Annex IV

MULTILATERAL INVESTMENT FUND ICT4BUS PROGRAM CALL FOR PROPOSALS 2007-2008

DEMOCRATIZATION

OF ACCESS TO INFORMATION IN THE

MERCADO MODELO

(UR-M1034)

I.
1. 2. 3. 4. 5. 6.

Basic project data Title: Democratization of access to information in the Mercado Modelo of Montevideo Country: Uruguay Project number: ICT4BUS Program - #1335 Executing agency: Inter-American Institute for Cooperation on Agriculture (IICA). Beneficiary: Comisin Administradora del Mercado Modelo [Mercado Modelo Management Board] (CAMM) Estimated costs and financing: Total project cost US$680,000. MIF financing US$369,000; Institute for Connectivity in the Americas (IDRC/ICA) counterpart financing US$150,000; CAMM/IICA counterpart financing US$161,000.

II. Background About 2,000 small and medium-sized enterprises (SMEs) are active in Mercado Modelo, including traders, grocers, fruit and vegetable stand operators, self-service store operators, supermarkets not belonging to chains, and distributors in the interior of the country. Fiftyseven percent of them are family businesses, 7% are commercial companies, 33% are single-person businesses, and 3% are other types. A typical SME that operates in the Mercado Modelo is a business operated by a family with a low level of education and no formal commercial or business training. Its know-how has been acquired through everyday work and experience. The sector is composed of an aging population, with 40% more than 50 years old, but there is a core of more dynamic operators, most of whom are managers, who are around 30. A large commercial operator has estimated annual billing of about US$1.3 million. A small commercial operator bills somewhat over US$30,000 a year, on average. SMEs in the Mercado Modelo have little access to information and communications technology (ICT). More than 90% of these companies do not use formal information management or analysis methods. Also, the smallest SMEs do not have systemized information on product supply and demand or formal channels of communication that give them access to such data. Large producers handle information of this kind in a fluid manner, which gives them a strong competitive advantage. SMEs do not have defined work processes or practices to achieve quality levels or follow logistical standards. Although no

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benchmark statistics are available, there are indications that the gap in access to technology and information between large and small operators is tending to widen to the detriment of the latter. The current national and international market context and the logistical and infrastructure restructuring being promoted by CAMM offer a great opportunity for the SMEs that operate in the Market to become more competitive. However, 80% of them are barely benefitting from this situation since they do not have the technology or information to permit them to make their businesses more profitable. In relation to the proposed project, three lines of work that CAMM is carrying out in the sector are worth mentioning: (i) generation and dissemination of information on selling fruit and vegetables on the domestic and regional markets, in coordination with the other markets in the region; (ii) identification of the training needs of operators in business management and good practices in handling fruit and vegetables; and (iii) promotion of food safety in fruit and vegetable consumption, based on monitoring waste in coordination with the National Agricultural Research Institute and the Food Science Directorate of the Municipality of Montevideo. The incorporation of ICT into the markets own management systems and those of the operators who are active there will make for a significant increase in the impact of the lines of work mentioned above, both with regard to the generation and use of business information and with regard to technical and entrepreneurial training for operators and the public perception of the market as a reliable food supplier. The project proposes to establish a virtual community based on a Web platform that integrates: (i) an Internet portal for the promotion of SMEs and their marketable products; (ii) a system to support decision-making based on supply and price indicators, and information on market trends; (iii) a virtual campus for online training for operators; (iv) a tool for communications and exchange of information, e-mail, and forums; and (v) Intranet with facilities for the exchange of information and knowledge among SMEs (e-mail, forums, news, events, Mercado Modelo operations, etc.). III. Project objectives, components, and activities The goal of the project is to help boost the competitiveness and productivity of SMEs that operate in Uruguays Mercado Modelo. The purpose is to incorporate access to Internet, online consultations of information, and the use of information through available ICT tools, as part of the decision-making process, integrating the SMEs into a virtual community. The project includes three components to attain the above objectives. Component 1. Development and start-up of the virtual community The objective of this component is to design and implement the technology platform to support the virtual community of SMEs. To that end, it includes the following activities: (i) design and implement a technology platform (virtual community of SMEs) with

