Ex-post Evaluation

1. Outline of the Project

Country:

Paraguay

Project title:

Marketing Improvement Project on Vegetables and Fruits in the Republic of Paraguay

Issue/Sector:

Agriculture

Cooperation scheme:

Project-type Technical Cooperation

Division in charge:

Livestock and Horticulture Division, Agricultural Development Cooperation Department

Total cost:

711 Million Yen

Period of Cooperation

Fiscal Year 1990 – 1997

Partner Country’s Implementing Organization:

Ministry of Agriculture and Livestock (MAG)
Municipal Office of Asuncion

Supporting Organization in Japan:

None

Related Cooperation:

Project-type Technical Cooperation; “Improvement of the wholesalers in the Food Supply Central Market of Asuncion”

1-1 Background of the Project

The Municipal Office of Asuncion has built a food central market of Asuncion (DAMA) to modernize food distribution including vegetables and fruits. In relation to this, the Government of Japan had implemented the Seven-year Project-type Technical Cooperation “Improvement of the wholesalers in the Food Supply Central Market of Asuncion”, since December 1981.

Through the Project, the basic system of the Market was developed, however DAMA had not introduced the quality standards to the producers and the market information supply system such as wholesale price and quantity was not yet developed, and it was necessary to establish a more reasonable market distribution system.

Under these circumstances, in 1989, the Paraguayan government requested technical cooperation to the Japanese government, in order to develop a fair and efficient distribution system for vegetables and fruits by appropriate classification of products, collective storage and delivery, setting up the trade standards of DAMA and offering market information to producers.

1-2 Project Overview

The Project implemented the technical cooperation to DAMA, Farmers' Market Information Service (SIMA) of the Ministry of Agriculture and Livestock, model agricultural cooperatives (such as of La Colmena and Coronel Oviedo) on developing, implementing and managing the vegetables and fruits distribution system such as collective storage and delivery of vegetables and fruits, offering market information, management of the market.

(1) Overall Goal
To contribute to the promotion of agricultural production, setting up the marketing structure for the collective storage and delivery, focusing on storage and selection of fruits and vegetables based on quality norms, mainly in DAMA.

(2) Project Purpose
Agricultural production is promoted and product distribution is stabilized through the following; establishment of market information system by SIMA, preparation of DAMA standards of traded products, and formulation of collective storage and delivery system at two model agricultural cooperatives.

(3) Outputs
1) Collective storage and delivery; farmers are organized, acquire the necessary methods and know-how of managing facilities and equipment, and products of standardized quality are produced as planned and delivered collectively.
2) Wholesale market: By improving the market transaction practices (use of unified invoices, remittance invoices, to respect the market administrative regulations), the demand and supply are balanced, and public benefit is assured.
3) Market information: The market transactions are stabilized by the information exchange between sellers (market) and producers (including the daily market prices of fruits and vegetables and the volume of incoming merchandise).
4) General: Small-scale farmers incomes are increased and stabilized by being more protected from the middlemen.

(4) Inputs

2. Evaluation Team

Members of Evaluation Team

JICA Paraguay Office
(commissioned to CADEP (Centro de Analisis y Difusion de Economica Paraguaya))

Period of Evaluation

10 December 2001 - 27 March 2002

Type of Evaluation:

Terminal Evaluation by Overseas Office

3. Results of Evaluation

3-1 Summary of Evaluation Results

(1) Relevance
The increase in the population and change in consumer preferences have accelerated the consumption of fruits and vegetables in urban areas. MAG still prioritizes the production and distribution of fruits and vegetables in its policy because 1) MAG’s budget for this issue accounts for 9.2 percent, 2) more than 50 percent of technicians of the Department of Distribution are specialized in this field, and 3) there are technical/administrative cooperative agreements between DAMA and MAG. DAMA still plays an extremely important role in the wholesale market in Paraguay although there is are growing complaints against the quality of products sold in DAMA, and expansion of Asuncion's Supermarkets (the biggest buyer force) as one of the distribution channels which directly buys the products from producers.

(2) Effectiveness
In both model cooperatives of the Project, there was a strong drop in the number of membership after the completion of the Project, leading to the reduction in the volume of collective storage and delivery. Income of those two model cooperatives by selling fruits and vegetables were slightly or largely decreased from 1998 to 2001 respectively, however this was not the direct effect of the Project. Recognition of classification standards (quality, size and packing) by market participants is extraordinarily high, reaching almost 100 percent at the producers and wholesalers level. However, the enforcement level is quite low and hardly disseminated. Farmers do not classify because they do not get better prices, there is no demand for classification from wholesalers, while classification implies the loss of both products and time for producers.

