Action Fiche for Paraguay (Annex I) Project approach partially decentralised. DAC-code Sector Agricultural policy and administrative management

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1 Action Fiche for Paraguay (Annex I) Title/Number Support to the economic integration of the Paraguayan rural sector No CRIS: DCI-ALA/2010/22009 Total cost 5,100,000 EU Contribution: 4,000,000 Contribution of Paraguay: 1,000,000 Contribution Beneficiaries of Support Fund: 100,000 Aid method / Method of implementation Project approach partially decentralised DAC-code Sector Agricultural policy and administrative management 1. RATIONALE 1.1. Sector context The Paraguayan economy largely depends on agriculture and livestock, mainly the production and export of soybeans, cereals, oil, cotton and beef (25% of the GDP). For this reason, exports remain vulnerable to climate and fluctuations of international commodity prices. The main market is MERCOSUR with 48% of the total exports, followed by the European Union with 8%. According to a recent survey 1, one of the key elements that hinder agriculture and forestry competitiveness is "weak application of quality criteria at different stages of the production chain". The Government of Paraguay implemented several activities to enhance competitiveness, addressing, in particular, sectors with high export potential. The Plan Estratégico Económico y Social (PEES) established enhancement of competitiveness and improvement of the business and investment climate as one of the pillars for economic growth. Within the framework of the Plan Nacional de Exportación 2004, the Ministry of Industry and Commerce created, with the support of several donors, a network assembling investors and exporters, REDIEX, as well as 8 sector-oriented working groups. The Ventanilla Única del Exportador (VUE) that aims to simplify export processes constitutes an important tool in facilitating export operations. The Ministry of Agriculture and Livestock promotes Livestock and Farm Development, as well as the Development of Agricultural Competitiveness through the Strategic Framework for Agriculture 2009/ Lessons learnt The Project picks up in part where the initiatives of the Project on Strengthening the Competitiveness of the Paraguayan Export Sector (FOCOSEP ALA/PY/2004/16713) left off. Indeed, the identification of this Project has partly been based on the conclusions and recommendations of the different monitoring and evaluation missions that took place as part of FOCOSEP. One of the main reasons for the difficulties encountered in implementing FOCOSEP was the lack of knowledge and previous experience of EU contractual and financial procedures by the Beneficiary. Therefore, technical assistance has been foreseen again in this Project. 1 American Institute for Cooperation on Agriculture, 2008 EN 1 EN

2 Another weakness was the lack of coordination between international donors and the Government, in particular on agricultural issues. With the recent creation of the round table on agriculture, chaired by the Ministry itself (see 2.4), this problem should be solved and coordination should be reinforced. FOCOSEP has performed well at the level of institutions and clusters, but did not fully reach the producers. In addition, the strengthening of the National Animal Quality and Health Service SENACSA capacities was strongly focused on beef and not other meat production. Therefore, this project seeks to concentrate on activities in a way to reach directly the producers of poultry, swine and dairy products and to reinforce the capacities of SENACSA to provide assistance to these sectors. Finally, FOCOSEP has contributed to the National Agriculture and Livestock Census through which the country has been able to update its data on swine, poultry and dairy production. These data will enable the Government can implement, with this Project's support, a National Sanitary Plan for Poultry and Swine Complementary actions This action will be complementary to the project of Support to the Economic Integration of Paraguay (ALA/PY/2007/19481), financed by the EU for an amount of 6 million. This project aims to strengthen institutional capacity to deal with the challenges of globalisation and increase and diversify external trade through the adoption of simplified customs procedures, providing assistance to overcome Technical Barriers to Trade (TBT) and increase the capacity of private companies to address external trade requirements. The project covers four areas of intervention: (1) Trade Facilitation (TF) through the simplification of export and import procedures, (2) setting of strategies to tackle TBT and Non-Tariff Barriers (NTB), (3) innovation, including the strengthening of quality certification systems for companies and (4) coordination. EU-MERCOSUR initiatives like cooperation for the harmonisation of veterinary and phyto-sanitary norms and procedures, food safety and differentiated agricultural and livestock production, and AL- INVEST IV, will complement this project. Additionally, the Government is implementing several projects in order to increase Paraguayan export capacity Donor coordination In line with the Declaration of Paris, which has recently been signed by Paraguay, this project aims to promote and strengthen existing national entities responsible for the execution of the project in order to guarantee ownership and sustainability. In November 2009, the Round table for External Technical and Financial Cooperation in the Agricultural Sector was created by Presidential Decree. This coordination stage is presided over by the Ministry of Agriculture and Livestock. Its main objective is to coordinate, rationalise and prioritise external technical and financial cooperation in the context of the Strategic Framework for Agriculture. Finally, one of the expected results of the project is public-public and public-private coordination. This component will also increase the coordination among donors and projects in order to avoid overlapping of activities and to increase the impact of the funds. 2. DESCRIPTION 2.1. Objectives The overall objective of the Project is to contribute to the economic integration of the Paraguayan rural sector. The specific objective is the improvement of Paraguayan livestock production competitiveness EN 2 EN

