POLICIES AND STRATEGIES FOR A

NEW MODEL OF IRRIGATION

DOCUMENT SYNTHESIS

1
 SERIES: POLICIES AND STRATEGIES FOR A NEW MODEL
OF IRRIGATION

V.1 – The Importance of Agribusiness Irrigation for the

Development of the Northeast of Brazil

V.2 – National and International State of the Art Irrigation

Agribusiness 2000

V.3 – General Model for Optimization and Promotion of Irrigation

Agribusiness in the Northeast of Brazil

V.4 – Specific Model for the Optimization and Promotion of the

Salitre Irrigation Project – Juazeiro, State of Bahia – Brazil

2
POLICIES AND STRATEGIES FOR A
NEW MODEL OF IRRIGATION

DOCUMENT SYNTHESIS

Francisco Mavignier Cavalcante França

Coordinator

BANCO DO NORDESTE
Fortaleza – 2002

3
Work published by the

Board of Directors
President: Byron Costa de Queiroz

Directors: Ernani José Varela de Melo, Marcelo Pelágio da Costa Bomfim,

Osmundo Rebouças and Raimundo Nonato Carneiro Sobrinho

Internet: http://banconordeste.gov.br
Circulation: 1.000 copies
Information: Consumer Hotline: 0800.783030
E-mail: ren@banconordeste.gov.br

Editorial Coordination: Ademir Costa

Proofreading: Antônio Maltos Moreira
Bibliographic standardization: Rita de Cássia Alencar

Official Archive in the National Library, under Act 1823

of December 20th, 1907
Copyright © Banco do Nordeste Printed in Brazil
Banco do Nordeste
B213p Policies and strategies for a new model of irrigation: document
synthesis/Francisco Mavignier Cavalcante França, coordinator. -
Fortaleza: Banco do Nordeste, 2002.
120 p.
Translation of the políticas e estratégias para um novo modelo
de irrigação: documento síntese.
1 – Irrigation. 2 – Irrigation-Northeast. 3 – Brazil-National policy
of irrigation. 4 – Salitre project. 5 - Northeast development. 6 –
Agribusiness. I – França, Francisco Mavignier Cavalcante. II -
Título.
CDD: 631.587
Printed in Brazil

4
 General Coordinator of the Study
Francisco Mavignier Cavalcante França

Consulting Firm Consortium Responsible for the Study

Plena Consultoria de Engenharia Agrícola Ltda.
Elias Teixeira Pires (Consortium Coordinator)
Eliseu Andrade Alves
José Luiz dos Santos Rufino
Mário Ramos Vilela
Paulo Severino de Rezende
Ruy Aderbal Rocha Ferrari

Getúlio Vargas Foundation

Ednéia da Silva Bezerra
Gregory Honczar
Guilherme Soria Bastos Filho
Ignez Guatimosim Vidigal Lopes
Mauro de Rezende Lopes
Nuno Monteiro Casassanta
Stivilane Dornelas

PROJETEC – Projetos Técnicos Ltda.

André Luiz da Silva Leitão
Fábio Chaffim Barbosa
Jaco Charcot Rios
João Joaquim Guimarães Recena
Luiz Alberto Teixeira

Banco do Nordeste Technical Team

Cláudio Vasconcelos Frota Francisco Mavignier Cavalcante França
Maurício Teixeira Rodrigues Rubens Sonsol Gondim

Inter-Institutional Management Team

Rômulo de Macedo Vieira (Coordinator) - National Integration Ministry
Edson Zorzin - Codevasf
Francisco Mavignier Cavalcante França - Banco do Nordeste
Guilherme Lincoln Aguiar Ellery - DNOCS
José Honório Accarini - Ministry of Planning, Budget and Administration (SPI)
Washington Aquino de Mendonça - Ministry of Planning, Budget
and Administration (SEAIN)

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 Inter-Institutional Technical Support Group
Francisco Mavignier Cavalcante França (Coordinator)
Artur Eustáquio R. Saabor - National Integration Ministry
Clésio Jean Almeida Saraiva - DNOCS
Edson Zorzin - Codevasf
Euzébio Medrado da Silva - EMBRAPA
Humberto Leite Freitas Filho - Ministry of Planning, Budget
and Administration (SEAIN)
José Honório Accarini - Ministry of Planning, Budget
and Administration (SPI)
Manfredo Pires Cardoso - Agriculture and Agrarian Reform
Secretariat, State of Bahia - Brazil

Inter-American Development Bank Team

Francisco Basílio Souza (Coordinator)
Asako Yamamoto
Benard Darnel
Charles Smith
Fausto Medina-Lopez
Juan Luna-Kelser
Myriam Quintero
Valnora Leister

Advisory Council (Independent Consultants)

Alejandro Luís Seminário Duany - Peru Augustín A. Millar - Chile
Francisco de Souza - Brazil Jim Charles Bryon - USA
John Wilkison - Brazil José Cruz Roche - Spain
Juan Sagardoy - Italy Pablo Lalanda Carrobles - Spain

Collaborators:
Aluysio Antônio da Motta Asti, Armando Munguba Cardoso, Carlos Alberto
de Carvalho, Francis Puglise, Frederico Reis de Araújo, Hans Steinbichler,
José Airton Mendonça de Melo, José Bento Corrêa, José Eduardo Borella,
José Olimpio Rabelo de Morais, José Paulo Silveira, José Raimundo
Machado dos Santos, José William Araújo Sousa, Juscelino Antonio de
Azevedo, Decision Bernardes, Leda Maria Marques Cavalcante, Luís Carlos
Ramos de Lima, Luiz Hildemar Colaço, Maria Lucinete Valente, Otávio
Gondim Pereira de Costa, Ricardo Lima de Medeiros Marques, Roberto
Duarte Vidal Silva, Rodrigo Magalhães Neiva Santos, Valdir White Castle,
Yara Januzzi.

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 PRESENTATION

The Brazilian Northeast is known to have the best conditions for the
production of fruits and vegetables in the whole world, which opens great
possibilities for the development of irrigated agriculture in the region. The
strategic relevance of this activity, that stands out for job generation, income
and foreign exchange credits, inspired the creation of the project ‘New
Model of Irrigation’, in the ambit of the program ‘Advance Brazil’, of the
Federal Government.
Of an innovative character, this project seeks, mainly, to stimulate
private investment in all phases of irrigation agribusiness, to guide
production towards market opportunities and to redirect the government's
participation in the activity, prioritizing the roles of induction, orientation,
regulation and promotion. Its goals are also, to generate synergy between
private initiative and governmental spheres, to guarantee efficiency in the use
and in the management of water for irrigation, to identify new sources and
financing models and to propose mechanisms for the control of
environmental and social impacts.
Owing to the importance of the Project, the need for a study of
reference to guide the organisms involved in the implementation of the New
Irrigation Model was identified. Feasibility was accomplished through the
partnership between the Ministry of Planning, Budget and Administration,
the Ministry of the National Integration, the Interamerican Development
Bank (IDB) and the Bank of the Northeast.
Elaborated with the contribution of more than 1.500 national and
international specialists, this work consists of a collection composed of the
following volumes: 1 – the Importance of Irrigation Agribusiness for the
Development of the Northeast, 2 – State of the Art National and International
Irrigation Agribusiness 2000, 3 – General Model for Optimization and
Promotion of Irrigation Agribusiness and 4 – Specific Model for
Optimization and Promotion of the Salitre-Juazeiro Irrigation Project, of the
state of Bahia.
It is with satisfaction, thus, that the Bank of the Northeast makes
public this set of studies, as a form of disseminating, among public and
private agents, the new strategies that will invigorate irrigation agribusiness
in the Region.
Byron Queiroz
President of the Bank of the Northeast

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8
 CONTENTS

PRESENTATION ............................................................................. 11

1 - INTRODUCTION ........................................................................ 13

VOLUME 1 - THE IMPORTANCE OF AGRIBUSINESS

IRRIGATION FOR THE DEVELOPMENT OF
THE NORTHEAST................................................... 17

1 - THE IMPORTANCE OF THE AGRICULTURE SECTOR IN

THE ECONOMY OF BRAZIL AND THE NORTHEAST ....... 18
1.1 - In the Generation of Wealth ...................................................... 18
1.2 - In the Generation of Employment ............................................ 20
1.3 - In the Generation of Foreign Exchange Credits........................ 20

2 - DEVELOPMENT OF IRRIGATION IN BRAZIL

AND IN THE NORTHEAST ....................................................... 22
2.1 - Evolution of Irrigated Areas in Brazil ....................................... 22
2.2 - Evolution of Irrigated Areas in the Northeast .......................... 24
2.3 - The Importance of Irrigated Agriculture in the Northeast ...... 26
2.3.1 - Socioeconomic impacts ........................................................... 26
2.3.2 - Generation of employment ..................................................... 26
2.3.3 - Crop diversification ................................................................ 27

3 - PUBLIC AND PRIVATE IRRIGATION PERFORMANCE ..... 28

4 - STRATEGIC IMPORTANCE OF IRRIGATED

AGRICULTURE FOR THE NORTHEAST ............................... 32

VOLUME 2 - NATIONAL AND INTERNATIONAL STATE OF

THE ART AGRIBUSINESS IRRIGATION 2000 .... 34

1 - METHODOLOGICAL ASPECTS .............................................. 35

2 - NATIONAL STATE OF THE ART – LEGAL BENCHMARK... 37

2.1 - Main Points of the National Irrigation Policy –
The Irrigation Law .................................................................... 37

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2.2 - Conceptual Analysis of the Current Irrigation Law ................ 42

3 - GLOBAL ANALYSIS AND RESULTING

RECOMMENDATIONS ............................................................. 47

VOLUME 3 - GENERAL MODEL FOR THE OTIMIZATION AND

PROMOTION OF IRRIGATION AGRIBUSINESS
IN THE NORTHEAST OF BRAZIL........................ 52

1 - THE IMPORTANCE OF IRRIGATION FOR THE

NORTHEAST AND FOR BRAZIL ............................................ 54

2 - CURRENT SITUATION OF IRRIGATION IN BRAZIL AND IN

THE NORTHEAST ..................................................................... 56

2.1 - The Role of the Public Sector in Irrigation ............................... 56

2.2 - Mechanisms of Financing for Irrigation ................................... 57
2.3 - Mechanisms for the Recovery of Costs and Capital ................. 57
2.4 – Situation of Public Irrigation Projects in the Northeast .......... 58
2.4.1 - The focus on the implantation of works ................................. 58
2.4.2 - Area implanted in production and to be implanted ............... 59
2.4.3 - Operation and maintenance management ............................. 59
2.4.4 - The production process .......................................................... 60
2.4.5 - The participation of private initiative .................................... 61

3 - THEORETICAL BENCHMARK OF THE NEW

CONCEPTUAL MODEL ............................................................. 63

4 - PROPOSED NATIONAL IRRIGATION POLICY ................... 65

4.1 - General Guidelines of the New National Irrigation Policy ....... 66
4.2 - Proposed Juridical Regime ........................................................ 67
4.3 - Guidelines For the Implantation of Irrigation Projects ........... 70

5 - INSTRUMENTS OF THE NEW NATIONAL IRRIGATION

POLICY ........................................................................................ 71

5.1 - Irrigation Planning .................................................................... 71

5.2 - Irrigation Policy, Plans, Programs and Projects Management.. 72
5.2.1 - Scope of irrigation management ............................................ 72

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5.2.2 - Proposal for a management system applied to the irrigation
management environment .................................................... 73
5.2.3 - Attributions of each public project management entity ......... 75
5.2.4 - Management systems for irrigation projects ......................... 78
5.3 - Production, Post-Harvest, Distribution and Market Systems .... 79
5.3.1 - Commercial management system ........................................... 80
5.3.2 - Market strategies .................................................................... 81
5.3.3 - Market information system .................................................... 82
5.3.4 - Technological information system .......................................... 83
5.4 - Support Services ........................................................................ 83
5.4.1 - Information base ..................................................................... 84
5.4.2 - Technical assistance / production management ..................... 85
5.4.3 - Research and development (R&D) ......................................... 85
5.4.4 - Management training program .............................................. 86
5.4.5 - Environmental management services .................................... 86
5.5 - Economic and Financial Mechanisms ....................................... 87
5.5.1 - Sources and mechanisms of financing .................................... 87
5.5.2 - Description of financial risks .................................................. 91
5.5.3 - Strategies for the mitigation of commercial risks .................. 93
5.5.4 - Guiding premises for the role of the public sector: federal,
state and municipal ............................................................... 94

VOLUME 4 - SPECIFIC MODEL FOR THE OTIMIZATION AND

PROMOTION OF THE SALITRE IRRIGATION
PROJECT - JUAZEIRO, STATE OF BAHIA -
BRAZIL ..................................................................... 95

1 - GENERAL DESCRIPTION OF THE SALITRE PROJECT ..... 96

1.1 - Water Supply ............................................................................. 96
1.2 - Parceling of the Area ................................................................. 97
1.3 - Project Implantation ................................................................. 99
1.4 - Agricultural Production Potentiality ........................................ 99
1.5 - Potentiality of the Salitre Project for Agro-Industry and the
Foreign Markets.......................................................................... 99
1.6 - Environmental Studies ............................................................ 104

2 - RECOMMENDATIONS FOR THE APPLICATION OF THE

NEW IRRIGATION CONCEPTUAL MODEL IN THE
SALITRE PROJECT ................................................................. 106

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2.1 - Proposal for an Information Platform .................................... 106
2.2 - Guidelines for a Business Plan of the Salitre Project ............. 107
2.3 - Guidelines for a Promotion and Marketing Plan ................... 108
2.4 - Mechanisms for Financing ...................................................... 109
2.4.1 - Collective irrigation infrastructure ...................................... 109
2.4.2 - Parcel infrastructure ............................................................ 110
2.5 - Project Management ............................................................... 111
2.5.1 - Management model for stage - 1 of the Salitre Project ........ 111
2.5.2 - Management model for the subsequent stages of the Salitre
Project ................................................................................. 113
2.6 - Support Services ...................................................................... 114
2.6.1 - Management of small companies ......................................... 115
2.6.2 - Environmental monitoring ................................................... 116
2.6.3 - Proposal for a training program .......................................... 117

6 - REFERENCES............................................................................ 120

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1 - INTRODUCTION

One of the projects of the Avança Brasil program, pertaining to the

Federal Government, is the New Model of Irrigation Project. The focus of
this project considers irrigation as business. And, for this reason, its basis
is in the private sector, in the building of infrastructure works, in the
implantation and operation of agricultural activities, agro-ndustrialization
and commercialization, as well as in the search for an active relationship
with the external environment, with the participants of the productive
chain and with the government.
Endeavoring to offer subsidies that assure the efficiency of the
New Model of Irrigation Project in view of the new scenarios, the Federal
Government, through the Banco do Nordeste, following an international
bidding process, contracted the consulting services of the consortium
PLENA-Consultoria de Engenharia Agrícola Ltda., Fundação Getúlio
Vargas (FGV), Projetos Técnicos Ltda. (Projetec) to develop, validate
and establish the structural, conceptual, operational, financial and
regulatory bases of the model, focusing on the Northeast of Brazil.
The study was developed by a team of multidisciplinary
consultants and agricultural entrepreneurs, with wide-reaching knowledge
of irrigation, regional development, public administration,
commercialization, research and agricultural development, technical
assistance, economics, environment, and the management of public
irrigation projects of irrigation, among other themes.
Dealing with the development of a conceptual model for irrigation
policy, the study embraced the close involvement of several agents in the
chain of irrigated agriculture, from the Northeast and the North of the
state of Minas Gerais. Between May 1999 and April 2000, several events
were held to discuss proposals for models and gather subsidies from the
various segments of irrigated agriculture, besides contacts and interviews
with current and potential investors in irrigated agriculture.
At the same time as the events mentioned, subsidies were also
sought in the National and International Bibliography on themes related
to irrigation. The review of the literature is presented in the volume that
deals with State of the Art National and International Irrigation

13
Agribusiness, in which obstacles and opportunities found and their
corresponding casual factors were identified together with the paths
explored for their resolution and maintenance, as well as a view of the
future, provided by institutions and entrepreneurs within irrigated
agriculture.
This analysis covers 11 countries which have vast experience in
irrigation, both public and private. The United States stands out in private
irrigation , in public participation, and in the transfer of public projects to
organizations of farmers, to Mexico, Colombia and another 8 countries
and, finally, Chile, France, Spain, USA and Israel, that use sophisticated
technology for irrigation and commercialization.
The conception of the model, in addition to the subsidies offered
by agents of the irrigation agribusiness chain in the Northeast and North
of Minas Gerais and those obtained from the national and international
bibliography, benefited from visits by some consultants to the United
States (USA), Colombia, Mexico, Chile, Argentina, Spain, France and
Israel. The visits were undertaken in order to acquire knowledge of
problems and solutions encountered with regard to themes such as
irrigation, perimeter management, government policies and the relations
among the links of the productive chain of irrigation agribusiness.
A proposal for a national irrigation policy was discussed, based on
the New Irrigation Model Project. This proposal considers that, in a
globalized world, the capacity to compete defines the possibility for
survival and market expansion. Those who master information
technology will be competitive and will grow. Irrigation is also
considered an important development tool, especially for the Northeast
and North of Minas, for its capacity to generate income, stable
employment, foreign exchange credits, and increase food supply, besides
fomenting the modernization of rural areas.
The proposal of the New National Irrigation Policy is based on the
participation of the private sector in irrigation agribusiness. It is based on
the proposal of changes in the present irrigation legislation (law no.
6.662/79 and its regulations), on guidelines for irrigation implementation
and planning. It supports the management of policies, plans, programs
and projects. It shows what a more modern production, post-harvest,
distribution and market system should be like. It establishes the essence

14
of support services, such as information technology, technical assistance
and production management, Research & Development, management
training program, environmental management and economical and
financial mechanisms.
If the proposal for changing the present irrigation law is approved,
it will allow for the association of private and public sectors, create
conditions for the private sector to participate, in the form of concessions,
in the implementation of public projects and even finance them. It defines
that, even when the government implements public projects, it can only
operate them for a limited period. In addition, government can either sell
or lease the collective infrastructure.
The proposal of the New Policy shifts the guidelines of public
irrigation projects, up to now focused on works, to the agribusiness focus.
It requires business advertising, the implantation of an information
platform and its divulging on a national scale, seeking to attract
agriculturists and competent companies. It defends the organization of
producers, aiming at a more symmetrical coordination in the agribusiness
chain. It proposes a financing model for agriculture which associates rural
credit with other types of credit and with business management.
This document contains the Executive Summary of the complete
study, including the four reports mentioned previously, as follows:
The Importance of Agribusiness Irrigation for the Development
of the Northeast of Brazil – It shows the importance of the agricultural
sector in the economy of Brazil and of the Northeast, it describes the
development of irrigation in Brazil and in the Northeast and it discusses
the importance of the irrigated agriculture for the Northeast.
National and International State of the Art Agribusiness
Irrigation 2000 – It presents, in a global and holistic way, the exploration
of irrigated agricultural, based on the experience of 11 countries,
responsible for 35% of the irrigated area in the world, besides 6 irrigation
clusters located in the Brazilian Northeast and in the North of Minas.
General Model for Optimization and Promotion of Irrigation
Agribusiness in the Northeast of Brazil – It discusses the current
situation of irrigation in Brazil and in the Northeast where it focuses on
the role of the public sector in irrigation, mechanisms of financing for

15
irrigation, and mechanisms for the recovery of costs and capital, among
others. It presents the theoretical benchmark for the development of a
new irrigation policy, the proposal for a new irrigation politics.
Specific Model Specific for Optimization and Promotion of the
Salitre Irrigation Project – Juazeiro, State of Bahia – Brazil – It
describes the principal characteristics of the Salitre Project, its
potentiality, and it proposes guidelines for its implementation based on an
information platform, a business plan, promotion and marketing,
management and support services (technical assistance/management,
environmental monitoring, and a training program).