In the wholesale market, it can be estimated that nearly half of DAMA's wholesalers utilize the unified invoice. DAMA's trading and administrative regulations have been widely accepted by the agents, with favorable opinions about them, but the enforcement rate has been very low.

As regards the information offering, the number of registered users who utilize SIMA's price information service has doubled since Project completion because of the introduction of the Internet, despite the difficulties in allocating the budget. However, SIMA's price information is just the reference to the producers and wholesalers, and they do not use the information in the decision-making process.

(3) Impact
The production of fruits and vegetables during 1998-2001 has remained unchanged, despite the recession since 1998. The production cost increased by the depreciation of the exchange rate, in addition to its traditional low price and unfair competition, which lead to a decrease in the number of producers of vegetables and fruits and the impact on the economy remained negligible. The classification standards or fruits and vegetables planned in the Project have not yet been used at the local wholesale markets. This situation is greatly due to the fact that other markets mostly function as a retailing market, and DAMA has a unique role as a food supply/wholesale market in the country. The collective shipping has not spread to other markets mainly because other markets have a function as retailers.

Collective shipping has contributed to a reduction of remittance cost in case the products are fully loaded on a truck, but has not contributed to the improvement in scheduled shipping, nor to the producers’ price. On the other hand, the selected products by the introduction of the classification standards for fruits and vegetables can be surely sold and the products out of the classification standards are effectively utilized to feed farm's livestock; therefore, there is little negative impact.

In conclusion, despite the relatively positive impact of collective delivery and classification standards, the project itself, however, has not had the expected impact at the national level because of scarce demonstrative effects.

(4) Sustainability
Judging from the following facts, it is difficult to find the Project as sustainable.
1) There are no clear MAG policies to foster the collective delivery and strengthen DAMA. The policies vary according to the senior management in charge.
2) Seventy percent (70%) of the former counterparts of the Project are still engaged in fruits and vegetables production and marketing. After the completion of the Project, staff of MAG and DAMA disseminated the transferred techniques during the Project to other staff voluntarily.
3) The financial status of one model cooperatives has been stable, while another model cooperative has piled up deficits. The budgetary behavior of the DGC during the last six years shows a commitment to keep supporting the project at a minimum level, even with the budgetary constraints.
4) The frequent change of staff in higher positions has a strong negative influence over these criteria as the administrative standards can also be easily changed, and there is some uncertainty in the capabilities of the market operation and management.
5) Traditional business practices, the lack of respect for the rules of the game, the tolerance to unfair competition, and the mutual distrust between farmers and wholesalers, which the Project was supposed to eradicate have not changed.
6) The constant flow of smuggled products and increase in production costs because of the depreciation in the exchange rate lowered the farmers’ motivation to produce vegetables and fruits.
7) Some efforts have been made to assure the technical sustainability. After the completion of the Project, staffs of MAG and DAMA have tried to disseminate the transferred techniques during the Project to other staff voluntarily.

3-2 Factors that promoted realization of effects

SIMA contributed to the expansion of the registered users by introducing Internet after the completion of the Project even though it was difficult to allocate the budget.

Seventy percent (70%) of the former counterparts of the Project are still engaged in fruits and vegetables production and marketing, which contribute to the technical sustainability of the Project. After the completion of the Project, the staff of MAG and DAMA made efforts to disseminate the transferred techniques during the Project to other staff voluntarily, which means that they are trying to ensure the technical sustainability of the Project.

3-3 Factors that impeded realization of effects

1) High turnover rate in MAG authorities and the city managers cause a negative influence over the market management standards which are operated and implemented insufficiently.
2) The chronicle financial deficit since 1995 makes the continuous implementation of policies difficult.
3) Smuggling has caused serious damage to domestic producers, causing systematic drops in fruits and vegetable prices.
4) Persistent existence of traditional business behavior (the lack of respect for the rules of the game, the tolerance to unfair competition, and the mutual distrust between farmers and wholesalers) could have jeopardized the application and diffusion of classification standards and regulations of the market trading.
5) At the model agricultural cooperatives (La Colmena), young people of Japanese ancestry have emigrated to Japan or given up agriculture, which could worsen the continuity of producing fruits and vegetables at the site.

3-4 Conclusion

The Project is extremely relevant to the marketing improvement on vegetables and fruits in Paraguay; however, the Paraguayan Government and the participants related to the vegetables and fruits marketing could not accomplish the expected effects after the termination of the Project. There was achievement to some extent such as participants applied their acquired knowledge, concepts and techniques in the establishment of the foundation for vegetables and fruits marketing and to establishment of the information offering system of SIMA, classification standards for fruits and vegetables, unified invoices, DAMA's trading and administrative regulations. However, there remain many problems in the actual utilization and application of the acquired knowledge, concepts and techniques.

