USAID CBJ FY 2002: Nicaragua

Summary: This objective aims at achieving broad-based economic growth through encouraging agricultural development, increasing access to economic opportunities for urban and rural poor, expanding private markets, preserving biological diversity, and ensuring sustainable management of natural resources. Development Assistance funds and a P.L. 480 Title II program will be integrated to achieve this goal.

The agricultural component helps small farmers diversify production and increase output in a sustainable way, through crop diversification, improved soil and water conservation, environmentally sound cultivation practices, improved post-harvest storage, and the use of improved seed. This component provides technical assistance to small farmers, largely through U.S. Private Voluntary Organizations (PVOs) and Nicaraguan nongovernment organizations (NGOs), to encourage the adoption of environmentally sustainable agricultural practices. The component also supports a national seed improvement program and provides technical assistance to Government of Nicaragua (GON) land titling activities and land market development.

A second component involves strengthening rural credit unions, enabling them to provide financial services and mobilize savings in rural areas. This component also provides resources to expand micro-enterprise lending for post harvest processing and storage, food processing, equipment manufacture and repair, and commercial services.

The third component of the objective helps protect biologically important ecosystems by strengthening protected area management and by introducing environmentally sustainable agricultural practices into buffer zones surrounding the protected areas.

Key Results: Under this objective, USAID promotes economic growth in rural areas especially in the agriculture sector. To this end, USAID established a 7% growth rate target in agricultural Gross Domestic Product (GDP). Under the microenterprise component, USAID seeks to finance 107,000 microenterprise loans over a seven-year period ending 2002. The target established under the natural resources management program is to ensure that protected areas are under effective management, as measured by the Parks in Peril protected areas management index.

Performance and Prospects: The economic prospects for the agriculture sector are bleak. The devastation caused by Hurricane Mitch, subsequent droughts, the decline in coffee prices, and economic mismanagement by the GON have weakened the economy and hindered the country's sustainable development. Growth in agricultural GDP, the highest level indicator for this program, was sharply affected by Hurricane Mitch, dropping from 8.5% in 1997 to 4.2% in 1998. According to revised GON figures, the agricultural growth rate climbed back to 7.5% in 1999. The GON is predicting agricultural growth of 8.4% in 2000. Some observers think agricultural GDP statistics are optimistic and have been buoyed by historically high sales of meat, including exports. This, rather than being an indicator of economic health, may represent a sell-off of livestock by farmers, forced by economic necessity. Although agricultural production has increased since 1980, nearly all of the increased production has been due to increases in the area under cultivation, rather than increased yields. The amount of additional land that can be brought under cultivation without threatening the natural resource base is rapidly diminishing. Unless agricultural productivity is increased, improving food security will be impossible.

By the end of 2000, a total of 64,500 farmers (approximately 50,500 men and 14,000 women) had received assistance through USAID's agriculture activities that seek to assist small farmers in diversifying and increasing their agricultural production in a sustainable manner. Increased availability of P.L. 480 resources enabled the Mission to exceed its target for this year by more than 40%.

USAID funded 13 grants, ranging in size from $70,000 to over $500,000, to ten Nicaraguan NGOs. These grants support a wide variety of agricultural activities, including the rehabilitation of coffee plantations, the expansion of cacao and commercial vegetable production, small-scale irrigation, and the introduction of improved grain production practices, and will ultimately benefit nearly 23,000 producers. For example, the project has supported the creation of three model farms and training centers that provide hands-on training in vegetable production, crop diversification, conservation practices, the use of fertilizers, erosion control techniques, and market development. The three model farm/training centers have been so successful that Winrock is helping local NGOs establish four more centers in other parts of the country.