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 The Importance of Agribusiness Irrigation for the
Development of the Northeast of Brazil

Agriculture has given, historically, an unquestionable contribution

to the development process of Brazil, participating in the generation of
employment, income and foreign exchange credits. Thus, upon
observation of the behavior of the Southeast and South regions, where
more substantial development of the industrial and services sectors
occurred, it may be verified that its agriculture and cattle raising also
stand out, considering the economic drawbacks that the country has faced
over a long period, that affect the agricultural sector more acutely.
On the other hand, the Northeast region has been presenting a
general growth of its Gross Domestic Product (GDP) higher than the
growth of the Country itself. Its agriculture, however, has a declining
participation in the regional GDP, although it employs more than 80% of
its economically active population.
In this segment the importance of regional agriculture is discussed,
with the insertion of irrigated agriculture, from both points of view,
governmental and private, including the strategic importance of irrigation
for the development of the Northeast.

17
1 - THE IMPORTANCE OF THE AGRICULTURAL
SECTOR IN THE ECONOMY OF BRAZIL AND OF
THE NORTHEAST

Brazilian agriculture has, in the past and in the present, and will
have, certainly, in the future, relevant contributions to give to the
economical and social development of Brazil. In the past, it contributed
decisively, through the classic functions, to supply cheap food to urban
populations, liberate labor for the growing industry, generate foreign
exchange credits, through the export of surpluses, and also capital for the
industrialization process.
The process of modernization of agriculture provoked radical
changes in the internal production system and in its relationship with the
industrial sectors, located before and after the gate, giving a meaning to
the concept of agribusiness or agro-industrial complex, involving the
activity of agricultural production (farmings, livestock, vegetable
extraction), those linked to the supply of inputs, those related to the agro-
industrial process and those that support product flow until the final
consumer's table. This focus on agribusiness has deep implications in the
economical organization of Brazil, because, through it, the real strategic
dimension of Brazilian agriculture is revealed, and it can no longer be
seen as a stagnant activity, whose added value represents a small and
decreasing portion of the Gross Domestic Product (GDP), with the
progress of economic development, but as a dynamic center of a group of
economic activities, capable of generating wealth, employment and
foreign exchange credits.

1.1 - In the Generation of Wealth

The Brazilian GDP was US$ 775,7 billion, in 1998, having

increased 17,37%, in the period 90/98, and presented an ascending
tendency as of 1992, having, however, a reduction in its value of 3,3% in
relation to 1997.
The GDP of the agricultural sector, in the concept of "behind the
gate", on the contrary, presented a descending tendency as of 1993,
except for 1998, maintaining, however, a variable participation of around

18
8 to 10%. On the other hand, when the agricultural GDP is calculated in a
systemic manner, in other words, aggregating the links of the
agribusiness chain , its participation is 40%, making it the most important
economic activity of the country. Calculated on the value of the GDP of
the last 3 years, this participation approaches US$ 300 billion, annually.
In the understanding of some of those that study the issue, this
systemic vision endeavors to obtain a better understanding of the
operation of agricultural activity, displaying its real dimension, and
aiding decision-makers to formulate more focused policies with more
success probability. That vision breaks away from segmented analysis,
that often loses important information on the linkage of the actions. It is
because agro-industry and a series of warehouse, transport and processing
services, besides the industry of inputs, machines and equipment, would
not exist without agriculture.
The GPD indexes, disaggregated by geographical area, confirm the
great concentration of national wealth in the Southeast region, that
represents, on average, 60% of the total, in the period analyzed, while the
Northeast region participates, on average, with 12,5% of the GDP of the
country.
On the other hand, analyzing the disaggregated data by region and
sector, it may be observed that all regions, in the analyzed period, 90/98,
grew in the agricultural sector (segmented vision), except in the
Northeast, that presented small oscillations, but with a small fall in the
period, maintaining an approximate relative participation of 10% of the
regional GDP in the period in analysis, differently of the observed
behavior in its other two sectors.
The agricultural section, in spite of all the inherent difficulties, in
view of the uncertainties and risks that agricultural activities go through,
and those that are imposed on it by macroeconomic policies, which are,
most of the time, unfavorable, has been performing its role, generating
wealth, as it is responsible for 40% of the national GDP, in a systemic
and modern vision of agribusiness.

19
1.2 - In the Generation of Employment

To analyze the importance of the participation of agriculture

correctly in the generation of employment, the vision of agricultural
integration is also of the utmost importance. Agricultural production
employed about 16,7 million people in 1997, which represents 22,3% of
the Population Economically Active (PEA) of Brazil. If this number, by
itself, is very representative, specialists sustain that, for each occupation
in the agricultural production corresponds to another occupation in the
remaining agribusiness, which means roughly 33,4 million jobs are
generated, corresponding to 44,6% of the Brazilian PEA.
In terms of the Northeast region, agriculture is absolutely
fundamental. In this region, agriculture, under its conventional concept of
" behind the gate ", employed 8,2 million people, the equivalent to 38,7%
of the regional PEA, and 48,8% of the PEA of the agricultural sector of
the whole of Brazil in 1997. When the participation of the several
economical activities were analyzed, in the Northeast, in the absorption
of the economically active population, it was verified that 41,4% of the
working total is in agriculture, in the concept of direct activity, and the
contribution of industry and services was small. Also, if agribusiness is
considered, it hired in the Northeast about 83% of the working population
and 77% of the total of the population economically active in 1997.

1.3 - In the Generation of Foreign Exchange Credits

The agricultural sector has been contributing strongly to the

generation of foreign exchange credits for the country. Historically, the
participation of agricultural products in the Brazilian trade balance was
always very significant. In 1970, it represented 74,1% of the total of
exports. Although its relative participation has decreased, in function of
the industrialization process and the diversification of exports, Brazilian
agriculture in the period 70/98 also contributed, expressively, with about
32% of the exported total. On the other hand, the participation of
agricultural imports, in this period, is less than 11%. Between 1970 and
1998, the balance of Brazilian trade reached US$ 99,3 billion, while the
balance of the agricultural sector was of US$ 130,6 billion, thus being
greatly responsible for the generation of foreign exchange credits for the
country.

20
 The space distribution of Brazilian exports shows a concentration,
as in the GDP, in the Southeast region, representing about 58% of the
total exported in 1998, and rising to more than 82%, when the South
region is added, leaving to the Brazilian Northeast the contribution of 8%
of the total exported.
With this vast participation potential in the Brazilian economical
development (generator of wealth, foreign exchange credits and
employment), agriculture – as a driving force of agribusiness – has its
future scenario delineated in a new atmosphere, today marked by the
economic opening, hoping that the State carry out its role as a stimulator
and moderator.

21
 2 - DEVELOPMENT OF IRRIGATION IN BRAZIL AND IN
THE NORTHEAST

2.1 - Evolution of the Irrigated Areas in Brazil

Except for the flooded rice areas and narrow strips of land along
rivers, production through irrigated crops, in Brazil, is relatively recent.
Its evolution occurred in 4 phases (Figure 1), estimating that, in 1998, the
irrigated area of the country was 2.870.000 hectares.

FIGURE 1
EVOLUTION OF IRRIGATED AREAS IN BRAZIL
(thousands of hectares)

FIRST PHASE SECOND PHASE THRID PHASE FOURTH PHASE

Years

SOURCE: Agência Nacional de Energia Elétrica (ANEEL), 1999.

The first phase, initiated in the middle of the last quarter of the
XIX century, extended halfway through the decade of the 60s, of this
century, and performance, in the domain of irrigation, was guided by
isolated and topical actions, concentrated in the federal sphere towards
specific objectives, without the corresponding structures of national
policies or programs.
The second phase began at the end of the sixties, with the creation
of the Group of Integrated Studies for Agricultural Irrigation and
Development (Geida), whose orientations produced effects until the end

22
of the first half of the eighties. Amplification of global knowledge was
sought, on the available natural resources and for the conception and
implementation of national programs, such as the Pluriannual Irrigation
Program (PPI). Opportunities to attract private initiative were created in
the sphere of irrigation and drainage, the conception of "enterprise lots"
in public irrigation projects, consolidated in the Project of the I National
Irrigation Plane, based on actions commanded by the public sector, but
clearly guided by incentives for private initiative.
The third phase was characterized by the institution of the
Irrigation Program of the Northeast (Proine) and the National Irrigation
Program (Proni), both in 1986. That phase, marked by decisions adopted
in function of priorities established by the federal government, in
articulation with the private sector, and the implementation of a sub-
sector irrigation project with infrastructure support for private initiative,
with a clearer division of roles between the public sector and private
initiative, in the development of irrigation projects, limited the action of
the government to the execution of major collective works (hydraulic,
electric and macro-drainage support), and leaving to private initiative the
other arrangements for its attainment.
The fourth phase considered that the several initiatives put into
practice, during the last 50 years, should be redirected to the new
orientation substantiated in the National Irrigation and Drainage
Policy, denominated, in the executive phase, the New Irrigation Model
Project.
As shown, the total irrigated area in Brazil is estimated at
2.870.244 hectares, with strong concentration in the South and Southeast
regions, that represent 72,7%. Only the state of Rio Grande do Sul,
concerned with rice production, is responsible for 35% of the irrigated
area in the country.
The Brazilian Northeast answered for 17,26% of the irrigated area
irrigated in the country, in 1998.
At the beginning of the decade of the 90s, there was stagnation in
the irrigated areas due to the removal of some specific credit lines for
irrigation, mainly in the South, Southeast and Center-west, such as the
Program for the Use of Irrigated Lowlands (Provarzeas) and the Program
for the Financing of Irrigation Equipment (Profir), and to the non-

23
existence of interest rates that entice the adhesion of private initiative,
and administrative reforms, resulting in government indecision for the
irrigation sub-sector.
The growth observed in the period of 96/98 was due to the
expansion of private irrigation, in horticulture, grains and coffee,
especially in the States of Bahia (West and South regions of the State),
North of Espírito Santo, North and Upper Paranaíba, in São Paulo, in
Minas Gerais, Rio Grande do Norte and Pernambuco and in the
cultivation of irrigated rice in the South.
2.2 - Evolution of Irrigated Areas in the Northeast

The specific analysis of irrigation in the Northeast is important,

since, of all the regions in Brazil, it is the one that presents characteristics
of water deficiency for plants, under normal conditions, with low rainfall
indexes and irregular distribution of rains, making irrigation a
fundamental technology for the agriculture of the region, which is its
principal economic activity, in relation to labor absorption.
The first attempts to take the benefit of irrigation to the semi-arid
region occurred in the decade of the 40s, carried out by the National
Department of Works Against Droughts, with the construction of great
dams and irrigation canals.
In the São Francisco Valley, in 1943, in the Municipal district of
Petrolândia – state of Pernambuco, the São Francisco Agroindustrial
Nucleus was implanted, by the extinct Lands and Colonization Division
of the Ministry of Agriculture, where the first plantations of irrigated
onions were initiated in the alluvial region of the sub-medium São
Francisco (today, this nucleus is submerged by the lake formed by the
Itaparica Dam). With the creation of the Commission of the São
Francisco Valley (CVSF), in 1948, the use of these lands with irrigation
was enlarged with other crops, such as: melons, grapes, among others.
The Superintendency for the Development of the Northeast
(Sudene) was created in 1959, with the mission of agglutinating actions,
seeking, among other objectives, the rational use of water and soil
resources in the region, gave effective priority to the development of
irrigated agriculture and the creation of the Group of Integrated Studies
for Agricultural Irrigation and Development (Geida).

24
 Geida carried out the first ample study of irrigation possibilities in
the semi-arid region, determining the technical economical feasibility of
73 projects, of which 62 are located in the Northeast, and drew up the
guidelines of an irrigation policy, that constituted the first phase of the
National Irrigation Plan.
In 1972 the formulation of the National Development Plans began
(PNDs). In the I PND (1972-1974), the goal to irrigate 40 thousand
hectares was established.
The II PND (1974-1979) admitted that the Brazilian Northeast, "in
spite of possessing a volume of water accumulated in dams and areas
with a high potential of underground waters, has not been using the
available resources for irrigation conveniently". The irrigated farming
areas in the Northeast, about 11.330 hectares, represented very little in
relation to what could be accomplished in the region.
The I National Irrigation Plan (PNI), elaborated in 1982, foresaw
the continuity of the Federal Government's actions, with emphasis on the
great public irrigation projects, that were already being implanted by
National Department for Works against Droughts (DNOCS) and São
Francisco Valley Development Company (Codevasf); however it
foresaw the incentive to the development of private irrigation, on a small
scale, by the concession of special credit and the use of resources (non-
recoverable funds) for infrastructure works.
The first legal text on irrigation in Brazil dates from June 25, 1979,
with the publishing of Law n.º 6.662 – the Irrigation Law (BRASIL,
1979). Its regulation, however, only occurred on March 29, 1984, by the
publishing of Ordinance n.º 89.496 (BRASIL, 1984).
Throughout the years, public and private performance incorporated
more than 495.000 irrigated hectares of the Northeast, and public projects
were responsible for 28% of this area.

25
2.3 - The Importance of Irrigated Agriculture in the Northeast

2.3.1 - Socioeconomic impacts

Irrigated agriculture, working with up-to-date technology, in semi-

arid regions that present favorable climatic temperature and brightness
conditions, constitutes an agribusiness, and, as such, as a rule, becomes
the principal inductor of the process of regional development.
With effect, the regional transformations are visible, helped by the
use of irrigation technology, in the Petrolina-Juazeiro, North of Minas
(Janaúba), South of Bahia poles and others. However more evaluation
studies of these impacts and their fundamental causes are still lacking, in
regions that use irrigation to transform their regional agricultural
economy.
Some accomplished studies show that irrigated agriculture
promotes favorable alterations in the regional GDP, contemplated in the
decrease of the rural-urban migratory flow, in the increase of the per-
capita GDP per-capita and in a better balanced demographic growth.
Finally, it contributes to the reduction of poverty.

2.3.2 - Generation employment

Irrigated agriculture in the Northeast, as already commented, due

to the climatic conditions that reign there, allows for intensive use of the
soil, with cultivation during the whole year, unlike irrigated agriculture in
the South of the country, concerned basically with the monoculture of
rice and developed only in one period of the year.
The capacity of irrigated agriculture for employment generation, in
the semi-arid region, may be verified through studies and reports that
allow the evaluation of the potential for the generation of direct and
indirect jobs starting from irrigation agribusiness. Naturally the data
present variations, that are a consequence of the type of existent
explorations in the period of the analysis, because each crop has a
specific demand for labor. It can be affirmed, based on the mentioned
data and on the experience of the Consortium, in several conditions of
irrigated agriculture, that 1 irrigated hectare generates from 0,8 to 1,2
direct jobs and 1,0 to 1,2 indirect jobs, in a consistent and stable manner,

26
compared to the 0,22 direct jobs in dry agriculture, in the semi-arid
region.

2.3.3 - Crop diversification

The Northeast region offers climate, brightness and temperature

conditions during the whole year, favorable to the development of several
crops, when under irrigation.
A group of more than 25 crops are identified, with the
technological package being used and therefore proven, to have good
productivity levels, such as: pineapples, lemons, mangoes, bananas,
grapes, beans, onions, etc.
It is important to stress that most of them present, in the principal
consuming centers, seasonal offers and prices, due to the fact that
production originates in areas that produce under a dry agricultural
regime. The irrigated areas of the Northeast, as they are able to produce
the whole year, can plan their plantings and means of conducting their
farming, so as to reduce seasonal effects, allowing consumers to enjoy
these products the whole year, at more stable prices.
Also, irrigated agriculture in the Northeast can kindle the
appearance of agro-industries, with offer stability during the whole year.

27
3 - PUBLIC AND PRIVATE IRRIGATION PERFORMANCE

Previously, a little of the history of the development of irrigation in

Brazil was reported. This will be complemented in this chapter, with an
analysis of the performance of both public and private irrigation.
In the specific case of private irrigation, usually located in lands
with more favorable soil, topographic and water availability conditions,
the government’s participation is limited to the endowment of
infrastructure of energy, highways and, in some situations, macro-
drainage works and works of protection against floods. In the decade of
the 80s, there was strong financial credit support, making available credit
resources with subsidized interest rates. This segment represented about
95% of the irrigated area irrigated in Brazil in 1998, mainly concentrated
in the Southeast, South and Center-west regions.
In the case of public irrigation in the Brazilian Northeast and in the
North of Minas the location of the areas to be irrigated implies in larger
cost, with derivation works, storage, reception and distribution of water,
because the location is in areas not as privileged as those of private
initiative. Almost always, there is also need for government intervention
in the land structuring of the project and its direct participation in the
process of land reorganization.
Also in the energy, highways, collective hydraulic works and
financial credit support infrastructure, in the execution of the parcel
systems of irrigation, the participation of the government is necessary, as
well as at the beginning of the operation of the hydraulic collective
system, with technical, material and equipment support.
Public irrigation represents around 5% of the irrigated area of the
country, however, it is responsible for more than 28% of the irrigated
area in the Northeast, a region that, besides having the most adverse
climate conditions, as to distribution and amount of rain, has soil that is
capable of being irrigated distant from water sources, demanding, thus,
the construction of barrages or dams with accumulation of a volume of
water sufficient to assist production, or great distances of water
transportation, from their reception source.

28
 Public Irrigation in the Brazilian Northeast and in the North of
Minas, is being greatly responsible for the transformation in irrigated
agriculture, as occurring with horticulture, especially in the São Francisco
Valley, besides contributing as a driving element for the development of
private irrigation in the mentioned area, because:
• it reveals the technical and economical feasible aspects of the
projects, starting from soil and water studies, carried out by
government institutions involved in promoting irrigation in the
region, creating important information for private initiative;
• it allows areas that may be irrigated, distant from water supply
sources, to be incorporate to irrigated agriculture. Prevailing
over such distances represents a very high cost for private
initiative, which, therefore, would limit the expansion of the
irrigated area in the semi-arid;
• it allows for the formation of strategic water supplies (through
barrages and dams), in areas with serious problems of water
availability, for agricultural expansion.
• it creates means for private initiative to know and test the
application of up-to-date technology in the reduction of
technological risk and in the development of crops with greater
density and economic value, as the case of grapes, mangoes,
bananas, practically introduced in the Northeast area, initially in
public irrigation perimeters, by private initiative.
In spite of all the difficulties, the existent literature, the
observations "in loco" and the contacts with the leadership of the sector,
show that public and private programs and projects, developed in the
irrigation sub-sector, promoted a significant income and employment
increase upstream and downstream, with highly positive effects on the
local and regional economies.
Such difficulties are felt more in the semi-arid region, where the
entrepreneurs have introduced high production cost crops, with little or
no technological information, such as: grapes, mangoes, bananas, guavas,
coconuts, melons, and watermelons, among others.