3-5 Recommendations

(1) DAMA should focus on some issues, such as opening and closing time, cleaning, parking and a clear definition of the wholesalers' area that are feasible in the light of present contexts.

(2) It is necessary to restart the meetings among related personnel (such as DAMA's staff, wholesalers, MAG's technicians, supermarkets and farmers) in order to find an effective solution to the common issues such as the fruits and vegetables smuggling problem, updating the classification standards and administrative regulations, and settling wholesale market management standards.

(3) SIMA should consider offering price information, not only trading price but also the sales and wholesale prices of supermarkets the number of which have expanded as a distribution channel in Paraguay.

(4) SIMA should consider implementing a “Fruits and Vegetables Production and Marketing Survey in Paraguay”, as one has not been implemented since 1995, in order to understand the current status of the market.

(5) As the short-term measures, JICA should raise an issue to the related persons (such as DAMA< SIMA, wholesalers, supermarkets and farmers) through conducting an evaluation seminar and individual discussions and urge proactive actions (especially for the classification standards and wholesale market management standards reflecting the needs of supermarkets) to the Paraguayan side.

(6) As the middle-term responses, JICA may not prioritize the cooperation in this field for the future depending on the result of narrowing down the cooperation programs, but the following After-Care Cooperation could be considered on the condition that the Paraguayan side takes concrete actions for improvement.
1) Conducting a survey on the markets for products smuggled from neighboring countries in terms of its quantity and routes of the major fruits . The survey results would be the basic information for taking countermeasures against the smuggled products. It is recommended that a local consultant be utilized.
2) Taking the actual condition of Paraguay (constant weakness of the public organization, traditional, persistent existence of business behavior, the mutual distrust between farmers and wholesalers and smuggling) into consideration, the suggestion should be made on how the wholesale market should be including privatization or semi-public joint venture. Mainly the third-country specialist should be utilized.

3-6 Lessons Learned

(1) In Paraguay, there are huge negative influences on the Project to materialize its effect from the following incidences: weakness of the governmental and implementing organizations (insufficient follow-up because of the lack of budget and the lack of continuity and consistency of policies and measures caused by the frequent instability of highly positioned staff); existence of underground economy (in case of the Project, inflow of smuggled products) which cannot be measured by the national statistics; and persistent existence of traditional business behavior. Taking this into consideration, it is necessary to settle the realistic plan and goals taking the wishful thinking away and considering the hindering factors.

(2) Necessity of cooperation to improve the “external conditions”: Huge impact from cooperation can not be expected after the completion of the Project, even though the outputs are accomplished during the Project period, given the “external condition” as described in (1) which place them outside project’s scope. The Paraguay Government and related donor organizations recognize so-called “Good Governance” problems such as the weakness of the public organization and insufficiency of fair market rules (inflow of smuggling) in Paraguay, so it is a major issue to be overcome. For the sustainability of the effects after the termination of the Project period, the Government of Japan should proactively consider the cooperation to solve these issues as well when cooperating with Paraguay in the future.

(3) It was difficult to disseminate and well implement the classification standards and marketing conditions because the farmers and wholesalers resisted them owing to persistent traditional business behavior. However, it is said that those standards set by supermarkets were disseminated and used as a major wholesaler. This means that the introduction of the standards can be easily adopted in case the economic benefits of using them are clear enough. Therefore, when implementing a project related to economic activities such as production and sales supports, it is necessary to understand what the major private sector has an interest in and to study whether introducing and disseminating techniques and know-how increases the benefits of the private sector at the planning stage and reflect these in the Project plan.

3-7 Follow-up Situation

Upon the above recommendations, the following follow-up has been implemented.

(1) Study on the Distribution and Marketing of Agricultural products in Paraguay (basic survey by overseas offices, FY 2002/ February 2003 - March 2003): The survey was aimed at figuring out the marketed quantity and the value from the supply to consumption by integrating existing statistics and the result of the questionnaire survey on the major fruits and vegetables.

(2) Improvement of the administration of the wholesalers in the Food Supply Central market of Asuncion (overseas office-driven Project-type Technical Cooperation, FY2003/approved/ scheduled from October 2003 to October 2005): Providing support to outsourcing of DAMA activities (management of refrigerators/cleaning/access control).

(3) Fact-finding study on the governance in Paraguay (Project Formulation Study at overseas office, FY 2002/ January 2003 - March 2003): The study is aimed at figuring out the backgrounds, features and causes of the elements that define the level of governance.