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information on product supply and trends; (ii) procure and install technology infrastructure in the market and for operators, including transfers to the smaller SMEs to partially finance procurement of their equipment; (iii) support and maintain the virtual community; (iv) participating SMEs evaluate the platform; and (v) implement and develop community content. Component 2: Train the SMEs in operating the platform and in taking information-based decisions The objective of this component is to train the beneficiaries on the fundamentals of strategic decision-making. The planned activities include: (i) adapt and install training infrastructure; (ii) design and implement training courses on the strategic use of information; (iii) design and implement training courses on how to operate the platform; and (iv) manage systems and statistical information for training. Component 3: Strengthen existing channels of communication with SMEs, adding value to the information provided at present This component will develop tools for analysis and dissemination of the purpose of the virtual community and its main benefits. The following activities are planned: (i) design a communications plan and implement communications activities; (ii) launch the virtual community for SMEs as a strategic tool and support for sector decision-making; (iii) analyze and identify the most effective way of positioning the Mercado Modelo Website and sending information through text messaging and the call center; (iv) update information, adjust methods for its analysis and incorporate them into the system; (v) hold a seminar to publicize the projects achievements; and (vi) measure and evaluate the impact of the dissemination activities. IV. Project costs, financing, and execution period The project will last for 24 months and the funds will be disbursed over 30 months. It will cost a total of US$680,000, with the MIF financing US$369,000. The counterpart financing amounts to US$311,000 and includes a US$150,000 contribution from the Institute for Connectivity in the Americas (IDRC/ICA). The income generated during the execution period will be deposited in a fund to feed back into the platform administered by CAMM, and will not be considered counterpart funds. The budget is presented in the following table:
Components Component 1: Development and start-up of the virtual community Component 2: Train the SMEs in operating the platform and in taking information-based decisions Source of financing (in US$) IDRC/ICA Counterpart 97,160 40,420 40,500 33,780

MIF 123,080 22,720

Total 260,740 96,920

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Component 3: Strengthen existing communications channels with SMEs, adding value to the information provided at present Administration Midterm and final evaluations and auditing Contingencies Total Establishment of the baseline and monitoring system Fiduciary strengthening and ex post reviews of procurements and disbursements ICT cluster activities Travel related to cluster activities Impact evaluation Total

40,417 93,244 25,000 30,000 334,461 5,000 10,000 12,000 5,000 2,539 369,000

12,420 0 0 0 150,000 0 0 0 0 0 150,000

20,000 66,720 0 0 161,000 0 0 0 0 0 161,000

72,837 159,964 25,000 30,000 645,461 5,000 10,000 12,000 5,000 2,539 680,000

V. Executing agency The executing agency will be the Inter-American Institute for Cooperation on Agriculture (IICA), which is an agency of the Organization of American States that specializes in agriculture. The IICAs Office in Uruguay was established in 1953, and it has extensive experience executing development projects in the rural sector, many of them in cooperation and partnerships with different public and private stakeholders. The beneficiary will be the Comisin Administradora del Mercado Modelo (CAMM), which provides infrastructure and services for the wholesale marketing of fruit and vegetables, based on the public and private interests and objectives of all sectors in the fruit and vegetable chain, from production to final consumption. Today, approximately 70% of the fruit and vegetables consumed in the country are sold through Mercado Modelo. CAMM is composed of representatives of the different private players who operate in the Market, and it is chaired by a representative of the Montevideo municipal government. The project forms part of the Mercado Modelos strategic plan which includes support for SMEs as a key strategy, as part of the objective of promoting and improving management of the productive sectors. CAMMs management seeks to create operating conditions for the participating agents, so that the fruit and vegetables can be marketed efficiently and transparently. To that end, it provides a series of marketing support services as an outcrop of its main service, which is management of the infrastructure of the building where buyers and sellers of fruit and vegetables meet and carry out their business. VI. Main considerations Project beneficiaries: About 2,000 SMEs use the Mercado Modelo directly, including producers, commercial operators, distributors in the interior, traders, grocers, fruit and vegetable stand operators, self-service store operators, and supermarkets not forming part of chains. About 500 of them are potential project beneficiaries, particularly operators and distributors. The majority of these SMEs are businesses operated by families with low levels of education and no formal commercial or business training.