29
 The principal points that limited greater development of irrigated
agriculture were:
• the absence of coordinated and structured action between the
irrigation and production structure works;
• the absence of a rural credit policy for costs for the purpose of
attending to the conditions of irrigated agriculture, allowing the
activity to grow during the whole year, since it has a
differentiated cost compared to agriculture on dry lands, besides
allowing cultivation in non traditional times under dry
conditions;
• the absence of more intense research work, especially, aimed at
the search for alternatives of species and adapted hybrid crops,
besides handling technology water+soil+ plant for the several
regional conditions;
• the absence of a structured program, aimed at foreign markets,
mainly for tropical fruits, prioritizing: area and products,
marketing and quality promotion, knowledge of the demands of
different markets regarding sanitary control aspects and
chemical residues, studies and definitions of "free areas",
training of technical personnel, organization of quality control
companies to meet the demands of different types of market;
• the absence of programs for use of the potential of internal
markets of fruits and vegetables, mainly in the last five years;
• the lack of continuity of irrigation policies, with long term
planning, for the development of the sector, that would only
suffer the normal adjustments in the changes of public sector
administration;
• in the most specific case concerning irrigation in public
perimeters, besides the limitations mentioned previously, other
contributions could be mentioned:
- the delay in the execution of works, mainly due to
contingencies of financial planning, that also provoke delays

30
 in the settlement of the farmers and consequently in the
production process;
- greater emphasis to projects and engineering systems
(barrages, canals, water mains, pumping stations, etc.) in
detriment of irrigated agriculture;
- the existence of legal devices that have privileged a selection
process of farmers with little efficiency, with the settlement
of some people without managerial capacity, demanding
strong government participation in the operation and
maintenance process of the collective hydraulic works, in
spite of the positive evolution verified since the mid eighties,
with larger evolution on the part of Codevasf and little
progress of DNOCS;
- the lack of managerial capacity of most of the organizations
of producers in the perimeters;

31
4 - STRATEGIC IMPORTANCE OF IRRIGATED
AGRICULTURE FOR THE NORTHEAST

Irrigation has an important role to play in the semi-arid Northeast

(including also the North of Minas Gerais), guaranteeing economic
sustainability to agricultural activity, minimizing technological risk above
all, represented by the shortage of water.
The semi-arid Northeast, with a potential of more than 2,4 million
hectares of land suitable for irrigation, irrigates little more than 490.000
hectares. Agricultural activity is responsible for 10% of the regional GDP
and for employing 77% of the economically active population. Living
with climatic instability (irregular distribution and insufficient amount of
rainfall) irrigated agriculture is an important strategic option in the
process of sectorial and regional development.
With effect, the development of this activity in the region (as an
inductor of agricultural modernization and agroindustrialization) will
allow a series of benefits to be unchained, such as:
• Generation of foreign exchange credits – with the
implantation of an irrigated horticulture program, with tropical
fruits, in a systematized, technical and organized manner,
seeking participation in a world market appraised at almost US$
2 billion a year.
• Internal provisioning of horticultural products – with the
implementation of technical, programmed and organized
agriculture for each region, that can minimize the effect of
seasonal offers and prices, (the temperature, brightness, and
humidity of the air allow the cultivation of several types of
vegetables and fruits during the whole year), and can supply the
internal market with several types of vegetables and fruits,
appraised in 1998, for the 10 most important Brazilian States, at
US$ 4,4 billion, and for the year 2030 at US$ 5,9 billion. Study
data of the National Integration Ministry, show that only in the
supermarket sector, the value of the products represented
transactions of R$ 5,6 billion in 1998.

32
• Internal provisioning of grains/fibers – with the
implementation of technical agriculture, organized by region, to
minimize the need for annual imports of more than US$ 1,6
billion in cotton, rice, beans and corn.
• Generation of employment – with the implementation of
irrigated agriculture, that allows production during the whole
year, and could generate, in the agribusiness chain, at least 2
jobs for each irrigated hectare and, with this, help to mitigate
the intra and inter-regional migration.
• Expansion of the Regional GDP – irrigated agriculture in the
Northeast will participate positively, according to the studies
mentioned here, in the positive alteration of the regional GDP
and the per capita GDP and, with this, reduce regional
differences.
• Quality of life Improvement – the development of irrigated
agribusiness influences trade, industry and services sectors
positively, and, consequently, promotes quality of life
improvement, in general, reflected in health, home and
education aspects.

33
NATIONAL AND INTERNATIONAL STATE OF THE ART
AGRIBUSINESS IRRIGATION 2000

The Report on the State of the Art of Irrigation contains a

prospective diagnosis and an analysis among the many and complex
issues that involve irrigated agriculture in the agribusiness vision, with
prominence for the aspects of production, commercialization and support
services organization.
It seeks subsidy on the modern relationship between public and
private sectors in public projects, especially in the management process
of these projects. It analyzes the legal benchmark that support to
irrigation, in Brazil and in several other countries.
The analysis of the State of the Art of the policies and instruments
for the promotion of irrigated agriculture, and of the implantation and
management of projects, where the public sector was and continues to be
incisive, covered 11 countries and 6 irrigation clusters of the Northeast.
The 11 analyzed countries have great experience in irrigation. With
Brazil they answer for more than 35% of the irrigated areas in the world.
The analyzed countries were: USA, Chile, France, Spain, Argentina,
Peru, Colombia, Mexico, China, Israel and South Africa.
The irrigation clusters of the Northeast of Brazil analyzed present
great experience and diversity with irrigated agriculture. They contain
73% of the irrigated area in public projects. The analyzed clusters were:
Petrolina-Juazeiro, North of Minas, West Bahia, Açu-Mossoró, Lower
Jaguaribe and Higher Piranha.
In this summary, the work methodology, the Brazilian legal
benchmark and the global analysis and resulting recommendations are
presented.

34
1 - METHODOLOGICAL ASPECTS

This report is of great importance, as it presents a number of

experiences that will subsidize the proposal of the structural, conceptual,
regulatory, operational and financial bases, that will allow the
implementation of the New Model of Irrigation Project in the Northeast
Region of Brazil and North of Minas, with the agribusiness vision. The
focus of this study also permeated the need to stimulate private
investment in the development of irrigated agriculture (in a productive
chain vision) and reorient the government's participation (orientation,
regulation, promotion, among other).
The Study was developed in a holistic and global vision,
contemplating public and private irrigation, and looking towards small,
medium and big irrigators, in an individual way, their organizations, the
management of public perimeters of irrigation, the issues related to the
market, commercialization processes, inputs, rural credit, among other
themes. The context was analyzed and lessons and more relevant
applications were amassed.
The Study was accomplished using the following methodological
strategies:
• Countries with the most diversified irrigation experiences were
identified, as the example of the United States, with a history in
private participation; Mexico and Colombia, with public
participation and transfer to organizations of producers; and
those with strong organizational outlines for markets (Chile,
France, Spain and USA). Eleven countries were chosen, and
added to Brazil, they answered for 35% of the irrigated area in
the world, in 1990.
• The concentration of public and private irrigation projects in the
Northeast and North of Minas was identified and the 6 principal
Poles, where 73% of public irrigated areas of the Northeast of
Brazil and North of Minas are concentrated, are being studied.
At these clusters there is strong performance of government and
private entities in the development process, where a clear

35
 definition of the potentiality of irrigated agriculture towards the
market may already be noticed.
• A seminar was held in each selected cluster, with 243
participants, among producers, agroindustrialists,
representatives of input and commercialization companies,
financial agents, public organs, and research centers, aiming at
collecting information on the characteristics of each cluster and
subsidies on the strategy of private participation and the
government's role.
• A careful analysis of the national and international bibliography
was held, on the most varied themes, such as: recovery of
public investments, tariffing of water, business platforms,
market vision, legal and institutional benchmark.
• The experience of the team of consultants of the Consortium
was used, as producers of irrigated agriculture, former public
managers, and as technicians, and also the results of
observations of visits carried out by these consultants during the
last years, to ascertain aspects linked to irrigation projects,
management of perimeters, government politics, productive
chains, among other themes. The countries visited were: USA,
Mexico, Colombia, Chile, Argentina, Spain, France and Israel.

36
2 - NATIONAL STATE OF THE ART – LEGAL BENCHMARK

Among the several issues studied due to their importance, a

summary of the analyzes accomplished on the Legal Benchmark of
Irrigation in Brazil is presented in this chapter.
The development of activities concerned with irrigation in Brazil,
especially the implantation of public projects, as to the legal aspects, rests
on three basic axes:
• the National Irrigation Policy instituted by Law n.º 6.662, dated
06/25/79, and all the regulation and resulting norms (BRASIL,
1979);
• the National Environment Policy, dictated by Law n.º 6.938,
dated 08/31/81, also with ample regulation and normative
devices defined inclusively by the States; and, finally,
• the National Hydro Resources Policy, established by Law n.º
9.433, dated 01/08/97, and not totally regulated yet (BRASIL,
1997).

2.1 - Main Points of the National Irrigation Policy – The

Irrigation Law

The principal points of the national irrigation policy in effect are

described below:
a) The irrigation projects are thus defined, by the 8th article of the
Irrigation Law (BRASIL, 1979):
• Public - “those whose irrigation infrastructure is projected,
implanted and operated, direct or indirectly, under the
responsibility of Public Power”.
• Private - “those whose irrigation infrastructure is projected,
implanted and operated by private parties, with or without
incentives from Public Power”and it adds that “private projects
that intend to benefit from incentives given by Public Power,

37
 should be analyzed and approved by the Ministry of the
Interior”.
b) Use of the Soil
According to legal advice, public projects would be located, in first
place, on lands pertaining to public patrimony, reserved or acquired for
this objective (art. 12 - Ordinance 89.496/84 – (BRASIL, 1984a)).
Legal ordinance defines that in areas of predominant social interest
family lots should prevail, admitting also small and medium companies,
as long as they don’t occupy together an area superior to 20% of the
perimeter (art. 14 - Ordinance 89.496/84 (BRASIL, 1984a)), as already
mentioned.
No longer using the mechanism of dispossession for social
interests, the lands are purchased through negotiations with the
proprietors.
By a proposal of the executive entity of the public irrigation
projects of the São Francisco Valley, this article was altered by
Ordinance 90.309/94, that introduced the possibility, by proposal of the
managing entity of the project, but only exceptionally, for the Minister of
State to be able to elevate the percentile of participation of companies to
50% (BRASIL, 1984b).
Starting from this legal determination, for each project to be
implanted, a ministerial authorization was requested and obtained, for
destination of 50% of the area to small producers and the other 50% to
entrepreneurs.
Seeking to give the enterprises a more economic character,
Ordinance n.º 2.178/97 1 started to allow that up to 100% of the area be
occupied by companies.
The lots are thus characterized:

1
Available in <http://www.codevasf.gov.br/port/legislacao/D2178.html>.

38
 • Family Lots
Paragraph 2 of art. 14 of Ordinance 89.496/84 defined a family lot
as “a property that, directly and personally explored by the farmer and his
family, absorbs their available manpower, guaranteeing their survival and
their social and economical progress” and art.15 tries to establish a
dimension when defining “the family lot, whose dimension should
correspond to the minimum production area, capable of assuring the
economical and social promotion of the irrigator and his family”.
Commencing from the legal determination pertaining to the
minimum area, the family lots had areas varying between 4 and 6
hectares, in agreement with the studies of each project. It must be
highlighted that in some projects there were lots of 1,5 hectares, and in
others the family lot reached 8,0 hectares.
• Entrepreneurial Lots
Although not deserving special attention in the legislation,
entrepreneurial lots grew in importance in public irrigation projects. Not
only because of the economical aspect of generation of larger production,
but also because of the effect their examples have on small producers,
due to technology development and also the generation of employment.
The size of the entrepreneurial lots is also defined in the studies of
each project, having, on an average, in the São Francisco Valley, 30
hectares, and capable of varying, individually, between 7,6 and 70
hectares.
• Lots for professionals in Agrarian Sciences
All facts indicate that, the intention of the Extraordinary Minister
for Irrigation Issues, when signing Law 74, of June 3, 1986, establishing
that in Public Irrigation Projects, a maximum of 10% of the total area
should be earmarked for professionals in Agrarian Sciences, was to
obtain a demonstration effect and some technical orientation for small
producers, through the observation of their neighbors.
Although the desired effect was not obtained, the judicial directive
is still valid, because it can only be annulled by another Minister,
successor to the responsibility on the irrigation issues.

39
c) On amortization
Article 16, in Ordinance n.º 89.496/84, established that all the
works and services executed in the lot would have their cost incorporate
to the value of the land, for the effect of usage cession, alienation or
partnership incorporation (BRASIL, 1984a).
Paragraph 3rd of this article established that the amortization of
family lots would be calculated in Readjustable Federal Treasury Bonds
(ORTN), and made in a period of up to 25 (twenty-five) years, including
a 5 (five) year grace period, at interest rates of up to 6% a year, according
to the peculiarities of the project (BRASIL, 1984a).
This paragraph was the object of 4 (four) of the modifications
introduced during this period - Ordinances n.º 90.309, dated 10/16/84, n.º
90.991, dated 2/26/85, n.º 93.484, dated 10/2986, all revoked by n.º
2.1782, of 3/17/97, that again establishes a new wording for articles 14
and 16, culminating with the following version:
“The purchaser of a family lot will amortize public resources
applied in internal improvements, and the value of the land, ascertained
on the date of the purchase, in a period of up to 25 years, with a grace
period of up to five years, at interest rates of six percent a year”.
Internal improvements are the deforestation, the “on farm”
irrigation system, the grading and others, necessary for the immediate
commencement of production on the lot, at the time of the settlement of
the families.
For the entrepreneurial lots, it defines: “the purchaser of
entrepreneurial lots will amortize value of the lot in a period of up to 12
years, with a 3 year grace period, at interest rates of six percent a year”.
d) On Emancipation
Art. 9 of Ordinance n.º 89.496/84, that regulated the Irrigation
Law, establishes, in its first paragraph, that public irrigation projects, with
predominant social interest, partially or totally implanted, may be
declared to be emancipated, by act of the Minister of State, observing the
pertinent legal precepts (BRASIL, 1984a).

2
Available in <http://www.codevasf.gov.br/port/legislacao/D2178.html>.

40
 Thus, for emancipation to be declared, the following are necessary,
(§ 2nd):
• conclusion of infrastructure works considered indispensable;
• the settlement of, at least, 2/3 (two thirds) of the irrigators;
• the community has to be socially and economically capable of
growing, having an internal organization that assures its own
administrative existence and autonomous commercial activities
(BRASIL, 1984a).
Ordinance n.º 2.178, dated 03/17/97, when modifying art. 42,
introducing paragraph 4, specifies that, in the case of indirect
administration of public projects, the responsibility for the administration,
operation, conservation and maintenance of the infrastructures may be
delegated to the organization of irrigators.
e) On Water Tariffs
Base on the regulations pertaining to amortization, the Water Tariff
was established (art. 43), constituted of two components:
• the parcel that corresponds to the amortization of public
investments in infrastructure works for common use, calculated,
annually, based on the accounted updated value of the
investments and established for each hectare of the user’s
irrigated land, by the Minister to which the administrating organ
is linked;
• the parcel that corresponds to the value of the administration,
operation, conservation and maintenance expenses of the
infrastructures, divided among the irrigators and defined by the
organ to which the project pertains, or according to
modification introduced by Ordinance 2.178/973, by the
organization that administers the project, calculated annually for
each 1.000 cubic meters of water supplied. It establishes, also,
that the minimum value of each user's consumption will be
equivalent to 30% (thirty percent) of the foreseen consumption.

3
Available in <http://www.codevasf.gov.br/port/legislacao/D2178.html>.

41
2.2 - Conceptual Analysis of the Current Irrigation Law

Private projects are developed by private initiative. The land and

the irrigation infrastructure is their property. In some cases, mainly in the
South region, the government built dams and canals, leaving their
administration in the hands of private initiative. But it is not always clear
who is the owner of the infrastructure that the government built. Also,
neither formally nor informally, mechanisms were developed that allow
for the government's association with private initiative, through which it
could be a capitalist partner. In other words, mixed irrigation projects
didn't become a reality among us.
Public projects are in the Northeast, and the largest area is in the
São Francisco Valley, under the responsibility of Codevasf. DNOCS
covers the areas not contained in the São Francisco basin. Standing out,
more recently, are the state governments. Even in the Northeast, two
thirds of the irrigated area belong to the private sector.
The government, the first to diffuse, through public projects,
irrigation in the Northeast, assumed the risk that are inherent to all new
enterprises. It created opportunities for both entrepreneurial irrigation and
family agriculture. It generated new knowledge and, finally, opened the
horizons for a competitive business. It strives, currently, to increase the
exports of the irrigated poles.
In the currently valid conception, public projects are built (or
acquired) by public power that becomes the proprietor of the irrigation
infrastructure for collective use. The management of the infrastructure is
theirs, although it may be delegated to an association of irrigators
(District of Irrigation etc.).
The valid Irrigation Law mentions reimbursement of investments.
But, incorrectly, as public power continues to be the proprietor of the
infrastructure for collective use. Actually, the water tariff covers only the
depreciation and the maintenance of the project and cannot contribute
towards the amortization of public investments as ordered in the
mentioned Law.
The law allows public power to delegate the management of the
project to an association of irrigators or irrigation District. Note that
management has been dealt with in the name of, and in the place of

42
public power. Therefore, no rent should be charged. Obviously, the law
prohibits the sale of the project to the district and to private sectors, when
it states that the irrigation infrastructure for collective use is public
property.
In the concept still prevalent in Brazil, a public project is one that
is built or acquired by the government, that continues to be the proprietor
of the irrigation infrastructure for collective use, and has the
responsibility of managing it, although it could delegate its administration
to the Irrigation District. The public project, according to current Law,
cannot be leased or sold. Emphasizing, the water tariff covers only the
depreciation and maintenance expenses of the project.
This fact, for the moment of Brazilian irrigation, constitutes one of
the difficulties for the expansion of irrigated agriculture in the semi-arid
northeastern region, and for larger involvement, there, of the private
sector in public irrigation projects, because those who acquire the lots
(entrepreneurial irrigators), pay for the amortization of the infrastructure
and will never be its owners.
Besides, we have still not developed, among ourselves, even on an
experimental bases, any type of procedure for the association of the
government with private sectors in the implantation of mixed irrigation
projects (the emphasis is ours).
Effectively, the currently valid irrigation law foresees the
reimbursement of public investments in irrigation by the users, but in an
incorrect way, as public power continues to be the proprietor of the
irrigation infrastructure for collective use.
Actually, the water tariff established only covers the depreciation
(K1) and the maintenance (K2) of this asset and can not contribute, as
determined by current legislation, towards the amortization of public
investment, because it prohibits the transfer and even the lease, through
rental payments, to private sectors.
Thus, some concepts, such as the rental of capital, depreciation and
K1, K2 should be reviewed, as seen below:

43
a) Rental of capital
The collective use infrastructure, in Irrigation Projects, constitutes
a capital asset that, in public projects and by the current law, is the
government's property. Being a capital asset that renders services to the
irrigators, it should be paid for, in this case, in the form of rent, which
should reflect the opportunity cost of the capital. In long terms periods,
and at international levels, this value is around 3 to 6%.
Brazilian tradition in public irrigation never imputed value to this
rent. It was as if the services, that this infrastructure of collective use
rendered, were worth zero, as rent.
Someone may object that no rental of this collective infrastructure
is formally carried out. But, the services that it renders are normally made
available to the irrigators and, for this reason, in principle, they should be
paid for, by those that use them. And the remuneration must correspond
to the rent of this infrastructure. Of course the holder or proprietor of the
capital asset may, as public power did in the case of Brazilian public
projects, impute zero, to the value of the rent.
It must also be highlighted that there are only two situations, from
the point of view of the owner of the capital asset: he can sell or rent it.
See the example in which the owner of the capital asset also operates the
implanting company of the irrigation project. In this case, he is the
capitalist and the entrepreneur, at the same time. He rents the capital asset
to the company and charges a rent for this. He accomplishes, as an
entrepreneur, production (the irrigation project, in this case), paying all
the production factors, including the rent of the capital asset, depreciation
etc. What is left over, comparing production value with the expenses, is
the entrepreneur's remuneration.
In summary, rent is payment for the services of capital. It should
reflect the opportunity cost of capital. In an open economy, in a long term
point of view, it is opportunity cost, at an international level, of capital.
Therefore, public power should formalize the rental of
infrastructure for collective use to the irrigators, through the District of
Irrigation. This value can be used to cover loan obligations at banks (the
emphasis is ours).

