955-69, agricultural product grew only 3% per year, with a marked slowing in the rate towards the end, mainly due to rice production problems. Of the total 1969 value of agricultural production, cane sugar contributed 47% and rice 12%. All crops together contributed 70%, livestock 14%, fishing and forestry 8% each. Agricultural Services 2.07 Agricultural Extension is organized into six districts with a staff of 65. Most work on sugar, rice, and general farming; none specif- ically on beef cattle. 2.08 Agricultural education is centered on Government's principal agricultural research station at Mon Repos, near Georgetown. Two-year diploma and certificate courses are offered together with regular 3 to 4 week courses for farmers. Advanced agricultural training is available at the Imperial College of Tropical Agriculture, Trinidad, where Guyana has a student quota. 2.09 Rice and coconut research is conducted at Mon Repos, with some attention to livestock, mainly dairy cattle, pigs and poultry. Beef cattle and pasture research is conducted mainly at Ebini in the Intermediate Savanna. Work here and at St. Ignatius in the Rupununi (now closed), though of long standing, has had little impact because it lacked an economic approach. Production-oriented research has begun at Ebini, and USAID has a program there for cattle cross-breeding and study of the nutritional value of pastures and supplements. 1/ 'Fconomic Bulletin M3, Bank of Guyana, December 1969, and Bank economlc mission early 1970. - 4 - 2.10 The Government Veteritary Service comprises a Senior Officer and six District Officers with supporting technical staff. District Officers have wide powers to control disease and also advise on animal husbandry and nutrition. They are now too few for a full service, though improvement is expected as gradua tes return from overseas. Credit 2.11 There are six commercial banks in Guyana. 1/ Five are branches of international banks and the sixth is the new National Cooperative Bank. About 80% of their loans to the private sector are for one year or less. They provide some long term credit, as do the Guyana Credit Corporation, life insurance companies, and a building (savings and loan) society. Most long term lending is for real estate. About 10% of total credit is devoted to agriculture, though between 1966 and 1969 the amount increased from G$2.5 to 5 million (US$1.3 to 2.5 million) in line with growth in other lending. Between 4% and 10X was for livestock. 2.12 The average interest rate in 1969 was about 8-1/2% per year; in 1968 it was just over 8%. Prime lending rate has been 7-1/2% since July 1966. The rate for agriculture is now generally 8-1/2% to 9-1/2%, with 10% for some personal loans. Banking and credit are discussed more fully in Annex J. 2.13 Agricultural enterprises witL good collateral are well supplied with short term credit, but very little long term credit has been available. Small farmers get limited short term credit from the Guyana Marketing Corpo- ration, and the National Cooperative Bank is intended to help them further. Bank Group Lending for Agriculture 2.14 The Bank Group has made two loans related to Guyana agriculture. Loan 285 BG was made to the Credit Corporation in 1961 and repaid in 1969. US$5 million loan 559 GUA for Sea Defense, which essentially protects agricultural production, was approved in September 1968 (US$161,000 disbursed by August 31, 1970). C. The Beef Cattle Sub-Sector 2.15 The national beef herd of about 260,000 is almost entirely Creole and Creole-Zebu cross. About 180,000 are in the coastal strip and 60,000 in the Rupununi. The cattle population had risen between 1960 and 1/ Barclays (DCO), Royal Bank of Canada, Bank of Baroda, Chase Manhattan Bank, Bank of Nova Scotia; Guyana National Cooperative Bank. - 5 - 1965 to perhaps more than 300,000, though figures are not very reliable. The number is now dwindling because of poor management, reduction of grazing areas due to agricultural development, and premature slaughter of young stock and breeding cattle. Cattle generally run freely to graze where they can - often, in the coastal areas, on public domain or communal pastures (which are badly mismanaged). Output is consequently low and losses high. About 45,000 coastal families are in rice farming and half of them own cattle. Less than 1,000 owners have more than 25 cattle; about 200 have more than 50; very few more than 1,000. 2.16 There is little experience of modern cattle ranching. Average annual offtake is 10%; by comparison, an average of 15% is quite common in South America. Average carcass weight is low and has been declining; it was 320 lb in 1965 and 280 lb in 1969. On the few well managed ranches, steers reach a carcass weight of 400-420 lb in 3 to 4 years in the Coastal Savanna, and in 5 to 7 years in the Rupununi. Animal Health 2.17 Calving percentages are low (about 40%) and calf mortalities sometimes as high as 35%. General causes are poor nutrition and parasitic infection. In the Coastal Savanna, a common cause is drowning, for most coastal pastures are low-lying, flood for 3 to 8 months every year, and rarely have high ground on which cows can calve. Adult cattle mortality is also high (6 to 7%), due partly to mineral deficiencies; stealing may be a contributory factor on the coast. 2.18 Foot and mouth disease (FMD) occurs spasmodically in the Rupununi but not on the coast, though it is a potential threat there. Paralytic rabies occurs countrywide. These and other diseases are controlled by the veterinary service through regular vaccination programs. Problem of Increasing Beef Production from Coastal Area 2.19 The key to development of the Guyana beef industry is increased production from the coastal area. Most owners there realize their cattle would do better if properly handled in herds under controlled management, instead of wandering at will; but they are not very willing to give up individual ownership to form such herds. It would be technically feasible to increase production from small units, but it would be difficult, take a long time and be costly in relation to achievable benefit. Further details of the industry are in Annex 2. !arkets 2. 20 Annual per capita beef consumption at 16 lb is one of the lowest in South America. 1/ To reverse the declining production trend, 'I Bolivia 18, Argentina 190 lb; also cf Jamaica 21, USA 110, UK S0 lb. -^ 6 - without importing large numbers of breeding cattle (which are hard to find, and would be costly), immature stock and breeding cows must be retained. This would initially reduce beef production still further, requiring increased imports to maintain consumption at present levels. 2.21 Georgetown and New Amsterdam are the two principal markets (see Map) and cattle move there by boat, truck, train or on foot. Georgetown has one major municipal abattoir but this has no facilities for recovery of by-products and its cold storage is not used. Private cold stores in Georgetown, however, have sufficient capacity for immediate needs. Lethem, in the Rupununi, has a modern abattoir with spare capacity for near-term expansion. 2.22 Coastal cattle are generally sold through dealers, while those from the Rupununi are sold almrost entirely through Meat Marketing Ltd (a company organized by 22 producers). The average retail price of beef in 1969 was G$0.67 (US$0.38) per lb. Average farmgate price is about 75% of retail. Guyana has exported small quantities of beef, but tight supply and uncertainties about FMD have now almost eliminated exports. During the last five years, beef imports varied between about 10% and 20% of consumption. Further details are in Annex 3. ItI. THE PROJECT A. General Description 3.01 The Project is the development of selected beef cattle ranches in Guyana. It includes a 5-year program of long term loans for ranch development (12 years) and land clearing equipment (5 years) through commercial banks. These would finance the equivalent of 15 coastal ranches, (including one in the Intermediate Savanna and the cattle operations of some small coastal mixed farms), 10 commercial and Amerindian tribal ranches in the Rupununi, 1 LDCo coastal ranch (20,000 ac), and 1 LDCo Rupununi ranch (200,000 ac). Phasing of the entry of ranches into the Project, each borrowing by three annual instalments, would be approximately: Year 1 2 3 Total (Number of ranch units) Coastal 5 7 3 15 Rupununi 4 4 2 10 Livestock Development Co. 2 - - 2 TOTAL 11 11 5 27 - 7 - 3.02 Technical services would be provided through a Livestock Projects Division (LPD) which, together with a Livestock Development Fund (LDF), formed by Government for rediscount of loans under the program, would be administered by the Bank of Guyana as Trustee for Government (see Section D). The Project would also provide training of ranch managers and studies for further development of the livestock industry. B. Project Areas and Land Tenure Coastal Project Area 3.03 Fourteen of the fifteen coastal ranches, would be in the low lying flood plain within 30 miles of New Amsterdam (see Map). The fifteenth would be a partially developed private ranch in the Intermediate Savanna. Native pastures are generally good, though improvable, an(d high rainfall would make for relatively easy pasture establishment on cleared forest land. Commercial ranching is being successfully carried out at the Kabawer ranch (Bookers Sugar Estates Ltd). Unimproved pasture carries about 1 beast to 4 ac: minimal improvement raises this to 1 beast to 2 ac. Rupununi Project Area 3.04 The ten Rupununi ranches would have Lethem as their natural outlet (see Map). Open range carries only 1 beast to 64 ac but careful management can improve this to 1 beast to 30 ac, or better. Extensive cattle ranching can be successful there, as the Rupununi Development Co Ltd and numbers of smaller private ranches demonstrate. Rainfall is good and so are prospects for pasture improvement. Land Tenure 3.05 Few project ranches now have acceptable freehold or leasehold title. On the coast most of them would be newly established on State land with 25 year renewable, transferable leases. Large tracts of suitable land are available. Most Rupununi ranchers have long term title to their homesteads, but only annual grazing rights for their pasture. Whi]e these rights have been regularly renewed, they do not encourage long term investment and cannot be used as security for long term loans. 3.06 Government has promised prompt issue of leases to participating ranches on terms acceptable as security for commercial banks. To facilitate issue of leases within 60 days of application Government is amending its legislation to enable aerial survey to be used for defining lease areas. During negotiations, appropriate assurances were obtained from Government, and it will be a condition of effectiveness that at least 30,000 ac of coastal land had been surveyed for immediate lease as project ranches. - 8 - 3.07 Amerindian (indigenous) villages have non-transferable tribal land, unsuitable as security for loans from commercial banks. Government has guaranteed repayment of principal and interest on commercial bank loans to participating Amerindian ranches (of which about four are expected in the Project) in a form acceptable to the commercial banks and it is a condition of effectiveness that the necessary legislation be passed. C. Detailed Features Ranch Ownership and Type 3.08 Participating ranches would be owned by individuals, partnerships, companies or cooperatives. The form of ownership would depend on individual preference and circumstance but, unless a ranch was owned by only one person, cattle would be owned by the ranching enterprise and not by its members separately. Coastal and Amerindian ranches are expected to be owned by newly formed cooperatives whose members would have contributed cattle in exchange for share. The few coastal mixed farmers included, whose cattle operations would be developed under the Project, have mortgageable land and own up to 500 cattle each. They are equivalent in total to about one coastal ranch. All ranches (except Amerindian - see para 3.07) would have long term renewable leases or otlher acceptable land title. The average ranch and herd sizes would be: Type of Ranch Size Acres to be Initial Target (Acres) Developed Herd herd Coastal 10,000 7,500 2,750 5,000 Rupununi 64,000 64,000 1,200 2,250 Mobilization of Coastal Cattle Owners 3.09 A special and important feature of the Project is the grouping of small coastal cattle owners into commercial ranching enterprises. The Preparation Commission set up for this Project, together with Government staff, persuaded a number of small coastal cattle owners that it would be worth their while to combine, transfer most of their cattle to enterprises they would own collectively, on new land that Government would make available, and employ ranch managers under the central supervision of a Project Director. Those who rely on cattle for occasional cash income would keep a few for this purpose. They would also keep or dispose of elsewhere, those cattle not accepted into the Project. Enough cattle owners have expressed interest to form at least ten enterprises, and a few have already been formed as ranching cooperatives; others await the outcome of Government's application to IDA and the granting of leases. All would need the stimulus the Project can provide. Government's offer of long term leases on new land at reasonable rental is a powerful incentive and 15 coastal ranches, of various types, is a reasonable initial objective. Cooperative Ranching Enterprises 3.10 For primary agricultural cooperatives of the usual type, in Guyana as elsewhere, business transactions are simple and conducted on a relatively small scale. Such cooperatives can be managed by the elected officers and committee. For ranching enterprises, it is essential that the ranch manager be clearly responsible for the technical and financial operation of the ranch, without interference from elected officers and committee. For this, and other reasons the traditional form of cooperative rules is not entirely suitable for cooperative enterprises. A form of rules has been devised that would, with relatively minor amendments, be suitable, and acceptable to IDA. Certain exemptions would be required under the Guyana Cooperative Societies law and can be given by the Cabinet of Ministers. During negotiations, assurances were obtained that rules, acceptable to IDA, and in conformity with the Cooperative Societies Ordinance would be adopted and would not be changed so as to adversely affect commercial operation of project ranches. It would be a condition of effectiveness that any neces- sary exemptions be obtained. 3.11 Cattle owners forming ranching enterprises will need help with legal and administrative details. Only limited assistance can be expected from the overworked Cooperative Department and an early task of LPD (see paras 3.02, 3.22 and 3.23) would be to organize ranch formation. The LPD Deputy Director (Administrative) would be primarily responsible for this task. Details of the problems of cooperative group ranch organization and suggestions for their solution are outlined in Annex 4. LDCo Ranches 3.12 LDCo, to be formed specially by Government and private investors, would be an important part of the Project. LDCo property would comprise: (a) a 20,000 ac ranch based on the Government owned Mara Rice Scheme (now dormant), which has housing, workshops and access roads. It would include an initial commercial herd of about 3,000 local cattle and a small stud herd of specially imported cattle to provide high grade breeding stock to the industry. Commercial production of pasture legume and grass seed would also be included; and (b) a 200,000 ac ranch based on the Government owned St. Ignatius station in the Rupununi with an initial herd of about 3,000. - 10 - 3.13 These ranches would be run by a Ceneral Manager, internationally recruited by LDCo and satisfactory to IDA; he would be available part time for training ranch managers and 25% of his salary would be paid by LPD. At the time of appraisal, LDCo had not been formed. Covernment has since been discussing details with prospective shareholders, on the basis of Government holding 51% of the share capital, and has registered LDCo under Guyanese law. It would be a condition of effectiveness that LDCo had been established and shall have adopted articles of Agreement mutually satisfac- tory to Government and IDA and Government shall h-ave secured confirmed agreement from other interested parties to subscribe to its equity. During negotiations, assurances were obtained from Government that LDCo general manager, satisfactory to IDA, would be appointed. Ranch Development and Management 3.14 Four models illustrate the Project: one for ranches in the Coastal Savanna; one for ranches in the Rupununi; and one for each of the two LDCo ranches. Financial projections show the amount of new investment and how it would be financed-80% by long term loans from commercial banks and 20% by ranch contributions (in cash and kind). Coastal ranches would have surplus saleable steers, or equivalent cash, to help provide working capital and ranch contributions to investment. Rupununi ranches already have some improvemenits but would need funds for ranch contributions to new investment (para 3.15) and additional working capital. LDCo would have equity financinlg for ranch contribution to new investment and initial working capital. All ranches would need short term finance during the initial herd build-up period and, during negotiations, assurances were obtained from the Bank of Guyana that it would require participating banks to provide this finance to eligible ranches on the basis of development plans approved under the Project. Details of Investment, Herd Projections and Financial Projections are in Annexes 5 through 16. 