Executive Summary

The first loan from the International Fund for Agricultural Development (IFAD) to Argentina was approved in 1988 with the aim of reducing rural poverty through loans and technical assistance to small farmers. In mid-1990, the Argentine Government and IFAD then started promoting small farmers’ organizations, the integration of beneficiaries into the market, institution-building with a view to rural development, and the protection of vulnerable groups. IFAD supported these interventions through funding (US$84 million) for five projects (with a total cost of US$150 million) and a grant to help in formulation of a rural development strategy (US$778,000). The country also benefited from five subregional support grants to the Common Market of the South (MERCOSUR) (US$4.9 million) and 15 grants for knowledge management in South America (US$11.2 million). These activities are the subject of this first country programme evaluation (CPE) carried out by the IFAD Office of Evaluation (IOE).

The CPE found that overall collaboration between IFAD and the Argentine Government had been moderately satisfactory. Policy dialogue, a sphere of vital importance for IFAD, was the most successful aspect of this collaboration. Through such dialogue, IFAD supported the Government in the improvement of rural development institutions and policies. It supported and promoted policy discussions at the subregional level, facilitated the participation of organizations of the rural poor in policy dialogue and supported the generation and dissemination of knowledge concerning rural development and family farming. These activities helped to generate debate on rural poverty in Argentina and increased the visibility of the sector in a country traditionally oriented towards agro-industry for export. This policy dialogue process, animated by the Government together with family farmers’ organizations and supported by IFAD, led to the creation of a new, stronger institutional capacity regarding rural development and family farming, with radical institutional changes in the past three years, culminating in 2009 in the creation of a secretariat for rural development and family farming under the new Ministry of Agriculture, Livestock and Fisheries.

Despite the extremely positive results of policy dialogue, the overall evaluation of cooperation between IFAD and Argentina was affected by a moderately unsatisfactory performance of the portfolio of projects. Only two of the five projects approved since IFAD started activities in Argentina in late 1983 have been completed, while two were refocused after being declared “at risk” by IFAD due to slow progress on their implementation. On the other hand, the fifth project approved – and declared effective in December 2009 – is showing significant progress in its implementation, with prompt incorporation of the provinces taking part.

The relevance of the portfolio is deemed moderately satisfactory. The projects in general respond to the Government’s priorities and the needs of the rural poor. However, some objectives in such important spheres as the incorporation of small farmers into the commercial banking system and the creation of markets for the supply of technical services were fairly unrealistic in the country’s rural context and were not fully shared by the Argentine Government. Moreover, IFAD did not take sufficient account of institutional difficulties in the country. The provinces’ public-sector institutional capacity is limited, and institutional, economic and political relations between provincial governments and the Federal Government are complex. In addition, during the period evaluated, the country experienced major political and economic upheavals, including a serious financial crisis and many ministerial changes at the start of the 2000s. It was in this context that IFAD accepted the challenge of designing and implementing a portfolio of projects in line with the framework requested by the Government, consisting of a decentralized programme with provincial execution of projects. The programme was designed and implemented in a relatively standard manner from Rome, in some cases with insufficient consultation processes at the country level and with insufficient account taken of differences in procedures and operational rules among the three parties involved (IFAD, the country and the provinces).

On balance, the effectiveness of the portfolio is deemed moderately unsatisfactory. Of the sole two projects concluded, only the Rural Development Project for the North-Eastern Provinces (PRODERNEA) achieved any major objectives. The technical assistance of the subprojects promoted appropriate, cost-effective technologies in terms of the available social capital. Albeit small in scale, support to vulnerable groups, including young people, women and indigenous people, was also satisfactory. However, support for the supply of rural financial services (26 per cent of IFAD’s total investment in the country) constituted a fairly intractable problem because of the limited institutional capacity of the financial sector in the rural economy. The two projects that were recently refocused have been delayed, although positive progress can be seen in their implementation, particularly in the case of the North Western Rural Development Project (PRODERNOA). The effectiveness of the fifth project, the Rural Areas Development Programme (PRODEAR), cannot yet be evaluated because it has only recently started operations.

The efficiency of the portfolio is deemed moderately unsatisfactory. The entry into effect and implementation of the portfolio of projects suffered huge delays (twice the Latin American norm), thus compromising its efficiency and effectiveness. The delays in these projects increased organizational and administrative costs. In the case of PRODERNEA, administrative costs were some 29 per cent of total costs during project execution, thus reducing the funding available for the beneficiaries. Although PRODEAR was well designed, it also suffered major delays as a result mainly of the political instability suffered by the country in the period between its approval and its being declared effective (36 months). It was very hard for IFAD to react in time from Rome in the face of the unexpected political changes seen during this period. IFAD’s lack of a physical presence in Argentina hampered the execution of complex rural programmes that often require no objection statements, which take longer than necessary to obtain, inasmuch as they are administered mainly from Rome. Moreover, Argentina is one of the IFAD-supported countries that is physically furthest from Rome, a fact that presents additional difficulties for programme management.