44
b) Depreciation
As K1 is being paid, according to the Law to amortize collective
investment, and this will not be the property of the user, in reality it is a
charger of depreciation.
All capital assets wear away, physically, with use. This loss creates
depreciation. Another type of loss occurs when a capital good becomes
obsolete, due to technological innovation. In this case, if the company
does not provide replacement, it will not remain in the market, because it
becomes less competitive.
There are several methods of depreciating. The most common of
them is lineal depreciation. It is based on the following hypotheses:
a) the capital asset continues producing, with the same
productivity, during its useful life, if appropriately maintained;
b) the capital asset wears away continuously and proportionately to
the years of operation;
c) the capital asset disappears on the last day of its useful life,
“sudden death”, and could leave behind a residual value, (that
needs to be deducted correctly from depreciation), which is
greater in the case of obsoleteness.
Thus, the value of K1 received from the irrigators and that, in
reality regards depreciation, needs to be accumulated in an account, with
the objective of substituting the capital items that stop working.
This account, obviously, is only used to receive values
corresponding to depreciation and to pay for the acquisition of the items
that were substituted (the emphasis is ours). It cannot be used for any
other purpose, such as pay for commitments with banks and amortize
investments.
However, it is important to observe some procedures in relation to
depreciation of the infrastructure for collective use. Depreciation is lineal.
It is done by items. For each item, the annual depreciation is its own
value, as if it were new, divided by the number of years that it will last, in
other words, that it will remain in full use. Once calculated, it will not
change from year to year, while the item lasts, except for updating of the

45
value, when there is inflation. If an item is substituted by one of better
quality (because of its obsoleteness), the depreciation for the introduced
item will be calculated according to the same procedure, being careful to
deduct the value, of the substituted item, from the value of the annual
depreciation. The same procedure is used for new investments and for
items that became obsolete or were worn-out and substituted. In other
words, the item that was substituted from depreciation is deducted, and if
the case may be, the new item is introduced, considering its value and
duration. The total value of depreciation is the sum of the depreciation of
the items.
c) Maintenance
The useful life of a capital asset is shown in years. To be always
operating appropriately the number of established years, as its useful life,
capital assets require maintenance. This maintenance creates expenses.
Adding to these, those corresponding to the administration of the project,
we have maintenance expenses which are K2. Thus, the values collected
from the irrigators, to cover maintenance expenses, should be
accumulated in the maintenance account, that will cover the
corresponding expenses.

46
3 - GLOBAL ANALYSIS AND RESULTING
RECOMMENDATIONS

In this chapter a global analysis of the Study of Irrigation State of

the Art is made, and some suggestions for the implementation of the New
Model are presented, without eliminating all the possible references for
the study.
In relation to the analyzed countries the following observations
must be underscored, as they are certainly relevant for the evaluation of
the current irrigation policy in use in Brazil and, above all, for the
implementation of the New Model proposed:
i) The use of irrigation has been a successful strategy to, through
the reduction of technological risk, reduce the oscillation in
agricultural productivity and increase the rate of
occupation/use of lands, enlarging the offer of food, fibers;
creating stable jobs, and improving agricultural income;
ii) This initiative was always strongly induced and/or supported
by the public sector, independent of the dominating political
system and of the development stage in which these countries
were found. However, changes in the macro-economic
conditions influence, in a non homogeneous manner, the form,
intensity and regularity of governmental support for the
private sector involved with irrigated agriculture. Such
differences are explained much more by the perception that
society and government have, as for the importance of the
contribution that agriculture should give for the development
of the country and how the roles and responsibilities should be
distributed, between the public and private sectors, than by the
financial conditions of the treasury;
iii) The heavy initial investments in works, hydraulic
infrastructure and in facilities and electrical-mechanical
equipment, for common use and required in the medium and
big irrigation and drainage projects, were always financed by
governments and their costs only partially reimbursed (when
they were) by the users of irrigation water. The recovery of

47
 these investments and, in many cases, of part of the operation
& maintenance costs of the irrigation projects is assumed by
the government, including through higher taxation of other
uses;
iv) Due to the complexity of integrated and sustained
management of water resources, and also to the growing
monitoring and management constraints of the public sector,
to take care of, alone, such a complex task, the participation of
users of water in this administration (through committees of
hydrographic basins), as well as in its exploitation (through
associations of water users), intensified as of the eighties, in
both more and less developed economies, independent of the
prevailing political system.
v) This broader involvement of the private sector, in the large
span irrigation projects, invariably begins with the transfer to
the water users, through their organizations, of the operation
& maintenance (O&M) of the hydraulic infrastructure for
common use, and through administration contracts with public
institutions responsible for the identification, conception and
implantation of the irrigation project; and
vi) Concerning the environmental issue, a clear change is
observed in the behavior of the more experienced government
agencies, involved not only in the management, but also in the
use of water resources, for the generation of hydroelectric
energy and irrigation.
Thus, as for the use of water for irrigation, the concern with
the balance of water, evermore critical and with its impact on
the environment, has made governments and agencies that
promote irrigation projects, besides the organizations of
irrigators and they themselves, stimulate, induce and even
condition the adoption of practices and water saving methods,
above all in semi-arid regions, that range from the spread of
the concept of hydro-economy, in the evaluation and control
of the efficiency of irrigation, in other words, adopting,
besides the index of physical efficiency (kg/m3), the indicator
of economical efficiency (produced value / unit of consumed

48
 water / unit of irrigated area), in substitution to the
endowment of water (volume of water delivered / unit of
irrigated area / time);
vii) An issue has been challenging farmers and governments,
throughout the history of irrigation, and agriculture in general:
the commercialization of production, causing all types of
interventions, but not always with the desired results.
This issue is stimulated, due to the globalization of economic
activities and markets (thanks to innovations in the fields of
computer science, communications and transports, above all
those that occurred in the last two decades). Besides, the
traditional method of trying to flee from the yoke of market
forces, through integration, in a same company, of several
stages of the chain of values of the industry, will no longer,
from now on, be the only path taken, to obtain more market
control, since a company, separately, can no longer dominate
the whole chain.
However, one cannot stop considering that the merger of
companies is still going on at an accelerated march, also in the
world food market, thus the number of those that operate in
each sector of the economy is steadily reducing.
In the case of agricultural products in general, the
concentration of power is immense in supermarkets, true also
for Brazil today, and flows back to industry, contributing to
also accelerate the merger process in industries. This
concentration of power is also enormous in the firms that
operate in the international market, and has a similar effect to
that of the supermarkets, in that which concerns our industry.
Thus, we are heading towards a model, in which greater
coordination among agribusiness agents is imperative to
obtain efficiency.
International experience obtained shows different paths
followed to live with these occurrences: in Chile, the quest for
coordination through anchor-companies, multi-traders and/or
multi-processors; in Spain, through a strong apparatus of
market intelligence; in France, through government support

49
 for the invigoration of producer organizations, and, in the
United States of America, through close mutual collaboration
(regulated by contracts of purchase and sale) between
supermarkets and multi-processors and producers, which more
closely approaches the utopia of the winning game among
players in the market.
viii) The use of irrigation, mainly in the countries with more
developed agriculture, is accompanied by a broader vision in a
productive chain, in which some factors such as quality,
production organization, technology, market, post-harvest, are
part of the context of agricultural policy, as it may be seen in
the case studied, of Chile, France, USA, Spain, Israel.
On the other hand, upon examining the state of the art of the
six poles located in the Brazilian Northeast and North of
Minas, considering the supra-mentioned international
evidences, issues that should be considered in the
implementation of a new Irrigation model in the country were
identified:
i) The process currently used in the world, of the transfer of
operation & maintenance management of public irrigation
projects and consequent devolution of power, on the part of
the public sector to the farmer-irrigators and their
organizations, is also heading towards irreversibility in the
public perimeters of the analyzed poles;
ii) There is a clear disposition and interest on the part of the
irrigators in not only assuming the operation & maintenance
activities, but also their costs (as a form of assuring the
continuity and quality of the services rendered), as long as
they participate in the decisions related to the whole cycle of
the investment project in the public perimeter of irrigation
and, in projects already concluded, that they not be held
responsible for additional operational and maintenance costs
(O&M), resulting from non-satisfactory or unconcluded
implantation of such projects, whose technical deficiencies
have not been set right before the transfer;

50
iii) With the arrival of the new legislation pertaining to water
resources in the country (Law 9433/97 and its related state
versions), the organizations of water users, for irrigation, are
entitled to participate in the System of water resource
Management in the Hydrographic Basin where the irrigation
project is or will be implanted. It is in this new public space or
forum (in other words, that is suitable to, and, therefore,
interests all) that the issues related to planning and
conservation management, development and use, sharing of
that natural resource, should be resolved in first administrative
instance;
iv) The transfer, when well conducted, accelerates the adoption of
a systemic focus on the management of irrigation projects; in
the conducting of the businesses there installed and in the
mediation of the interests of the community participating
and/or influenced by them, going from a narrow vision of
works, to a more including focus of local development
(regional), “activated” by agribusiness and anchored in
irrigated agriculture. It also liberates resources (technical and
financial) of the government agency for new irrigation
enterprises, now acting more as a “sponsor”, than as an
executor of great projects;
v) During the last years, stimulated by government actions
(Federal and State), and supported by institutions such as
Codevasf and the Bank of the Northeast, a process for the
organization of producers has been developing, aiming at the
market, having agribusiness as an objective, and focused on
post-harvest, quality, controlled production technology,
already separated from the vision of irrigation versus works.
Such is the case of the Exporters of Fruits, Vegetables and
Derivatives of the São Francisco Valley (Valexport)
(Petrolina/Juazeiro), Abanorte (North of Minas), Association
of coffee producers from the West of Bahia, among others.

51
 GENERAL MODEL FOR THE OPTIMIZATION AND
PROMOTION OF IRRIGATION AGRIBUSINESS IN THE
NORTHEAST OF BRAZIL

The present Report constitutes the proposal of a New Conceptual

Model for irrigation agribusiness of the Northeast. It discusses the
importance of irrigation for the Northeast and for Brazil, the current
situation of projects, and the irrigation law, and presents a proposal for a
new irrigation policy, according to the guidelines of the New Irrigation
Model Project, aiming at stimulating greater participation of the private
sector and a realignment of the participation of the State.
The study was accomplished by a team of multidisciplinary
consultants, with wide-reaching knowledge of irrigation, regional
development, public administration, commercialization, research and
agricultural development, technical support, economics, environment,
and the management of public irrigation projects, among other themes.
Several members of this team are also entrepreneurs in the irrigated
agriculture sector, in the North of Minas Gerais State and in the
Northeast.
Dealing with the development of a conceptual model for irrigation
policy, the study embraced the close involvement of several agents in the
chain of irrigated agriculture, of the Northeast and the north of Minas
Gerais State. Between May 1999 and April 2000, several events were
held to discuss proposals for models and harness funds from the various
segments of irrigated agriculture. Most notable were the seminars in
irrigation clusters in the Northeast and North of Minas Gerais
(Petrolina/Juazeiro, West Bahia, North of Minas Gerais, Açu/Mossoró,
Lower Jaguaribe and the Higher Piranhas Basin); the February 2000
seminar in Fortaleza, with representatives from Government bodies
involved in the activity; contact with current and potential investors in
irrigated agriculture and, finally, specific meetings with institutions
related to the sector, to discuss the model proposed.
At the same time as the events mentioned, subsidies were also
sought in the National and International Bibliography about themes
related to irrigation (recovery of public investment, water tariffs, business
platforms, market vision, legal and institutional benchmarks, privatization

52
and public projects, etc.) The review of the literature presented in the
State of the Art in Irrigation Report, in which obstacles and opportunities
were found and their corresponding causal factors were identified,
together with the paths explored for their resolution and maintenance, as
well as a view of the future, provided by institutions and entrepreneurs
within irrigated agriculture. This analysis covers 11 countries which have
vast experience in irrigation, both private and public. The United States
stands out in private irrigation, in public participation, and in the transfer
of public projects to organizations of farmers in public projects, and in
Mexico, Colombia, and another 8 countries and finally, Chile, France,
Spain, USA and Israel. These latter countries use sophisticated
technology for irrigation and commercialization.

53
1 - THE IMPORTANCE OF IRRIGATION FOR THE
NORTHEAST AND FOR BRAZIL

Brazilian agriculture will evolve to the level of more developed

countries, which are characterized by employment of a small fraction of
the country’s population economically active (PEA) and will also be
based on an increasingly lower number of farming establishments.
The issue which arises in public administration is how to conduct
this process of adjustment, so as to meet three objectives, which are: (i) to
adequately supply the domestic market; (ii) to expand exports of raw or
processed agricultural products; and (iii) to generate employment in rural
areas and in the city and, thus, reduce the impetus of rural exodus and its
negative effects.
Agricultural policies which simultaneously meet all three
objectives must be given priority. From amongst these, irrigation should
be paramount, because it generates a large number of stable jobs within
the context of agriculture and in cities (or rather, outside the immediate
context: before and after); because it contributes towards servicing
domestic demand for fruit and vegetables (which is increasing at a fast
rate, as a result of income-elasticity equal to or superior to 1, and this
applies to all classes of income), because it expands exportation, without
causing an increase in domestic prices and, furthermore, has the
additional role of contributing to the solution of specific problems.
Specialists estimated the rural exodus, per decade, dating from
1940 and showed that the rural Northeast is losing its population more
rapidly. Thus, in the period 1991/2000, almost half of rural emigration
was from the Northeast, around 4,3 million, compared with the10,1
million, who migrated from rural areas in the whole of Brazil. In the
previous period, 1980-91, the rural Northeast lost 4,1 million inhabitants
compared to 10,4 million of the whole of rural Brazil. The rural exodus
gains speed in the Northeast and slows down in the three southern
regions.
There are, in the Northeast, 2,3 million establishments, that is
equivalent to 47,5% of the number of establishments in Brazil. However,
on average, only the north-eastern farming establishments with more than

54
200 hectares (except irrigated areas) that correspond to less than 6% of
the total, remunerate a family’s work with one minimum salary per
month or more. Therefore, the vast majority of farms in that region are
unstable, failing to offer remuneration to each worker even equal to a
single minimum salary. They tend, therefore, to disappear and, thus,
cause unemployment of large groups of family labor and even waged
workers.
Exclusively due to market powers - because rural areas of the other
regions are also population losers, the migrating rural workers from the
Northeast would rather go to the cities in three South regions, as had
historically been happening, and, as a second option, to the cities of the
Northeast and the North, worsening the urban problem of employment,
and, as a result the problem of public security. This fact shows that the
Northeast is priority number one for all policies that want to keep the
population in rural areas, in order to allow a rural-urban transition with
less suffering.
However, keeping population in the rural environment and cities
linked to agriculture depends on the viability of paying competitive
salaries in agriculture. Irrigation agriculture offers this condition. Its
employment capacity is multiplied when associated with export, mainly
fruit, vegetable, grain and meat exports. Thus, it is priority for the
Northeast. It has the means to reduce technological risk, due to adverse
climatic conditions, reduce the oscillation of agricultural productivity and
increase the occupation rate and the intensive use of lands.

55
2 - CURRENT SITUATION OF IRRIGATION IN BRAZIL
AND IN THE NORTHEAST

2.1 - The Role of the Public Sector in Irrigation

The current National Irrigation Policy was based on postulates that

emphasized the social function of irrigation, especially, in the areas
assailed by adverse climatic phenomena.
Although the Irrigation Law mentions, several times, the
participation of States, Federal District, municipal districts and private
initiative, it centralizes in the federal public administration, at the time, in
the Department of the Interior and its linked entities, a preponderant
portion of the responsibilities and implantation authority and
management of public irrigation projects. In other words, not only the
planning, but also the execution, operation and maintenance of the
irrigation projects, besides the social infrastructures, installed in function
of the projects, were under the protection of the state.
In Brazil, currently, irrigation (estimated at 2.870.000 ha, 1998) is
divide into private and public irrigation, and the private sector is
responsible for 95% of the total irrigated area, and for 67% of the total of
the Northeast (estimated at 495000 hectares, 1998).
The public projects are located in the Northeast and in the north
region of the state of Minas Gerais, and the largest area is located in the
medium and lower São Francisco Valley, under the responsibility of
Codevasf. DNOCS covers the areas not contained in the San Francisco
River hydrographic basin. Recently, some state government initiatives
have been highlighted, in those two regions.
The government, as a pioneer, and through public projects,
diffused irrigation in the Northeast, assuming the risks that all new
enterprises always bear. It created, thus, opportunities, for entrepreneurial
irrigation, and also for the irrigation of family agriculture. It generated
new knowledge and also opened horizons for a competitive business. It is
endeavoring, currently, to enlarge the productive capacity of agriculture
and industry in the irrigated clusters.

56
2.2 - Mechanisms of Financing for Irrigation

Subsidized agricultural credit was, until the beginning of the

decade of the nineties, the main incentive instrument for private initiative.
But the terms did not have a close relationship with the return of the
activity. Very generous in some situations and, in other, they
presupposed, at least implicitly, returns exaggeratedly high for irrigation.
During these last six years, the credit offer for irrigation was
characterized by the readiness of resources, above all, for investments, for
periods and financing limits more compatible with the characteristics of
the businesses. However, the interest rate and the lack of warranties were,
in the period, the obstacles most cited by the immigrants.
The Federal Treasury is the main funding source for the
infrastructure of irrigation works for collective use, of support and of a
social nature in the public projects of the Northeast and the North of
Minas Gerais regions. In the state of Rio Grande do Sul, it financed the
infrastructure irrigation works for collective use. External financing
generated resources for the federal government (and for some States).
They were used in the implantation and rehabilitation of the
infrastructures for collective use, besides contributing to the technical
support for small irrigators.

2.3 - Mechanisms for the Recovery of Costs and Capital

Art. 24, of Law n.º 6.662/79, in its § 3 rd paragraph, determines that,

verbis: “irrigation infrastructure investments will be amortized, total or
partially, by the irrigators, as established by Public Administration e
power (the emphasis is ours). At the same time that Art. 25, of this same
Law, determines, mistakenly, that, verbis: “the irrigation infrastructures,
in the implanted Public Projects, financed with budget resources of the
Union, will be the property of the Federal Government, represented by
the entities linked to the Department of the Interior (the emphasis is ours)
(BRASIL, 1979).
Thus, when regulating these provisions of the Law, by Decree n.º
89.496, dated March 29, 1984, the federal government established that,
verbis: Art. 43. “The value of tariffs that relate to the use of water in

57
public irrigation projects, dealt with in this Regulation, will be composed
by the addition:
I - of the portion corresponding to the amortization of public
investments in the infrastructure irrigation works for common
use, based on the updated value of the works - denominated
K1 (the emphasis is ours);
II - of the portion corresponding to the value of the annual
management, operation, conservation and maintenance
expenses of the infrastructures - component K2.
This issue was analyzed previously with more detail, following
internationally accepted procedures, dealing with the meaning of Rent,
Depreciation, Maintenance, K1 and K2.

2.4 - Situation of Public Irrigation Projects in the Northeast

2.4.1 - The focus on the implantation of works

Emphasis was given to the aspects of works/engineering, in the

implementation of Public Irrigation Projects, by the executive agents.
State of the Art technology, doubtlessly, was developed in aspects of
study and projects, as well as in civil/hydraulic works.
The purpose for which the work had been developed, in other
words, the agricultural production, or better still, the agribusiness (that
generates jobs, income, and stimulates regional development) that assures
the return of investments, quite often, did not find the same contribution
of interest and resources.
As measures aimed at agribusiness deserved a little more attention,
the results emerged, for society and for the producer, as it may be seen
throughout the São Francisco Valley and, especially, in the projects of the
Petrolina/Juazeiro region.
Although, in the implantation of public irrigation projects, the
focus on Engineering works prevailed, more recently, starting from the
mid eighties, as in the case of Codevasf, attention was given to operation
and maintenance organization and to production, in a poorly systematized

58
way, however, advancing towards offering better support to the
agribusiness process.