3.15 Ranch output would markedly increase through management techniques applied under the guidance of the Project Director and through investment in fencing, stock handling facilities, dry season water supplies, land clearing and pasture establishment, and other improvements, including tractors and implements, 4-wheel drive vehicles, outboard canoes (water access is important in the Coastal Savanna) and adequate housing for the managers and labor. 3.16 Ranch managers would ensure disease control, particularly in the Rupununi where cattle would be vaccinated regularly against FMD. During negotiations, assurances were obtained from Government that: veteri- nary services would be provided for project ranches, comprising at least one veterinary officer for coastal ranches and one veterinary officer for the Rupununi, both of whom would be stationed permanently in their respec- tive areas; adequate measures to protect cattle from FMD under the Project in the Rupununi would be taken including the use of appropriate vaccines fully in accordance with the Pan American FMD Prevention Program; and sup- plies of vaccine for project ranches would be readily available. - 11 - Ranch Manager Training 3.17 Though some ranches would have managers or owner/managers who could operate successfully under the guidance of the Project Director, shortage of trained managers is a major constraint. About 24 potential managers are being trained at Tuskegee, Alabama, but most would need further experience in Guyana before assuming full responsibility. LDCo would set up a training scheme under its General Manager but, until this is ready, the Kabawer ranch (para 3.03) would provide facilities. The Project Director would arrange this training. It would be a condition of every sub-loan that a manager, approved by the Project Director, be employed. Land Clearing 3.18 An important element is land clearing on coastal ranches (about 10% of their area). Several contractors in Guyana have experience in clean clearing with heavy tractor and blade but few know how to clear by chaining i.e. pulling down trees with a heavy chain drawn between two tractors. To encourage interest in this type of clearing, the Project includes 5-year loans for two heavy duty (250 hp plus) tractors and a heavy (10 to 16 ton) chain. Funds are also included for visits by LPD and contractor staff to similar areas, e.g. Venezuela, where chaining is practiced. Project costs have been based on the higher known cost of blading (US$15 per ac). The Project Executive Committee (para 3.21) would select a contractor after inviting proposals. During negotiations, assurances were obtained from Government that no loan for clearing equipment would be made unless the Committee was satisfied as to the prospective borrower's competence in chaining. Developmental Studies 3.19 The Project includes production-oriented technical, marketing, and processing studies for the future development of the industry, and the preparation of further livestock projects for possible Bank group lending. Technical studies, for which about US$80,000 would be provided, would include pasture establishment with tropical legumes,, animal production trials and use of urea/molasses supplements. They would be carried out in the Project Areas, Intermediate Savanna and the Northwest by staff of the Ministry of Agriculture and, if necessary, by consultants. The other studies would be carried out by consultants (8 to 12 man-months) and are estimated to cost about US$40,000. Before each study was carried out, the Project Director, who would be responsible for study supervision, would be consulted and Government would submit for IDA approval, detailed terms of reference and the names of proposed consultants. During negotiations appropriate assurances to this effect were obtained. D. Organization and Ianage!yent 3.20 The Project would be organized throtugl its trtiste42, the Bank of Guyana (see Chart), the most suitable agency through which to channel funds - 12 - to the commercial banks. A Livestock Advisory Commnittee, set up by Minis- terial Decree, composed of the Governor of the Bank of Guyana (Chairman) and one representative each from the Ministries of Agriculture and of Economic Development, the participating banks and one selected by the cattle produ- cers, would be responsible for general policy. The Project Director would be Executive Secretary. It would be a condition of effectiveness that such a committee be set up. 3.21 A small Project Executive Committee, set up by the Bank of Guyana Board, would make LPD's recommendations to commercial banks. It would com- prise one representative each from the Ministry of Agriculture (Chairman), Bank of Guayana, and the Ministry of Economic Development, and the Project Director. 3.22 LPU) would be headed by the Project Director, a specialist in animal husbandry or related activity, responsible to the Governor of the Bank of Guyana for implementation of the project. He would be assisted by a Deputy Director (Technical), a Deputy Director (Administrative), approximately five Livestock Teclhnicians, and supporting staff. It would be a condition of effectiveness that LDF and LPD had been established and that an internationally recruited Project Director, satisfactory to IDA, had been appointed on terms and conditions acceptable to IDA and, during negotiations, assurances were obtained from the Bank of Guyana that Deputy Directors (Technical) and (Administrative), accepta- ble to IDA, would be appointed. (See Annexes 17 and 18). 3.23 LPD would help ranches prepare loan applications, including detailed ranch development plans, and would make a technical, economic and financial appraisal of each ranch on behalf of the commercial bank through which an application had been submitted. Conmercial banks would assess creditworthiness. LPD staff would supervise progress of ranch plans and assist and advise ranch managers. The Project Director would arrange for local and overseas training of technicians. During negotiations, assurances were obtained from thle Bank of (;uyana that sub-loans would be made on the basis of ranch plans approved by LPD and that loan agreements would contain suitable performance covenants. E. Cost Estimates 3.24 Total project cost is estimated at G$8.9 million (US$4.4 million), including contingencies, of which about US$1.8 million would be the foreign exchange component. Estimates are based on enquiries in the field during appraisal, and include approximately 10% for contingencies to cover possible omissions and increases in cost. Details are in Annex 19. The Livestock Development Fund cash flow is in Annex 21. Summarized cost estimates are: - 13 - Total Foreign Q~( ytusan _j US$ (thousands) Project- Exchange Category Local oreign Total Local oreign Total Cost Component On-ranch Investment Fencing 530 440 970 270 220 490 45 Pasture 390 380 770 190 190 380 50 Machinery 130 51Q 640 60 260 320 80 Farm Buildings 480 230 710 240 120 360 33 Other 260 210 470 130 100 230 45 Sub-total, 1,790 1,770 3,560 890 890 1,780 50 Livestock 1,190 710 1,900 600 350 950 37 Sub-total 2,980 2,480) 5,460 1,490 1,240 2,730 59 45 LDCo Transferred Assets Buildings and installations 240 - 240 120 - 120 Local livestock 1,010 - 1,010 510 - 510 Sub-total 1,250 - 1, 250 6f30 - 630 14 Sub-total 4,230 2,480 6,710 2,120 1,240 3,360 73 Working Capital 490 50 540 240 30 270 9 10 Clearing Equipment 70 330 400 40 160 200 4 83 Technical Services 410 570 98( 200 290 490 11 58 Develoymental Studies 40 200 240 20 100 120 3 83 Total 5,240 3,630 8,870 2,620 1,820 4,440 100 41 Percent 59 41 1o0 - 14 - P. Finan 3.25 Proposed financing is based on IDA covering 60% of new on-ranch investment and clearing equipment costs,, with participants (including Govern- ment as LDCo shareholder) and commerical banks providing 20% each. IDA would also cover the foreign exchange costs of LPD and developmental studies. IDA would thus finance the total foreign exchange cost of US$1.8 million and US$0.4 million equivalent of local currency cost. Participants would contri- bute US$0.8 million in cash or kind according to their means, and commercial banks US$0.8 million. Goverlnment contribution includes assets and some cash for LDCo and the local cost of LPD and developmental studies, a total of US$0.6 million. Ranches would also contribute by retaining stock, not in- cluded in project cost, valued at about US$1 million during the first three years of herd development. 3.26 On the above basis, estimated project financing (including contingencies) would be: US$ (thousands) Category Private/I Banks Government IDA Total On-ranch Investment 460 550 80 1,640 2,730 (Percent) (17) (20) (3) (60) (100) Transferred Assets (LDCo) 310 - 320 - 630 Sub-total 770 550 400 1,640 3,360 Working Capital - 240/2 30/3 - 270 Clearing Equipment 40 40 - 120 200 Technical Services - - 200 290 490 Developmental Studies - - 20 100 120 Total 810 830 650 2,150 4,440 Rounded 800 800 600 2,200 4,400 (Percent) (18) (18) (14) (50) (100) L1 Ranches, LDCo commercial investors and clearing contractors. /2 Or private. 7T Proportion of LDCo working capital attributable to Government. G. Procurement 3.27 International competitive bidding would not be appropriate because the scale of individual investment is too small, and the variety of items too great, for bulk procurement. There is no restriction on imports and, except on vehicles (25%), duties are reasonable (6 to 11%, - 15 - subject to Commonwealth preference of 5%). Apart from breeding cattle, semen and pasture seed, items needed for the Project are readily available through existing commercial channels, including many international suppliers. Competition is keen and servicing adequate. Breeding cattle and semen would be purchased by LDCo from a country free of FMD; but the Project Director would be consulted and no imports under this category made without his prior approval. Pasture seed is subject to rigorous Government control. During negotiations, appropriate assurances as to procurement were obtained from Government and from the Bank of Guyana. H1. Disbursement 3.28 IDA would reimburse to Government the amount of commercial bank loans discounted by the Bank of Guyana from LDF (up to a maximum of 75% of the total of such loans) and 100% of the foreign exchange cost of LPD and developmental studies, against certified statements of disbursement. 3.29 IDA credit disbursement, allowing slippage (Annex 21), would be approximately: IJS$ (thousands) Category 1970/71 1971/72 1972/73 1973/74 1974/75 Total On-ranch Investment 120 380 580 390 170 1,640 Clearing Equipment - 120 - - - 120 Technical Services 30 90 60 60 50 290 Development Studies 20 40 40 - - 100 170 630 680 450 220 2,150 3.30 It is intended that amounts not used for the credit be canceled. I. Accounts and Audit 3.31 Commercial banks would keep separate accounts of project lending and submit details to LPD. LPD would also keep accounts showing the total of approved ranch plans (on-ranch investment and working capital), sub-loans made, amounts discounted by LDF, and LPD expenses. The above accounts would be audited by the independent auditors of the Bank of Guyana (Pannel, Fitzpatrick & Co), who are acceptable to IDA. The Ministry of Agriculture would keep separate accounts of expenditure on developmental studies and these would be audited in a manner satisfactory to IDA. Appropriate assurances were obtained during negotiations. Assurances were also obtained that sum- maries of these accounts would be submitted quarterly to IDA, and that copies of audited project accounts would be submitted to IDA not more than three months from the end of the Bank of Guyana's and Government's fiscal years, - 16 - respectively, and that copies of the Bank of Guyana's audited annual accounts would be sent to IDA, when issued. J. Lending Operations 3.32 Each loan application would be made to a commercial bank and, if the applicant's credit rating were satisfactory, would be passed to LPD for appraisal. After appraisal it would go to the Project Executive Committee for final recommendation and return to the commercial bank that submitted it. A favorable recommendation would not be made without the Project Director's approval which would also be needed before changes to the development plan could be made. Criteria for selection, in addition to creditworthiness, would be: ownership of an acceptable beef herd; manage- ment by a ranch manager approved by the Project Director; and tenure, on a 25 year renewable lease (or better), of an appropriate ranching area, includ- ing in the case of coastal ranches, at least 10% not susceptible to annual flooding. During negotiations, assurances were obtained that these proce- dures would be followed. Assurances were also obtained that LPD would sub- mit details to IDA before submitting for approval, any sub-loan (or series of sub-loans to one applicant) of more than US$150,000 equivalent and in the case of sub-loans to LDCo the LPD would satisfy IDA that LDCo has sufficient funds and is adequately staffed to carry out the Development Plan. 3.33 To enable cattle to be accepted as security for long term lending, Government has drafted a Livestock Loans Act, similar to the Guyana Agricultural Loans Act of 1966, which would enable lenders to take a fixed and floating charge over a borrower's assets and make it a criminal offence for a borrower to sell pledged property except as provided in a loan agreement between lender and borrower. During negotiations, assurances were obtained from Government that the Livestock Loans Act was acceptable to participating banks as the legal basis for long term lending, and it would be a condition of effectiveness that such an Act had been passed. 3.34 The commercial banks would make sub-loans for 12 years, with 4 years' grace, at 9 1/2% per year, including 1/2% service fee which would be credited to LDF. 75% of each loan would be rediscounted with LDF at 6%, (except Government guaranteed loans to Amerindian ranches, which would be rediscounted at 8%) giving commercial banks, which would carry the total loan risk, a reasonable margin of 3%. The rediscount rate would be keyed to prime rate (changing in the proportion of one point to every three points change in the prime rate) so as to maintain the margin on the banks' own 25% contributions. Commercial banks would also make short term loans for working capital at the current rate. During negotiations, appropriate assurances were obtained from Government and the Bank of Guyana including an assurance that a form of agreement acceptable to IDA, would be entered into between the Bank of Guyana and participating banks. - 17 - 3.35 The IDA credit would be made to Government which would bear the foreign exchange risk. IDA funds for rediscounting cormercial bank loans, and for operation of LPD, would be credited to LDF by Government which would need to provide initial resources (interest free) to LDF. Surpluses would be freely available to Government for any public investment purpose including further livestock development, as interest payments are made and sub-loans repaid over 14 years (Annex 20). During negotiations, conditions of the Trusteeship Agreement between Government and the Bank of Guyana were finalized and specific assurances were obtained from Government that it would provide the amounts needed for initial operation of LDF. It would be a condition of effectiveness that the Trusteeship agreement be signed. IV. MARKETS, PRICES AND PRODUCER BENEFITS Markets 4.01 In spite of a rising population, Guyana beef demand has remained fairly static over the last few years, due largely to tight supply (Annex 3). Existing slaughter facilities are satisfactory for the Project but improve- ments would be needed to make them suitable for later meat exports. Sales would be made through Meat Marketing Ltd or other channel acceptable to the banks. During negotiations, assurances were obtained that no price control would be imposed on beef unless mutually satisfactory to Government and IDA. Prices 4.02 Between 1965 and early 1970 beef retail prices rose by 25% from G$0.55 to 0.69/lb. Producer prices generally rose in parallel, though with a tendency to harden during late 1969/early 1970 because of the temporary ban on movement of Rupununi cattle due to FMD. W4hile prices might continue to rise somewhat, a steady coastal producer price of G$0.50/lb (Rupununi G$0.43), the 1969 average, has been assumed for project estimates, compared with G$0.55/56 during early 1970 and an average of G$0.47 over the last four years. Producer Benefits 4.03 It is difficult to quantify present benefits to coastal beef producers, who are numerous and whose practices vary. The Project would, however, increase net income before tax, as the following table shows: - 18 - Before At Full Financial Rate Sensitivity to 10% Development Development of Return Price Variation (Guyanese Dollars) /1 (%) (%) /Z Coastal 24,800 158,000 20 17-23 Rupununi 6,900 61,000 21 18-25 Livestock Development Co. - 730,000 13 11-14 /1 Before debt service. /2 Result of 10% decrease/increase from assumed output prices. 