3 by strengthening the producers' capacities as well as the institutions involved, and fostering production chains and/or clusters, with the objective of meeting national and international market requirements Expected results and main activities The Project has three expected results: 1. Support to producers' capacities: Competitive livestock producers are integrated into production chains and/or clusters. 2. Institutional capacity-building: Public institutions responsible for livestock development, capacity-building, technical assistance and the application of sanitary controls are equipped and strengthened in order to tackle challenges in national and international markets. 3. Strengthening of public private and public public partnerships: Public-private and publicpublic sectors execute actions in a coordinated way to improve competitiveness and to ensure market access for livestock products. The main activities to obtain these results are: For result 1: Training and capacity-building of producers on new technologies, norms, hygienic and sanitary measures, negotiation tools, cost analysis, etc. Exchange of experiences and best practices through field visits, participation in national and international fairs. Long-term technical assistance on technical issues, such as the implementation of adequate production systems, as well as on administrative and financial issues. Short-term consultation to improve sectoral competitiveness. Technological innovation through training, capacity-building, improved technologies, etc. through the implementation of a Support Fund (Calls for Proposals). Studies. For result 2: Purchase of equipment for the laboratories of SENACSA and staff training to diagnose certain diseases. Training and capacity-building of the staff of the Vice Minister of Livestock and other public departments involved in the project. Exchange of experiences and best practices through field visits. Short-term consultation on public policy making and institutional positioning. Reinforcement of the Centros Demostrativos of the Vice Minister of Livestock to promote good practices in the livestock sector. EN 3 EN

4 For result 3: Coordination activities to formalise the dialogue between public institutions, private sector and universities to meet the expectations of the producers, guaranteeing sustainability of the project activities. Joint drafting committee to establish production protocols, etc. Studies that contribute to the improvement of quality control, market studies to understand the specific needs of the market. Risks and assumptions Risks: Risks are associated with the outbreak of any disease that could close the border for export animal products with negative economic consequences for producers. The aim of the Project is to strengthen the capacity of SENACSA in order to reduce this risk. Institutional instability could delay the implementation of the activities foreseen in the Project. Since the Project will contribute to the implementation of the Strategic Framework for Agriculture, which was agreed by several actors from public and private sectors and authorities at regional level, it is expected that institutional instability will only marginally affect the implementation of the project. Finally, the failure of tenders for services, supplies and works could end with no acquisition of important resources for the project. To mitigate this risk, technical assistance is expected to aid in the drafting of tender dossiers. The political decision to implement the actions foreseen in the Strategic Framework for Agriculture and the functioning of the round table for coordination will contribute to the achievement of the project's results Crosscutting Issues The Project will take into account the national and international legislation concerning environmental issues. Producers, processors and traders will follow and implement the norms and resolutions derived from The Secretariat of Environment. In addition, all the producers and the industries must have a study of environmental impact approved by the competent authority before the start up of action. In addition, actions of mitigation and adaptation to climate change are expected. Gender equality will be promoted through encouraging women's participation, in particular, in the call for proposals that will be launched to support producers' organisations. Good governance will be strengthened through the formalisation of sector activities and the improvement of technical sanitary and tax inspections Stakeholders The project aims to improve the competitiveness of small and medium scale producers, organised in committees, unions, non-profit associations and/or cooperatives, that have a minimum productive infrastructure but a high growth potential, and are located in the Departments of Central, Cordillera, Paraguarí, Caaguazú, Itapúa, and Alto Paraná. These are the main departments that produce and process poultry, swine and dairy, the products that are of interest to this Project. The Vice Minister of Livestock is responsible for the execution of the Project and therefore one of the main stakeholders. Other offices of the Ministry involved in the execution of the project are: the Directorate of Research and Animal Production, the Directorate for Agriculture Education, the Directorate for Commercialisation, and the Directorate for Agriculture Extension. Other stakeholders are: the External Technical and Financial Cooperation Desk for Agricultural and Rural Development, the National Animal Quality and Health Service (SENACSA), the Ministry of EN 4 EN