2.4.2 - Area implanted in production and to be implanted

According to data obtained from the responsible institutions, public

projects corresponded to an area, in 1998, of 169.055 hectares, in
operational conditions and capable of being irrigated. Of that area,
107.493 hectares are effectively in production. The remaining area is in
an auction process for the sale of lots, or without use, due to problems
such as insufficient credit offer on the part of the financial agents,
inadequate credit conditions, low loan capacity of the irrigator (that does
not allow access to credit), low availability of his own resources to
undertake, speculation, among others.
There are, at least 60.000 hectares in the final implantation phase,
that will be annexed in the next 2-3 years to the production process.

2.4.3 - Operation and maintenance management

The operation and maintenance of Public Irrigation Projects of the

Northeast includes the following forms:
- Carried out directly by the executor agent, federal or state, that
will not outsource the activity.
- Delegation is made to the organization of producers such as the
District, Cooperative or other form of association of producers.
As of the mid eighties, led by Codevasf, a process of delegation of
O&M of the Project for the users began, by the Irrigation District, which
represented quite significant progress, that was not accompanied by
DNOCS. And this delegation, as occurring in most countries, is not a
very rapid process and has a better response when the irrigation system is
in perfect operational conditions. Otherwise, a recovery program is
necessary. Besides, it should be accompanied by training for the users for
them to assume, with safety, the responsibilities that are imposed.

59
2.4.4 - The production process

- Technical support

For small producers, linked to Codevasf, there is a program that

has guidelines and strategies, in which the search for results is based. It is
not observed in the perimeters of DNOCS.
As for the medium and big irrigators, in public project or in private
properties, technical support comes from private companies or from
autonomous professionals.
What is verified is that, at the level of public perimeter (small,
medium or big irrigators) as well as at private properties, technical
support work has given greater emphasis to production within the
property, not getting involved in agribusiness, as a whole, as it is in
France, Chile and other countries.
- Research and Development in the Semi-arid Northeast
In spite of the progress of irrigated agriculture in the last twenty
years, agricultural research gave very little emphasis to irrigation, in
matters that concern irrigation techniques, the handling of water and
cultural practices, as well as in the development of new varieties. In
recent times, thanks to the pressure of the irrigation clusters, this attitude
has changed. But the change is slow. As a short term substitute, the
import of technologies and international technical support grows rapidly.
As the generation of information, mainly in the area of
Horticulture, is slow, the appropriation of these benefits by the farmers
also occurs in medium and long periods, in the cases in which the import
of technologies is impossible.
In spite of this, there are some punctual results for some products
and practices, mainly, for those products with a shorter cycle.
There is, however, a hiatus between the growth of irrigated
agriculture and the offer of technological information. It is greater in
research areas, as in vegetable hybrids, irrigation handling and fertile-
irrigation, plant-sanitation, weed control, harvest and post-harvest.

60
- Organization of the Producers
As also observed in the experience of the analyzed countries, in the
implantation of great irrigation projects by the public sector, a great lapse
of time generally separates the identification phase, project design,
construction and arrangements of political-institutional-financial nature -
indispensable for its effective implantation – from the phase of final
implementation. It is that, given the volume of financial resources
involved, not rarely, changes in the macroeconomic picture, in the
priorities and in the modus operandi of the sponsoring governments result,
invariably, in discontinuities, which not only delay the physical
implantation, but also disrupt the lives of the farmers and their
organizations, due to the uncertainties generated.
In spite of the mentioned discontinuities, the organization process
of the producers notably moved forward as of the mid eighties. We notice
organizations concerned with agribusiness, such as cooperatives and
associations, and the arrival of associations that seek to promote the
products of the São Francisco Valley, in Brazil and abroad, and help the
irrigators to produce better quality. Organizations of the producers that
execute operation and maintenance activities of public projects also
appeared.
- Structure of Chain Organization
The high percentage of 65% of the volume produced in public
projects, has its commercialization process accomplished with the
participation of an intermediate agent, without any coordination
symmetry and information.

2.4.5 - The participation of private initiative

In public projects, there is a major participation of private

initiative, as irrigation projects are the hydraulic works for collective use
and a compound agricultural production process that uses the technology
of water application as a tool. Private participation represents 64 to 68%
of the investment costs.
Public Projects have a variable cost of US$ 4.500 to 5.500/hectare,
when the cost with the hydraulic infrastructure for common use and
parceled irrigation infrastructure of the small irrigator is imputed.

61
 Erroneously, costs such as highways, electric networks, houses,
schools, etc. are imputed to Public Irrigation Projects. Thus, the value of
Public Projects reaches the amount of US$ 7.000 to 8.000/hectare. Such
items, however, are the responsibility of Society, in irrigation or in any
other situation.
TABLE 1
PUBLIC AND PRIVATE SECTOR SHARE IN PUBLIC PROJECTS
Cost Discrimination Value (US$)
– Water infrastructure for common use ................... 3,000 to 3,500/ha
– Partial irrigation infrastructure .............................. 1,500 to 2,000/ha
– Partial support infrastructure (housing,
warehouse, packing-house etc) ......................... 700 to 1,000/ha
– Formation of permanent cultivation...................... 3,000 to 4,000/ha
– Soil value ............................................................ 300 to 500/ha
– Total project investments ................................. 8,500 to 11,000/ha
– Public share (only in Water infrastructure for
common use) ..................................................... 35.3 to 31.82%
– Private share ..................................................... 64.7 to 68.18%
SOURCE: Plena Consultoria de Engenharia Agrícola Ltda.

62
3 - THEORETICAL BENCHMARK OF THE NEW
CONCEPTUAL MODEL

Considering the concern of the study in proposing a new

restructuring of irrigation business, a try was made to portray the
theoretical benchmark with support in the literature on competitiveness
and coordination of agro-industrial chains. In this context, the
institutional, organizational and competitive atmosphere in the irrigation
business is discussed.
Competitiveness includes two dimensions traditionally separated in
the analytical focus of the theory of industrial organization, but that are
determined and only with difficulty can they be identified separately in
the real world: conduct and performance (FARINA.; AZEVEDO; SAES,
1997). While performing, competitiveness is expressed as the survival
and expansion capacity in domestic and international markets. In this
context, the participation indicator in the market is the most
representative. The dimension of conduct concerns the competition
process. The agribusiness of irrigated agriculture should comply with
both criteria/dimensions.
If technological or institutional changes that may result in the
change of this competition standard are identified, then competitive
advantages based on cost leadership are no longer sufficient to sustain
competitiveness. Such a situation is of high relevance for the
identification of factors that sustain dynamic competitiveness.
Competition standards are altered with time, as an answer to
institutional changes (commercial opening, protection to intellectual
property etc.), technological changes (such as biotechnology, that
generated a convergence among chemical-pharmaceutical industries and
the seed industry), changes in the competitive atmosphere itself, of which
competition standard is a part (industrial restructuring, changes in
consumer habits) and changes in the individual strategies of companies
that endeavor to create asymmetries and, when successful, may alter
competition standards when they are imitated by competition (FARINA;
AZEVEDO; SAES, 1997).

63
 The definition of the agro-industrial chains (in the case of irrigated
agriculture), as a link of contracts that extend from the farm to the
consumer, allows handling of this range of organizational possibilities
that respond to technological, institutional and strategic determinants. It
allows for the understanding of the organization through markets, and
vertical integration and the contracts with suppliers and distributors. It
allows also for the understanding of the organizational changes demanded
starting from alterations in variables of the competitive atmosphere of
firms. It is, therefore, a particularly appropriate conceptual apparatus to
discuss competitiveness (FARINA; AZEVEDO; SAES, 1997).
Thus, the organization of the firm, the productive chain, the sector,
and the regulation determines competitiveness, since they are at the base
of the capacity to answer to business opportunities. That answer capacity
depends fundamentally on the capacity of coordination of the production
and distribution activities, that is, the capacity to transmit information,
incentives and controls along the productive chain so as to answer to the
changes in the competitive atmosphere.

64
4 - PROPOSED NATIONAL IRRIGATION POLICY

Concerning the investments and the administration of irrigation

projects, involving major participation of the public sector, the concerns
are due, largely, to the result of evaluations, as those already undertaken
in public irrigation projects, financed by the International Bank for
Reconstruction and Development (BIRD), all over the world (JONES,
1995). They identified widespread problems related to operation &
maintenance, the recovery of costs and problems with groups of users,
being the former the most important, because they influence the benefits
of the project. And, also, the evaluations concluded that the groups that
are favored with irrigation can be valuable partners in the direct
management of these activities, simply because their members identify
themselves with the enterprise.
In contrast, the lack of participation frequently reduces the benefits
of the project and causes disturbances in the implementation. Thus, the
most promising way to improve the performance of operation &
maintenance is to make the beneficiaries responsible, providing them
with technical support.
The recovery of costs and the consequent safety of the financial
sustainability of the investments depend on two factors: in first place, on
the forms of property (the contractual process), and on the application
and execution of the pertinent regulation. In second place, on the capacity
of each organizational administrative arrangement in complying to
quality criteria and good performance.
In relation to the productive process and its competitive insertion in
markets (domestic or foreign), a flagrant difference is observed, between
Brazil and those countries where Agribusiness, based on irrigated
Agriculture, is more advanced.
In countries with advanced irrigated agriculture (like the USA,
Israel, France, Spain and Chile, for example), Irrigation Policy has
already overcome the pioneering phase. It developed from centralization
on engineering works to that of Irrigated Agriculture, as a business. And,
in this case, production activities, within each irrigated portion, as well as
those that occur before and after production, are decisive for economical

65
sustainability and, consequently, for the continuity of irrigated agriculture
itself and, therefore, of each irrigation project.
As the activities of engineering works implantation give up their
place to those related to production & commercialization - which demand
larger interaction on the part of government agencies, the suppliers of
public assets of a varied nature, complexity in the synchronization and
coordination of public support action for Irrigated Agriculture increases.
Besides, government Agencies, specialized in the implantation of
public irrigation projects, that perform in a vertical way, in respect to
coordination, no more find space to continue performing in this manner,
because of specialization (in Public services rendered) and the consequent
pulverization of public budgets, which is characteristic of the
organization of the modern State and, that, among us, has already reached
even the municipal sphere.
It is inferred, therefore, that the needs of Irrigated Agriculture,
although containing demands of the irrigation project, have extravasated
them greatly. Thus, its competitive insertion demands changes, in what it
is and how it is carried out, by private entrepreneurs and also by public
administration, that stimulates and supports it. Thus a new irrigation and
drainage policy is proposed and described below.

4.1 - General Guidelines of the New National Irrigation Policy

The general guidelines of the new Irrigation Policy are:

• In relation to the regions of the Northeast of Brazil and North of
the state of Minas Gerais, it should stimulate greater
participation of the private sector in the development of
irrigated agriculture in those areas, also in the implantation
investments of the irrigation infrastructure for collective use, of
the irrigation projects of larger size or complexity.
• To contribute towards the generation of necessary information,
that will facilitate decision making on the part of public and
private agents, according to a vision of the productive chain.
• To guide the development of the irrigated agricultural
production, based on the opportunities and demands of the

66
 markets, domestic and foreign, according to the parameters of
competitiveness of agribusiness.
• To allow the government to re-organize its performance for the
sub-sector, with emphasis on the role that belongs to the
modern State (orientation, regulation, promotion, among other),
besides strengthening the partnerships between private initiative
and the government, in the extent of the three spheres, federal,
state and municipal;
• Finally, it should stimulate the implantation, in the irrigated
perimeters, of modern irrigation monitoring systems, and tariff
policies, applicable to the Northeast and North of Minas Gerais,
aiming at the rational use of water, in other words, considering
environmental, economical and social sustainability.

4.2 - Proposed Juridical Regime

The New Irrigation Policy demands some changes in the existing

irrigation legislation (Lei N.º 6.662/79 and its regulations), so as to create
a favorable atmosphere, in terms of an institutional infrastructure - with
appropriate legal support (that allows for the implementation of
contracts), subordinate to the structure of regulation of the sector
pertaining to hydro resources, now in an advanced definition phase in the
Legislative Branch. The new irrigation legislation should offer
indispensable juridical safety to the public sector and it should encourage
farmer-irrigators and other private entrepreneurs to invest even more in
irrigated agriculture (BRASIL, 1979).
Bill no. 229/95, which is in the Senate, deals with “National
Irrigation Policy and Other Steps”.
In March 2.000, following the study, a consolidated version of the
preliminary draft was sent by the Ministry to the eminent reporter. That
was the result of a widespread discussion at the ministry, which included
Technical Assistance , related bodies and also Northeastern State
Departments. Several meetings were held by Banco do Nordeste in
Brasília in October 1999.
Thus, in order to solve the problems mentioned, the proposal
updates and improves current law (Lei N.º 6.662/79), correcting the
67
conceptual mistake related to investment amortization in irrigation
infrastructure for collective use in public projects (as already seen). It
also encourages and expands liability to the private sector in managing
and expanding irrigation investments, as assured by many devices such as
(BRASIL, 1979):
Article 1, paragraph 3rd, establishes potential market and private
sector participation. It represents a relevant impulse and government
support for irrigated agriculture project development
- Article 2, concerning the aims of national Irrigation Policy,
where item V stimulates private and public agents’ operation in
irrigated agriculture, in previously defined areas, selected
according to technical, cultural, social, economic and
environmental criteria
- Afterwards, item XVII of article 3 defines the lease as a return
value paid by the irrigator concerning irrigation infrastructure
use and collective use draining systems. Furthermore, item
XVIII defines the ideal share of irrigation infrastructure for
collective use, property of the irrigator by achievement or
building co-responsibility. This quote is an essential and
indivisible part of title deed ownership of the area.
- The same article 3 has already identified, in item I – Public
Irrigation Project – those implemented by government and its
irrigation and drainage infrastructure for collective use, to be
initially its property, available to be transferred or leased.
Paragraph 1 says: public irrigation projects must originate from
Federal, State, Municipal and Federal District governments.
- Thus, article 9 establishes in its paragraph 2 that government
may transfer its concession to the public irrigation project users,
once they are organized into irrigation districts or any other
self-management entity.
- In item II –Private Irrigation Project is one implemented by the
private sector or purchased from government under current law.
- In item III – Mixed Irrigation Project is one implemented by
both public and private sectors in partnership.

68
- Item VII of article 3 leaves no doubt about economic
importance and destination of water tariff, defining it as a value
paid by irrigator for using the water and the collective use
irrigation infrastructure.
- Article 24 establishes that irrigation infrastructure for collective
use in public and mixed projects must be administered, operated
and maintained by organized irrigators preferably in irrigation
districts.
Paragraph 1 – Government must support an Irrigation District
or another self-managed entity for a year after the first
irrigator’s operation.
Paragraph 2 – Expenses concerning administration, operation
and maintenance of irrigation collective use infrastructure will
be shared between its users, in tariffs, as regulation establishes
Paragraph 3 – Water tariff will be charged automatically by
government on every irrigator, irrigation district or another
concessionaire. Its value shall be enough to cover
administration, operation and maintenance expenses.
Paragraph 4 – In public irrigation projects, government shall
pay for operation costs increasing concerning potential irrigated
areas not yet occupied.
Paragraph 5 – Government can directly hire the irrigation
district to build infrastructure under legal requirements.
- Article 25 – Government is allowed to acquire the infrastructure
building from project irrigators, for collective use, through
Irrigation District without a bidding process. The payment term
shall be up to fifty years.
Paragraph 1 – Social infrastructure built in the project will not
be part of the cost value covered by this article.
Paragraph 2 – The share of irrigation infrastructure for
collective use for each irrigator will be proportional to his area
and cannot be separated through legal registration.

69
4.3 - Guidelines For the Implantation of Irrigation Projects

If approved by the Legislation Branch, the proposed irrigation law

will encourage guidelines for irrigation project implementation of
undoubted value, as follows:
i) To be implemented, a public irrigation project must show
economic-financial sustainability, compatibility with national
and local priorities; environmental rules and water resources,
capacity to increase employment and develop family
enterprises.
ii) Government may build irrigation projects in the Northeast but
must organize a producers’ association (Irrigation District etc)
in the first year of the project. It must also have a shared
administration with the irrigation district and, afterwards,
transfer the finished product to the association which will be
responsible for its operation and maintenance. If the
association resigns, the project will be transferred to a private
company.
iii) Government will always have the option of selling any public
project to the private sector. This means that the producers
installed in these projects will have prior rights.
iv) Mixed irrigation projects are allowed but the government must
always have minority interests.
Thus, there are public sector attributions to establish priorities,
incentives, restrictions, to create administrative instances and operate
them aiming to resolve doubts and conflicts between irrigators, irrigation
districts or private companies. It is also public sector responsibility to
define water tariffs, as well as control and supervise public and mixed
irrigation projects.

70
5 - INSTRUMENTS OF THE NEW NATIONAL
IRRIGATION POLICY

As mentioned before, new irrigation policy implementation will

demand several tools to facilitate irrigation planning, planning
management, programs, projects, support services, and economic-
financial mechanisms, among others. This will be discussed as follows

5.1 - Irrigation Planning

The “architecture” of public irrigation projects can no longer be

linked only to engineering and organization sectors. It is necessary to
include the promotion sector in search of a competent definition of a
business plan for the enterprise.

- Basic Principles

Irrigation must be implemented through plans, programs and

projects, which must:
a) pay special attention to areas with adverse hydrological
conditions which may be reverted, allowing agricultural use in a
competitive, economic way;
b) be reasonable in exploiting water and soil resources;
c) make branch plans and programs compatible with others;
d) integrate with Federal, State and Municipal governments;
e) observe technical, cultural, social and economical criteria;
f) respect the environment.

- Criteria for Choosing Implementation Areas for Public Projects

The selection of implementation areas for public projects must

consider the following criteria:

71
 - Climate: Public irrigation projects must be implemented in
semi-arid regions of Brazil (limited to 800 mm/year), areas
where water balance deficits last 7 or more months, or strategic
areas of national interest.
- Soil: Soils must be apt for irrigation, following the criteria of
the Empresa Brasileira de Pesquisa Agrapecuária (EMBRAPA),
and observing recommendations of the manual of land
classification for irrigation published by the US Bureau of
Reclamation.
- Drainage: If technical analyses show potential drainage
shortage (underground) and water quality favorable to
crystallization, project must include studies, drainage projects
and management recommendations.
- Water: The management agent for the water basin’s resources
must approve the use of water for irrigation in that area.
- Integration: Priority should be given to areas inserted in
regions with development programs. There must be a protocol
of intentions between Federal, State and Municipal
governments, describing the responsibilities of each of them in
the future project.
- Land Ownership Situation: Areas must have their legal
ownership clearly defined and in order.
- Competitiveness: Business plans must be presented with the
greatest possibility of success, lowest associated risks and
conditions for market structuring.

5.2 - Irrigation Policy, Plans, Programs and Projects Management

5.2.1 - Scope of irrigation management

Irrigation project management is based on norms of irrigation

policy, plans and programs. These norms establish incentives, constraints,
priorities, goals and resources, as well as ensuring conditions for
administration by indicating limits for each public or private agent.

72
 Management is consolidated in four environments (decision
bodies) and levels (or decision categories), as follows:
1st. The responsibility for determining irrigation sub-sector policy (with
its principles, guidelines and orientation tools for its use and
implementation). Political and strategic decisions prevail, constantly
related to political-institutional affairs and inevitably conditioned by
environmental and water resource law as well as macroeconomic
environment.
2nd. The environment of decision processes, related to irrigation project
location and implementation (usually composed of one or more
irrigated areas). Here tactical decisions prevail, which are the
responsibility of executive bodies or irrigation sub-sector policy,
which implement the project directly or together with other
government levels and bodies and with the private sector
3rd. The environment of irrigated perimeter management. Here tactical-
operational decisions that go from public to private sector in every
country where irrigation is important prevail.
4th. Finally, the environment or domain of final-activity management,
which is exclusively the role of the private sector. This environment
comprehends agriculture and stock raising together with market
coordination

5.2.2 - Proposal for a management system applied to the

irrigation management environment

Scope of Determining National Irrigation and Drainage Policy

Illustration 1, following, presents the Proposal of Management

Systems applied to the environment of Irrigation Management.