4.04 Rupununi returns would be lower because costs are higher and farmgate prices lower than on the coast; but no additional management costs would be incurred on owner-managed Rupununi ranches. In addition to the above increases in net income, herd values would increase substantially: coastal from G$370,000 to 820,000; Rupununi G$138,000 to 280,000; and LDCo G$0.8 to 3.8 million. Revenue Generation 4.05 Ranches would pay interest and repay loans from revenue over the first 12 years and their owners would be liable to income tax on total ranch and other income. Capital expenditure is deductible for tax pur- poses, and losses can be carried forward. At the forecast rate of invest- ment, tax would not be payable until about the 7th or 8th year when, at present rates and under present tax law, it would be 45% if profits are retained, 60% if distributed. The following is an illustration: Coastal Ranch Before /1 After Development Development- Year 6 Year 13 (Guyanese dollars) Total Net Income/2 25,000 65,000 168,000 Debt Service/3 - 28,000 - Net Income after Debt Service 25,000 37,000 168,000 Taxable Income 23,000 (90,000)/3 156,000 Income Tax Liability 10,000 - 70,000/4 Net Income after Taxes 13,000 37,000 86,000 Total Herd Value/5 370,000 640,000 820,000 /1 Reflects low extraction rate and marketing of immature stock. /2 See Annex 8 /3 Income tax loss brought forward. /4 45% on undistributed profits. /5 See para 4.04. - 19 - 4.06 Beef cattle owners have not reinvested extensively in cattle raising, mainly because of lack of secure land title (para 3.05). Proj- ect ranches would have this security and would be encouraged to make further improvements. They would also reinvest through their increased herds, retaining stock that would otherwise have been sold (para 3.25). 4.07 The tax position of individual ranches would vary according to size, profitability and other income. At present, cooperatives are not taxed as corporations but members are liable for tax on dividends. Government tax revenue would depend on these variables, future tax poli- cies, and the efficiency of tax collection (not high in rural Guyana). Based on the above table and on similar calculations for Rupununi and LDCo ranches, maximum incremental tax revenue from the project would be of the order of G$2 million (US$1 million) per year at full development. V. ECONOMIC BENEFITS AND JUSTIFICATION 5.01 The Project would increase Guyana's beef supply from about the 4th year. At full development in the 11th year, incremental annual production would reach 2,800 sh tons beef, valued at about G$2.8 million (US$1.4 million). This would be about 45% of present annual supply. At full production, an- nual foreign exchange earnings or savings would be about US$1.0 million annually. 5.02 The estimated rate of return to the economy of Guyana, dis- counted over the assumed 20 year life of project ranches, would be 20%. A shadow wage rate has been used (G$3 instead of G$4) because of the high rate of unemployment, and the value of Rupununi production has been re- duced by the amount of the air freight subsidy. Details of these and other adjustments are in Annex 22. 5.03 In addition to its direct benefits, the Project would be impor- tant for the stimulus it would give to the beef cattle industry, both by example and by the supply of surplus improved young breeding and fattening stock. It would involve the commercial banks for the first time in long term lending for agriculture and would lead to import savings and ultimat- ely to export revenues. VI. RECOMMENDATIONS 1/ 6.01 In addition to standard assurances agreement was reached with Government during negotiations that: 11 References in parenthesis to previous paragraph numbers. - 20 - (a) 25 year (or better) renewable, transferable leases, on terms acceptable as s.!curity to the commercial banks, would be issued promptly to participating ranches (within 60 days of application) (3.06); (b) rules for cooperative ranches, acceptable to IDA, and in conformity with the Cooperative Societies Ordinance, would be adopted and would not be changed so as to adversely affect commercial operation of project ranches (3.10); (c) LDCo general manager satisfactory to IDA would be appointed (3.13); (d) essential veterinary services would be provided so as to ensure disease control, particularly FMD, on project ranches (3.16); (e) no price control would be imposed on beef unless mutually satisfactory to Government and IDA (4.01). 6.02 During negotations, assurances were obtained from the Bank of .'uyana as Trustee administering LDF that: (a) it would require participating banks to provide short term finance to eligible ranches on the basis of development plans approved under the Project (3.14); (b) sub-loans would be made on the basis of ranch plans approved by LPD and loan agreements would contain suitable performance covenants (3.23); (c) it would rediscount up to 75% of sub-loans by participating banks at 6% (guaranteed Amerindian sub-loans at 8%), ad- justed t.o maintain the margin on the banks' own contribu- tions (3.34); (d) a form of agreement, acceptable to IDA, would be entered into between the Bank of Guayana and participating banks (3.34). 6.03 In addition to the customary conditions the following have been agreed upon as conditions of effectiveness of the proposed credit: (a) at least 30,000 acres of coastal lands had been surveyed for immediate lease as project ranches (3.06); (b) The Livestock Loans Act and legislation to permit Governmen. guarantee of loans for Amerindian ranches had been passed; (3.07 and 3.33); - 21 - (c) necessary exemptions from the Cooperative Societies Law (for cooperative ranch rules) had been obtained (3.10); (d) LDCo had been established and adopted Articles of Agreement satisfactory to IDA and Government had secured confirmed agreement from interested parties to subscribe to its equity (3.13); (e) a Livestock Advisory Committee had been set up by Ministerial Decree (3.20); (f) LDF and LPD had been established and an internationally recruited Project Director, satisfactory to IDA, had been appointed on terms and conditions acceptable to IDA (3.22); (g) a Trusteeship Agreement, satisfactory to IDA, between the Government and the Bank of Guyana had been signed (3.35). 6.04 The Project is suitable for an IDA Credit of US$2.2 million. ANNEX 1 Page 1 GUYANA BEEF CATTLE PROJECT Banking and Credit A. General The Banking System 1. The banking system in Guyana, on the traditional British pattern, comprises: a) the central bank, the Bank of Guyana, whose essential purpose is "to foster monetary stability and promote credit and exchange conditions conducive to the growth of the econony" (Bank of Guyana Ordinance 1965), and b) the commercial banks, five of which are branches of international banks with head offices overseas. A sixth bank, the Guyana National Co-operative Bank, was established on February 2h, 1970, by Government as part of its program to foster cooperativism in the "Cooperative Republic of Guyana". The Credit System 2. The commercial banks are the most important institutional source of short term credit. At the end of December 1969, about 8% of their lending was for agriculture, excluding processing. Long term credit is provided generally by the Guyana Credit Corporation, the life insurance companies, and the New Building Society (savings and loan society), and about 30% of commercial bank lending is for more than a year (see para 15). Most of this longer term lending is for real estate investment, though the Guyana Development Corporation also invests loan and equity capital in industry and commerce. The Guyana Marketing Corporation provides credit in kind to small farmers, eg livestock feed for pig producers and fertilizers for producers of some crops. B. The Banks 3. The Bank of Guyana is the sole bank of currency issue; holds gold and foreign currency reserves; is banker for Government and other banks; and is primarily responsible for controlling credit and foreign exchange activities. It undertakes ancillary functions, such as the management of the internal public debt, and provides statis- ical and other services for the banks and Government. Exchange control is presently limited to non-sterling transactions. Annex 1 -2- Page 2 4. The 4-man Board of Directors, under the chairmanship of its Governor, is the policy making organ of the Bank of Guyana. The other members are the Banking Manager (Deputy Governor) and two representatives nominated by the Minister of Finance. The Secretary to the Treasury attends Board meetings, but without a vote. 5. The commercial banks must maintain minimum balances with the central bank. These are 6% against demand liabilities and 4% against time liabilities, the level at which they were fixed when introduced in March 1966. 6. The banks must also maintain a prescribed level of liquid assets fixed, since December 1966, at 20% of demand liabilities and 15% of time liabilities (the central bank may change this level between 15% and 30% for demand liabilities, 10% and 20% for time liabilities). These liquid assets comprise mainly deposits with the central bank, cash balances and balances with banks abroad, foreign treasury bills, commercial bills eligible for rediscount with the central bank and local treasury bills. 7. Advances from the Bank of Guyana to Government are agreed from time to time but, under the Bank of Guyana Ordinance, are subject to a ceiling of 15% of the average annual ordinary revenues collected and accounted for by the Government during its last three preceding financial years, and to the constraint that such direct advances shall not, during any financial year, be outstanding for a total of more than 350 days. 8. Table 1 shows assets and liabilities of the Bank of Guyana at December 31, 1969. The Commercial Banks 9. The Private Banks. The 5 private commercial banks operate main branches in Georgetown' the capital, and subsidiary branches in other parts of the country: Bank Branches including main branch Barclays (DCO) 16 The Bank of Baroda 2 The Royal Bank of Canada 11* Chase Manhattan 1 The Bank of Nova Scotia 1 *Including a mobile branch. The oldest established in Guyana (more than 50 years) are Barclays (DCO) and The Royal Bank of Canada. The newest (1968) is the Bank of Nova Scotia. Annex 1 _ 3 _ Page 3- 10. The Guyana National Cooperative Bank. The Guyana National Coop- erative Bank has no operational experience, as yet. Its authorized share capital is G$10 million (US$5 million). Eligible shareholders are Government, registered cooperative societies, registered trade unions, registered friendly societies, public corporations established under the Public Corporations Ordinance, 1962, and such other corporate bodies as may be recommended by the Minister of Finance. 11. The assets and liabilities of the branches of the private commercial banks operating in Guyana are not published separately, though they are reported confidentially to the Bank of Guyana. The total rose from G$115 million (US$58 million) at the end of 1968 to G$130 million (US$65 million) at end 1969, an increase of 13%. The Commercial Banks as a Credit Source 12. The return to stability in the country since 1964 has been reflected in the increasing demand for money and this in turn has resulted in pressure on the commercial banking system for loans. 13, An analysis of lending between 1965 and 1969 is in Table 2. The total doubled during the period. The proportion of this total lent for agriculture remained at about 8%; and of the amount lent for agriculture, between 4% and 10% was for livestock. In 1969, loans to commerce and services were about 40% of the total, to manu- facturing about 30% and for personal consumption (including direct loans for housing) about 20%. Commercial Bank Interest Rates 14. Since July 26, 1966, when the Guyana bank rate rose to 6W6 from 6%, the prime lending rate (usually 1% above bank rate) has remained at 73;;%. In general, rates of interest range from the prime rate of 7V- for traditiozmU1y good business customers, to over 10% for some personal loans. The average annual rate of interest for all loans and advances was about 81g in 1969, compared with a little over 8% in 1968. Loan Term 15. Most loans by the commercial banks are for short term financing of business enterprise. At the end of 1969, "term" loans totaled G$23.3 million, (about 30% of the value of all lending) of which G$18.8 million were in the private sector, with 31% of these loans to individuals. Distributed by amount outstanding at the end of 1969, 50% of "term" loans were for less than 2 years; 43%, 2 to 7 years; and the remaining 7%, over 7 years. The weighted average term was about 3 years. Annex 1 4 Page 4 16. Long term lending in the agricultural sector is almost entirely to large corporations that can offer substantial collateral security. A recently passed Agricultural Loans Ordinance permits creditors to take a lien on crops as part security for a loan, but the commercial banks are uncertain of its validity and, so far, it has been rarely used. Default Rate 17. Due to careful scrutiny of potential borrowers and very adequate collateral security, commercial bank loan defaults are rare. On the other hand, lending tends to be cautious and a large potential demand for development loans remains unfulfilled. This caution is under- standable against the background of poor repayment records of other lending instttutiows in Uuyana, evon whan direct-collection from crop procedds is attempted. C. Other Lending Institutions The Guyana Credit Corporation 18. The Guyana Credit Corporation (established in 1954) is a Government lending agency providing medium and long term loans for agricultural improvement, industrial development, and housing; but it has tended to concentrate heavily on housing, light industry, purchase of agricultural machinery and equipment rather than on general farm improvement based on well drawn and carefully supervised plans. It has, nevertheless, been the principal source of the small amount of long term agricultural loan funds available to farmers other than the large corporations. Like the commercial banks, the Credit Corporation also requires collateral security, usually real estate, and small farmers lacking this kind of security have found it difficult to borrow, It has a poor repayment history. Insurance Companies and the New Building Society 19. Insurance companies and the New Building Society lend long term mostly for housing or other real estate. During 1969 their rates of interest averaged around 8% and maximum maturities were 15 to 20 years. Loans are generally subject to a maximum of about 75% of the lenderts valuation of the underlying security. Other Sources of Credit 20. Other institutional sources of credit are not at present veryr important, The Guyana Marketing Corporation provides credit in kind to farmers with whom it contracts for purchase of farm produce. Most of the transactions were for pig production but other production has recently been included, especially crops for which the Marketing Corporation provides fertilizers. Annex I - Page 5 21. Consumer credit, especially through hire-purchase, has helped many farmers to mechanize their operations. This credit is generally for only 1 or 2 years and the effective interest rate (since repayments are made monthly as a proportion of the original cash cost plus interest) is a good deal higher than the nominal amount charged on the original loan. 22. Cooperative credit societies provide small loans to members at 12%. The effective rate is somewhat lower, since borrowing members are usually paid dividends out of cooperative net income(including interest income). Thrift and Credit Societies in the rice industry have benefited from such short term loans. Non-institutional Credit 23. Many persons, including farmers, have recourse to moneylenders 'who provide small loans at very exorbitant rates of interest. The borrower is usually unaware of the real rate of interest, eg 4% or 5% per month. He is usually either unable to convert this to an annual rate or thinks of it only as a payment for short term accommodation. The amount of such lending is not known, but it is likely to be sub- stantial. D. The Private Investment Fnd 24. The Private Investment Fund (PIF) was established in 1966 with a loan of US$2 million from USAID and G$3 million from Government. The Bank of Guyana is trustee and administrator but PIP loans are made through the commercial banks who act as on-lenders and carry the credit risk but do not provide any long term funds. The Bank of Guyana decides the interest rate to be applied to PIF loans, and the commercial banks receive a margin of 3% for risk and administration. 