Evaluaci6n Econ6mica del Proyecto de Desarrollo Rural Integral del Alto Huallaga

A complex project like this one, composed of various operational units, each with its own accounts, requires analysis and calculations of profitability for each unit and then, in a consolidated manner, for the entire project as a whole. In this evaluation, given the existence of different programs and zones, it is essential to propose a model through which the various indicators can be obtained for each of its components, with the aim of ensuring that the entire project and its elements maintain homogeneity in terms of hypotheses, cost imputations, income, and value of recovery, among others, throughout the planning period. For the calculation of the different indices, the following notations have been used: t = time; t = 1, 2, 3, ..., indicating the succession of years; n = total number of years considered, duration of the project's existence; It = investment costs in year t; Et = operating costs in year t; Rt = income in year t, which includes not only the exploitation products of the project but also the value of liquidation in year n and capitalization when applicable. The adoption of a discount rate is a delicate problem. To avoid this difficulty, the Internal Rate of Return (IRR) is adopted, which, by definition, is the discount rate that annuls the total discounted benefit of the operation. If we call k this rate, we have: Bt = (1 + k)t Rt - Et, or, Bt = (1 + k)t It. This means that the total discounted benefits are equal to the total discounted investments; the annual benefits cover exactly the value of the investments, i.e., they do not leave any net benefit. The total discounted benefit is obtained by summing the discounted incomes and subtracting the discounted costs and investments: B = r ∑[Rt (1 + i)t - Et (1 + i)t - It (1 + i)t] t=1 n. The net annual benefit equivalent to this total discounted benefit is equal to the amount of the constant annuity b, served during n years, and whose present value of residues is B. This annuity is: B = Bi (1 + i)n / (1 + i)n - 1. The annual average rate of return is obtained by dividing the average benefit by the total discounted investments: I = r ∑[Rt (1 + i)t - Et (1 + i)t - It (1 + i)t] t=1 n / ∑[It (1 + i)t] t=1 n. The choice of a suitable discount rate for evaluating the present value or actual value of sums to be received or paid in different periods in the future is one of the key issues in evaluating a project. For example, a high discount rate confers a higher return on projects that require relatively small investments in the short term but have high operating costs, while a low discount rate favors those that need high investments and more economical exploitation. There are various alternatives that can be considered: considering the interest rate at which capital is effectively lent in the national market, considering retained discount rates by various public international organizations, or considering interest rates based on a basket of currencies using information from various international markets. Based on these considerations, it has been analytically considered advisable to work with three levels of interest rates: 5%, 10%, 15%, and in some cases, 20%. In an agricultural project, it is natural that the loan be taken at the end of the period or crop cycle, so the nominal interest rate is equal to the effective interest rate. The Agricultural Bank, for livestock activities, provides loans at a nominal interest rate of 32.5% per year. Suppose, equally, that inflation reaches 60% per year on average, according to various government projections and official declarations. Therefore, the problem for us is to calculate the real interest rate (re) at which we will discount the flows of our Project: 1 + Effective Interest Rate = 1 + Inflation = 1 + 0.325 = 1 - 0.172 = 1 + 0.60. This gives us a negative real interest rate. According to this, it would be possible to discount with a negative interest rate, but the uncertainty regarding inflation, as well as the fact that various international organizations use rates that vary between 3% and sometimes 12 to 15%, leads us to think that the suitable rate for the Project should be around 5%.