73
 FIGURE 2
SCOPE OF DETERMINING NATIONAL IRRIGATION AND
DRAINAGE POLICY

President
Congress
Governors
Social Mayors
Control Society, Interest target

Information Information
perception representatio

Measurement and
National Output/ Visibility of
Evaluation Tools
Integration Measurement and
and Techniques:
Ministry Evaluation
data manipulation
Systems
process

Measurement
Plans, Programs
Systems and
and Projects and
Techniques:
improvement
data collection
techniques
process

Inputs Outputs

Input Organizational Output

Systems Systems Systems

SOURCE: Plena/FGV/Projetec Consortium.

74
5.2.3 – Attributions of each public projects management entity

Within the scope of the National Irrigation Policy

Determining policy and defining plans and programs includes the

following attributions to its responsible individual/bodies:
a) Formulating National Irrigation and Drainage Policy
• National Integration Ministry (Coordination)
• Planning, Budget and Management Ministry
• Agriculture and Supply Ministry
b) Approval and Control of National Irrigation Policy
• President of Brazil
Congress (providing legal instruments needed and watching its
execution).
c) Formulating and approving National Plans (Four-year Plan and Annual
Plan) and Local Programs for Irrigation
• Elaboration: National Integration Ministry - Coordination and
Control
It comes from a close participation of related bodies and
partners, as well as entities representative of irrigated
agriculture entrepreneurs;
Planning, Budget and Management Ministry;
Environment Ministry/Water Resources National Board:
combining water resource policy, plans and programs, as well
as establishing a commitment with sustainable development
policy of water resources in hydrographic basins improved by
irrigation projects.
Agriculture and Supply Ministry - combining mainly with Policies,
Programs and Planning and Development projects (P&D), Technical
Assistance and Rural Extension (Ater), Agricultural Sanitary Defense,

75
development and market protection for agricultural products and, finally,
the commitment with the current agricultural policy execution and
adoption.
• Approval: the four-year plan is approved by the Congress, and
the annual plans are approved by the National Integration
Ministry.
• Validation: Within the political sphere, validation occurs at
Congress, The House of Representatives or even Town Council
Chambers, depending on the local, regional or national level of
the action.
Within the scope of Irrigation Project Management
Defining location, designing and implementing irrigation projects
will be the responsibility of the National Integration Ministry
(coordination, attendance and evaluation), having support from:
- Hydro Infrastructure Department - supervision and control
- Related bodies: Codevasf and DNOCS - co-execution.
The following attributions must be observed:
a) Global Project Management - location definition and project
design. Negotiation, preparation and execution of contractual
instruments of co-financing and management. Promotion and
diligence. Securing and allocation of funds. Supervision and
control over allocation and recovery of investments.
b) Works Management - planning, contracting, supervising and
controlling over management; provision and fund location in
public projects;
c) Minority interest in mixed projects - provision of location
studies and pre-viability projects that cover up to 49% of the
public sector investment, supervision and technical assistance
(both in implementation and management) as well as operation
regulation.

76
Within the Scope of Public Irrigation Project Management
Project administration, operation and maintenance of its irrigation
infrastructure for collective use will be the responsibility of the National
Integration Ministry, through the Hydro Infrastructure Department,
having the support of:
a. Related bodies:
Codevasf e DNOCS – co-management (only in the implementation
phase); management co-financing, O&M and technical assistance
(for family entrepreneurs); supervision, technical and management
assistance; control, audit and use of fund and arbitration (of water
distribution and tax policies).
b. Partners:
• by rights transfer – Water Users Association, Irrigation Districts
(integrating rural producers of small, medium and large scales)
in order to assume project administration and O&M activities
after its implementation.
• by decentralizing power – State departments – project
administration and transfer of O&M irrigation infrastructure for
collective use to the Districts.
c. Interested bodies (government sectors) – public goods providers,
etc.
Within the Scope of Agricultural Production Organization
In production organization, from the production process to market
coordination aspects, the following attributions must be observed:
a. Public sector
Provide public goods, develop and promote markets, ensure an
appropriate contractual environment and an economic policy
which does not discriminate against agricultural activity, in
order to achieve and maintain the dynamic competitive
advantages of agribusiness activities.

77
 b. Private entrepreneurs
All scale producers, whether or not associated in groups and/or
cooperatives, integrated under contractual instruments with other
agribusiness activities.
5.2.4 - Management systems for irrigation projects
The international experience of public-private partnership in water
resource use, even when restricted to water distribution operation services
(as in public irrigated perimeters) suggests several alternatives for a new
irrigation policy concerning the expansion of private sector participation
in public irrigation projects for collective use.
Five main models of contracting, adopted in many countries, are
suitable for public irrigation projects.
i) Sub-Contracted Services
These contracts have simple execution but limited benefits. They
are adopted whenever an operational aim is clearly defined, or whenever
a certain expertise is sought and the goal is to reduce costs and improve
service efficiency, in the scope of public autarchy, which are already
relatively well administered companies and entities with viable
commercial tariff systems.
ii) Management Contracts
Management contracts usually go from three to five years, are
presented as a previous phase to implement more sophisticated
alternatives to private sector participation, such as lease, the contracts for
BOT (Build-Operate-Transfer) or BOO (Build-Operate-Own) or asset
sale.
Management contracts may be important in the medium-term in
opening new possibilities for the private sector both in management and
investments.

78
 iii) Lease Contracts
Lease contracts are an important phase of introducing risk in public
irrigated perimeters management. Under these contracts Government
leases specific assets, irrigation infrastructure for public use, for example,
to an irrigation district or a private company that from that moment
becomes responsible for its total operation, maintenance and
conservation. These contracts range from 8 to 15 years.
iv) BOT and BOO contracts
Contracts to BOT, are those in which private groups are invited to
develop the following tasks
(i) finance and to build certain complete systems.
(ii) operate the system during a fixed term (20-30 years) and thus
attain return on investment;
(iii) return installations to the public sector after the contract ends.
v) Asset Transfer Contracts
Asset transfer contracts have some of the characteristics of
privatization, which is prohibited by current law. Under the law, services
may be delegated but the assets cannot be transferred to the private
sector. Thus, its use will depend on changing Law 6.662/79, under the
appreciation of the Senate. In Brazilian irrigation law, the payment term
may go up to 50 years (BRASIL, 1979).
5.3 - Production, Post-Harvest, Distribution and Market
Systems
In Northeastern irrigation clusters there is segmentation between
production, post-harvest and distribution, with price negotiation under
“available” system. There is lack of contractual links between production
and input systems (coordinated links between harvest, selection, peeling,
processing, packing and transport).
Information from distribution final markets is not systematically
and clearly transferred to producers due to brokers in every post-
production phase. Information on price, quality, demand or market

79
consumption rates is asymmetrical and thus the buyer has more relative
power to bargain.
The result of this contract system with no coordination is higher
risks for all players, from producer to finance agent, going through the
chain as a whole.
Access to information allows individual trade players to reduce
their risks, transferring them to players with smaller information levels,
like producers.
Besides an asymmetrical information system, according to market
and trade aspects, one also notes some difficulties for technicians, small
and large-scale irrigators, concerning technical information available in
research. It is still fragmented, but not appropriate for the user and quite
usually spread amongst several players and not systematic or suitable for
the region as a whole.
As may be seen, the post-harvest production, distribution and
market systems prevailing in Northeastern irrigation clusters and, thus, in
public irrigation projects, has problems due to asymmetry in the
information system concerning prices, technology and trade management.
As an implementation tool for the new irrigation policy, seeking
economic, financial and environmental sustainability in agriculture in
exports, the post-harvest production, distribution and market system must
be oriented to trade management aspects, market strategy, market and
technological information. That is what happens in the United States,
France, Chile and Spain, among other countries.

5.3.1 - Commercial management system

In public irrigation projects nowadays, irrigators (either small,

medium or large-scale), individually or associated (cooperatives, districts,
associations etc.) undertake many activities within the production
process, from identification of market opportunities or raw material
purchase to making production viable. Thus, the decision process is
complex and involves greater risks, especially dealing with vegetables.
To eradicate this characteristic means to increase producers’
incomes, especially small producers who generate low volumes and work

80
by themselves. It will be possible in cases where the trade process is
operated by leader organizations (producers, co-operatives, associations,
agribusiness industries, companies specialized in trading etc.), when the
individual production volume is insufficient or directly sold by producer
or even when individual production volume is enough.
The leader organizations will be coordinating the market and
making information more symmetrical, because it is important to them.
The emphasis will be on commercial management.

5.3.2 - Market strategies

The government should stimulate producers and organizations,

through information and training, to study and define markets.

Principles

• Companies, producers, associations and co-operatives generally

trade directly to retailers, emphasizing supermarkets and big
retail markets. They therefore market achieve margins that
today are distributed between many players in the production-
consumption chain
• Research is a very lucrative investment.
• The association of the producers is fundamental to the obtaining
of scale earnings, which assure competitive costs.
• If association is not possible, the option is trading companies
which already have tradition in the market.
• Professionalism is fundamental for success.

81
Strategy Phases

PHASE 1 – Market Awareness

PHASE 2 – Production planning

Information collected allows production planning, in order to

respond to business conditions under conditions agreed.

PHASE 3 – Post-harvest and trade logistics

PHASE 4 – Post-sale

1. It is quite common to find production problems identified in

supermarkets and large retailers’ sales areas. Post-sale
assistance allows detection and solution of these problems. A
direct contact with product replacement staff and consumers is
interesting to get information to help production planning.
2. Return contact with purchaser also allows evaluation of the
operation and collection of strategic support for continuation of
business.

5.3.3 - Market information system

Irrigated area development is related to implementation of

strategies that aim to improve the management profile of people
responsible for decisions, both in production and trading, guiding them to
improve decision process.
Several attempts at correcting errors was focused on production,
with lack of emphasis on the market, including post-harvest and trading.
Thus, the expected effects were not reached.
An information system is proposed through actions directed to
collect, treat and disseminate usable information for management
decisions, from amongst producers and their organizations. The aim
includes turning information into the “key-element” of competitive
capacity increase. These actions are developed by the Government, as in
the major countries, articulated with the private sector.

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5.3.4 - Technological information system

EMBRAPA coordinates the National Agricultural Research

System (SNPA). Based on research information, notes from various local
production systems and economic analysis of technology. Governments
must organize and offer each irrigation cluster a production system
(“technological pack”) including information on each crop, as follows:
• crops, their acceptance and compatibility with market demands;
• plant population/hectare;
• soil correction and fertilization;
• legal proceedings;
• pest and disease control;
• forms of crop cultivation;
• crop treatments;
• irrigation management (how, how much and when to irrigate);
• harvest, storage and packaging aspects etc.

5.4 - Support Services

Successful implementation of a new irrigation policy demands a

support service that further aids private sector participation in the
irrigation business (concerning market, trade, agricultural industry,
private project implementation and mixed project participation).
Moreover, it must create conditions for development of small irrigators in
public projects. Concerning Northeastern irrigation clusters, it is
important to give access to specific market characterization in some
aspects such as: origin certification, quality certification and production
schedule.
A group of support services may be implemented or ensured
through specific government actions for each irrigation cluster, aiming to
provide competitiveness. It includes information services, technical

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assistance and production management, research and development,
management and environmental management training.

5.4.1 - Information base

The information base in each Northeastern irrigation cluster aims

to provide, as in many countries, access by several players to technical
and management information that aids the private sector in decisions,
such as: agricultural industrial implementation, export companies and
private irrigation projects. Information also helps them to decide the area
to purchase, in a public project, in order to respond to a specific demand
as well as to decide about mixed projects. Information must be detailed to
allow related risk evaluation and attraction of enterprises.
Information base will allow transmission of the most convenient
forms of technology and production organization to small producers,
whether in public projects or not.
Information base must be available on the Internet and use the
most varied forms of dissemination. It has to be established in each
irrigation cluster and must have, at least:
- Basic information concerning weather, water and soil,
projects’ pre-viability, environmental characterization, transport
infrastructure availability, health, education and phyto-sanitary
obstacles among others.
- Technological information related to potential crops in the
region.
- Market information related to historical market data of each
crop, potentially described as technological information.
- Management information related to the irrigated area,
production by crop in recent years, financial agents, credit lines,
etc.

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5.4.2 - Technical assistance / production management

Small producers linked to public irrigation projects under Codevasf

receive financial and training support through a technical assistance
program, with guidelines, strategies and searches for result. However,
DNOCS adopts a different procedure.
Concerning medium and large-scale irrigators, whether in public or
private projects, technical assistance is provided by private companies or
independent professionals.
In public projects (with small, medium or large-scale irrigators) or
in private areas, technical assistance is focused on production aspects. It
is limited to the area’s boundary and is not highly committed to
agribusiness. Thus, it is opposed to modernity, so it is not convenient for
the competitive agriculture desired by the country.
Government should help by training private technical assistance in
management, trade and export promotion areas, providing technical
information generated or identified by research.
Concerning family businesses (small irrigators), government must
take part in production management through a specialized crew.
Production management procedure, and not only technical
assistance, allows family entrepreneurs or small irrigators to achieve
competitiveness in an agricultural situation that depends more and more
on productivity and quality focused on market.
The strategy proposed, as occurs with agriculture in other
countries, uses help and participation from specialized organizations not
only focused on agriculture, such as The National Service for Rural
Training (Senar), the Small and Micro-Enterprise Support Services
(Sebrae) and the information base.

5.4.3 - Research and development (R&D)

The study proposes the following:

i) Identify and define production systems (technological packages),
involving regional players (producers, innovators, technical

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 assistance and research crews) based on regional information.
Costs and incomes must be measured.
ii) Use prospect methodology to define research demand, also
using regional thematic seminars that involve representatives
from irrigated agriculture businesses, in order to find research
problems as well as solutions and financial strategies

5.4.4 - Management training program

Agriculture needs to guarantee economic and environmental

sustainability in irrigation projects, both public and private. Thus, it
requires a high level of qualification and maximum efficiency in all raw
material and services uses. Thus, the new irrigation policy cannot deny
responsibility to support a management training program suitable for
regional characteristics. The National Service for Rural Training (Senar)
and the Small and Micro-Enterprise Support Service (Sebrae) may
organize and even sponsor it, focusing business players as their target.
Training programs must consider the target population involved, as
small irrigators and entrepreneurs, including providing aid for the former.
The management training program curricula will always focus on
the production chain and must include, at least, cost accountancy, price
formation, users’ organization administration, focused on trade, product
quality, users’ organizations focused on operation and maintenance
irrigation projects and behavior change.

5.4.5 - Environmental management services

The increasing quality demand for agricultural products, both in

domestic and foreign markets, requires the use of origin labels in order to
control quality.
To compete means to produce with lower prices than the
competitor, respond to consumers’ desires and preserve the environment.
Environmental control procedures sustain the quality and also the original
labels. Thus, in public irrigation projects it is necessary to implement an
environmental management system to follow the Report on
Environmental Impact (Rima) guidelines and control water quality,

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defensive use (quantity and type) and appropriate garbage availability
(agricultural and residential), amongst others, as well as undertaking
educational work on environmental affairs.

5.5 - Economic and Financial Mechanisms

Irrigated agriculture encompasses: (i) those projects under

exclusive responsibility of the private sector, that cover from small
irrigated areas, with less than 4 hectares, up to areas above 1,000
hectares; (ii) those where the public sector builds irrigation infrastructure
for collective and social use, locates irrigators and manages to create
conditions for success.
The new law also proposes a mixed project where the public sector
may join the private sector in an irrigation enterprise, with shares limited
to 49%. It is up to the private sector to finance mixed and private
projects.
Concerning irrigated agriculture, and also agriculture in general,
Government credit is the main financing instrument for private projects
and with regard to the private sector in public projects. In such projects,
Government still finances its part: project elaboration, area expropriation,
builds irrigation infrastructure for collective use, roads, electricity,
irrigator location, implementation and development of irrigation district
and its own action supervision.
Another important source of funding are the funds from project
implementation itself and those generated during the operation. More
sophisticated financing forms were not used until now. They will be
revised in order to indicate conditions that must be created to take-on an
additional irrigation financing form, for irrigated agriculture and also to
discuss the financing of a public project.

5.5.1 - Sources and mechanisms of financing

a) Rural Credit

From the point of view of costs return, it is essential that public

projects mature in as short a time as possible. Three factors are obstacles
to this: (i) Government delay in finishing works, selecting and locating

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irrigators. The reason is the constant contingency of funds by the
Ministry of Finance that obliges Government to postpone investments;
(ii) mistaken selection of irrigators, either from human capital point of
view or the fact of having minimum funds to afford the enterprise, since
irrigated agriculture is a capital intensive activity and, finally, (iii) rural
credit norms that require an exaggerated warranty level contributing to
deficient supply of credit in terms of volume and period.
Credit norms need to be geared to irrigation characteristics,
covering volume for various sources, terms, interests, opportunities and
warranties.
The access to credit may be improved through the following
procedures:
1. it has been noted that efficient credit administration depends on
reducing transaction costs, both to borrowers and credit
institutions. Thus, mobile unit lines and proposition receivers’
units or similar initiatives must be taken.
2. another point concerns irrigation credit management training, an
area that cannot be left outside the new activity structure. Here,
not only operational crew and financial technical assistance to
portfolio is important, but also three extra strategic areas require
more attention:
• borrower management training;
• borrower training in financial operations;
• borrower training in costs accountancy.
Financing Manual to Irrigated Agriculture
There is no doubt that rural credit is one of the most important
instruments of irrigation policy. There is a good range of credit lines,
mainly for the production sector. However, it is necessary to consolidate
norms into a single document named the Financing Manual for Irrigated
Agriculture. Something similar was developed by Banco do Nordeste
with the Manager’s Handbook.

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b) Stock market: stocks, shares and stock certificates
In spite of the characteristics of the finance market (understand:
stock market: stocks, shares and stock certificates), it is possible for
irrigated agriculture to use this mechanism, through their organizations
and companies. The market has created opportunities that should be
considered by the irrigators and their organizations in the area of
irrigation business. There are new businesses and new financing
alternatives / capitalization that, added to those already existent, try to
insert in the stock market a very larger number of companies.

c) Risk companies

Capital risk companies focus investments, through diversified

portfolios, on small and medium scale companies of great potential for
huge incomes and development, by partnership. These companies’ funds
come from individual investors, large companies, federations,
entrepreneurial associations and “clubs”, banks, incentive bodies and
other investors, expecting to exceed traditional financial investment
returns. They were especially successful in technology. The main
advantages are: (i) they are more advanced forms of equity financing –
essential nowadays to make middle maturity investments viable
(otherwise, many investments worldwide would not be viable, despite
very high return rates).; (ii) in search of high return rates, they are able to
finance more risky investments, since greater risk brings higher return
rates; (iii) they know how to compensate risk operating with high-tech
companies and richer markets; (iv) by choosing competently managed
companies, they make modern management techniques viable.
The main disadvantages are that they are not viable when they
operate: (i) with lower value-added commodities; (ii) with systems
subject to intensive labor activities; (iii) with very complex operations,
depending on several service suppliers or intermediary raw material; (iv)
with long term maturation investments; (v) with enterprises which have
bank credit as their main financing source; (vi) in a market with low level
of stock share negotiability; (vii) in regimes which do not respect
minority partners’ rights; (viii) in systems where business owners do not
pay dividends or stock- holders participation; (ix) with investors who do
not participate with risk capital.

