US embassy cable - 05MANAGUA2093

UNCLAS SECTION 01 OF 03 MANAGUA 002093 
 
SIPDIS 
 
AIDAC 
 
AID FOR PEBALAKRISHNAN/FRVIGIL/AMOUSHEY, DCHA/FFP/DP, 
RKAHN, LAC/CEN, AWAHAB, LAC/RSD 
 
E.O. 12958: N/A 
TAGS: EAID 
SUBJECT: USAID/NICARAGUA CONCURRENCE CABLE ON 
CATHOLIC RELIEF SERVICES (CRS) FY 2006 DEVELOPMENT 
ASSISTANCE PROGRAM AMENDMENT 
 
Summary.  CRS submitted the second phase of the 
Development Assistance Program (DAP) amendment 
to USAID Nicaragua on March 28, 2005.  The 
first phase of the DAP amendments for Nicaragua 
incorporated the Coffee Relief Activity into 
the DAPs.  For the second phase, the partners 
are proposing programmatic adjustments to the 
DAPs including a request for a two year 
extension.  USAID Nicaragua concurs with CRS' 
request to extend the program until 2008 for 
the reasons listed below.  End Summary. 
 
1.  DAP extension and program adjustment for 
phase two of the DAP amendment.  With the 
results and recommendations from the Food Aid 
Program and Policy Assessment for Nicaragua, 
the credit component review and the Nicaragua 
Title II program mid-term evaluation, the Title 
II Cooperating Sponsors will make adjustments 
to the DAPs to target the most vulnerable 
groups through an efficient and effective 
program and extend the program until 2008 to 
coincide with USAID/Nicaragua's Country Plan 
and the Central America and Mexico Regional 
Strategy. 
 
2.  Program design and progress to date.  The 
Nicaraguan Title II food aid program focuses on 
increasing food availability, food access and 
food utilization. The main components are to 
link small farmers to markets (Agriculture) and 
to improve maternal-child health and nutrition 
(Health).  There are four PVOs implementing the 
program in Nicaragua: ADRA, CRS, PCI, and SCF. 
All of them carry out both agricultural and 
health activities. 
 
2.1.  Agricultural activities focus on 
increasing the production of high-value, non- 
traditional crops, basic grains production, 
increasing higher levels of marketing and 
processing of products and promoting 
irrigation, storage, reforestation and soil and 
water conservation practices.  As of September 
2004, there were 3,474 farmers working with the 
agricultural team in new technological 
activities such as production of non- 
traditional crops using certified seeds, 
irrigation systems and greenhouses. 
 
2.2.  Health activities focus on integrated 
management of common illnesses, improving 
prenatal and postpartum care and strengthening 
the relationship between target communities and 
the local government health facilities.  The 
number of beneficiaries under the MCH component 
for FY 2004 is 11,652. 
 
2.3.  The productive component of the DAP is 
helping to increase the competitiveness of 
smallholder farmers given the challenges and 
opportunities posed by the US-Central American 
Free Trade Agreement (CAFTA).  As the majority 
of problems facing smallholder producers lie in 
the marketing system, increasing the 
competitiveness of small holder farmers by 
linking smallholder production to market demand 
is essential preparation for CAFTA.  CRS has 
3,474 beneficiaries under this component who 
had sales that totaled US $ 2,187,642.27 in FY 
2004.  CRS implements the program through local 
partners FIDER and CARITAS, which has been 
effective because the results are excellent. 
 
2.4.  The marketing component complements the 
agriculture activities by facilitating linkages 
between farmers and major national and 
international buyers.  Furthermore, the Title 
II partners promote the formation of 
cooperatives so that the farmers sell at higher 
prices and volumes and to ensure sustainability 
once the DAPs come to an end.  Higher prices 
and income improve household food security by 
allowing beneficiaries to be able to buy their 
own food supplies. 
 
3.  Program extension.  The CRS DAP will 
consolidate efforts directed to increasing 
incomes and reducing the incidence of 
malnutrition in up to 101 communities in the 
Departments of Matagalpa, Estel and Jinotega. 
In addition, it will aim at strengthening local 
capacities, reducing resilience to shocks and 
preparing small-scale farmers to compete in 
regional and international markets. 
 
3.1.  The DAP amendments for the Nicaraguan 
Title II programs include the following: 1)  A 
two-year extension in the program with 
additional funds (FY 2007-2008); 2) 
Improvements in the program to broaden their 
impact and ensure sustainability; 3) 202 (e) 
funds request; and 4) Development Assistance 
(DA) funds request in FY 06. 
 
3.2.  Regarding the DA funds request in FY 06, 
the Mission will modify the Title II partners 
Transfer Authorization (TA) to create a Hybrid 
TA.  The purpose is to enhance the agriculture 
and marketing components should a need arise to 
scale up efforts to assist small-scale farmers 
as a result of the passage of CAFTA.  The 
Mission is in favor of having a Hybrid TA 
because it will provide flexibility for the 
Mission to add DA funds to the DAP program in 
the remaining fiscal years.  This is subject to 
funds availability. 
 