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Project indicators: Some of the outcome indicators for this project are shown in the following table.
From the standpoint of Objectives Market/sales Indicators Number of companies using the services of the virtual community Number of companies that increase their revenue levels Increase in the companies profits Year 3 50 80% 10%

Sustainability. Technical and managerial sustainability will be provided by: (i) redefining the processes that CAMM will have to use to implement the virtual community, which implies a redesign of the processes of registering the marketing information channels that the operators present when they join the Mercado Modelo; (ii) the framework agreement between the Directorate General of Farming (DIGEGRA) and CAMM guarantees the continuity of the studies on market trends and prices that are necessary for the virtual community created under the project to continue to function; (iii) training for commercial operators in the application of ICT for the use of market information; and (iv) training for CAMMs technical and administrative team assigned to this project, which will continue with the same function after it ends. Financial sustainability is based on CAMMs power to charge a fee for its services, which will provide it with the sums necessary to ensure its operation. The idea is that once the system is consolidated, all the participants will pay a monthly fee (an estimated US$20 a month) which will contribute to the financial sustainability of the system. Dissemination. CAMM has identified the Federacin Latino Americana de Mercados de Abastecimiento [Latin American Federation of Supply Markets] (FLAMA) as being interested in learning about this experience and replicating it once it has been completed. This means that if the project is a success, it can be replicated in other markets in the region. Risks. The projects primary risk is cultural, namely that not enough SMEs join the work platform. This is due to the natural resistance of individuals to change which, in this case, would require the operators to change how they handle information. Many of the operators are older and do not readily manage the new technological tools. The following actions will be taken to mitigate this risk: (i) having a communications plan for the proposal and raising the awareness of the different agents to clearly explain what it consists of and what the costs and benefits will be; (ii) made-to-measure training program; (iii) specific actions to involve young collaborators who, with the consent of company owners, can play an active role in implementing the new solutions inside each business; and (iv) design of user-friendly, intuitive interfaces that use the everyday language of Mercado Modelo operators. VII. Project execution and supervision The project will be monitored by the Banks Country Office in Uruguay, in accordance with the new risk- and performance-based project-management model (fulfillment of

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milestones) established by the MIF in April 2008. Milestones are activities or outputs critical to achieving the development objectives, and must be determined jointly by the IICA and the MIF. They may be revised and reprogrammed during the project. The IICA may also request that the Bank modify the milestones, provided that the corresponding deadlines have not passed. Fulfillment of milestones does not relieve the IICA of the responsibility to meet the targets set forth in the Logical Framework. Parallel to implementing the project components, applied research activities will be carried out, coordinated and financed by IDRC/ICA. Support will be provided by a local academic institution responsible for the research. The objective of these parallel activities is to develop regional models for platforms to provide market information and intelligence in wholesale and retail environments devoted to marketing agricultural products, with a view to improving management by merchant SMEs through the use of ICT tools. IDRC/ICA and the IICA will sign a cooperation agreement to execute this parallel activity. Results-based disbursements. To disburse the MIFs resources, a revolving fund with up to 30% of the MIFs contribution will be formed. The first disbursement of MIF funds will be made in the form of an advance to the IICA after the agreement is signed and the following conditions have been fulfilled, in addition to those set forth in the General Conditions of the technical-cooperation agreement to be signed with the Bank: (i) signature of agreements with the entities participating in the project; (ii) approval by the Bank of the projects annual work plan, including the first cycle of milestones; and (iii) selection of the members of the executing unit. The amount of successive disbursements will depend on the needs of the activities programmed for the period in question. Disbursements will be made when requested by the IICA to continue with normal execution of the project, and after it is confirmed that no milestones are pending at the time of the request. To this end, the IICA must submit evidence of fulfillment of milestones to the MIF before submitting the disbursement request. In the event that milestones are not reached, the MIF will assess the seriousness of the situation and take appropriate measures to ensure that this does not have an impact on project implementation and/or achievement of the objectives. Ex post reviews will be conducted of supporting documentation for disbursement requests from the IICA. Procurement. Procurement processes carried out with resources from the contribution will be in accordance with the Policies for the Procurement of Works and Goods Financed by the Inter-American Development Bank (document GN-2349-7, as updated), the Policies for the Selection and Contracting of Consultants Financed by the Inter-American Development Bank (document GN-2350-7, as updated), the MIFs guidelines (of 26 June 2008) for contracting consultants and procuring goods and services, and the projects Procurement Plan. Before any procurements can be made, the IICA must submit the initial Procurement Plan to the Bank for approval. This plan will be updated annually or when there is any significant change in procurement methods or in the goods or services to be procured. Each new version must be submitted to the Bank for approval. Ex post reviews will be conducted of supporting documentation for procurement processes. Project status reports. The IICA will be responsible for submitting project status reports (PSRs) to the MIF within 30 days after the end of each six-month period during the project. These reports will be in a format provided by the MIF, and will include: (i) status of project