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d) Mutual Investment Funds and Emergent Companies
Answering for a substantial part of risk resources in competitive
segments of financial markets worldwide, these funds have been
presenting amazing results and development. They are unquestionably
risk investments, including expanded risks, due to the group of
companies that compose these funds (which in a certain sense does not
occur with capital risk companies).
Its advantages are: (i) spread risk; (ii) potential to form a group of
shares in high return companies (even when they are few among a group
of bigger companies); (iii) alternative to investment outside the highly
competitive circuit of funds and investments (where return is slightly
superior to traditional savings, from the market point of view); (iv)
quickness in service demand expansion, as happened in the United States
and Europe, along with increased value quotes.
e) Capital Risk Funds and Local Development
This is one of the most promising financing systems for small and
medium-scale companies in irrigation projects. One of its main
advantages is that in irrigated agriculture there is enough income to form
a saving fund and loan fund with low operational cost and low levels of
subsidy dependency (SDI, or the difference between financial costs plus
administration costs and loan rates).
These funds must count mainly on local investors’ resources. Thus,
they are savings and loan funds. This, by itself, makes a big difference.
Funds like these have the advantage of overcoming huge
difficulties from conventional credit systems, that mix development credit
with commercial credit, whish is still abandoned in some countries.
f) Sales Receivable Security
Increasing operations worldwide prove this system’s advantages,
which grow significantly every year.
Nowadays, receivable security is even more related to small
companies’ financial operations, whenever its origin is linked to similar
operations involving big company invoice discounts (merchant invoices,
for example). Due to security provided, the interest for these operations at

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banks is growing. Many small companies operations were focused on
“non-bank” scopes (such as factoring). Today, “vendor” operations and
receivable security interests non-specialized banks, totally supported by
commercial banks.
Operation basically involves: (i) “homogeneous activity” papers
offered by a “receivable salesman”; (ii) a specialized broker to issue
“certificates” (server); (iii) investors interested in buying these
certificates; (iv) fiduciary link that classifies receivables; (v) a credit
assistance that adds credibility.
g) Public Projects Financing
Financing public project infrastructure for collective use is the
responsibility of the National Treasury or The National Bank for
Economic and Social Development (BNDES) and may be complemented
with resources from international institutions.
In the short term, it is possible that the private sector start financing
irrigation infrastructure for collective use, since Government agrees in
providing warranties, based on water tariff payments, for example.
Government sells infrastructure during irrigators leasehold, but the
official ownership transfer occurs when the last installment is paid.
Government gives these parcels paid by irrigators as warranties to the
company which financed the project. In addition to this, Government
guarantees future installment payment, during a given period negotiated
in each case. This negotiation is provided for during project bidding
process announcement. Installments may also guarantee the company that
financed the project in its future loan operations.

5.5.2 - Description of financial risks

This chapter aims to evaluate investment risks in commercial

enterprises of irrigation projects. Another task is to evaluate project
exchange risk, when financed by international loans, capital investment
of foreign companies focused in export. From exchange rate
liberalization, today in a floating exchange regime, risk generated at
Government had a significant reduction. Exchange rate started to float
according to market forces, not confounding speculative operations
anymore. Under irrigation project conditions, it is noted that our

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economic risks have complete domain over exchange risks. Thus, we
decided not to evaluate it.
Thus, this chapter focused on risk evaluation as noted by investors.
For this purpose, potential business investors were consulted. The
objective is to know business investors’ opinion, as well as irrigation
project risks.
a) General Risks of Irrigation Projects
The main general risks of an irrigation project, presented by
investors, are:
1. Until now, it has not been possible to build competitive
advantages from comparative advantages.
2. Not knowing the real dimension of products market size.
3. Are the logistic conditions of public infrastructure
appropriate?
4. Do we have technological know-how?
5. Currently, is there integration within irrigated agriculture
chains? Is there a holistic view inside this sector?
6. Can we trust the unity of the chain as a whole concerning
common objectives and business promotion?
7. How does the Government and private sector partnership
work in this business? Is there a tradition covering its new
objectives? If not, is it possible to change it?
8. What are the efforts to develop export markets by promoting
Brazilian products abroad?
9. Is the labor force qualified? Educated? Trained?
10. What are the labor costs? Are there any incentives?
11. Concerning electricity supply, in some areas it is not
satisfactory.
12. There is also a water supply risk.

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b) Financial Risk Evaluation
The principal financial risks for irrigated agriculture, as pointed out
by investors, were:
1) Delay at project implementation as a whole.
2) Foreign capital constraints (financiers).
3) Domestic capital constraints (borrowers).
4) Low debt capacity (asset commitment).
5) Unexpected capital costs in cash-flows.
6) Non-fulfillment of public fund release commitments as
predicted for water supply and infrastructure phases.
7) Improper Government interference: institutional risk.

5.5.3 - Strategies for mitigation of commercial risk

As in the previous section, current and potential investors in

irrigated agriculture in the Northeast of Brazil and north of the state of
Minas Gerais were interviewed. Their proposals were as follows:
1. Detailed information about all kinds of possible crops to be
developed in irrigation projects, to be used in preliminary
market studies, essential to start up decision process.
2. Indication of potential export products, as well as physical
conditions for loading production for foreign market
3. Preliminary guarantees that projects will be financed (mainly
from Banco do Nordeste).
4. Inventory of social and production infrastructure available:
roads, schools, electricity etc.
5. Availability of labor force and local workers’ training, as well
as irrigation management experience.
6. Involvement of building companies that would be associated to
a group responsible for executing project construction works.

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 7. Indications of partnerships with national or international banks
(in participation portfolios) and fixed asset credit warranties, as
well as guarantees for investment, expenses, trade and export.
8. Fiscal incentives to increase and accelerate economically viable
project returns.
9. Permanent promotion of Brazilian products provided by
Government.

5.5.4 - Guiding premises for the role of the public sector:

federal, state and municipal

The role of the public sector role is to supply high quality public
goods and services. It must not provide private goods and services that
are the responsibility of the private sector. Irrigated agriculture is very
demanding concerning strategic public goods. Based on these, the private
sector builds its management and investment plans. Investments will be
more viable depending on the best use of scarce public resources.
In order to attract private investment, it is first of all necessary to
clearly define the public sector’s role, as in the Proposed Law mentioned
earlier in this report. Secondly, excellent conditions must be created for
the private sector leading to investment and profits. In third place, it is
necessary to show that irrigation business can compete in terms of
advantages with other investment opportunities.
After clearly defining Government’s role in this new paradigm,
investors assume their responsibilities. New irrigation policy
implementation, which includes private sector participation, in higher
investment volumes will depend on operational paradigm changes, both
in size of investment needed and associated risks.

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 SPECIFIC MODEL FOR THE OPTIMIZATION AND
PROMOTION OF THE SALITRE IRRIGATION PROJECT –
JUAZEIRO , STATE OF BAHIA - BRAZIL

This segment makes a brief description of the Salitre Project,

located in the municipal district of Juazeiro-state of Bahia. It presents
suggestions to implement the Project within the conception of the New
Model, however based on current legislation. The proposal is based on
the capacity to attract more and better entrepreneurs to the project
through the mechanisms of Information Platform, Business Plan,
Promotion and Marketing Plan and an advanced form of technical
support and management for small entrepreneurs.
It was developed according to the guidelines of the General Model
adjusted to the current Irrigation Law. It considers the Salitre Project to
be an enterprise contained in an agribusiness with irrigated agriculture.
It proposes a modern strategy for the implementation of
enterprises, based on an information platform, a business plan, and a
promotion and marketing process.
It proposes that the leading promoter of the enterprise, Codevasf,
associate itself to a Sponsor, as the Bank of the Northeast and/or the
National bank for Economic and Social Development (BNDES), and to
the Government of the state of Bahia, in the implantation of a managerial
model that seeks greater participation on the part of private initiative.

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1 - GENERAL DESCRIPTION ON THE SALITRE PROJECT

The Salitre Irrigation Project is an enterprise run by the

Development Company for the São Francisco Valley (Codevasf), linked
to the Secretariat of Hydro Infra-Structure of the National Integration
Ministry.
The Project, to be implanted in 5 stages, has an agricultural useful
surface (SAU), in other words, an area of 29.588 hectares that may be
irrigated. The first stage, 5.940 hectares, is in its implantation phase.
Located in the municipal district of Juazeiro (Figure 3), state of
Bahia, located, therefore, in the Petrolina-Juazeiro agro-industrial cluster.
Codevasf already developed feasibility and Basic Project studies in
1997, having as indicators:
- Present liquid value-VPL (11% per annum) US$ 240 million
- Benefit/cost relationship - B/C (11% per annum) 1,66
- Internal rate of return 20%
- Direct jobs to be generated 20 thousand
- Cost per direct job US$ 18,7 thousand
- Population directly benefited 54.400 people

The main characteristics of the enterprise are shown below.

1.1 - Water Supply

- Water Source of the Project: the São Francisco river

- Impounding foreseen for the Project: 42,00 m3/s
- Situation of the river at impoundment: quota of 360,23 m for
minimum flow of 640 m3/s and quota of 366,00 m for maximum flow
of 9.000 m3/s.

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1.2 - Parceling of the Area

Eighty percent of the irrigated area is destined to medium-size

companies (23.714 ha), with lots ranging from 30 to 60 ha SAU, and the
remaining 20% (5.874 ha) destined to small companies (previously
denominated small producers), with more than 6,0 ha.
Excluding the FAO area, the perimeter is composed of 1.429 lots,
distributed by type of users, in the following way:

TABLE 2
DISTRIBUTION OF THE PERIMETER BY TYPE OF USER
Company
Sub-area Total
Medium Small
CHESF 77 328 405
SALTPETER 408 616 1.024
Total 485 944 1.429
SOURCE: Codevasf.

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1.3 - Project Implantation

Codevasf foresees that the Irrigated Salitre Perimeter should be

implanted in 5 stages, in a total period of 12 years (Figure 4).
Now Stage 1 is being implanted, and it was subdivided in three
phases, thus characterized:

TABELA 3
SALITRE IRRIGATED PERIMETER – STAGE 1
No of Lots - Companies Forecast for
Phase Area (ha)
Small Medium Conclusion
I 2.057 154 19 December/2000
II 1.806 43 28 March/2001
III 2.077 48 36 December/2001
Total 5.940 245 83 -
SOURCE: CODEVASF

1.4 - Agricultural Production Potentiality

The climate characteristics and soil of the project and water

availability favor the cultivation of a wide range of products. Crops that
presented higher potential and were defined technologically by research,
tested at producer level, were ascertained, or those that were defined with
technology adapted from other regions, therefore already tested at
producer level. It presents potential for cultures such as: mango, banana,
lemon, coconut, industrial tomato, industrial peppers, corn, bean, onion,
papaya, grape, etc.

1.5 - Potentiality of the Salitre Project For Agro-Industry and

the Foreign Markets

Strategically located within the important Petrolina-Juazeiro

cluster, the Salitre Project encounters a privileged environment for its
development, due to the infrastructure already existent and the agro-
industrial compound already installed, inserted in a true cluster,
considered to have the greatest growth potential in the context of irrigated
agriculture in the Northeast region. The area destined for the implantation

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of the Salitre Project is located about 40 kilometers to the south of the
city of Juazeiro, on the right bank of the São Francisco river, close to the
Sobradinho dam. The area belongs to the municipal district of Juazeiro
and the water basin of the São Francisco, sub-basin of the Salitre river.
The city of Juazeiro forms, with Petrolina, an ample urban area cut
by the São Francisco river, and by important highway turnpikes of the
Northeast, and is endowed with railway, river, and air transport
infrastructure, with great potential. Petrolina and Juazeiro are the most
important cities of the region and here agricultural businesses are
concentrated. The cluster is characterized, also, by the existence of great
number of industrial and commercial agricultural product companies, that
find there a favorable atmosphere for diversification and
complementation of their activities, indispensable to the new paradigms
of regional competitiveness.

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101
 The Petrolina-Juazeiro cluster, where the Salitre Project area is
located, is practically halfway between the great Northeastern capitals
and the great centers of the country (table below).

TABLE 4
DISTANCES BETWEEN THE SALITRE PROJECT
AND SOME CENTERS OF THE COUNTRY
City Distance (km)
Saving 511
Recife 721
Fortaleza 878
Brasília 1.810
Rio de Janeiro 1.928
São Paulo 2.241
SOURCE: Codevasf

The current access to the area of the project is federal highway BR-
407 and state highway BA-210, as well as by dirt roads that cross or they
leave these highways bound for localities in the region. There is regular
bus service to Belém, São Luís, Teresina, Picos, Fortaleza, Juazeiro do
Norte, Crateús, Natal, Caruaru, Recife, Salvador, Brasília, Belo
Horizonte, Rio de Janeiro and São Paulo.
The airport of Petrolina is the second most important of the State of
Pernambuco, satisfying the demands for passenger and cargo transport of
its area of influence and that of Juazeiro, with daily flights to Fortaleza,
Recife, Salvador, Brasília and São Paulo. Air transport is making the
commercialization of some high unitary value local products feasible,
such as grapes "in-natura", usually earmarked for export. The shipments
are made at the airport of Petrolina, classified as type “A”, located 5 km
from the center of Juazeiro.
It is undeniable that the location of the Petrolina-Juazeiro cluster
and the infrastructure already implanted, of the several transport
modalities, offer good alternatives for the exploration of routes for
distribution logistics and production flow, giving the Salitre Project a
competitive advantage that differentiates it from other irrigation projects
from the location point of view.

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 The region can also count on agencies of the main financing banks:
Banco do Brasil, Banco do Nordeste, Bandeirantes, Bradesco, Excell,
HSBC-Bamerindus, Itaú, Caixa Econômica Federal, Banco Bilbao
Vizcaya Argentaya BBVA, Banco do Desenvolvimento do Estado de
Pernambuco (Bandepe), Banco do Estado da Bahia (Baneb), América do
Sul.
Regarding commercialization infrastructure, the conditions in
general are favorable for the development of modern agriculture and
agribusiness. The existence of “packing-houses” at the main exporting
companies is essential to guarantee appropriate packing and presentation
of the products destined to domestic and foreign markets. In general, the
companies possess cold storage chambers that, due to harvest problems,
are idle four months a year. Some companies, due to the demands of
foreign consumers, possess distinct “packing-houses” for grapes and
mangoes.
In terms of institutions aimed at research and development, the
region has high installed capacity, with units of Codevasf, Embrapa,
Empresa Brasileira de Desenvolvimento Agrícola (EBDA), Escola de
Agronomia, in Juazeiro (BA), that, together, have been contributing to
accelerate the adoption of new production technologies and business
management.
Fundamental teaching in the region satisfies the prerequisites of the
Ministry of Education and Culture. There are 43 public schools in
operation in the principal center, 17 in the rural area and 61 private
schools. Vocational schools offer secretariat, nursing, administration,
accounting and teaching courses.
Regarding higher education, there are three universities
functioning, Federation of the Commercial Associations of the State of
Pernambuco (FACEP) (Administration) and University for the Formation
of Teachers of Petrolina (FFPP) (teachers' formation) in Petrolina, the
School of Agronomy, in Juazeiro, and at the Campus of University of the
State of Bahia (UNEB) (Law). Besides those already mentioned, there are
now undergraduate courses in accounting sciences, mathematics, biology,
geography, history, languages and pedagogy.
The presence of agribusiness in the region reveals a strong
indicative for the dynamics of development of the region where the

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Salitre Project is located. Unlike other public projects, installed far from
agro-industrial clusters, Salitre has already been assured demand
originated in the agribusiness installed in the Petrolina-Juazeiro cluster.
The Cluster is standing out as an important exporter of fruits
(European and American markets), mainly of mango and grape (edible).
Among the main agro-industries/companies installed in the Petrolina-
Juazeiro cluster, the following stand out: Agrovale (sugar, alcohol and
mango), Fruitfort and Curaçá Agrícola (mango), Carrefour - Labrunier,
Vale das Uvas, Orgânica do Vale (grape); Grupo Queiroz Galvão -
Fazenda Timbaúba e CAJ (grape and mango); Grupo Special Fruit -
Sueme (grape and mango), Fazenda Brasiuvas (grape); and Fazenda
Nova Fronteira Agrícola (mango).
According to the Brazilian Institute of Geography and Statistics
(IBGE), in 1996, the population of Petrolina was 191.238 and that of
Juazeiro 172.065, with growth rates of 5,2% and 6,3% a year,
respectively, in relation to 1980.
Concerning population distribution, in 1996 high urban
concentration was verified, 71% in Petrolina and 79% in Juazeiro.
Compared to 1980, a percentile increase of the rural population of the two
municipal districts was observed. This increase can be credited to the
development and implantation of irrigated perimeters in the region.
In relation to population age, it is observed that 60% are under 15,
9% above 65 years and 30% are between 15 and 65 years of age. The
high percentage of youths in the population economically active is an
important factor for the development of the region, since future labor can
be easily trained. For this, an education and training system, aimed at the
needs of the region, must be offered.
Concerning income, it is observed that 85% and 89% of the families
living in Petrolina and Juazeiro, respectively, earn up to two minimum
wages. This shows that the purchasing power of the region is low.
1.6 - Environmental Studies

Environmental Impact studies were carried out by Codevasf in

1997, through contract with JP-ENCO-TAHAL. In the report the main
observations are:

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- The enterprise interventions as a whole are, by their own nature,
inductors of positive impacts, due to productivity increase,
making the primary sector dynamic, and through the
optimization of the existent regional infrastructures, by the use
of advanced technologies, introducing a new vocation in the
region.
- The dry climate, good sunlight, a tolerable relief and the high
fertility of most of the soils constitute strong incentives for the
investments in irrigated agriculture. In fact, an irrigation system
with computerized water control and the choice of crops
according to soil conditions, are, also, positive aspects of the
enterprise.
- In project implantation, the following mitigating measures
should be considered:
• deforest the natural vegetation gradually, to avoid
environmental shocks;
• minimize soil alterations at the places of the main
engineering works;
• adapt the drainage works to the natural relief of the area;
• try to hire the necessary labor only in the local market, to
avoid population migration from other regions;
• develop and to implant a plan for the resettlement of the
people that live within the area of the project, that will be
dispossessed and or dislodged;
• prioritize the reallocation of those populations in the project,
both as small producers, or as employees of agricultural
companies;
• promote the best possible institutional articulation, seeking
to relieve social pressures and develop education and health
services.

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2 - RECOMMENDATIONS FOR THE APPLICATION OF
THE NEW IRRIGATION CONCEPTUAL MODEL IN
THE SALITRE PROJECT

In this section, the recommendations for implementation of the

Salitre Project are discussed, under the guidelines of the New Irrigation
Model, adjusted to the current Law of Irrigation n.º 6.692/79 and their
regulations.
The recommendations here presented are fruit of the successful
experiences in several countries studied, presented in the State of the Art
Irrigation Report, mainly in the organization and production aspects (the
case of Chile, France, USA); of the structuring of a platform of
information (examples of Chile and USA) of the experience of Codevasf
in the management of the São Francisco Valley Project, associated to the
experience of the group of consultants of the consortium and private
entrepreneurs. Added to this are the guidelines and proposals contained in
the Report of the New Conceptual Model.
The recommendations are based on the fact that the Salitre Project
should be an enterprise contained in the agribusiness of irrigated
agriculture and therefore requires modernization in its implementation,
that involves: Platform of Information, Business Plan, Promotion and
Marketing, Enlarged Global Management, credit definition (line and
volume of financial resources), financing alternatives for collective
irrigation infrastructure (not only from the government), among other
activities that are suggested below.