4.  Issues letters.  The issues letters were 
sent by FFP Washington so that the partners 
could clarify or respond to questions raised 
after the second phase of the DAP amendments 
were received.  The letter sent to CRS included 
threshold and non threshold issues.  Threshold 
issues focused on the following topics: DA 
mission funding, Micro finance sustainability 
plan, counseling under the Health component, 
Gender strategy and 202 (e) funding.  Non 
threshold issues focused on the following 
subjects: Exit strategy under the Health 
component, exit strategy for the packaging and 
collection centers, disaster management 
strategy capacity and plan, detailed budget, 
and the use of SODIS, a water purification 
method. The training for the SODIS method is 
easily implemented and low cost. 
 
4.1.  Responses to threshold issues.  CRS's 
responses to USAID Mission and USAID Washington 
threshold issues are: CRS is requesting 
$250,000 in DA funds to strengthen the 
agricultural component; CRS described how they 
will address the recommendations from the DAP 
Mid Term Evaluation in regards to counseling 
under the Health Component and in the Gender 
strategy; and CRS revised their annual budgets 
to be consistent with FFP policy.  The Mission 
feels that the above mentioned issues were 
properly addressed by CRS. 
 
4.2.  Responses to non threshold issues.  CRS's 
responses to USAID Mission and USAID Washington 
non threshold issues are:  CRS explained how 
they will carry out their exit strategy for the 
Health component; CRS made clear how they will 
implement the exit strategy for the community 
packaging and collections centers; and CRS 
illustrated their disaster management strategy 
and capacity to carry it out.  The Mission 
feels that the above mentioned issues were 
properly addressed by CRS. 
 
5.  Micro finance sustainability plan.  Sixty 
days after the Transfer Authorization is 
signed, CRS and the other Title II partners 
will submit the micro finance sustainability 
plan to USAID/Nicaragua and to FFP/Washington. 
 
6.  Bellmon Certification.  The Bellmon 
Analysis was updated in January 2005.  The 
Mission Director certified that there will be 
adequate storage and transportation available 
in Nicaragua at the time of arrival of Title II 
commodities to prevent the spoilage or waste of 
these commodities.  The Mission Director also 
certified that the distribution or sale of 
these commodities in the case of Title II 
monetization will not result in a substantial 
disincentive to, or interfere with, domestic 
production or marketing in Nicaragua. 
 
7.  Usual Marketing Requirement (UMR).  The UMR 
for wheat products to Nicaragua has been 
established at 48,300 metric tons (MT) and the 
maximum for U.S. programming at 101,000 metric 
tons (MT).  Under the joint monetization 
arrangement, ADRA, CRS, PCI, and SCF currently 
plan to monetize a total of 27,050 Metric Tons 
(MT) of Northern Spring (NS) wheat in FY 2006 
to fund the activities proposed in their DAPs. 
 
8.  Cooperating Sponsors Capacity.  CRS has 
demonstrated adequate technical, financial and 
managerial capability to design, implement and 
monitor the FY 2002 - 2008 DAP.  The DAP 
explains how CRS' headquarters, international 
and regional personnel will adequately backstop 
CRS/Nicaragua during the implementation of the 
DAP. 
 
9.  Funding levels recommendation. 
USAID/Nicaragua recommends that the FY 2002 - 
2008 CRS Title II DAP be funded in FY 2006 at 
the following levels (Tonnage and section 202 
(e) levels): 
 
Commodities are in Metric tons as requested in 
Lines 8 and 17 of the FY 2006 Annual Estimate 
of Requirements (AER) of the DAP. 
 
Commodity                Line 8    Line 17 
Corn Soy Blend (CSB)        877        730 
Vegetable Oil 4Lt.can       155        140 
Long grain rice             270        250 
Lentils                     270        260 
Total Metric Tons         1,572      1,380 
NS Wheat (monetization)   7,320      7,320 
 
Section 202 (e) Level for FY 2006: US Dols 
180,000 
 
10.  Environmental Compliance Documentation: 
CRS submitted the following documents as part 
of the Environmental Appendix: Environmental 
Compliance Facesheet; Pesticide Evaluation 
Report and Safe Use Action Plan (PERSUAP); 
Title II Environmental Status Report Facesheet; 
and Environmental Monitoring Plan.  The Mission 
has reviewed and cleared this Environmental 
Appendix. 
 
11.  Host Country FFP Agreement.  The Mission 
Director certifies that CRS can satisfactorily 
operate a Title II program in Nicaragua in the 
absence of a host country Food for Peace 
Agreement.  The Mission Director also certifies 
that the commodities brought in under the Title 
II program for direct distribution will be free 
from duties and taxes, and the interests of the 
USG can adequately be looked after and 
protected. 
 
12.  USAID/Nicaragua has reviewed the CRS DAP 
amendment and finds it to be consistent with 
the food security needs of Nicaragua, 
USAID/Nicaragua development priorities, and 
USAID's Food Aid and Food Security Policy 
Paper.  The documentation satisfactorily 
reflects guidance from FFP on the submission of 
DAP Amendments. 
BRENNAN