25. The commercial banks are responsible for finding applicants. The Guyana Development Corporation plays a role in appraising the individual loan applications, in close cooperation with the banks, who are responsible for final assessment of creditworthiness. Once a loan is approved, the banks disburse promptly to the ultimate borrower, all funds or credits received from PIF. They help borrowers with complementary working capitU.' They pay the Bank of Guyana, as PIF Trustee, all amounts received from borrowers (repayments and interest), less their approved 3% spread. PIF lending is confined to US or local procurement. May 8, 1970 GUYANA BEEF CATTLE PROJECT Assets and Liabilities of the Bank of Guyana as at 31st December, 1969 G$ (thouwands) ASSETS LIABnITTIES Total Foreign Assets 40I,842 Government of Guyana Notes 38,918 Government of Guyana Securities 3,190 Government of Guyana Coins 1,524 Government of Guyana Treasury Bills 3,107 Government Deposits - Advances to Government of Guyana 11,089 Deposits of International Organizations 340 Advances to Commercial Banks - Bankers Deposits 9,835 Fixed Assets 3,532 Other Deposits 2,112 Other Assets 857 General Reserve Fund 2,739 Capital Paid Up 4,287 Other Liabilities 2,862 62,617 62,617 May 8, 1970 CD GUYANA BEEF CATTLE PROJECT Analysis of lending by purpose 1965-1969 (at December 31) G$ (thousands) Purpose 1966 % 1966 f 1967 % 1968 % 1969 % Commerce and Services 10,566 35 13,273 33 15,799 36 22,881 40 25,848 38 Manufacturing 3,136 10 4.,992 12 3,991 9 10,514 19 17,605 26 Agricultural Processing (8,642) 29 (12,325) 30 (10,277) 23 (6,118) 11 (3,448) 5 Timber and Sawmilling 557 974 1,402 2,094 1,308 Sugar and Molasses / 4A54 7,013 6,494 2,690 721 Rice Milling 3,631 4,338 2,381 1,334 1,419 Agriculture (2,458) 8 (2,391) 6 (3,901) 9 (3,918) 7 (5,090) 8 Sugar Cane 13 44 50 32 29 Paddy 1,821 1,629 3,072 1,873 2,734 Livestock 186 244 166 265 356 Forestry 286 306 145 247 410 Shrimp and Fish 39 47 294 1,393 1,386 Other 113 121 174 108 175 Private Financial Institutions 1,252 4 2,140 5 2,685 6 3,362 6 2,606 4 Personal Loans 14,044 14 5,878 14 7,494 17 9,675 17 12,78 19 Total 30,098 100 40,999 100 441,147 100 56,9468 100 67,395 100 1/ SubJect to wide seasonal variations e.g. September 1969 G$ 13,645,000, December G$ 721,000. Source: Bank of Guyana May 8, 1970 ANNEX 2 Page 1 GUYANA BEEF CATTLE PROJECT The Guyana Beef Cattle Industry INTRODUCTION 1. The Guyana national herd is estimated at about 260,000, about 70% of which are in the coastal strip east of Georgetown and about 25% in the Rupununi Savanna. A few thousand are in the Intermediate Savanna, now only of minor importance, but with potential. 2. Meat production from the coastal region and the Rupununi was 3,350 and 1,150 short tons, respectively, in 1968, and the per capita consumption of meat fell from a peak of nearly 19 lb in 1966 to 16.3 in 1969. M4eat quality is poor and the 280 lb average carcass weight in 1969 reflected the large percentage of lightweight animals being slaughtered from the coastal area. In the RIapununi, the offtake is mainly steers over 5 years old, with a dressed carcass weight of 400 to 450 lb, and cull cows of 300 to 350 lb. COASTAL REGION 3. MIost coastal cattle are owned by rice farmers and are generally of local Creole/Zebu breed, well adapted to surviving under adverse con- ditions. Average herd size is about 12 head per family. Less than 1,000 families own more than 25 head while only 200 own more than 50. These rice farmers keep cattle as a supplementary source of income, selling them off irrespective of age, sex, or as cash is needed. Farmers actually prefer to sell young animals because of the danger of theft from their free ranging herds (see para 5). 4. Because they do not own enough land on which to depasture their animals all the year, farmers must use communal grazing areas, usually within 3 miles of their farms. These areas, however, have about 6 in to 2 ft of water over them for 3 to 8 months of the year. About 30% of the area is above flood height but covered by forest and not used. These communal grazing areas are badly overstocked and have degenerated because no attempts are made to control either the numbers or movement of animals; and the high quality swamp grasses have largerly disappeared from them. 5. The animals themselves receive very little attention although the owner may visit his cattle about once in a week. Mating is uncontrolled and breed improvement impossible; cow fertility is low because of disease (mainly brucellosis) and poor nutrition. The 30% calf mortality is due mainly to losses from drowning at birth. No attempts are made to control parasites or diseases and the percentage of calves weaned is a mere 30%. Losses from stealing from these communal areas are also high. Under these conditions, it is barely possible to maintain cattle numbers and impossible to increase production. ANN= 2 Page 2 6. While communal grazing areas could be extended by using large areas of available State lands, it is doubtful that the problem would be solved without also providing management and control. It is also highly doubtful that many of thie local fa.mers would be willing to place their animals in areas farther away from their farms than the existing communal grazing areas. 7. Making the necessary changes in management to increase meat pro- duction would be difficult because of the ownership pattern. The necessary basic changes are that (a) stocking rates be limited to ensure sufficient pasture to sustain an economic breeding/fattening operation; and (b) animals and land be managed to optimize weaning and extraction rates. 8. This can best be achieved with herds large enough to carry the cost of the skilled management needed. One successful commercial ranch in the coastal region, Kabawer, exemplifies the value of sound management and capital investment in fencing, sleeping mounds, forest clearing and pasture establishment and better quality breeding stock. This 16,000 ac ranch commenced its development less than 4 years ago with 3,000 cattle. It now has 8,000 head of improved stock, is continuing to develop and expand its herd and is on a sound profit-making basis. The few rice farmers aware of the need for this type of manage- ment have previously lacked the land, know-how, cattle and capital to undertake such a venture. These farmers recognize also that, while there may be some difficulty in persuading others to put their animals into larger production units, first class management is the most important requirement. 10. One way to establish such units in Guyana would be on a co- operative basis. Rules and by-laws would be designed to allow small owneis to place all or some of their cattle on a cooperative ranch where they could be managed as a single production unit without interference from individual cooperative members in day-to-day management. The cattle so contributed would form the nucleus herd for a ranch development program. Optimum size for such a ranch in the coastal area is between 5,000 and 10,000 ac, carrying between 2,500 and 5,000 animal units at full develop- ment. Ample State land is available for lease to interested cooperative or company groups on 25-year terms, with option of renewal and right of transfer. Enough rice farmer/cattle owmers have shown interest to ensur'e the establishment of 15 ranch units of about 7,500 ac average each over a 3-year period. This involves the aggregation of about ho,000 head of cattle. 11. A key feature would be to ensure that sufficient high land grazing is available during the wet season, particularly for animals about to calve. All new ranches would have up to 30% of such land. On each, about 750 ac of the forest that covers this high ground (10% of the total area) would be cleared and sown to highly productive tropical legume/grass pastures. ANNEX 2 Page 3 12. Cl)aring these areas cheaply and quickly, would require use of techniques new to Guyana. The areas are well suited for chain clearing but local management personnel and operators would have to be trained. This could very likely be done in Venezuela where chain clearing is being done successfully. The use of improved tropical legumes and grasses would also be new to Guyana and it would be necessary to ensure that the best species were selected and that correct management was applied. RUPUNUNI SAVANNA 13. The Rupununi Savanna covers about 25,o0o sq mi in southeast Guyana (see Map) wthere cattle ranching is the main activity. Annual rainfall is about 50 in, most of which falls between May and October. Soils are infertile and are particularly low in phosphate, The pastures are generally burned annually and therefore consist of a fire-resistant low-quality grass with virtually no legumes. During the wet season, they grow and mature rapidly and lose feeding value unless the growth is con- trolled by grazing or cutting but this is not possible under the existing extensive management conditiona. In the dry season, the pasture dies and becomes very dry, its feeding value declines further and, from January to March, it is so low in available energy and protein that it cannot meet even maintenance requirements of grazing animals. The quality of the pas- ture could be improved by stopping annual burning to allow the softer more nutritious grasses to regenerate. The dry season feed quality problem could also be alleviated by establishing improved pastures but this must be dond economically. The most promising approach lies in using tropical legumes which will "hay off" and retain feeding value in the dry season. 14. Of the 55 to 60,000 head of Creole/Zebu cattle in the region, about 30,000 are o-ned by the Rupununi Development Company and run on its 24,000 sq mi ranch. The remainder are owned by about 12 individual ranchers (about 12,000 head), Amerindian villagers (about 11,000 head) and the Government (about 3,000 head). Most of the latter were confiscated from ranchers involved in the January 1969 rebellion. The privately operated ranches are in the north. Average size is about 50,000 acres and herds vary from a few hundred to over 2,000 head. 15. Insecurity of land tenure has discouraged these ranchers from investing in their properties and applying modern ranching technology. All land in the Rupununi is State owned and leased on a year-to-year basis, with no guarantee of renewal. Government policy now proposes, howJever, that 25-year leases be granted, as for the proposed coastal project ranches. 16. Fencing is inadequate on all ranches and communal reserves and the cattle are run on the open range, making control of grazing almost impossible. Carrying capacity is estimated at about 10 animal units per sq mi (1 AU/64 ac), weaning is about t0%, adult mortality is about 7% per annum, and steers are marketed at 4 to 5 years old at an average cold carcass weight of 400 lb or at 5 to 6 years old for a slightly higher carcass weight. The cull cows are slaughtered at 250 to 300 lb carcass weight. The annual extraction rate is about 10;. AMThEX 2 Page 4 17. Most of the region's cattle areslaughtered at a central abattoir at Lethem, with an annual throughput of about 6,000 head. The beef is air- freighted to the Georgetown market at a cost of 90 (G)/lb. A subsidy of 5e/lb is paid by the Government market and the producer receives about 43 to 45h (G)/lb cold dressed weight. Almost all slaughtering and marketing from the area is done by Meat Marketing Ltd (Annex 3). 18. Many consumer goods and essential on-ranch investment items (fencing wire, troughing, tools and equipment) required to develop the area must be air-freighted from Georgetown, which increases their cost. This, plus the cost of air-freighting meat from the region would place the Rupununi at a dis- advantage compared to the coastal areas if it were not for the lower production costs in the Rupununi - G$3/head compared to G$11/head on the coast. 19. Since shipment of boned-out meat is perhaps the best way of immedi- ately reducing transport costs, the Government should be encouraged to provide facilities at Lethem. A small treatment plant to process bones could then be established and the bone produced flour could be fed to range cattle to provide badly needed supplementary phosphate. The potential bone flour production would meet about 35% of estimated requirements. 20. There is one Veterinary Officer on short term appointment from Georgetown in the area. He is responsible mainly for supervision of the Lethem abattoir and regional foot and mouth disease (FMD) control programs. FMD is not endemic but occurs sporadically (there have been two outbreaks in the last 9 years). An outbreak generally has serious repercussions since the entire area is placed under quarantine to prevent the disease spreading to the coast. Shipment of meat is stopped and not allowed to resume until all ani- mals in the area have been vaccinatedtwice at 4-month intervals, and no out- break has occurred for 3 months. 21. The fact that beef production can be increased considerably has been demonstrated in some of the better areas where carrying capacity has gone from 10 to 40 head/sq mi by using fencing to control grazing. Also, large tracts in the Rupununi appear to be suitable for the tropical legume Townsville st3lo, This legume can be sown from the air with no seed bed preparation. In similar areas in Australia, it has increased animal production per ac 3 to 5 times. Townsville stylo is native to tropical South America and is found in those areas in the Rupununi that have been protected from annual burning. INTERMEDIATE SAVANNA 22. This area covers 3,800 sq mi south of the coastal alluviums, 30 to 40 miles from the sea. Annual rainfall is 70 to 80 in during two wet seasons, December through January and May through July. The solls are infertile and consist of white and brown sands. They are freely drained and pasture growth is often seriously retarded during the dry seasons. The mature pastures are poor and cattle cannot be kept in good condition without management and min- eral supplements. AfNTEX 2 Page 5 23. The only cattle in the area are located at the Ebini research station (about 2,500 head) and at an adjacent private ranch (500 head). The Ebini station was founded in 19L12 to determine whether beef could be produced in the area. W4ork has been concentrated on the establishment and management of sown pasture grass (mainly pangola) and study of a wide range of beef breeds. Although high levels of production have been obtained, results are of little practical value because of the large amounts and high cost of the fertilizer (mainly nitrogen) needed to maintain this type of pasture. 