2.1 - Proposal For an Information Platform

Continuous and solid flow of information promotes alterations that

lead to the economic growth and increase of competitiveness. Therefore a
solid and efficient system of information will be capable of supporting
the government and the private sector in the formulation of strategies and
in the making of managerial decisions in the Salitre Project.
The objective of creating an Information Platform in the Salitre
Project is to allow, as in several countries, the access, of the several
participants, to technical and managerial information, that can subsidize

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decision making by private initiative as to the implanting or not of an
agro-industry, of an export company, of buying or not an area in a public
project, of associating or not to public power, how to operate business,
etc. The information should be detailed at such a level so as to make it
possible to evaluate the associated risks and the attractiveness of certain
enterprise.
The Platform will also allow technical teams to transmit to the
producers, in public projects or not, the most convenient forms of
technology, and organization of production, among others.
The platform should contain the following group of information:
- Basic information, related to available studies, such as: climate
study, hydrology, soils, environmental characterization;
availability and infrastructure conditions for product flow;
health; education; barriers phyto-sanitary barriers, among others.
- Technological information, related to the potential cultures for
the region.
- Market information, related to the historical series of market
data for the cultures of the region (prices, planted/harvested
area, production, exported volume, average price, exit port and
market destination at species/variety level).
- Managerial information, in this block, should contain the
Project’s business plan, characteristics of the project, financial
agents, etc.
The Consortium suggests that an INFORMATION PLATFORM
FOR THE SALITRE PROJECT be constituted and made available,
through Internet, Folders, etc., as part of a process for the promotion and
attraction of private investment for the Project. Codevasf, as the leading
promoter of the Project, should, in an isolated or associated manner,
constitute and implement the PLATFORM.

2.2 - Guidelines For a Business Plan of the Salitre Project

It is suggested that Codevasf and their futures partners elaborate

and make available a business plan of the Salitre Project.

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 The Business Plan is a written document, that has the purpose of
structuring data and relevant information, that will be taken, through the
Promotion & Marketing Activity, to the potential entrepreneurs, to allow
them to evaluate well and better decide, as to the feasibility of the
business in which they may invest (in the present case, the agricultural
iirigated production in the Salitre Project).
Thus, the main objective of the Business Plan, in the implantation
phase of each stage of the Salitre Project, is to guide the potential
entrepreneur, regarding the strategic decisions of the business, before
beginning his enterprise. It will also allow him to evaluate the feasibility
of the implantation of irrigated agricultural production (the main
component of his business). Thus, in case the business is not feasible, for
economical, financial, technical or marketing reasons, the entrepreneur
can certify himself of this, a priori (“in written”) and not in the hard
reality on the field, after some time has elapsed since the beginning of the
functioning of his enterprise, when he will have already invested in it all
or part of his available capital (his own or financed).
Another aspect of the Business Plan is that it becomes a permanent
analysis instrument of the situation of the business, not only in the
installation phase of the enterprise, as well as in the “takeoff” and
consolidation phases. Therefore, the Business Plan is not static, but
dynamic, allowing the individual entrepreneur and his association, as well
as the promoters of the Project as a whole, to accompany the evolution of
the macro-environment of the business, included the market in which it is
located.

2.3 - Guidelines For a Promotion and Marketing Plan

A plan for the implementation of the promotion and marketing of

the Salitre Project is suggested. For each stage of the Project, its own
mechanisms should be developed, observing the bases in the guidelines
discussed in this document on enterprise management.
Success in the implementation of projects is owed mainly to the
effectiveness of the planning process. To plan in an effective way
implicates in doing the right thing, at the exact moment, in the correct
way, through the appropriate people, for a very defined public. To be just
efficient is not enough. One of the essential factors for the obtaining of

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effectiveness in the accomplishment of any enterprise consists of the
methodological exercise, that makes work more rational and dynamic,
avoiding wastes of labor, time and financial resources and, of course,
guaranteeing good results. The execution of each stage of the process
described in planning is necessary, otherwise, the final result will be
jeopardized.
We must never forget the fact that planning is composed of a group
of interdependent actions and that therefore it should be carried out,
respecting its function in view of the total project. Thus, the correct
definition and the implementation of approach strategies of the defined
public-objectives as priority are directly linked to the definition of
competitive positioning, obtained through the prior analysis of
competition in confrontation with the strong and weak points of the
Salitre Project. The development of these actions in chain leads to the
reduction of the margin of investment risk and, therefore, it increases the
probability of project success.
The detailing of each phase should contain:
- Determination, identification and selection of priority public
groups.
- Construction of a date base on priority public groups.
- Analysis of competition.
- Definition of competitive positioning.
- Definition and implementation of approach strategies for each
priority public group.
- Definition and implementation of the result evaluation system.

2.4 - Financing for Mechanisms

2.4.1 - Collective irrigation infrastructure

Collective irrigation infrastructure may be financed according to

the following suggestions:

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 1st.) The main irrigation structure will be of responsibility of the
Federal Government for financing.
2nd.) The secondary irrigation structure, in the case of medium and
large companies, can be financed by the Federal
Government and auctioned to them in agreement with law
6.692/79, and that is always valid for small irrigators.
3rs.) The secondary irrigation structure, in the case of medium and
large companies, can be carried out by the future
entrepreneurs, (with their own resources and or financing),
that for this a condominium will be constituted; by
companies or groups of companies (with their own resources
and or financing), through a bidding process via Codevasf.
In this case, the futures irrigators, when settled, will assume
implantation costs, with their own resources or financing.

2.4.2 - Parcel infrastructure

As presented in the volume that deals with state of the art

irrigation, and concerning the importance of irrigation for the Northeast,
we have, in Brazilian public projects, an area of more than 60.000 ha of
land that may be irrigated, without agricultural use, in spite of the
definition of all collective infrastructure and water distribution.
Among the main factors identified for this situation there is an
inadequate selection process of producers, without warranty capacity at
financial agents, inadequate administrative capacity associated to small
credit availability at financial agents for irrigated agriculture; and the low
financial capacity of future producers.
Specifically for the Salitre case, it is desirable that the credit
availability factor not be a restrictive factor. For this, the creation of a
Guarantee Fund is suggested, (examples of this type of action are being
developed by the Bank of the Northeast in several regions), to facilitate
access to credit and guarantee a better flow of credit profitability.
Besides, it is desirable that the selected entrepreneurs (mainly the
medium and big ones) have good financial capacity. We should also
associate the possibility, when attracting commercialization companies
(example: supermarkets, export companies) and agro-industries, of

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looking for those with potentiality to participate in the financing process
of the productive process.
The Salitre Project is in its 1st Stage, that is divided in Phases, and
foresees the conclusion of the infrastructure common use works at the
end of 2001. Thus, the need for financial resources was evaluated to
implement the productive process of Stage 1 at a parcelled level.
The total of necessary resources for investments to implement
agriculture in the Project, at a parcelled level, adds to R$ 70,1 million, in
a period of 5 years. And for costing (annual operational costs), the
necessary resources add to R$ 77,4 million. The total between investment
and costing adds to R$ 147,5 million for a period of 5 years.
The mentioned values show the need for the Bank of the Northeast
to accomplish studies to contribute credit resources, as a complement to
the entrepreneurs' own resources, so that, resources will not be lacking
and the implementation of the Project will not be delayed, besides
guaranteeing good technological and managerial level.

2.5 - Project Management

2.5.1 - Management model for stage 1 of the Salitre Project

Observing the terms of the Irrigation Law currently valid (n.º

6.662/79), Codevasf is implanting Stage 1of the Salitre Project, as a
Public Irrigation Project, having, therefore acquired the lands, and it has
been building the irrigation infrastructure for collective use, exclusively
with resources from the federal government. In the same way, it will
support the implantation of parcelled infrastructure in the lots destined to
small companies. Such investments should be amortized by the small and
medium entrepreneurs, and the irrigation infrastructure for collective use
will remain in the domain of the Union (BRASIL, 1979).
Other infrastructures as those of support (electric power, highways,
etc.) and those for common use are being implemented, according to
agreements that, for that reason, are (or will be) formalized, by
articulations on the part of Codevasf. After the beginning of the
settlement, and up to 12 months, the activities of Operation and
Maintenance of infrastructure for collective use, as well as the general

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management of this first Stage of the Irrigation Perimeter of the Salitre
Project, will be delegated to the Irrigation District, constituted by those
entrepreneurs (small and medium).
This management model, undertaken by Codevasf, as Promoter of
the Salitre Project, is one of Global Administration Strictu Sensu (GGS).
This model is broadly used in investment projects of larger span, in which
the engineering works, intrinsic to them, represent, in the implantation
phase, the most relevant effort, not only due to the volume of the
financial resources involved, but for being a critical factor for the success
of the economic activity, that will be implanted, starting from the
physical infrastructures.
According to the guidelines of the New Irrigation Policy, the
Project cannot be considered as just a work of Engineering, conceived
and executed. It should be a vigorous instrument of regional
development, based on a “core” stimulator that is agribusiness. Thus, the
necessity for the adoption of the enlarged concept of management, in
other words, Enlarged Global Administration (GGA).
GGA in reality is a coordination activity of the interactions
between Project-work-supply (typical of the implantation phase) and of
the interactions that occur during and after the constructive phase for a
larger profitability of the enterprise.
Codevasf, as the leading promoter of the enterprise, will, alone or
associated to other Agencies and or Sponsors (such as the Bank of the
Northeast, BNDES, Bank of Brazil or private agents), or the Government
of the state of Bahia, implement this new management. After the
settlement, this management can be accomplished by the Irrigation
District, or by a committee of producers, constituted for this purpose.
This new management mechanism should execute the following
activities, among others:
• accomplish global management of the works;
• implant the Information Platform;
• develop a promotion and marketing process;

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 • define and make available credit for the different levels of
entrepreneurs;
• coordinate a process for managerial training according to
suggestions in this document; and
• attract private companies to make investments in post-harvest
activities, such as processing, and, mainly, in the
commercialization of production, processed or not.

2.5.2 - Management model for subsequent stages of the Salitre

Project

For the following stages of the Project, although under the

conditions of the irrigation legislation currently valid, the main guidelines
of the new Irrigation Policy must be observed (without conflicting with
the current legislation). In this case, irrigation projects should be
considered integral parts of an agribusiness, with the capacity to sustain
itself, and the desire for larger participation of private investments, in
their implantation and development.
To reach such objectives, it is necessary to use the concept of
Enlarged Global Management (GGA), be it for the diversity and
complexity of requested actions, or be it for the growing difficulty of
accomplishing them in a vertical way.
For the development of the subsequent stages of the Salitre Project,
the leadership of Codevasf, as leading promoter of the Project, is
indispensable. In the following stages Codevasf will be responsible for
the purchase of land and for the extension of the infrastructure - master or
principal - for the supply of rough water. For small entrepreneurs
Codevasf should perform as in Stage 1, in other words, making water
available at the entrance of the lot and giving the necessary conditions for
them to implant their parcelled infrastructure. They will also be
responsible for the process, selection, settlement, and technical support,
among other activities usually executed.
For the medium entrepreneurs, Codevasf will make the Studies and
Basic Projects available, leaving to them the Executive Project and the
execution of water distribution works, starting from the main structure. In

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the case of option for financing of that infrastructure, the responsibility
will belong to the producers or companies. They will make the
electrification structure, highways and social support available.
It is proposed that Codevasf associate to a Sponsor, as the Bank of
the Northeast and/or BNDES, the Government of the State of Bahia, to
develop a Finance Project, to make it feasible for private investors to
participate in the water distribution infrastructure investment (starting
from the main infrastructure) for each medium-size company, in case this
is their option. They should also make feasible the implantation of the
agricultural activities.
As shown previously, this management mechanism should execute
several activities, among them:
• accomplish the Global Management of the main infrastructure
works for the transport of water, electricity, highways, social
structures and the distribution of water for the stage reserved to
the small companies;
• develop a specific promotion and marketing process;
• make available credit arrangements for different levels of
investors;
• coordinate a process of managerial training, according to
suggestions in this document; and
• attract private companies to accomplish investments in the
infrastructure of water distribution (starting from the main
infrastructure); post-harvest activities, in the processing, and
mainly, in the commercialization of production, processed or
not.

2.6 - Support Services

A proposal for support services for the Salitre Project was

discussed, with the vision of an agriculture with its attention focused on a
market that is evermore demanding for quality. Besides, it is been our
endeavor, since the beginning, to implement actions so that the
agriculture practiced in the Project would be in the context of

114
agribusiness, and would demand a higher degree of professionalism in the
exploration of the enterprise and, consequently, in the management of the
Project.
Thus, actions are being proposed, for production management, for
small producers, capable of making them more competitive in the market,
and environmental monitoring, capable of guaranteeing in the future ISO-
14000 certification for perimeter production, and a training programs.

2.6.1 - Management of small companies

The small companies in the Salitre Project represent 20% of the

area that may be irrigated. For their entrepreneurs (small producers, or
family entrepreneurs), the government (through Codevasf) has relative
responsibility in their process of settlement, production and organization.
In practice, in other perimeters, Codevasf has been contributing resources
for technical support and rural extension, hiring companies or transferring
the resources to the Districts. These resources are smaller every year and
not rarely they have been limiting the quality of the services. We have
also noticed that the small producers, during this process, have not been
intensely made to be co-responsible for the costs of the services. In the
same way, the technicians or companies have no co-responsibility in the
final product, that is the appropriate income for the families.
For the Salitre Project, observed the guidelines of the New
Irrigation Model, in which irrigated agriculture should be faced as a
business, a change in relation to the actions of management towards small
producers is proposed. It is a management model for small producers,
with specific functions and with emphasis for a public goal that requires
selection, technical support aspects, commercial organization for
purchase and sale, etc. adapted to the economic scales and techniques of
the size of the enterprise.
The proposed manager should participate in the selection process,
besides assuming technical support, commercial organization of purchase
and sale for the producers, setting up a “communitarian and united”
business, so that small companies may reach scale economies identical to
medium and big companies.

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 At the beginning of the global exploration process of businesses of
this public-target, the manager will have larger tasks to carry out, for
instance, in the preparation of producers, in the training and organization
of production – which represents a larger responsibility in the process of
“setting up a business”, beginning with a family producer.
For the small irrigation businesses to grow, it is necessary to
centralize the decisions of implementation of the explorations in a
company that knows the market, that the producers make a production
program under the training of this company, mainly when considering
that the volumes to be produced and marketed will grow with time. In
this case, it will be convenient to centralize the initial assembly functions
of the businesses, avoiding the risks of an atomized and disorganized
production. Soon afterwards, the company should be capable of attracting
investors, besides attracting buyers.
The company manager should advise the producers in the carry out
of sales contract commitments (quality, amount and price conditions)
between the organization of producers and the final buyer. At the same
time, it is necessary to assure that business investments will be facilitated,
as the scarcest factor is capital, more than the organization system.
Capital shortage has been responsible for the waste of productive
potential of projects in Brazil.

2.6.2 - Environmental monitoring

The District of Irrigation and the producers should be attentive also

to the growing demand for quality of agricultural products, in both
domestic and foreign markets. The tendency is to increase the demands
for labels of origin, with quality control. Add to these demands
environmental quality control, mainly in foreign markets, where concerns
with maintenance and improvement of environmental quality and
protection towards human health are decisive factors for consumer
preference and product fidelity.
To work towards environmental certification, an Environmental
Management system (SGA) should be implanted in the Salitre Project,
that, observing the guidelines that come from the Impact on the
Environment Report (Rima), can monitor, among other issues, the quality
of water, use of defensives (amount and type), appropriate disposal of

116
garbage (pesticide and residential), besides accomplishing educational
work, targeted towards environmental issues.
The advantages of the Salitre Project in implanting, since the
beginning, a system of environmental management lie in the obtaining of
economical potential benefits from the system. Among them, the
satisfaction of the criteria of investors, evermore demanding in the
environmental aspects of products and processes. SGA offers transparent
evidences of application of the environmental legislation, which tends to
facilitate the access to capital, assuring investors demonstrable
environmental management.
Other potential benefits include image strengthening and market
participation, the improvement of cost controls, the demonstration of
careful performance, the process facility to obtain licenses and
authorizations, besides contributing to improving the relationships of the
Project with the government and the local community.
A system of environmental administration possesses some
elements for its implementation. In first place, commitment on the part of
higher management of the Project is necessary. In second place, there
should be planning to pursue the environmental policy of the Project.
Finally, implementation demands training development and the necessary
support mechanisms to assist this policy, its objectives and its defined
environmental goals.
Monitoring is, thus, a follow-up instrument and an instrument of
environmental performance evaluation. It is necessary to inform the
irrigators the negative impacts, introducing appropriate practices for the
recycling, treatment, control mechanisms, efficient use of resources,
evaluation of water quality, treatment and use of residues, energy
management, seeking the prevention and minimization of environmental
impacts.

2.6.3 - Proposal for a training program

The implementation of an agriculture, that gives economical and

environmental sustentation to the irrigation projects, whether public or
private, implies in improvement of the educational and professional
levels for the use of all inputs and services with more effectiveness. Thus,

117
it is important for the Salitre Project, when being implanted, to have as a
support instrument a training program in management, that is adapted to
regional characteristics, through entities such as Senar, Banco do
Nordeste and Sebrae, and presented to the several participants of the
business.
In terms of professional training and management of agro-
industrial businesses, to accompany current changes, companies must
continually qualify their managers. The qualification of the principal
executive, the adoption of business administration techniques, the
planning and level of computerizing, are essential elements for company
competitiveness.
On the other hand, small and medium producers do not receive this
up-dating, and only receive information through lectures and training in
their own region. To overcome this deficiency, some entities such as
cooperatives, SEBRAE and governmental bodies try, through the
formation of groups of producers, to promote technical visits to more
advanced companies, aiming to induce them to the use of new production
technologies.
In terms of adoption of new management techniques, most of the
entrepreneurs are becoming aware of their importance, for the use of
consultant companies, training and participation in lectures.
Great part of the companies ignore the main customer, in other
words, the final consumer, since their businesses are carried out through
middlemen, that, in general, have not shown any interest in passing this
information on to the producing companies.
The training program should take into account the type of public
involved, from small irrigators to entrepreneurs, and contain the
following modules:
(i) Management and economic fundamentals
(ii) Accounting and project analysis
(iii) Business strategies
(iv) Technical training:
• Formation of Community Associations Methodology.
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• Training in Operation and Maintenance of Perimeters.
• Marketing and Product Processing
• Technology of Vegetable Sanitation
• Quality control.
• Environmental Monitoring

119
6 - REFERENCES

BRASIL. Congresso. Lei nº. 6.662, de 25 de junho de 1979. Dispõe sobre

a política nacional de irrigação, e dá outras providências. Diário
Oficial [da] República Federativa do Brasil, Brasília, DF, 26 de jun.
1979. Seção 1, p. 8937-8941.
BRASIL. Congresso. Lei nº. 9.433, de 8 de janeiro de 1997. Institui a
política nacional de recursos hídricos, cria o sistema nacional de
gerenciamento de recursos hídricos, regulamenta o inciso XIX do
artigo 21 da Constituição Federal e altera o artigo 1 da Lei 8.001, de
13 de março de 1990, que modificou a Lei 7.990, de 28 de dezembro
de 1989. Diário Oficial [da] República Federativa do Brasil,
Brasília, DF, 9 de jan. 1997. Seção 1, p. 470-474.
BRASIL. Presidência da República. Decreto nº. 89.496, de 29 de março
de 1984. Regulamenta a Lei nº. 6.662, de 25 de junho de 1979, que
dispõe sobre a política nacional de irrigação, e dá outras providências.
Diário Oficial [da] República Federativa do Brasil, Brasília, DF, 30
de mar. 1984a. Seção 1, p. 4.502.
BRASIL. Presidência da República. Decreto nº. 90309, de 16 de outubro
de 1984. Dá nova redação ao artigo 14 e ao artigo 16, δ 3º, do Decreto
nº. 89.496, de 29 de março de 1984, que dispõe sobre a política
nacional de irrigação. Diário Oficial [da] República Federativa do
Brasil, Brasília, DF, 17 de out. 1984b.
FARINA, E. M. M. Q.; AZEVEDO, P. F.; SAES, M. S. M.
Competitividade: mercado, estado e organizações. São Paulo:
Singular, 1997.
JONES, W. I. The world bank and irrigation. Washington, D. C.:
World Bank, 1995.

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