The importance of reducing delays in the portfolio cannot be stressed strongly enough. The Federal Government has been obliged in some cases to repay IFAD’s loans almost immediately after receiving disbursement, because delays have eaten up most of the grace period. As a result, IFAD’s funding for projects vanishes in practice, inasmuch as the resources transferred to the provinces end up by coming from the Federal Government. In these circumstances, the net flow of resources from IFAD to Argentina becomes negative, thus reducing any incentive for the country to receive funding from the Fund. Moreover, the level of ordinary resources that IFAD allocates to Argentina is relatively low, thus allowing only fairly small new operations. Under the current conditions of resource allocation and as long as there is no increase in the disbursement level, the net flow of resources from IFAD to the country would be negative.

It should be noted that IFAD resources are allocated to Argentina according to a calculation that uses the criteria of the performance-based allocation system (PBAS), applied in a relatively standard manner and without taking sufficient account of the special circumstances of the country. Although Argentina is a medium- to high-income country with a relatively small average rural population (11 per cent), it has a high level of income inequality and wide differences in regional percentages of rural inhabitants. Official figures indicate that the country has areas, especially in the north, with a total population, a percentage of rural population and rural poverty indicators that are higher than in some low-income countries. However, official figures are based on an administrative definition of rural population, while other methods of measurement based on an economic and/or geographical definition suggest that the rural population could represent 45 per cent of the total population.

It is still too soon to evaluate the precise impact of the IFAD-supported portfolio on rural poverty in Argentina. Of the five projects making up the portfolio, three are in course of execution and two of these have only recently started operations. However, the impact of the projects completed is judged moderately satisfactory, mainly on the basis of the results obtained by PRODERNEA. An impact study concluded that in overall terms the income of the beneficiary households had increased by approximately 35 per cent in comparison with the control group, including increases of roughly 71 per cent in Misiones and 73 per cent in Corrientes Provinces. No impact study was carried out in the case of the Programme of Credit and Technical Support for the Small Producers in Northeast Argentina (PNEA).

The sustainability of the portfolio is considered moderately satisfactory, backed up by the fact that the administrative institutions for rural development created by the completed projects have continued to operate, albeit at a reduced level because of budgetary problems. The main guarantee of sustainability, however, is provided by the continued existence and strength of the grass-roots rural organizations that were created with the support of IFAD. The establishment of the National Family Agriculture Forum (FONAF), the National Section of MERCOSUR’s Commission on Family Farming (REAF) and the provincial forums on family agriculture indicate the probable sustainability of the IFAD-supported programmes and projects concluded and under execution.

The portfolio of projects financed by IFAD was innovative even in those cases where performance fell short of expectations. The decentralized work with the northern provinces in the sphere of rural development initiated by PNEA in late 1980 – and continued by later IFAD-supported projects – was a major institutional innovation that contributed to the provinces’ empowerment, creating institutional capacity that was hitherto almost non-existent and improving relations between the centre and the provinces. The participatory policy generated in the country in support of rural development and family farming was another important innovation. At the project level, the participatory approach helped to generate many ideas among small farmers that can be replicated and are innovative in the Argentinian context. Activities in favour of vulnerable groups and the establishment of trust funds managed by public or semipublic agencies to supply technical, commercial and financial assistance to small farmers deserve special attention. However, the practice adopted regarding the promotion of innovations was not sufficiently well focused and lacked a systematic, strategic approach that concentrated on priority areas.

Non-financial activities (policy dialogue, associations and knowledge management) constituted one of the most successful instruments of IFAD’s support for rural development and family farming in Argentina. Policy dialogue helped to achieve in-depth institutional changes. Knowledge management was highly satisfactory, especially through the dissemination activities of projects, the activities of REAF-MERCOSUR and the dissemination management of FIDAMERICA. However, there is room for improvement in the promotion of partnerships and associations with other bilateral and multilateral financial bodies operating in the country.

The objectives set out in the country strategic opportunities programme (COSOP) approved in 2004 are in general line with the objectives of the Argentine Government and IFAD. Thus, in seeking to reduce rural poverty, they reflect the current assessment of poverty, IFAD’s capacities in the country and the Government’s priority stress on alleviating rural poverty. On the other hand, the Patagonia Rural Development Project (PRODERPA) proposed by the COSOP paper did not initially reflect the objectives of the provincial governments, and the subsectoral focus of the paper did not chime with the Government’s strategy in the proposal to establish a technical assistance market and incorporate small farmers into the commercial banking system.