24. The area could probably be developed to produce beef economically as has been shown in similar areas in N. Queensland. Studies on the native pastures should be expanded and include (a) supplementary mineral and protein feeding, with molasses as a carrier; (b) tropical legume establishment and management and; (c) economic use of phosphate fertilizer, particularly wzith tropical legumes. This requires additional financing, particularly for stock handling facilities, scales, fencing, pasture seeds, fertilizer and overseas training of local technicians. NORTH¶EST ZONE 25. Only a few head of cattle are now in the Northwest but there is potential for establishing productive ranching in the extensive tracts of virgin forest. Excellent legume/grass pastures can undoubtedly be grown in the deep rich soils. First, however, information is needed on land clearing methods and costs, and the pastures best adapted to the region. The Govern- ment of Guyana has asked for finance to help study these problems. May 8, 1970 ANNEB 3 Page 1 GUYANA BEEF CATTLE PROJECT Beef Cattle Marketing Consumption 1. Despite annual population growth of 3% from 1965 to 1969, Guyana's beef demand increased at a yearly rate of only 1.3%. World demand, on the other hand, is estimated to have increased 6% annually from 1965 to 1967.1/ Guyana per capita consumption fell from ncaioy 19 lb in.x L46 to 16.3 lb in 1969. This was due partly to the availability oI beef substitutes (particularly poultry), partly to the rising beef price. 2. In 1965, Guyana's local beef supply was about 9.2 million lb from 29,000 cattle averaging 314 lb carcass weight. In 1969, the local supply was 10.3 million lb from 36,000 cattle averaging 287 lb. The lower average weight was due to lighter, immature, cattle being slaughtered. 3. About 70% of Guyana's domestic beef supply comes from the coast, .25% from Rupununi (see Map). Imports of fresh, pickled, smoked and canned beef, mainly from Argentina and Australia, have declined from about 2.3 million lb in 1965 to 1.2 million lb in 1969, or from 20% to 10% of total beef consumption, as domestic production has risen (see Table). Local production is expected to decline temporarily, during the next few years, and Government plans to increase imports to keep overall supply more or less in line with demand at current prices. Commercialization 4. Cattle from the coastal areas are bought on-farm or in village centers by cattle dealers, bargaining individually with owners and esti- mating weights visually. There is no system of auction. The average farm- gate price for 1969 was G$0.50/lb (US$0.25); this had risen temporarily in February 1970 because of the Rupununi ban (see para 7) to G$0.56/lb (US$0.28). Purchased cattle can be moved by boat, truck or train, or can walk, to Georgetown and New Amsterdam for slaughter. Costs vary between G$0.06 and 0.23 per head per mile according to distance and quantity. 5. Cattle are slaughtered in Georgetown municipal abattoirs under moderately hygienic conditions. Countryside and village slaughter facili- ties, however, are poor. There are four abattoirs in Georgetown and its suburbs and one each at New Amsterdam, McKenzie and Bartica. They are operated on two or three days a week, well below capacity. None has 1/ Survey of the World Beef and Veal Economy. IBRD Economics Departmcn-t February 1970, page 9. ANIEX 3 Page 2 facilities for the recovery and procossing of blood, bone or other by- products. The Georgetown municipal abattoir has cold storage which is not used; therm is ample private cold storage in Georgetown, owned by four companies, Weting and Richer Co., Guyana Market Co., Williams and Son Co. and Frederiks Ltds. Total capacity is 260,000 lb. 6. Beef is retailed in supermarkets, municipal markets, and small shops. Eight supertnarkots are estimated to absorb around 1.5 million lb beef per year; 1 million lb are sold through Goergetown municipal markets and smal shops, and 6 million retailed in the rest of the country, Supermarkets are, therefore, still a rinor category although demand for improved quality and prewrapped cuts is increasing. Stew beef has by far the greatest sales volume, 7. Rupununi supplied 2.7 million lb beef in 1969, or about 40% of the Georgetown demand. In November 1969, however, this supply was temporatily cut off by a ban on Rupununi movements, due to an outbreak of foot and mouth disease. Rupununi ranchers sell their beef through Meat Marketing Ltd. a company owned by cattle producers (see para 8). Theynotify the company the number of cattle they have for sale the follow- ing month and these are usually delivered at the due time. There is no penalty for late delivery, but an explanation is required. Rupununi cattle are slaughtored at the Government owned Lethem abattoir and the carcasses airfreighted the same day to Georgetawn, where they are inspected and distributed. The rancher receives his proceeds 10 days after delivery. In 1969, FML paid G$0,43 (US$0.22) per lb to Rupununi ranchers, G$0.07 less than the price paid to coastal ranchers. MML paid G$0.04 for slaughtering, handling and inspecting and G$0.05 per lb for air freight. Meat Marketing Ltd (MUL) 8. MML is a joint stock company limited to 50 members and registered' under the Companies Ordinance in l956. There are currently 22 members and, of the issued share capital of 536 G$100 shares, Rupununi Development Co Ltd owns 250, Kabawa ranch 80, and Government the minimum of 5 shares, On a capital of G$60,000 MML is currently turning over G$l million annually and operating on a gross margin of 4.5%. 9. NML has consistently paid above average prices to producers, making a large initial payment and a half-yearly patronage bonus based on deliveries. It has declared regular dividends of 10% to 12%, after taxes, (18% to 22% grossed up at the standard rate)o MM would be a suitable chaniel for marketing project output, at least for the initial stages, preferably if other producers could be admitted as ehareholders in proportion to their output, Prices 10. If the-proposed project is implemented, local supply may equal demand in about 4-5 years. It should then be possible to consider expcrtding surpluses (Table 1), By that time also Guyana shouild aim to have slaughter- ing and cold storage facilities adequate to meet the standards required by ANNEX 3 Page 3 CARIFTA countries, notably Trinidad, Barbados and Grenada, the principal potential market for Guyana beef exports.l/ 11. Each year from 1960 to 1969, local beef retail prices increased 3.6%, the urban food price index increased 2.6%, and the national urban price index increased 2.8%. The indication is that beef prices are increasing faster than food prices by 1% and faster than the national urban index by 0.8% more or less following world beef price trends. This suggests that the use of current Guyanese beef prices in project estimates would be conservative; on the other hand expected production increases should restrain price rises after 1975. Average 1969 retail price in Guyana was G$0.67 (US$0.38) per lb as compared with uS$o.56 per lb in Central America for beef of probably higher average quality. Farmgate prices follow retail price trends (Table 1). Project estimates are based on 1969 farmgate prices; G$0.50 for the coast and G$0.43 for Rupununi. September 11, 1970 1/ Economic Intelligence Unit, April, 1969, pages 28-61. GUYLANA BEEF CATTLE PROJECT Beef Consumption, Imports, Exports and Prices Projected Unit!/ 1965 1966 1967 1968 1969 1970 1975 1980 Cattle slaughtered '000 29 32 31 32 36 3h 41 50 Carcass weight short tons 4,627 5,211 4,824 4,891 5,180 4,930 6,900 9,400 Slaughtered average weight lb/head 314 325 311 305 287 290 300 320 Imports short tons 1,167 1,008 1,062 770 644 945 - - Exports lb '000 818 303 - 57 153 - 600 2,600 Dbmestic consumption short tons 5,385 6,067 5,886 5,632 5,748 5,875 6,300 6,800 Human population&/ '000 652 672 689 696 706 716 766 816 Per capita consumption lb 16.5 18.6 17.1 16.2 16.3 16.4 16.5 16.6 Retail price G/cents/lb 55 63 61 66 67 692/ 70 67 Farmgate price: (estimated) Coast G/cents/lb 40 46 44 49 50 54 53 50 Rupununi G/cents/lb 35 40 38 41 43 44 45 43 1/ Figures derived from 1965/69 Guyana Ministry of ~..griculture and "Economist Intelligence Unit" information. 2/ 1965 Census; other estimated 3/ Supply shortage since November 1969, due to temporary movement ban in Rupununi. August 28, 1970 ANNEX 4 Page 1 GUYANA BEEF CATTIE PROJECT Types of Enterprise and Cooperative Group Ranches A. General 1. Guyana law relating to legal personality and control over business organizations and enterprises derives generally from British law. Partnerships 2. As in Britain, a partnership is the relationship that subsists between persons carrying on a business with a view to profit. This definition thus embraces all persons who are engaged in a business venture that has no other separate legal identity. The law relating to partnerships is codified in the Partnerships Ordinance (Cap 325). Partnerships may not exceed 20 persons and the code and its related case law are specific as to the rights and liabilities of members. In general, partners are jointly and severally liable for the total debts of the partnership. There is no provision in Guyana law for partnerships with limited liability. Companies 3. A limited liability company is a corporate body, for the debts of which the members are responsible only to the extent of their shareholding or of the guarantee they have given. Guyana companies are formed under the Companies Ordinance, which closely follows the British Companies Act of 1908. A company may be either public, with a minimum membership of seven, or private, with a minimum of two members and a maximum of twenty. Private coi'mpanios need not make certain statutory returns that apply to companies and need not publish accounts. All companies must be registered and each is subject to the Con- pani.es Ordinance and its own Memorandum and Articles of Association. Cooperatives 4. A cooperative is a society that has as its object the promotion of the economic interests of its members in accordance with cooperative principals and that is formed in Guyana under the Cooperative Societies Ordinance (Cap 326) 1948. The main differences between a cooperative society and a company are: (a) societies are registered with the Registrar of Cooperative Societies and submit their accounts to him; (b) a society may require and bind its members to deal exclusively through it; ANNEX h Page 2 (c) no member has more than one vote or rmay hold more than one- fifth of the share capital; (d) the payment of dividends, though not necessarily the distri- bution of cash surplus, is limited; and (e) societies may be (and are) exempted from the payment of income tax. A cooperative may be registered with or without linited liability, although in the former case, it may, through its rules, extend the liability of its members beyond the amount of their shareholding. Statutory Boards 5. A statutory board or corporation may be formed as a corporate business enterprise in Guyana, e.g., the Guyana Marketing Corporation. Each needs special legislation. They are generally set up to satisfy needs that, because of the risks or capital involved, cannot be fulfilled by the normal form of business enterprise, and they are subject only to the provisions contained in the legislation that incorporates them. B. Cooperative Group Ranches 6. The usual form of primary agricultural cooperative society in Guyana is a vil1age or community group, formed to obtain credit for goods and services or to lease a block of land that is then sublet to members. The Cooperative Ordinance and Regulations, and the standard form of cooperative rules are tailored to this form of enterprise. In these societies, business trans- actions are usually straightfonrard and they are managed by the elected officers and committee. Where cooperatives are few, and simple in operation, the Government cooperative staff have been able to cope with extension work. However, owing to the increase in the number of cooperative enterprises, which is a stated aim of the new Cooperative Republic of Guyana, field workers are now over-extended and a backlog of audit and supervision work is building up. For example, in the Upper Corantyne District, where a number of the proposed livestock cooperatives are to be located, a Cooperative Officer who has no staff and who is untrained in even simple bookkeeping methods is responsible for the supervision of 82 registered cooperative societies of all types; he is unable to offer the type of assistance and supervision provided for in the Cooperative Ordinance. 7. The object of the proposed group ranches is to assemble privately- owned cattle into ranch units and to run them as a commercial herd under competent management, supervised by project staff (Livestock Project Division of Bank of Guyana). Group ranches must be recognizable commercial entities and may be partnerships, companies or cooperatives. Neither the traditional form of the cooperative rules nor the current Guyana legislation is entirely suitable for cooperative group ranches and only limited assistance can be ANNEX 4 Page 3 expected from the Cooperative Department in their formation and supervision. Furthermore, farmers have seen a number of agricultural cooperatives fail, mainly because of inadequate management, and they are wary of pooling their cattle in an untried and unproven venture. 8. The problems that cooperatives pose for the project are thus both managerial and social and in order to cope with them the project must provide its own cooperative advisory service. This would be distinct from, but complementary to, project technical assistance and supervision. 9. A deputy project director (administrative) (DPDA) with wide cooperative experience would be employed on the project staff to help cattle owners form their group ranches and to supervise their business activities, which are defined as all matters such as financing, audit and marketing not directly related to animal production. Ranch managers would not handle these administrative matters but would concentrate on technical production, supported by the economic and financial data the (DPDA) would help to provide. The rules of the group ranch cooperatives and service contracts should provide that: (a) ranch managers are not to be employed as cooperative society secretary/managers; (b) arrangements are made for ranch operating expenses to be run on an imprest account controlled by the ranch manager, who would have responsibility for drawing up the operating budget, all recurrent expenditure, keeping of ranch records and accounts and employment of staff; and (c) all other financial matters, such as the purchase of capital items (as agreed upon in preparation of farm plans), and marketing should remain the responsibility of each cooperative's management committee, assisted by the DPDA 10. To give the farmers incentive to join a cooperative and in order to bind them to it once they have joined, the rules should also provide that: (a) cattle that members transfer to the cooperative should be evaluated in the manner prescribed in the rules, and shares of equivalent value issued for them; (b) such shares wiould be transferable but not withdrawable for at least 3 years; and (c) operating surpluses may be distributed as a patronage bonus. 