5 Industry and Commerce, the Technical Planning Secretariat, and the National Competitiveness Strategy Promotion Organisation (ONPEC). The municipalities will also be involved in the activities. All these stakeholders have been involved in the identification and formulation of this project through meetings and workshops and have approved the objectives, results and activities. 3. IMPLEMENTATION ISSUES 3.1. Method of implementation Partial decentralised management through the signature of a financing agreement with the Republic of Paraguay. The Commission controls ex ante all the procurement procedures except in cases where programme estimates are applied, under which the Commission applies ex ante control for procurement contracts > 50,000 EUR and may apply ex post for procurement contracts 50,000 EUR. The Commission controls ex ante the contracting procedures for all grant contracts. Payments are executed by the Commission except in cases where programmes estimates are applied, under which payments are executed by the beneficiary country for operating costs and contracts up to the ceilings indicated in the table below. The responsible Authorising Officer ensures that, by using the model of financing agreement for decentralised management, the segregation of duties between the authorising officer and the accounting officer or of the equivalent functions within the delegated entity will be effective, so that the decentralisation of the payments can be carried out for contracts up to the ceilings specified below. Works Supplies Services Grants < 300,000 EUR < 150,000 EUR < 200,000 EUR 100,000 EUR The project management is integrated to the internal structure of the institution responsible for the execution of the project, in order to ensure adequate ownership of its various components. In accordance to the Agreement signed among the parties and the EU procedures, the Beneficiary will appoint the project team, which will have autonomy in the execution of all aspects of the project. An Administrator and an Accounting Officer will be appointed for the Project management by the representative of the beneficiary country. Technical Assistance (TA) will be recruited according to EU procedures. The TA experts will integrate the project team Procurement and grant award procedures/programme estimates All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question. The essential selection and award criteria for the award of grants are laid down in the Practical Guide to contract procedures for EU external actions. The maximum possible rate of co-financing for grants is 90%. Full financing may only be applied in the cases provided for in Article 253 of the Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the Financial Regulation applicable to the general budget of the European Union. Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by Regulation 1905/2006 of 18 December Further extensions of this EN 5 EN

6 participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for in articles 31(7) and (8) Development Cooperation Instrument. All programme estimates must respect the procedures and standard documents laid down by the Commission, in force at the time of the adoption of the programme estimates in question Budget and calendar The duration of the project will be of 42 months (operational period of 36 months and a closure phase of 6 months). Item EU % Beneficiary % Other Benef. Total (Euro) 1. SERVICES 1,130, , ,210, Technical Assistance 1.2 Training, capacity-building, exchange of experiences 2. GRANTS (Support Fund)* 3. SUPPLIES 4. WORKS 5. COMMUNICATION AND VISIBILITY 6. RUNNING COSTS 6.1 Staff 6.2 Other running costs 7. INCIDENTALS 8. MONITORING, EVALUATION and AUDIT TOTAL 830, , , , ,000 1,000, ,000 1,100, , , , , , , , , , , , , , , , , , ,000 4,000,000 1,000, ,000 5,100,000 *For this Support Fund, Calls for proposals will be organised. They will enable non-profit organizations, such as unions, producer associations, chambers, universities, cooperatives, etc., to present proposals coherent with the objectives of the project. Such projects must foresee a financial contribution of maximum 10% of the total cost of the action Performance monitoring The programme will establish an internal monitoring system for each area. Specific indicators beyond those identified in the Logical framework (annex 1 of Technical and Administrative Provisions) will be identified in the course of the preparation of the programme estimates. The following are some of the Objectively Verifiable Indicators (OVIs): Overall objective: to contribute to the economic integration of the Paraguayan rural sector. By the end of the project's implementation, 20% increase of exports of swine, poultry and dairy. Specific objective: to improve Paraguayan livestock production competitiveness. By the end of the project, 20% increase of the volume of the production which provides the national market. EN 6 EN

7 Result 1: Competitive livestock producers are integrated into production chains and/or clusters By the end of the project, 30% increase of number of producers who providing raw material to processing plants. Result 2: Public institutions responsible for livestock development, capacity-building, technical assistance and the application of sanitary controls. By the end of the project, 3 national sanitary related projects implemented. Result 3: Public-private and public-public sectors execute actions in a coordinated way to improve competitiveness and to ensure market access for livestock products. By the end of the project, 3 sectoral action plans defined and implemented in coordination. The project's degree of progress and the fulfilment of its objectives and results will be internally regularly monitored. Ad-hoc monitoring reports will be prepared and distributed to all the stakeholders. Regardless of this monitoring, the Commission may carry out external monitoring missions (ROM) whose reports will be shared and evaluated in conjunction with the involved institutions Evaluation and audit The Project budget will cover the costs of mid-term and final evaluation missions and possibly an ex post mission. If necessary, complementary missions will be carried out at the request of the Commission or in agreement with the beneficiary. Evaluation missions will be carried out by teams of independent experts. The Beneficiary and the Commission will assess the conclusions and recommendations of the midterm evaluation and will agree on the follow-up to be given to such conclusions and recommendations and on the adjustments they may raise, including, where appropriate, the re-orientation of the project. Reports from other evaluation and supervision missions will be handed to the Beneficiary in order to take into account any recommendation that may result from such missions. The Internal Audit Directorate of the concerned Ministries will ensure internal control of the management operations. The national institution for independent external audit is the Controloría General de la República (CGR). External audits provided in the national legislation will be carried out by the national institutional responsible for independent external audit. The Beneficiary will also carry out a final audit during the closing phase. The results from this audit will be submitted to the Commission along with Project Final Report. The Audit Final Report will not include any reservations. In addition to these reports, the European Commission will carry out its own audit missions, in particular of each programme estimate Communication and visibility The Project team will follow the indications of the EU Visibility Guidelines for External Action. Communication, information, publicity, public relations, and other visibility actions will be carried out to value and make the Project known. A budget of 120,000 will be reserved for such actions. Each Program Estimate will include a detailed action plan for communication and visibility activities. This plan will be submitted, for prior approval to the Delegation. EN 7 EN

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