Under its Seed Improvement project (PROMESA), USAID facilitates the promotion and use of improved seed through demonstrations, field days, farmer-to-farmer training, seed science courses, the distribution of technical literature, and promotion campaigns. PROMESA's technical guidance led to a decision by the Ministry of Agriculture and Forestry (MAG-FOR) to distribute certified seed, rather than cleaned grain, under its national Small Producer Assistance Program (PNAPP), which provides inputs to over 17,000 small farmers per year. The use of certified seed will lead to increased yields and increased incomes for small farmers in Nicaragua.

USAID is assisting farmers to increase their incomes above the poverty limit through its grants to two U.S. PVOs, World Relief, and the Cooperative League of the U.S.A (CLUSA). World Relief will assist nearly 12,000 small farmers in Nicaragua through the provision of technical assistance, training, and credit. World Relief is introducing new crops, including spices, such as cinnamon and black pepper, and tree crops, such as rambutan and avocado. Greater diversification in the cropping system will spread farmers' risk and minimize the impact of price fluctuations in any given year. World Relief's program to distribute on-farm grain silos has enabled farmers in some areas to reduce post-harvest grain losses from nearly 50% to zero.

USAID's grant to CLUSA helps 3,200 farmers improve their production and marketing of organic and traditional coffee, cacao, sesame, and soybeans. CLUSA provides assistance to farmers in crop production, post-harvest handling, business record keeping, credit management, and marketing. As a result of these activities, farmers have strengthened linkages with buyers and processors. Organically produced crops generally command a higher price on the international market than crops that are traditionally grown. At the same time, reliance on composting for fertilizer and on homemade organic pesticides, rather than commercially purchased ones, can ensure profits by significantly reducing farmer production costs.

In March 2000, multisectoral, two-year Transitional Activity Proposals (TAPs) for Save the Children, the Adventist Development Relief Agency, and Project Concern International were approved. Previously, these PVOs had focused only on maternal and child health interventions. These TAPs broadened the post-Mitch focus to encompass agriculture and food security activities and assist with infrastructure rehabilitation. Food security will continue to be a serious problem in Nicaragua, even after these TAPs end early in 2002.

By the end of 2000, USAID micro-finance programs reached over 88,000 rural and urban micro-entrepreneurs, of which 85% were women. This credit has been used to support a wide range of small-scale enterprises, including dairy processing, canning, the purchase and construction of silos and small grinding mills, carpentry, the fabrication and repair of tools and equipment by local artisans, and consumer service activities, such as small rural stores. An additional 20,000 micro-entrepreneurs will obtain loans during the next two years, bringing the total number of micro-enterprise beneficiaries to 107,000 by the year 2002.

USAID financed the opening of 24 credit unions as sustainable financial intermediaries in their communities. USAID exceeded its targets by enrolling a total of nearly 17,000 members, of which 45% are women - and the total savings mobilized shot from $39,715 in 1997 to nearly $1.3 million by the end of 2000.

USAID will help Nicaraguan NGOs co-manage eight protected areas in collaboration with the Ministry of Natural Resources (MARENA) through its protected areas program which began last year. NGOs have already signed co-management agreements with MARENA to manage five protected areas. Three more co-management agreements will be signed later this year.

In FY 2001, USAID will use $10,749,000 of DA funds as follows: $7,349,000 will help farmers diversify crops, improve soil and water conservation, and improve post harvest storage; $2,400,000 will improve and strengthen credit unions and other microfinance institutions; and $1,000,000 will help protect biologically important ecosystems.

In FY 2002, USAID will use $9,630,000 of DA funds as follows: $7,130,000 will help farmers diversify crops, improve soil and water conservation, and improve post harvest storage; $1,500,000 will improve and strengthen credit unions and other microfinance institutions; and $1,000,000 will help Nicaraguan NGOs manage eight protected areas in collaboration with the Ministry of Natural Resources.

Possible Adjustments to Plans: Development of a new strategy has been postponed to allow USAID to complete the Hurricane Mitch Reconstruction Program - and therefore the SO has been extended through the end of FY2003. Nevertheless, the Mission will review all components of the objective in FY 2001.