11. These arrangements may be made under the Cooperative Ordinance although existing livestock cooperatives wishing to participate may need to change their rules. The bonus distribution referred to would require official interpretation under the Ordinance by the Chief Cooperative Officer, and rules to meet the above requirements would need Cabinet approval for certain exemptions, as provided under the Ordinance. AOTNEX h Pag e 4 12. IDA would need to be satisfied that audit and supervision arrangements were acceptable. It would also require that rules for the cooperative ranches were acceptable and that any future changes in cooperative law would not affect their commercial viability. GUYANA BEEF CATTLE PROJECT Coastal and LDCo Coastal Ranches - On-Ranch Investment (Guyanese Dollars) Unit Year 1 Year 2 Year 3 Total Total Coastal Ranches (7,500 an) Cost Units Cost Units Cost Units Cost Units Cost Fencing G$ 750 mi 18 13,500 9 6,750 8 6,ooo 35 26,250 Stock Handling (inc mounds) 6,500 2,750 1,750 11,000 Water G$1,500 2 3,000 2 3,000 1 1,500 5 7,500 Minor Drainage G$1/cu yd 2,000 2,000 2,000 2,000 4,000 4,000 Buildings / 18,000 4,000 1,500 23,500 Machinery g 19,100 4,200 23,300 Pasture Establishment / G$50/ac 150 ac 7,500 300 ac 15,000 300 ac 15,000 750 ac 37,500 Miscellaneous / 2 100 1,800 2,200 6,100 Sub-total 69,700 39,500 29,950 139,150 Livestock / 15 200 11,500 83600 Sub-total 8W4,900 51,000 38,550 Total (with contingency and rounding) 93,400 56,100 42,400 191,900 LDCo Coastal Ranch (20,000 ac) Fencing G$ 750/mi 40 30,000 20 15,000 15 11,250 75 56,250 Stock Handling 11,500 8,250 3,250 23,000 Wgter G$1,500 4 6,ooo 4 6,000 4 6,000 12 18,000 Minor Drainage G$1/cu yd 5,000 5,000 5,000 5,000 10,000 10,000 Buildings J/ 24,000 8,ooo 1,500 33,500 Machinery g/ 42,600 3,600 46,200 Pasture Establishment j G$50/ac 600 ac 34,500 i 700 ac 35,000 700 ac 35,000 2,000 ac 104,500 Miscellaneous / 5,900 4 1,600 600 8,100 Sub-total 1 82,450 6299,550 Livestock i 510 700 196 400 190,6o0 897,700 Sub-total 253,200 1,197,250 Total (with contingency and rounding) 731,700 306,800 278,500 1,317,000 Notes: Ranch house G$8,000 (LDCoG$15,000); bunk house G$6,000; barns, sheds, outstations. / Tractor and implements G$12,000; 4-wheel drive vehicle G$7,500; pumps, engines, generator, outboard canoe. / Clearing/burning G$30/ac; seeding G$20/ac; plus 100 ac seed production G$4,500. j Tools, veterinary equipment, saddlery, radio/telephone. / Additional bulls first 3 years plus horses, semen. Bulls G$370, horses G$300. Semen G$7 ampule standard. Includes 100 ac land preparation/seeding @ G$45/ac. / Additional bulls and heifers commercial herd, first 3 years; imported bulls, cows and heifers, stud herd; plus horses and semen. Herd bulls G$300, heifers G$100, stud bulls G$4,000, stud cows G$2,000, stud heifers G$1,500; horses G$300, semen G$20, ampule stud G$7 ampule standard. August 28, 1970 5 YANA BEEF CATTLE PROJECT Coastal Ranches (10,000 ac - 7,500 ac developed) Herd Projection Opening --------------------------------------------------- End of Ranch Year ------------------ Herd 1 2 3 4 5 6 7 B 9 10-20 Herd Composition Br-eding Cows 1,400 1,419 1,454 1,505 1,573 1,716 1,760 1,760 1,760 1,760 1,760 Bulls )6 71 73 75 79 69 70 70 70 70 70 Calves Weaned (420) (490) (710) (872) (979) (1,022) (1,116) (1,144) (1,144) (1,144) (1,144) Heifers - 12-24 months 210 210 245 355 436 490 511 558 572 572 572 Heifers - 24-36 months 195 197 200 235 344 423 475 496 541 555 555 Steers - 12-24 months 610 i / 210 245 355 436 489 511 558 572 572 572 Steers - ?4-36 months 100 j/ 452 200 235 344 423 474 496 541 555 555 Steers - 36-48 months - 194 96 56 - _ _ Total AU 2,571 2,559 2,611 2,856 3,268 3,610 3,801 3,938 4,o56 4,o84 4,o84 Total Animals 2,991 3,049 3,321 3,728 4,247 4,632 4,917 5,082 5,200 5,228 5,228 Mortality Breeding Cows 98 84 71 58 45 47 51 53 53 53 53 Bulls 4 3 4 3 2 2 2 2 2 2 2 Heifers - 12-24 months 15 13 10 10 11 13 15 15 17 17 17 Heifers - 24-36 months 14 12 10 8 7 10 13 14 15 16 17 Steers - 12-24 months 15 37 10 10 11 13 15 15 17 17 17 Steers - 24-36 months 7 6 23 8 7 10 13 14 15 16 17 Steers -36-48 months - - - 8 3 2 - Total 153 155 128 105 86 97 109 113 119 121 123 Sales Cull Cows 70 70 71 73 105 110 206 211 211 211 211 Cull Buils 6 8 11 4 4 8 8 8 8 8 8 Cull Heifers - 24-36 months 29 10 10 10 12 34 42 48 56 56 56 Surplus Heifers - 24-36 months - - - - - 67 149 161 205 218 Fat Steers i/ 195 i! 215 235 282 263 388 410 460 481 525 538 Total Sales 300 303 327 369 384 540 733 876 917 1,005 1,031 Purchases Bulls - 26 17 9 10 - 11 10 10 10 10 Production Coefficients Effective Calving % 30 35 50 60 65 65 65 65 65 65 Mortality - Adult / 7 6 5 4 3 3 3 3 3 3 3 Bulls/Cows Ratio % 4 5 5 5 5 4 4 4 4 4 4 Culling Rate - Cows 9 5 5 5 5 7 7 12 12 12 12 12 - Bulls % 10 15 15 5 5 10 12 12 12 12 12 - Heifers % 15 5 5 5 5 10 10 10 10 10 10 Stocking Rate 2/ Ac/AU 2.9 2.9 2.9 2.6 2.3 2.1 2.0 1.9 1.8 1.8 1.8 Extraction Eate %/ 12.0 5.2 9.4 9.8 9.0 11.7 14.9 1(.2 17i6 19.7 19.7 / 500 imature steers extra collected in exchange for shares for sale in years 1 & ' but not included in calculations of sales in predevelopment Year. 9 Steers fat at 900 lb liveweight. 9/ Steers 24-36 months sold immature in years 0, 1 and 2 at 750-800 lb liveweight. 9/ Applied tQ categories and rounded. 9/ Stocking rate calculated on basis of 7,500 ac although allowance made for some grazing of 2,500 ac undeveloped. 9/ Sales as percentage of total herd excluding extra steers years 0, 1 snd 2. August 28, 1970 GUYANA BEEF CATTLE PROJECT Coastal Ranches (10,000 ac - 7,500 ac developed) Sales, Purchases, Expenses and Net Revenue (G.yanese dollars) Unit Value --------------------------------------------- End of Ranch Year --------------- Years Years 0 1 2 3 4 5 6 9 10 0-6 7-20 Sales Cull Cows 110 145 7,4001/ 7,700 7,810 8,030 11,550 12,100 22,660 30,600 30,600 30,600 30,600 Cull Bulls 250 315 1,500 2,000 2,750 1,000 1,000 2,000 2,000 2,520 2,520 2,520 2,520 Cull Heifers - 24-36 months 125 1 60 2,900_/ 1,250 1,250 1,250 1,500 4,250 5,250 7,680 8,960 8,960 8,960 Surplus Heifers - 24-36 months 140 180 -- - - - - 9,380 22,350 24,150 30,750 32,700 Fat Steers 200 250 33,15031 36,5503/ 39,95Q/ 56,400 52,600 77,600 82,000 115,000 120,250 131,250 134,500 Total 44 950 47,500 51,760 66,680 66,650 95,950 121,290 182,620 191,310 210,230 215,820 Purchases Bulls 370 465 - 9,620 6,290 3,330 Expenses Fixed 15,200 22,100 22,900 25,300 35,200 35,900 42,000 42,500 42,500 42,500 42,500 Variable G$2/head 4,9804/ 6,080 6,640 7,460 8,490 9,260 9,830 10,160 10,400 10,460 10,460 Bull purchase --------- Included in Investment --------- 3700 - _ 4,070 _ 4,700 4,700 4,700 4.700 Total 20,150 28,180 29,540 32,760 47,390 45,160 55,900 57,360 57,600 57,660 57,660 Net Revenue 24,770 19,320 22,220 33,920 19,260 50,790 65,390 125,260 133,710 152,570 158,160 1/ Cull cows G$105 l/ Cull heifers 0$100 7/ Immature steers G$170 Years 0, 1 and 2 I7/ Based on herd without extra steers for early sale August 28, 1970 GUYANA BEEF CATTLE PROJECT Coastal Ranches (10,000 ac with 7,500 ac developed) Financial Projection Without ------------------------------------------------- __________________Ranch Yearn--e--------------------------------------------------------------- Development 1 2 3 4 5 6 7 8 9 10 11 12 13-20 SOURCE AIND USE OF FINDS SDURCE Not income (before debt service) 1/ 24,800 19,300 22,200 33,900 19,300 50,800 65,400 125,300 133,700 152,600 158,200 158,200 158,200 158,200 Short term loan (or equity) V/ - 17,300 17,400 8,100 11,o00| Long term loan - 74 700 44,900 33,900 - TOTALL SDURCE 24,80 11 3 4,500V 590 30,700 U" Ranch contribution - 18,700 11,200 8,500 Investment of loan funds - 74,700 44,900 33,900 Total Investment _ 93,400 56,100 42,40 Working Capital addition _ 14,400 400 1,600 7,300 (2,100) 6,400 700 100 Debt service Short term interest (836) _ - 1,500 1,500 700 1,000 Short term loan repayment - - 17,300 17,2400 8,100 11,2400 Lcng tera i~nterest (9L ) 4_/ - 3,500 9,200 13,000 14,600 . Lmcg term loan 28,300 S8,300 28,300 28,300 28,300 28,300 28,300 28,300 28,300 Total Debt Swvice - 3,500 28,000 31,900 23,400 40,700 CASH HATLCB (after debt service) 24 800 - - - - 12 200 30,7° 96 300 105,300 1214,300 129. 00 129,900 129900 158.200 TOTAL US5 7;2,800 111,300 824,500 75,900 30,700 50,800 65 400 125,300 133,700 152,600 15s,200 158,200 158,200 158,200 Working capital i - 14,400 14,800 16,4,00 23,-o 21,600 28,000 28,700 28,800 28,800 28,800 28,800 28,800 28,800 Herd value (nearest 0$ 10,000) 370,000 h60,000 470,000 500,000 560,000 610,00o 640,000 790,000 810,000 820,000 820,000 820,000 820,000 820,000 INCRE9TA&L NET CASH FLOW Ng income (before debt service) 24,800 19,300 22,200 33,900 19,300 50,800 65,400 125,300 133,700 152,600 158,200 158,200 158,200 158,200 Net income (without development) 24,800 24,800 24,800 24,800 24,800 24,800 24,800 24,800 24,800 24,800 24,800 24,800 24,800 24,800 Ineresmntal net income - (5,500) (2,600) 9,10D (5,500) 26,000 40,600 100,500 108,900 127,800 133,400 133,400 133,400 133,400 Incremental working capital - (14,400),/ (400) (1,600) (7,300) 2,100 (6,400) (700) (0oo) Incremental herd value 448,900 Investment - 168,400)w' 5S6.100) (427400) - - - - Incremental working capital 28, oo NET CASH FLOW - (188,300) (59,100) 34,900) (12,800) 28,100 34,200 99,800 108,800 611,100 (Year 20) Estimated Financial Rate of Return 20% NOTES 1/ Total sales, less operating expenses, to nearest hundred, excluding depreciation, including replacement. 2/ Balance of funds required annually; to be provided from short term borrowing (assumed in table) or ranch owners' equity contribution. 3/ On average loan drawn. 4/ 50% of expenses; financed by short term borrowing or ranch owners' equity contribution. g/ Includes G$ 75,000 value of additional 500 immature steers contributed O C$150. August 28, 1970 GUYANA BEEF CATTLE PROJECT Rupununi Commercial, Amerindian and LDCo Ranches - On-Ranch Investment "Guyanese DOllars) Unit Year 1 Year 2 Year 3 Total Total Commercial and Amerindian Ranches Cost Units Cost Units Cost Units Cost Units Cost (64,000 ac) Fencing 850/mi 20 17,000 15 12,750 5 4,250 40 34,000 Stock Handling X 3,000 1,500 1,500 3 6,ooo Water 2/ 2,600 2 5,200 2 5,200 - 4 10,400 Tractor and Implements 8,ooo 1 8,000 - - 1 8,ooo Engine, Pumps, etc. 2,400 1,200 1,200 1 2,4oo Pasture Improvement 12/ac - 200 2,400 - 200 2,400 Miscellaneous 3/ 1 600 1,300 300 3 200 Sub-total tatt 23,150 7,250 66,400 Livestock 4/ 7 900 4,600 5,800 18 300 Sub-total 27,750 13,050 Total (with contingency and rounding) 48,300 30,500 14,400 93,200 LDCo Ranch (200,000 ac) Fencing 850/mi 51 43,500 25 21,250 30 25,500 106 90,250 Stock Handling 6,ooo 6,ooo 6,oo0 18,000 Water 2/ 2,600 4 10,400 3 7,800 3 7,800 10 26,000 Tractor and Implements 10,000 2 20,000 2 20,000 Vehicles 8,0oo - 2 16,000 _ 2 16,000 Engine, pumps, etc. 2,400 1 2,400 1 2,400 _ 4,8oo Pasture Improvement 12/ac - 250 3,000 250 3,000 500 6,ooo Miscellaneous X 3,500 _ 1 500 5 000 Sub-total 85,00 56,450 186, Livestock 4/ 45,700 32,300 37,000 115,000 Sub-total 131,500 885,70 301,050 Total (with contingency and rounding) 144,700 97,600 88,900 331,200 X Corral crushes G$3,000; handling yards G$1,500. Well G$1,800; tank and trough G$800. 3 Tools, veterinary equipment, saddlery. Additional breeding stock (bulls and heifers) first 3 years; plus horses and semen. Heifers G$95, horses G$300, semen G$7 ampule standard. August 28, 1970 OUJYAllA BEEF CATTLE PROJECT Rupununi Commercial and Amerindian Ranches (64,000 ac) - Herd Projection Without -----------------------------------------_-------- End of Ranch Year- Development 1 2 3 4 5 6 7 b 9 10-20 Herd Composition Breeding Cows 490 514 577 614 668 695 720 720 720 720 720 Bulls (5%) 25 26 30 31 33 35 36 36 36 36 36 Calves Weaned (186) (220) (257) (316) (368) (434) (452) (468) (468) (468) (468) Heifers - 12-24 months 93 93 110 129 158 184 217 226 234 234 234 Heifers - 24-36 months 87 127 118 134 126 153 178 210 219 227 227 Steers - 12-24 months 93 93 110 128 158 184 217 226 234 234 234 Steers - 24-36 months 87 87 88 104 123 153 178 210 219 227 227 Steers - 36-48 months 81 82 83 84 100 90 74 86 103 104 110 Steers - 48. months 56 57 41 19 - - - - - Call Cow 25 26 20 10 - - - - Total AU 1,012 1,104 1,13 1,263 1,370 1,494 1,620 1,714 1,765 1,782 1,788 Purchased Steers - 100 100 100 100 100 100 100 50 Total AU 1,012 1,204 1,283 1,363 1,474 1,594 1,720 1,814 1,h15 1,782 1,788 Total Animala 1.198 1.424 1.540 1.679 1.842 2,028 2,172 2,282 _ 2,283 2,250 2,256 Mortality Breeding Cows 34 29 26 29 25 20 21 22 22 22 22 Bulls 2 2 1 2 1 1 1 1 1 1 1 Heifers- 12-24 months 6 6 5 6 5 5 6 7 7 7 7 Heifers -24-36 months 6 5 6 6 5 4 5 5 6 6 7 Steers -12-24 mnths 6 6 5 6 5 5 6 7 7 7 7 Steers -24-36 months 6 5 4 4 4 4 5 5 6 6 7 Steers- 36-48 months 6 5 4 4 3 3 3 2 3 3 3 Steers -548 months 3 3 3 2 1 Cull Cmes - 1 1 1 - - - - Par.hased Steers 5 5 4 3 3 3 3 2 Total 69 61 60 65 45 50 52 55 54 54 Sales Call Cows 25 - 24 45 52 77 70 72 72 72 72 Cull Bulls 1 1 1 2 2 3 4 4 4 4 4 Cull Heifers - 24-36 months 4 4 6 6 7 6 8 9 11 11 11 Surplus Heifers - 24-36 manthe - - - - - - 24 70 99 108 115 Fat Steers 72 72 91 99 99 126 161 159 184 209 211 Puracis..ed Steers 95 95 96 97 97 97 97 48 - Total 102 77 217 247 256 309 364 411 467 452 413 Purohases Rulls - 4 6 5 5 6 6 5 5 5 5 Heifers - 24-36 months 40 30 30 Steers - 100 100 100 100 100 100 10 50 - - Total 144 136 135 105 106 106 105 55 5 5 Production Coefficients Effective Calving % 38 45 50 55 60 65 65 65 65 65 65 Mortality - Adult 2. 5 7 6 5 5 4 3 3 3 3 3 3 Culling Rate- Cos % 5 5 5 7 7 18 10 10 10 10 10 -Bulls % 5 10 5 7 7 10 10 10 10 10 10 -JHeifers % 5 5 5 5 5 5 5 5 5 5 5 Stocking Rate as/AU 63 53 50 47 43 Lo 37 35 35 36 36 Extraction Rat3/ 1 10.0 6.9 10.3 12.0 11.6 14.2 16.5 18.3 21.0 22.7 23.1 1/ Steers fat at 900 lb I/ Applied to categories and rounded 31 Saues as percentage of total herd, exoluding purchased steers August 28, 1970 GUYANA BEEF CATTLE PROJECT Rupununi Commercial & Amerindian Ranches (64,000 ac) Sales, Purchases, Expenses and Net Revenue (Guyanese Dollars) Unit Without Value Develop- -------------------------------Ranch Year -----__ Years ment 0-6 7-20 1 2 3 4 5 6 7 8 9 10 11-20 Sales Cull Cows 110 130 2,500 )/ _ 2,640 4,950 5,720 8,470 7,700 9,360 9,360 9,360 9,360 9,360 Cull Bulls 225 280 230 230 230 450 450 680 900 1,120 1,120 1,120 1,120 1,120 Cull Heifers 100 120 400 400 600 600 700 600 800 1,080 1,320 1,320 1,320 1,320 Surplus Heifers 130 160 _ _- - - - 3,120 11,200 15,840 17,280 18,400 18,400 Fat Steers 195 245 13,650 13,650 17,750 19,310 19,310 24,570 31.400 39,000 45o080 51,210 51,700 51,700 Sub Total 16,780 14,280 22,220 25,310 26,160 34,320 43,920 61,710 72,720 80,290 81,90.0 o,900 Purchased Steers 170 200 - - 16,150 16,150 16,320 16,490 16,490 19,400 19,400 9,600 9,600 Total 16,780 14,280 37,370 41,460 42,500 50,o10 60,410 81,110 92,120 89,890 ,500 500 Purchases Bulls 290 350 - 1,160 1,740 1,450 1,450 1,740 1,740 1,750 1,750 1,750 1,750 1,750 Heifers 24-36 months 95 - 3,800 2,850 2,850 Sub Total 4, 960 4,590 4,300 Steers 130 150 - 13,000 13,000 13,000 13,000 13,000 13,000 15,000 7,500 7,500 7,500 7,500 Total 17,960 17,590 17,300) 14,450 i4,740 14,740 16,750 9,250 Expenses Fixed 6,900 7,400 7,600 8,800 13,700 14,900 15,000 15,300 15,300 15,300 15,300 15,300 Breeding stock _ ---Included in Investment--- 1,450 1,740 1,740 1,750 1,750 1,750 1,750 1,750 Steer Purchase - 13,000 13,000 13,000 13,000 13,000 13,000 15,000 7,500 7,500 7,500 7,500 Variable 3/ 3,000 3,560 3,850 4,200 4,605 5,070 5,430 5,710 5,710 5,750 5,770 5,770 Total 9,900 23,960 24,450 26,000 32,755 34,710 35,170 37,76p 30,260 30,300 30,320 30,320 Net Revenue 6,880 (9,680) 12,920 15,460 9,745 16,100 25,240 43,355 61,860 59,590 61,180 61,180 Cull cows before development G$ 100/head. Financed from Steer Purchase Fund. 2/ Supplements G$ 1.50; vaccines and veterinary G$ 1.00/head/year. August 25, 1970. GUYANA BEEF CATTLE PROJECT Rupununi Commercial & Amerindian Ranches (64,000 ac) - Financial Projection (Guyanese dollars) Without ---------------------------------------------------------------- Ranch Year ----------------- Development 1 2 3 _4 5 6 7 8 9 10 11 12 13-20 SOURCE AND USE OF FUNDS SOURCE Net income (before debt serv ce)- 6,900 (9,700) 12,900 15,500 9,800 16,100 25,200 43.400 61,900 59,600 61,200 61,200 61,200 61,200 Short term loan (or equity)2~ - 17,700 12,900 7,400 10,200 12,300 4,700 Ranch contribution - 9,700 6,100 2,900 - - - Long term loan - 38 600 214,000 11500 - TOTAL SOURCE 6,900 ,300 5,30 37,300 20,000 2,400 9,90 USE Ranch contribution - 9,700 6,100 2,900 Investment of loan funds - 38,600 24h400 11,500 Total Investment - 48,300 30,500 14,400 Working capital addition (permanent) - 5,500 200 800 3,400 1,000 200 300 Debt service Short term interest (81%)V/ (inc. bridging finance) - - 1,800 1,400 900 1,100 1,300 700 600 Short term repayment - - 17,700 12,900 7,400 10,200 12,300 4,700 7,300 Long term interest (9%)L/ - 2,500 6,100 7,800 8,300) 16,100_/ 16,100 16,100 16,100 16,100 16,100 16,100 16,100 Long term loan repayment - _- - Total Debt Service _ 2,500 25,600 22,100 16,600 27,400 29,700 24,000 CASH BALANCE (after debt service) 6,900 _ - - - - - 21,600 445,400 143500 45, 100 040100 145,100 45,100 TOTAL USE 6,900 56,300 56,300 37,300 20,000 28,400 29,900 43;400 61,900 59,600 61,200 61;200 61,200 61,200 Working Capital - Permanent6/ - 5,500 5,700 6,500 9,900 10,900 11,100 11,400 11,400 11,400 11,400 11,400 11,400 11,400 - Steer Purchase (3 months) - 13,000 13,000 13,000 13,000 13,000 13,000 15,000 7,500 7,500 7,500 7,5oo 7,500 7,500 Herd Value (nearest G$10,oCO) 140,000 150,000 160,000 170,000 180,000 190,000 210,000 270,000 280,000 280,000 280,000 280,000 280,000 280,000 INCREMENTAL NET CASH FLOW Net income (before debt service) 6,900 (9,700) 12,900 15,500 9,800 16,100 25,200 43,400 61,900 59,600 61,200 61,200 61,200 61,200 Net income (without development) 6,900 6,900 6,900 6,900 6,900 6,00 6 6,9 6, 6 6,9 6,600 6 6,900 6900 6,900 Incremental net income - (16,600) 6,000 8,600 2,900 9,200 18,300 36,500 55,000 52,700 54,300 54,300 54,300 54,300 Incremental working capital- - (8,700) (300) (800) (3,400) (1,000) (200) (800) 1,900 - Incremental Working Capital .13,300 Investment - (830) (000 (1,40) --- - - - Incremental Herd Value 11447,000 NET CASH FLOW (7;3,00) (214,800°) ((6,600) (500) o,200 18,100 35,700 56,900 52,700 5I4,300 514,300 54,300 21ear60) (Year 20) Estimated Financial Rate of Return: 211 l/ Total sales, less operating expenses, to nearest hundred, excluding depreciation, including replacements. 