Despite the challenges facing IFAD in Argentina and the limited resources invested, the Fund is considered a major strategic partner for the country because of its experience, its flexibility and its position as the only institution dedicated exclusively to eradicating rural poverty. Through its support, IFAD has played a major role in helping Argentina to carry out an in-depth shift in favour of rural development and family farming.

The overall rating of collaboration between IFAD and the Argentine Government is moderately satisfactory. These results are based on the evaluations of the portfolio of projects, non-financial activities and the COSOP paper.

Overall Rating of the CPE Regarding IFAD–Government Collaboration

Basis of Evaluation	Rating
Performance of the portfolio	3
Non-financial activities	5
Evaluation of the COSOP	4
Overall evaluation	4

 

RECOMMENDATIONS

IFAD’s Role in Argentina

Level of resources and funding. The Argentine Government and IFAD must jointly consider ways of increasing the resources available to finance rural development and family farming in the country. To this end: (a) the necessary measures should be taken to improve the performance of the portfolio; (b) the definitions of rural population relevant for the allocation of IFAD resources in the framework of the PBAS should be revised; and (c) efforts should be stepped up to raise national counterpart resources (public funds, contributions from beneficiaries and the private sector) and cofinancing resources on the part of other aid agencies.

Boosting of technical support, concentrating on innovation and knowledge management. This requires: (a) implementation of a limited number of activities with a high innovative content; (b) assurance of the quality of technical support during the design and implementation of projects; (c) an increase in the visibility of these activities through knowledge management; (d) promotion of their replication and scaling up by the Argentine Government or other financial bodies; and (e) development of an innovation agenda in a systematic, strategic form, concentrating on priority areas, for example young people and rural microfinance.

Support for successful ways of supplying rural financial services. The Argentine Government and IFAD should step up their efforts in support of development of the rural financial sector in Argentina, starting with an appraisal of the situation of the financial institutions catering to the agricultural sector. IFAD has had successful experience of rural finance in other countries and has supported some successful small-scale schemes to grant loans to small farmers in Argentina. This experience should be replicated and scaled up in the argentinean context. The following two types of activity in the Argentinian rural context deserve consideration: (a) loans granted through trust funds managed by public or semipublic agencies to supply technical, commercial and financial assistance to small farmers; and (b) loans granted to cooperatives of small farmers.

Geographical cover of programmes. In view of the low level of available resources, the Argentine Government and IFAD should continue to give priority to the country’s northern provinces (even within a national programme such as PRODEAR), concentrating their efforts in places with a high concentration of poor rural inhabitants and where the beneficiaries are not too widely scattered.

Greater use of grants and closer links with projects. IFAD should continue to finance grants in Argentina to promote highly satisfactory non-financial activities in connection with policy dialogue and knowledge management. Moreover, in support of the innovation agenda, IFAD should strengthen its partnerships with research institutions in the argentinean agricultural sector (for example the National Institute of Farming Technology) and ensure that grants are linked to the design of projects financed by IFAD.

Programme Design

Coordination with government agencies involved in the programme. IFAD should ensure the active participation of all the various governmental institutions, at both federal and provincial levels, involved in the design and implementation of the projects it finances. Apart from IFAD’s traditional partners, it is important from an early stage to ensure systematic inclusion of the Office of the Chief of the Cabinet of Ministers and the production ministries of the provinces benefiting from the programme.

Decentralized execution. The CPE recommends that the decentralized execution of projects (recognized and endorsed by the Argentine Government) be continued, particularly in those provinces that have shown an institutional and management capacity and have achieved an adequate level of coordination with the Federal Government through current projects. In provinces with a weak institutional capacity – and providing that the province is in agreement – a deconcentrated management model, similar to that adopted by the Small Farmer Development Project, could be considered, supported by development and institution-building components. In the long term, consideration could also be given to direct loans from IFAD, guaranteed by the Federal Government, to provinces with sufficient institutional and financial capacity. The CPE also recommends that in the decentralized management of projects, the coordination of federal, provincial and IFAD operational rules and procedures should be an integral part of the initial project design, prior to the signing of loan contracts.

Physical presence in the country. The CPE recommends that in the process of revising their long-term relations and within the framework of a significant increase in the portfolio, IFAD and the Argentine Government should include discussion of IFAD’s means of presence in the country and of implementation times. The CPE recommends considering at least the earliest possible recruitment of a national liaison officer.