In FY 2000 USAID, USDA and others completed food security assessments that predict a worsening food security situation in Nicaragua. Additional donor food aid assistance will be required to prevent an increase in serious chronic malnutrition. Four U.S. PVOs, all implementing P.L. 480 Title II activities in the Hurricane Mitch Reconstruction Program (Catholic Relief Services, the Adventist Development Relief Agency, Save the Children, and Project Concern International), are requesting P.L. 480 Title II funding for the period FY 2002 to 2007 to address the primary constraints identified by the food security analyses.

USAID will support the co-management of eight protected areas, rather than ten as originally planned. Of these eight areas, USAID will finance development of a co-management system that includes: basic infrastructure; simple hiking trails; development of management plans; basic biological inventories; and socioeconomic studies, for six areas.

Other Donor Programs: Many donors are active in the agriculture, micro-enterprise, and natural resources management sectors. The Inter-American Development Bank (IDB) approved a $200,000 grant to finance a two-year project to help the best performing credit unions in USAID's Rural Credit Union Project to modernize their management information systems. The United Nations Development Program (UNDP) and the Central American Bank for Economic Integration (CABEI) also have projects for small and micro-enterprises. The World Bank has approved a $40 million loan to strengthen the National Agricultural Research Institute (INTA), a government partner to the Seed Improvement Program. The IDB co-financed the coffee rehabilitation program implemented by one of Winrock's grantees. USAID's land titling technical assistance activity is collaborating with the World Bank's land tenure project. The World Bank is implementing a $6.4 million forestry program.

Principal Contractors, Grantees or Agencies: U.S organizations include: Winrock International, Development Alternatives Inc., Boston Institute for Developing Economies, World Relief Corporation, Cooperative League of the United States of America, Associates in Rural Development, World Council of Credit Unions, Foundation for Microenterprise Support (FAMA), and Foundation International for Community Assistance (FINCA) Nicaraguan organizations include: the GON P.L. 480 Secretariat, Pro-Mujer, Chispa Foundation, and Cocibolca Foundation.

Nicaragua 524-002

U.S. Financing

(In thousands of dollars)

	Obligations		Expenditures		Unliquidated
Through September 30, 1999	20,953	DA	9,058	DA	11,895	DA
	0	CSD	0	CSD	0	CSD
	10,262	ESF	9,354	ESF	908	ESF
	0	SEED	0	SEED	0	SEED
	0	FSA	0	FSA	0	FSA
	0	DFA	0	DFA	0	DFA
Fiscal Year 2000	8,134	DA	10,716	DA
	0	CSD	0	CSD
	0	ESF	852	ESF
	0	SEED	0	SEED
	0	FSA	0	FSA
	0	DFA	0	DFA
Through September 30, 2000	29,087	DA	19,774	DA	9,313	DA
	0	CSD	0	CSD	0	CSD
	10,262	ESF	10,206	ESF	56	ESF
	0	SEED	0	SEED	0	SEED
	0	FSA	0	FSA	0	FSA
	0	DFA	0	DFA	0	DFA
Prior Year Unobligated Funds*	0	DA
	0	CSD
	0	ESF
	0	SEED
	0	FSA
	0	DFA
Planned Fiscal Year 2001 NOA	10,749	DA
	0	CSD
	0	ESF
	0	SEED
	0	FSA
	0	DFA
Total Planned Fiscal Year 2001	10,749	DA
	0	CSD
	0	ESF
	0	SEED
	0	FSA
	0	DFA
			Future Obligations		Est. Total Cost
Proposed Fiscal Year 2002 NOA	9,630	DA	1,304	DA	50,770	DA
	0	CSD	0	CSD	0	CSD
	0	ESF	0	ESF	10,262	ESF
	0	SEED	0	SEED	0	SEED
	0	FSA	0	FSA	0	FSA
	0	DFA	0	DFA	0	DFA

Nicaragua

Activity Data Sheet

Nicaragua 524-002

U.S. Financing