2/ Balance of funds required annually if no cash drawings made (all profits reinvested); to be provided from short term borrowing (assumed in table) or ranch owners' equity contribution; excluding bridging finance for steer purchase. 3/ Including interest on 3 month steer purchase bridging finance. O/ On cumulative average loan drawn. '/ Subject to renegotiation if balancing finance (short term loan or equity) not available. T/ 50% of annual expenses, excluding steer purchase (see Annex 11). 7/ Permanent working capital plus 25% of steer purchase cost, for rate of return purposes. August 26, 1970. GUYANA BEEF CATTLE PROJECT IDCo Coastal Ranch (201000 ac) - C-m-eroial Herd Prolostion (See Annex 13 Page 2 for Stud Herd Projection Same Ranch) ---____--------------_------------------- End of Ranch Year ------------------- Opening RerdV/ 1 2 _ 3 4 5 9 9 10-20 herd Comosition Breeding Cas 1,300 1,824 2,904 3,485 3,643 3,664 3,800 3,800 3,800 3,800 3,800 Bulls 65 91 145 174 182 146 152 152 152 152 152 Calves Weaned (390) (520) (912) (1,742) (2,440) (2,550) (2,565) (2,660) (2,660) (2,66o) (2,660) Heifers - 12_24 months 1N0 195 260 456 871 1,220 1,275 1,282 1 330 1,330 1,330 Heifers - 24-36 months 300 958 485 550 442 845 1,183 1,237 1,244 1,290 1,290 Steers - 12-24 months 700 195 260 456 871 1,220 1,275 1,283 1,330 1,330 1,330 Steers - 24_36 months 0 658 185 250 442 845 1,183 1,237 1,245 1,290 1,290 Steers - 36-48 montho 0 - 625 178 121 - - - - - - Sub-Total AD 3,065 3,921 4,864 5,549 6,572 7,940 8,868 8,991 9,101 9,192 9,192 Purchased Steers 500 500 500 332 209 99 8 8 Total AU 3,065 4,421 5,364 6,049 7,072 8,440 9,200 9,200 9,200 9,200 9,200 Total Animals 3,455 4,941 6,276 7,791 9,512 10,990 11,765 11i,60 11,860 11o 860 11,860 Mortality Breeding Cows 78 91 116 104 109 110 114 114 114 114 Bulls 4 4 6 5 5 4 4 4 4 4 Heifers - 12_24 months 42 10 10 14 26 37 38 38 40 40 Heifers - 24-36 months 18 48 19 16 13 25 35 37 37 39 Steers - 12-24 months 42 10 10 14 26 37 38 38 40 40 Steers - 24-36 months - 33 7 8 13 25 35 37 37 39 Steers - 36-48 months - - 25 5 4 - - - - _ Purchased Steers - 25 20 15 15 15 10 6 3 - Total 184 221 213 181 211 253 274 274 275 276 Sales Cull Cms. 65 91 145 244 255 366 570 570 570 570 Cull Bhlls 3 4 7 17 31 22 23 23 23 23 Cull Heifers - 24-36 months 15 48 24 28 44 84 118 124 124 129 Surplus Heifers - 24-36 months _- - 124 346 392 399 438 Fat Steers 2/ - - 60C 294 546 820 1,148 1,200 1,208 1,251 Purchased Steers . 475 480 485 485 485 322 203 96 8 Total 83 618 1,256 1,068 1,361 1,901 2,527 2,512 2,420 2,419 Purchases RBlls 33 63 42 30 - 32 27 27 27 27 Heifers - 24-36 months 300 300 300 - - - - - Breeding Cows 400 4°° 400 - - - - - Steers - 12-24 months 500 500 50 500 _ 500 332 209 99 8 8 Total _1,233 1,26 1,242 530 500 364 236 126 35 35 Prod.otion Co-fficients Effective Calinig 40 50 60 70 70 70 70 70 70 70 Mortality - Adult % 6 5 4 3 3 3 3 3 3 3 Bull/Cmos % 5 5 5 5 4 4 4 4 4 4 Culling Rate -Cows % 5 5 5 7 7 10 15 15 15 15 - IBuls % 5 5 5 10 15 15 15 15 15 15 - Heifers - 24-36 months S 5 5 5 5 10 10 10 10 10 10 Stockiog Rate3/ ac/AU 4.3 3.5 3.1 2.7 2.2 2.0 2.0 2.0 2.0 2.0 Extraction Rate4/ 6 1.9 2.5 6.5 6.5 8.4 12.4 18.9 19.6 19.6 20.3 1/ Opening herd repres.oto -attle from Gover=ent farm and immature steers and heifers purchased on the maroket. 2/ Steer fat at 900 lb liosa.ight. 3/ Calculated on total for co=-ercial and stud herd; stocking to capacity. :/ Sales as percentage of total herd excluding purchased steers. August 28, 1970 GUYAHA BEEF CATTIE PROJECT LDCo Coastal Ranch (20,000 ac) Stud Herd Projection (See Annex 13 Page 1 for Commercial Herd Projection - Same Ranch) Opesisgl/ _ _--- - - - -- - - ------------ End of Ranch Year ---------8---------2 Herd 1 2 3 4 5 P H 9 10 11 12-20 Herd Co-position Stud COme 26 135 144 182 219 279 308 348 350 350 350 350 350 Bulls 2/ 2 4 5 6 6 9 10 11 11 11 11 11 11 Calves Weaned (20) (23) (119) (127) (160) (193) (246) (271) (306) (308) (308) (308) (308) Heifers - 12-24 months 10 4k 42 90 64 Ho 97 123 136 153 154 154 154 Heifers - 24-36 months - 10 39 41 89 63 79 96 122 134 151 152 152 Bulls - 12-24 months 10 10 11 59 63 80 93 118 130 148 149 149 149 Steers - 12-24 .onths - - - - - - 3 5 5 5 5 5 5 Steers -24-36 months - - - - - - - 3 5 5 5 5 5 Total AU 48 199 241 378 441 511 590 704 759 806 825 826 826 Total Animals 68 222 360 505 601 70k 836 975 1,065 1,114 1,133 1,134 1,134 Mortality Stud Ca-s - 1 1 1 2 2 3 3 4 4 4 4 4 Bulls - - - - - - - - - - - - - Heifers -12-24 -m ths - - 1 1 1 1 1 1 1 2 2 2 2 Heifers - 24-36 months - - - - - 1 1 1 1 1 1 1 1 Bulls -12-24 moths - 1 I _ 1 - - 1 1 1 1 1 1 Steers - 12-24 months - - - - - - - - - - - - - Steers - 24-36 months - - Total - 2 2 2 4 4 5 6 7 8 8 8 8 Sales Heifers - 24-36 months - - - - - - - 49 76 87 103 104 Bulls - 12-24 months - 9 10 11 56 56 74 85 110 122 139 140 i4O Steers - 24-36 months - - - - - - - - 3 5 5 5 5 Cull Bulls - - - - 1 1 1 1 1 1 1 1 Cull Cows - - - - - 22 27 31 35 35 35 35 35 Cull Heifers - 24-36 onths - _ - - 2 4 3 4 5 6 7 8 8 CullH ulls - 12-2J)mnsnth- - - - 2 3 4 5 6 6 7 7 7 Total - 9 10 11 6o 86 109 126 209 251 281 299 300 Import Purchases BuEls - 2 1 1 - - - - - - - - - Cons - 110 - - - - - - - - - - Heifers - 12-24 months - 30 30 30 Total _ 142 31 31 Production Coefficients 3/ Effective Calving % 88 88 88 88 88 88 88 88 88 88 88 88 Mortality - Adult 4/ % 4 1 1 1 1 1 1 1 1 1 1 1 Bull/C- Rati. 5 3 3 3 3 3 3 3 3 3 3 3 3 Calling Rate - Cows % - - - - 10 10 10 10 10 10 10 10 - Bulls (Adult) S - _ _ 10 10 10 10 10 10 10 10 10 -Bulls (12-24 km ths) % - - - - 5 5 5 5 5 5 5 5 -Heifers - 24-36 mnths % 3 3 3 3 5 5 5 5 5 5 5 5 Extraction Rate 5 4.1 2.8 2.2 10.0 12.2 13.0 12.9 19.6 22.5 24.8 26.4 26.5 1/ Opening herd existing Government Brahman stud herd. !/ Bull ratio to neat highest whale nunber. 3/ Stocking rate calculated in conjunction with commercial herd on sam ranch. :.: 4/, Total mortality; individual mortalities adjouted to whole nanbers. August 28, 1970 AiNNEX 14 B3 E CiTTLE PFb,2ECr LDGo Rupununi Ranch (200,000 ao) - Herd Projection - - - - - - - - - - - - - - - - - - - - - End of Ranoh Year - - - - - - - - - - - - - - - - - - - - - - _ Opentng Herd_1/ 1 2 3 4 5 6 7 a 9 10 11-20 Herdoe,posttion Breeding cows 1,500 1,624 1,874 2,121 2,248 2,218 2,500 2,500 2,500 2,500 2,500 2,500 Dulla 30 81 94 106 112 i16 125 125 125 125 125 125 Zalves Weaned (530) (600) (812) (1,218) (1,379) (1,574) (1,623) (1,750) (1,750) (1,750) (1,750) 1,750 Heifers - 12-24 months 265 265 300 406 609 689 787 811 875 875 875 875 Heifers - 24-36 moanth 248 402 402 438 394 i91 668 763 787 849 849 849 Steers - 12-24 months 265 265 300 406 609 690 787 812 875 875 875 875 Steers - 24-36 months 248 252 252 288 394 591 669 763 788 849 849 849 Steers - 36-48 ronths 230 236 239 242 279 382 573 649 740 764 824 824 Steers - 43 MOuthm Plus 214 218 112 57 - - - - - - - - Oull Cows - 75 81 47 _ _ _ _ _ _ _ Sub-Total AU 3,000 3,418 3,654 4,111 4,645 5,377 6,109 6,423 6,690 6,837 6,897 6,897 Purchased Steers - 350 350 350 500 500 400 200 - - - - Total AU 3,000 3,768 4,004 4,461 5,145 5,877 6,509 6,623 6,690 6,837 6,897 6,897 Total Animals 3,530 4,368 4,816 5,679 6,524 7,451 8,132 8,373 8,440 8,587 8,647 8,647 Hortality Breeding cows - 75 81 75 64 67 70 75 75 75 75 75 Bulls - 2 4 4 3 3 3 4 4 4 4 4 Heifers - 12-24 months - 13 13 12 12 18 21 24 24 26 26 26 Reifers - 24-36 months - 12 20 16 13 12 18 20 23 24 25 25 3 ee-s - 12-24 nonths - 13 13 12 12 18 21 24 24 26 26 26 Steers - 24-36 months - 12 13 10 9 12 18 20 23 24 25 25 Steers -36-48 wonths - 12 12 10 7 8 11 17 19 22 23 25 Steers 1-, months pl.s - 11 11 4 2 - - - - - - - .ull Cows - - 4 3 1 - - - - - _ _ Purchased Steers - - 18 14 10 15 15 12 6 - - 2otal - 150 189 160 133 153 177 196 198 201 204 206 .ull Gows - - 71 124 258 225 232 250 250 250 250 250 >ull Bulls - 1 4 5 11 11 12 12 12 12 12 12 Jull feifers - 24-36 months - 12 20 20 22 20 30 33 38 39 42 42 Surplus Heifers - 24-36 months - - - - - - 59 290 377 399 L57 457 Fat Steerso/ - 203 319 281 290 271 371 556 630 718 741 799 3ub-Total - 216 414 430 581 527 704 1,141 1,307 1,418 1,502 1,560 Purohased steers - 332 336 340 485 485 388 194 - rot 1 216 746 766 921 1,012 1,189 1,529 1,501 1,418 1,502 1,560 Purchases Bulls _ 54 21 21 20 18 24 16 16 16 16 16 Breeding Cows - 50 50 50 - - - - - - - - Heifers - 24-36 -onths _ 150 150 150 - - - - - - Steers - 350 350 350 500 500 400 200 - - - Total - 604 571 571 520 518 424 216 16 16 16 16 Peaduction Zoeiffci nts cfrentioe Calsing S 4° 50 65 65 70 70 70 70 70 70 73 Iortality - Adult% 5 5 4 3 3 3 3 3 3 3 3 3ctractitn Rate - 5.3 7.0 8.1 9.6 7.6 9.1 14.0 15.5 :6.5 17.4 18.0 Bull/Cow Ratio % 5 5 5 5 5 5 5 5 5 5 5 Culling Rate- Cows % 5 5 5 10 10 10 10 10 10 10 13 -Bulls 3 5 5 10 10 10 10 10 10 10 1Z _ eifrs- 24-36 wo.% 5 5 5 5 5 5 5 5 5 5 Sto-king Rate AU/ac 1V53 1/50 1/45 1/39 1/34 1/31 1/30 1/30 :/29 1/29 1/29 1/ Opening herd comprises cattle fmL Oseernsment fares and those confiscated during 1968 rebellion. 7' Steer fat at 900 lb liveweight. 3/ Sales as percentage of total herd including purchased cows and excluding purchased steers. August 28, 1970 GUYANA BEEF CATTLE PROJECT LLCo Sales, Purchases, ExPenses and Net Revesue S. Coastal Co=ereitl Herd - Sales and P,rchases Unit Value Years YearB ----------------- Ranch Yea ------------------------ 1-5 6-20 1 2 3 4 5 6 7o 9 10 11-20 Sales Cull Ceas 110 145 7,150 10,010 15,950 26,840 28,050 53,070 82,650 82,650 82,650 82,650 82,650 Cull Bulls 250 315 750 1,000 1,750 4,250 7,750 6,930 7,250 7,250 7,250 7,250 7,250 Call Heifers 135 170 2,030 6,580 3,240 3,780 5,940 14,280 18,530 2o,o6o 21,080 21,080 21,930 Surplus Heifers - 170 - - - 21,080 58,820 66,640 67,830 74,460 74,460 Fat Steers 200 250 - - 120,000 58,800 109,200 205,000 287,000 300,000 302,000 312,750 312,750 Parohased Steers 170 220 - 80,750 81,620 82.550 82.550 ~~~~~~ ~~~~~106,0 70,850 44,660 21,120 i,760 1,760 Tse Steea 1 98,250 22,550 176,120 233,390 10700 525,090 921,260 901,'930 499,950 500,80 Purchases (nearest G$100) Bulls 250 700 8,300 15,800 10,500 7,500 - 22,400 18,900 18,900 18,900 18,900 18,900 Breeding Cows 225 - 90,000 90,000 90,000 Neifers - 24-36 months 100 - _ 30,0 30,000 30,0^0 Sub-total 120,300 135, 00 130,500 Steers - 12-24 months 135 170 67 500 67 500 67,500 67,500 67,500 56,400 35.500 16,800 1,400 1.400 1.400 Total 19 00 03 300 19,000 7000 00 00 3700 0300 000 00 IT. Coastal Stud Herd - Sales and Purchases Sales HNifers - 24-36 months - 500 - - - - - - - 24,500 38,000 43,500 51,500 Bulls - 12_24 months 700 700 6,300 7,000 7,700 39,200 39,200 51,800 59,500 77,000 85,400 97,300 98,000 Steers - 24-36 msnths 250 20 - - - - - - - 750 1,250 1,250 1,250 Cull Bulls 300 300 - - - - 300 300 300 300 300 300 300 Cull Crs 225 225 - - - - 4,950 6,080 6,980 7,880 7,880 7,880 7,880 Cull Heifers - 24-36 mnnths 200 200 - - - 400 800 600 800 1,000 1,200 1,400 1,600 Cull Bulls - 24-36 mnnths 400 400 - - - 800 1.200 1,600 2,000 2.400 2,400 2,800 2.800 Total 6,300 7,000 7,700 40, 0 03 9 0 11330 3 154,430 163 330 Purchases Bulls 4,000 8,000 4,000 4,000 - - - - - _ - - Cows 2,000 220,000 - - eifters - 12-24 months 1,500 45,000 45,000 45,000 Total 373,000 59,000 59,0 III. Rupununi Nerd - Sales and Purchases Sales Cull Cows 110 130 - 7,010 13,640 28,380 24,750 30,160 32,500 32,500 32,500 32,500 32,500 Cull Bulls 225 280 230 900 1,130 2,250 2,480 3,360 3,360 3,360 3,366 3,360 3,360 Cull Heifers - 24-36 months 100 120 1,200 2,000 2,000 2,200 2,000 3,600 3,960 4,560 4,680 5,040 5,050 Surplus Beifers - 24.36 months - 160 - - - - - 9,440 46,400 60,320 63,840 73,120 73,120 Fat Steers 195 245 39,590 62,200 55,00 55,550 52,800 90,900 136,220 154,350 175,910 181,550 195,760 Sub-total 51,020 72,910 71,570 88,3b0 02,030 135,550 222,540 255,090 200,290 295,570 309,780 Purchased Steers 170 200 - 56,450 57,120 57,800 82,450 97,000 77,60o 38.800 - - Total 51,020 229,300 '28,690 146,100 165,5d0 235,560 300,050 293,890 280,290 299,970 309,780 Purechose s Bulls 290 350 15,660 6,090 6,o90 5,000 5,220 8,400 5,6oo 5,600 5,600 5,600 5,600 Breeding Coes 200 - 10,000 10,000 10,000 Heifers - 24-36 seethe 95 - 14,250 15,250 14,250 Sob-total 39,910 30,350 30,350 Steers 130 1S0 455,500 55,500 5,500 65,000 65,000 60,000 30,(00 - Total 5,510 7 7575,0 70,00 70,2Ž0 60,500 35,600 5,600 5,600 5,600 5,600 August 28, 1970 LDCo Sales, Purchases, Expenses and Net Revenue (Cont'd) (Ouyanee dolars) IV Expenses Unit Value Years Years -----------------------------------------------------------------Ranch Year ------------------------------------------------- ------ 1_5 6-20 1 2 3 4 5 6 7 5 9 10 11-20 A. Coastal Commercial Herd Fixedi/ 62,750 66,700 70,850 82,840 67,340 67,340 67,340 67,340 67,340 67,340 67,340 Breeding stock --- Included in Investment ----- 7,500 - 22,400 18,900 18,900 18,900 18,900 18,900 Steer purchase 67,500 67,500 67,500 67,500 67,500 56,400 35,500 16,800 1,400 1,400 1,4o0 Variable 0$2Aead/ 9,880 12,550 15,580 19,020 21 ,980 23,530 23720 23,720 23,720 23,720 23,720 Sub-total b 1,750 153,30 176,560 156,820 169,670 145,460 126,760 t11,350 111,360 111,360 B. Coastal Stud Herd Stud Master 5,000 5,000 5,000 5,000 6,000 6,000 6,000 6,000 6,000 6,ooo 6,000 Variable G$20/head 4.440 7,200 10,100 12,020 14,080 16,720 19,500 21,300 22,280 22,660 22.680 Sub-total 9,440 12,200 15,100 17,020 20,050 22,720 25,500 27,300 22..2(0 28,660 28,630 C. Rupoununi Herd Fixed-1/ 58,000 64,900 65,500 76,500 77,300 77,300 77,300 77,300 77,300 77,300 77,300 Breeding stock ---- Included in Investment --- 5,800 5,220 8,400 5,600 5,600 5,600 5,600 5,600 Steer purchase 45,500 45,500 45,500 65,0o0 65,000 60,ooo 30,000 - - - - Variable G$2.50/headV 10.920 12,030 14,200 16 310 18,630 20,330 20.930 21. 2,470 21,620 21,620 Sub-total 114,420 122,430 125,200 163 610 166,150 166 030 133,830 1013104,520 104,520 V Net Revenue SALES Table I 9,930 98,240 222,540 176,120 233,390 407,060 525,o90 521,260 501,930 499,950 500,800 Table II 6,300 7,000 7,700 40,400 46,450 60,380 69,580 113,830 136,430 154,430 163,330 Table III 41,020 129,350 128,690 146,180 164,480 234,460 300,040 293,890 280,290 295,570 3092780 Total Sales 57,250 234,590 358,930 362,700 444,320 701,00 B94,710 928,980 915,650 949,950 973,910 EXPENSES Table IV A 140,130 146,750 153,930 176,860 156,820 169,670 145,460 126,760 111,360 111,360 111,360 B 9,1440 12,220 15,100 17,020 20,080 22,720 25,500 27,300 28,280 28.660 28,680 C 114,420 122,430 125,200 163,610 166,150 166,030 133,830 104,000 104,370 104,520 104. 20 Total Expenses 263,990 21,400 294,230 357,490 343;050 358,420 304,790 258,060 2424,010 244,540 244J560 NET REVENUE (206,740) (46,810) 64,700 5,210 101,270 343,700 589,920 670,920 674,640 705,410 729,350 1/ Includes General Nanager: Total cost G$50,000 per year, of which G$12,500 charged to project technical services. 7/ Dipping G$0.50; supplements G$0.50; vaccines and veterinary G$1 .00/head/year T/ Supplements G$1 .50; vaccines and veterinary G$l.00/head/year _ August 28, 1970 GUYANA BEEF CATTLE PROJECT LDCo - Financial Projection (Guyanese dollars) 1 2 3 4 5 6 7 8 9 10 11 12 13-20 SOURCE AND USE OF FUNDS SOURCE Net income (before debt service) / (206,700) (46,800) 64,700 5,200 101,300 343,700 589,900 670,900 674,600 705,400 729,400 729,400 729,400 Share subscriptions 1,750,000 250,000 Short term loans (or equity) i ' 129,300 285,100 446,ooo 4oo,000 85,800 Long term loans SO 93 900 TOTAL SOURCE 2,244,500 526,700 '7, 900 290,300 547,50 743s700 675,700 USE Assets purchased or transferred 1,250,000 New investments LDCo contribution 175,200 80,900 73,500 Investment of loan funds 701,200 323,500 293,900 TOTAL NEW INVESTMENT 876,400 404, 400 367,400 Working capital addition (permanent) 75,500 8,700 6,400 21,900 (7,200) 15,700 (1,400) 1,000 700 300 Debt service Short term loan interest (81%) (including interest on bridging finance)2/ 2,400 2,800 13,800 26,700 39,300 34,400 7,300 Short term loan repayment 129,300 285,100 446,000 400,000 85,800 Long term loan interest (92%)y/ 33,300 82,000 111,300 125,300 242,700 242,700 242,700 242,700 242,700 242,700 242,700 242,700 Long term loan repayment _ _ _ _ . - Total Debt Service 33,300 64,400 114,100 ,400 ,00 728,000 677,100 335,800 CASH BALANCE (after debt service) 9,300 29,200 - - - - 100 431,200 462,1400 486,700 486,700 729,400 TOTAL USE 2,244,500 526,700 487,90 290,300 -56j,300 743,700 675,700 670,900 674,600 705,400 729,400 729,400 729,400 Working Capital - Permanent 75,500 84,200 90,600 112,500 105,300 121,000 119,600 120,600 121,300 121,600 121,600 121,600 121,600 - Steer purchase (3 months) 113,000 113,000 113,000 132,500 132,500 116,400 65,500 16,800 1,1400 1,400 ,400 1,400 1,400 Herd Value G$ (thousands - rounded) 780 1,400 1,740 2,010 2,270 2,610 3,460 3,610 3,690 3,750 3,780 3,780 3,780 INCREMENTAL NET CASH FLOW Net income (before debt service) 1] (206,700) (46,800) 66,100 5,200 101,300 343,700 589,900 670,900 674,600 705,400 729,400 729,400 729,400 Incremental working capital Z/ (103,700) (8,800) (11,200) (23,000) 12,300 3000) 13,600 2800 (700) (200) 200) Assets transferred or purchased (1,250,000) - - (17,800) 113,600 340,700 603,500 673,700 b73,900 705,200 729,200 729,400 720,400 New investment (8766400 14014,400) (367 400) Working Capitaa 121,900 NET CASH FLOW (2, 3,00 (0,000) -312,500) Herd Value 3 780 000 4',63l, 3°° NOTES:_____________________________________________________________ Estimated financial rate of return 13% (Year 20) NOTES: Total sales, less operating expenses, to nearest hundred, excluding depreciation, including replacements. Balance of funds required annually; excluding bridging finance for steer purchase. Including interest on 3 month steer purchase bridging finance. / On cumulative average loan drawn. )/ Subject to renegotiation if balancing finance (short tenm loan or equity) not available. 