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execution; (ii) fulfillment of milestones; and (iii) outcomes achieved and their contribution to the fulfillment of the objectives set forth in the Logical Framework. They will also cover any problems encountered in execution and proposed solutions. The December 2009 report will include the new annual work plan for the second year of the project, along with the milestones agreed upon with the Bank. Within 90 days after the end of the project, the IICA will submit the final PSR to the MIF, indicating outcomes achieved, the proposed sustainability plan, and lessons learned. Financial monitoring. The IICA will establish and maintain proper accounting of finances, internal control, and project filing systems, in accordance with the MIFs accounting and auditing policies and standards, and will prepare a project financial statement at the end of the project. The IICA will commission an auditing firm, to the Banks satisfaction, to review this financial statement. This audit will be financed with MIF resources. Also, the MIF may decide to change the method for reviewing procurement processes and/or disbursements from ex ante reviews to ex post reviews. If it does so, the MIF will hire independent auditors to conduct annual ex post reviews of supporting documentation for disbursement requests and procurement processes. The MIF may modify the method and frequency of these reviews, depending on the review findings and/or subsequent risk analyses during the project. Evaluations. Two evaluations will be conducted over the life of the project. A midterm evaluation will be carried out when 50% of the MIF contribution has been disbursed or half of the execution period has elapsed. This evaluation will cover, at a minimum, the following issues: (i) progress in scheduled activities; (ii) status of indicators set forth in the Logical Framework; (iii) institutional capacity of the executing agency; (iv) efficiency, efficacy, coverage, relevance, and sustainability of execution; (v) appropriateness of the project information system, not only for project management but also for future replicability; and (vi) fulfillment of the pari passu of the counterpart. This report should include lessons learned and indicate the corrective measures needed to ensure proper project execution. This evaluation will be the basis for a sustainability workshop to be held before the end of the project. A final project evaluation will also be conducted when the last group of milestones has been fulfilled or when 90% of the MIFs contribution has been disbursed. The final evaluation will include: (i) analysis of outcomes achieved in comparison to the baseline and the objectives set forth in the Logical Framework; (ii) best practices and lessons learned; and (iii) the degree of sustainability of actions promoted by the project after the MIFs contribution has been completed. These evaluations will be commissioned by the Bank with MIF resources. An evaluation and dissemination workshop will be held upon project completion to evaluate and disseminate project outcomes and the actions needed to increase the impact of the project. Within the first six months of the project, the monitoring and evaluation system must be up and running. The Bank will commission consulting services to establish the project baselines, which will serve as a benchmark for project monitoring, including midterm and final evaluations. Part of this consultants work will be to design the monitoring and evaluation system that the IICA will use as a management tool. Resources from the MIF will be used to design the monitoring system and determine the baseline, as well as to perform the midterm and final evaluations.