50( of annual expenses, excluding steer purchase. V Permanent working capital plus 25% of steer purchase cost, for rate of return purposes. September 2, 1970 ANNEX 17 GUYANA BEEF CATTLE PROJECT Cost of Technical Services (Guyanese dollars) Foreign Project Year Total Exchange Expenditure Items 1 2 3 4 5 Cost Component Operating Expenses Project Director IJ 80,000 80,000 80,000 80,000 80,000 40o0,000 100 Ranch Manager LDCo p 12,500 12,500 12,500 -- -- 37,500 100 Deputy (Technical) 12,000 12,500 13,000 13,500 14,000 65,ooo -- Deputy (Administrative) 10,000 10,400 10,800 11,200 11,600 54,000 -- Project Loan Techni- cians 3 21,000 22,250 23,500 24,750 26,000 117,500 -- Travel 4 7,000 7,000 7,000 7,000 7,000 35,000 -- Transportation 5/ 7,000 7,000 7,000 7,000 7,000 35,000 20 International Travel i 6,ooo 6,ooo 6,ooo 6,ooo 6,ooo 30,000 100 Other 7/ 13,000 13,000 13,000 13,000 13,000 65,ooo -- Contingencies 14,500 13,350 12,200 10,550 9,400 60,000 57 Subtotal 183,000 184,000 185,000 173,000 174,000 899,000. 57 Capital Exenditures Vehicles g 33,000 __ __ 15,000 15,000 63,000 80 Office Equipment 15,000 -- -- -- -- 15,000 50 Contingencies 4,800 -- -- 1,500 1,500 7,800 67 Subtotal 52,800 -- -- 16,500 16,500 85,800 67 Total 235,800 184,000 185,000 189,500 190,500 984,800 58 / Includes salary, dependency allowance, staff benefits, education, storage, car ship- ments and furniture, air-freight, home leave, resettlement transportation, briefing in Washington, housing utilities, resettlement duty station and contingency. / 25% of LDCo ranch managers salary paid by Project for 3 years for his services in on-ranch training of local managers and cowboys. Includes 5 technicians. I Estimated 350 man-days/year at G$20/day. z/ Operating costs, 4 project vehicles, local air travel and limited light aircraft charter. i Project Director approximately 3 months; other staff approximately 6 months each. 7 Includes secretarial help G$8,000/year; driver/messenger G$1,500/year, administra- tion, rent and services G43,500/year. Four four-wheel drive vehicles, 2 replaced in year 4 and 2 in year 5; and lightweight canoe outboard motor. August 27, 1970 ANEX 18 Page 1 GUYANA BEEF CATTLE PROJECT Draft Terms of Reference for Project Director, Deputy ProJect Director (Technical) and Deputy Proj ect Director (Administrative) Project Director The Project Director will: a) be a diploma or degree graduate, preferably specializing in animal husbandry or related activity; b) have at least 5 years practical experience in beef cattle production, preferably associated with pasture development in an environment ecologically similar to the Guyana Coastal and Rupununi Savannas; c) be responsible to the Governor of the Bank of Guyana for implement- ation of the project in accordance with policies laid down by the Livestock Advisory Committee (LAC) in consultation with Government and International Development Association (IDA); d) advise LAC on major policy decisions required for the project; e) cooperate with the Bank of Guyana and the participating banks in carrying out the project; f) recommend to the Governor of the Bank of Guyana, terms and condit- ions of employment to attract well qualified staff; g) recommend employment of such project staff for the Livestock Projects Department (LPD) of the Bank of Guyana as he considers necessary to c.arry out the project, the intention being that he will head a staff initially comprising a Deputy Project Lirector (Technical) a Deputy Project Director (Administrative), approx- imately 5 Livestock Credit Technicians and supporting staff; h) prescribe the duties and responsibilities of the Livestock Credit Technicians, train them and supervise their work; i) assist the Governor of the Bank of Guyana in selection of project staff for overseas training and arrange such training in consultation with the Livestock Division of IDA; Annex .18 Page 2 j) with tha assistance of tho Dcputy Project Directors, help In the formaston of group ranches and advise participating ranchos in iocbn ranching and ranch mi=goawnt tochniques; k) recommend to the Project Loan Committee, approval or rejection of loan applications, including ranch development plans, on technical and economic grounds but without responsibility for advising on the creditworthiness of applicants which wculd be the prerogative of participating banks; 1) ensure that no changes are made in ranch development plans without his approval.; m) supervise and assist the managers of participating ranches in the execution of their duties; n) ensure the frequent supervision of participating ranches by pro- ject staff and advise a participating bank to suspend disbursement of, or to call in, a loan if ranch development is not being carried out to his satisfaction; o) recommend to the employer of a ranch manager of any participating ranch, the termination or suspension of their manager, if he is inefficient or fails to comply with the agreed ranch plans ; and P) train a successor of Guyanese nationality, to take over on termina- tion of the Project Directorts contract Deputy Project Director (Technical) The Deputy Project Director (Technical) will: a) be a locally appointed technician experienced in the Guyanese livestock industry.; b) be responsible directly to the Project Director and assist him with his duties ; c) assume responsibility for project management during the absence of the Project Director; and d) work closely with the project technicians and ranch managers to ensure that the technical and managerial guidelines laid down by the Project Director are carried out; ANNEX 18 Page 3 De~u Poiot Director- (ASt.nistrative) The Deputy Project Director (Administrative) Vill: a) be a local appointee twith experience in cooperative organization b) be responsible to the Project Director primarily for assisting him in setting up group ranches (including comapanies and partner- ships) as detailed in Annex 4; c) make frequent supervision visits to all group ranches after they have been established and advise group ranch management committees and their ranch managers on administrative matters; and d) ensure, and assist in the establishnent of a suitable accounting system for each group ranch and supervise group ranch accounts, September 11, 1970 "root Cost lumer of Duit Cost ------ G$ (thoess ) ----- % Foreign Inits at Local foreign Total cOhanga On-ranch Investment Fencing Coastal &W mi 750 207 203 150 45 Rupununi 506 Si 850 236 194 430 45 Sub-total 15 45 Pasture Clearing 13,250 30/ha 314 54 398 21 Sowing 13,250 20/ac 26 239 265 90 Seed 2,500 12/ac 3 27 30 90 Seed Production 100 45/ac 2 5 45 Sub-total 3 w 698 Machinery Tractors and implemente 65 hp 17 12,000 41 163 204 80 Tractors and implnts 35 hp 12 8,ooo6 1/ 20 80 100 80 4 wheel drive vehicles 19 7,500 29 114 143 80 Engines, pumps, tools, etc. - - 27 110 80 Sub-total 1I7 80 Ranch Buildinige Ranch houses 16 8,000.1/ 81 54 135 4.0 Bunk houses 16 6,000 62 34 96 35 Barns and shade 16 5,000 60 20 80 25 Outstations 50 1,500 56 19 75 25 Corrals, yards, etc. - - 186 80 266 30 Sub-total 07. 32 Other Wells, drainage, saddlery, vet 233 190 423 45 equipmaent, R/telephone - - - Sub-total 1,624 1,613 3,237 48 Livestock Horses 480 300 108 36 144 25 Semen 26,45 3/7/ampule 19 169 188 90 Imported breeding stock 47 424 471 90 Local breeding stock 922 - 922 0 Sub-total 1,096 2T 1,725 36 Total New On-ranch Investment 2,720 2,2142 4,962 144 LDCo Transferred Assets./ Buildings and installation 240 - 240 - Livestock 1.010 - 1 010 Sub-total 1,250 - i Working CapitalV/ 490 50 540 9 Clearing Rouipimnt 2 160,000 70 250 320 78 Technical Services 385 532 917 58 (See Ann 17) Developmental Studi.-/ 40 200 240 83 Sub-total 4,955 3,274 8,229 40 Contingency/Roundingg/ 285 356 641 48 TOTAL 5,240 3,630 8,870 39 NOTES: 1/ LDCo 1haznuni ranch G$10,000. 2/ LDCo Coastal Ranch Manager's house 0*15,000. G G$20/aqpule for 120 unite stud semn on LDCo stud herd. Nil contingency. / Approximately 10%, except Clearing Bquipment 25%. Augast 27, 1970. GUYANA BEEF CATTLE PROJECT Livestock Devel ent Fund - Cash Flow ------------------------------------------------------------- Year -------------------------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 BASIC DATA Totals 1. Total on-ranch investment 1,537 1,654 1,528 584 156 5,459 2. Clearing equipment - 400 - - - 4DQ 3. Sub-total 1,537 2,054 1,528 584 156 5,859 4. Ccmercial bank loans (80% of 3) 1,229 1,643 1,223 467 125 4,687 5. IDA credit/rediscounts (75% of 4) 922 1,232 917 350 94 3,515 6. Comsercial bank contribution (25% of 4) 307 411 306 117 31 1,172 SOURCE AND USE CF FUNDS SOURCE IDA credit for: Commercial bank loan rediscount 922 1,232 917 350 94 3,515 LPD operation2_/ 145 107 107 1o6 106 571 Sub-total 1,067 1,339 l,o24 456 200 Service feel/ 1,3 , 9 16 20 20 0 1 16 13 11 7 4 1 Interest received4/ 28 1015/ 1145 185 91 27 15 - - - - 15 - Repayment annuities (commercial banks): On-ranch development loans - - - - 288 457 530 530 530 530 530 530 242 73 Clearing equipment loans - - 69 69 69 69 - 69 69 69 69 - 69 69 TOTAL SOURCE 1,098 1,449 1,254 730 668 572 562 61 612 610 606 549 312 1 USE Loans rediscounted 922 1,232 917 350 94 - 240 - - - - 240 - - Cost of LPD (Annex 17) Chargeable to le,nding program 214 162 163 98 64) Not chargeable7J 22 22 22 92 126) 636/ 63 63 63 63 63 63 63 63 .,Sub-total 236 1814 185 190 190) BALANCES (60) 33 152 1 384_ 509 259 552 5149 547 54 246 2149 79 TOTAL USE 19 1,149 1,2 COST OF SERVICING IDA CREDIT 5 14 21 25 26 26 26 26 26 26 44 44 43 43 1/ Excluding G$1.25 million transferred assets financed by LDCo share capital 7/ Foreign exchange component 3/ On average on-ranch investment loans outstanding (excluding clearing equipment loans) 6% on loans rediscounted except 8% on Amerindian loans (Government guaranteed). i/ Includes first year's interest on clearing equipment loans. 6/ Cost chargeable to supervision of lending program 7/ Amount chargeable to future lending program / (Contributed by) or available to Government. Accumulated total G$4.2 million (G$3.7 million after servicing IDA credit to Year 14). August 28, 1970 :hoi -:: Q? rter CL To r i.T --- ----------------------- Qar t er----------------------------------- To ,al. 1 2 3 Li 1570/71 Disbursed - 10 80 80 170 Undi,buirse:l 2,200 2,190 2,110 2,030 1-71/72 Disbursedl 150 160 160 160 630 Undisbursc 3 1,830 1,720 1,560 i,L4oo 1972/73 Disbursed 170 170 170 1l7n 680; Undisbursed 1,230 1,060 890 720 1973/74 Disbursed 120 110 110 110 450 Undisbursed 600 490 380 270 1974/75 Disbursed 100 90 80 - 270 Undisbursed 170 80 - Tot:1 2,2^2 September 9, 1970 GUYANA ANNEX 22 Page 1 BEEF CATTLE PROJECT Rate of Return to the Economy Rate of Return to the Economy 1. The estimated rate of return of the Project to the economy of Guyana is 20% as calculated from the attached table. The following paragraphs explain the rationale by which the component values were determined. Incremental Net Income 2. Incremental net income is taken from the models projected in Annexes 8, 12 and 16 multiplied by the number of units of model size expected to enter the Project in each of the first three years. Annual net income without development is deducted from annual net income with development, to arrive at incremental net income attributable to the Project. Since expenses are higher with the Project than without, and income is slow to build up, the increment is negative for the first few years. Shadow Wage Rate 3. There is 20% unemployment and underemployment in agriculture, and the current official wage rates overstate the cost of labor to the Guyana economy. However, if this wage cost in ranch expenses is reduced by 25% (G$3 per day instead of G$4) the effect on the rate of return would be less than one percent. Adjustment for Transport 4. Air freighted beef from Rupununi is subsidized at a rate of G$0.05 per pound. The cost to the economy is therefore increased by the annual weight transported multiplied by G$0.05. Investment 5. On-ranch investment cost is taken from the models in Annexes 5 and 9, multiplied by the number of units of model size, as in para 2 above. Adjustment for Taxes 6. Since import duties and taxes are transfer payments and not true costs to the economy, the amounts paid by the farmer and included in the farm financial projections are added back. ANNEX 22 Page 2 Technical Services 7. Technical services include training and staffing for post-project phases of beef cattle production and not all the cost of these services should be charged against the economic cost of the project. The cost of the project director, plus approximately half the cost of supporting staff, is included during the first three years, and this is gradually reduced as the need for on-farm appraisal and supervision declines and staff is transferred to other duties. Discount Period 8. Ranches are considered to have an economic life of 20 years, the assumed life of buildings and installations which form a significant part of project cost, and the net balances are discounted over that period. If they are discounted over 15 years or 12 years, the effect would be negligible (less than one percentage point, after rounding). October 20, 1970. GUINA BgF CGTLE PROJECT Rate of Return to the Econo ' G$ (thousand) I N I r I T S---- -- ----- -T---- - -------------C0STS- ---------- Inore eta1 Herd I/ Total AdJwut ent Working Adjuatmant Tedhnical Total lNt year 2t* Incoe Values _tAntits for Tranaport Capital I tfltmnt for tax SBoone"C b$0a lemalt 1 (301) (301) (3) 211 1,537 (25) 2114 1,S34 (2,23%) 2 (141) (1341) 26 148 1,654 / (35) 162 1,955 (2,0a6) 3 102 102 32 87 1,528 (31 163 1,779 (1 67t 4 91 91 40 89 584 (13 98 79. 70 5 285 285 49 52 156 () 64 316 6 826 826 65 54 63 162 7 1,694 1,694 Bo 31 63 174 I, 8 2,443 2,443 82 18 63 163 20 9 2,881 2,881 82 (3) 63 142 2 T,1 10 3,132 3,132 82 (3) 63 142 2z, 11 3,255 3,255 82 63 2dS 3,1N * 12 3,273 3,273 82 63 lI5 3,128 13 3,273 2,273 82 63 145 3,126 14 3,273 3,273 82 63 1 ).2I 15 3,273 3,273 82 63 I5 3,121 16 3,273 3,273 82 63 1.5 3,321 17 3,273 3,273 82 63 1I5 3,121 18 3,273 3,273 82 63 1.5 3,326 19 3,273 3,273 82 63 ).3,2 20 3,273 6,610 9,893 82 (319) 63 lo-? 21 2,389 3,730 6,119 25 (255) 40 (74 623C 22 1,238 1,640 2,878 12 (110) 20 2 The estimated rate of return to the ecocc' is 20% ~/ Residual herd ialeas (Incrsmutal) Year 20 Year 21 Tear 22 Coastal 449 x 5 ; x 7 ¶14 x3 3 Rapummi .147 x 4 588 x 4 588 x 2 294 LDCo 3,780 x 1 3.780 E/ xcluding clearing equipment (clearing costs included in on-ranch investment). GUYANA BEEF CATTLE PROJECT PROJECT ORGANIZATION BANK OF GUYANA (TRUSTEE) LIVESTOCK ADVISORY COMMITTEE Govemor, Bank of Guyana Representatives (4) of: Ministry of Agriculture PARTICIPATING BAN KS Ministry of Economic Development j Participating Banks Cottlemen's Association Project Director (Executive Secretary) PROJECT EXECUTIVE- COMMITTEE Representatives (one each) of: Ministry of Agriculture (Chairman) Ministry of Economic Development Govemor Bank of Guyana Project Director LIVESTOCK PROJECTS DIVISION Project Director Deputy Director (Technical) Deputy Director (Administrative) 5 Livestock Credit Technicians IBRD - 4927(3R) GUYANA ) - BEEF CATTLE PROJECT-: -IJ -I/ 8 \ - Kni4MTERs MO o 3 s O 7 Mathw ' 7~ ' ? 5toRs >, c Rid3 ge r < , itry> \r Ws \|1 t 5t ) ) 8 9 %~~~~~~~~~~~~~~~~~~~~~~~~~~~~I C .~) {/' >\ ,/r Wimf Ro.ds { 'r - ~ ~ ~ , - -,, -T.l S U R I N A M Rcilwrys 2^>b:{Aoez0< Airstrips or Godop: _ I.ndi ng poos. uph.k 7%< R.pids or folls 3poi (j; Mountoins oF over 600 feet }ewt KX in elevotion (sche..tl.) {ftlgnmiu 4gC C/.,- CoSt.1 Project Areoa A s B .R A; L0).0h AUGUST~~ ~ ~ ~ 197 IBR 2967Rc K*gna,¢ < °)