Document of The World Bank FOR OFFICIAL USE ONLY Report No: 34978-GT PROJECT APPRAISAL DOCUMENT ON A PROPOSED L O A N IN THE AMOUNT OF US$30 MILLION TO THE REPUBLIC OF GUATEMALA FOR A PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM February 27,2006 Finance, Private Sector and Infrastructure Department Central America Country Management Unit Latin America and the Caribbean Regional Office This document has a restricted distribution and 'may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No: 34978-GT
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED L O A N
IN THE AMOUNT OF US$30 MILLION
TO THE
REPUBLIC OF GUATEMALA
FOR A
PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM
February 27,2006
Finance, Private Sector and Infrastructure Department Central America Country Management Unit Latin America and the Caribbean Regional Office
This document has a restricted distribution and 'may be used by recipients only in the performance of their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective January 2006)
AGEXPRONT ANACAFE BANGUAT CAS CAFTA CIV CODISRA CONCYT COPRE ERR FIS FM FONAPAZ FONDETEL FRR GDR GOG GPOBA IADB BRD ICC ICT IEC IF1 INTECAP INGUAT MAGA MARN MINECO MINFIN M&E NGO OBA
Currency Unit = Quetzales 7.5 Quetzales = US$l
1 Quetzal = US$0.13
FISCAL YEAR January 1 - December 31
ABBREVIATIONS AND ACRONYMS
Organization of Exporters and Export Producers National Association o f Caf6 Producers Bank o f Guatemala Country Assistance Strategy Central American Free Trade Agreement Ministry o f Communications, Infrastructure and Housing Commission against Discrimination and Racism Nacional Council for Science and Technology Presidential Commission for the Modernization and the Decentralization o f the State Economic Rate o f Return Social Investment Fund Financial Management National Peace Fund Telephony Development Fund Financial Rate o f Return Rural Development Cabinet Government o f Guatemala Global Program on Output Based Aid Inter-American Development Bank International Bank for Reconstruction and Development Investment Coordination Committee Information and Communications Technologies Information, education and communication Intermediary Financial Institution Technical Institute for Training and Productivity Guatemala Tourism Institute Ministry o f Agriculture, Livestock and Food Ministry o f Environment and Natural Resources Ministry o f the Economy Ministry of Finance Monitoring and Evaluation Non-Government Organization Output Based Aid
PBD POP PPIAF PRONACOM REDP RDU SBD SEGEPLAN SINAPRE SINPET SME SNIP TMM USAID
Program Board of Directors Point o f Presence (telecommunications) Public-Private Infrastructure Advisory Facility National Competitiveness Program Rural Economic Development Program Rural Development Unit (SEGEPLAN) Standard Bidding Documents Presidential Secretariat for Planning and Programming National Pre-Investment System National Territorial Planning System Small and Medium Enterprises National Public Investment System Territorial Management Model United States Agency for International Development
Vice President: Pamela Cox Country ManagerDirector: Jane Armitage
Sector Directors: Task Team Leaders:
Laura Tuck and Makhtar Diop Pierre Werbrouck and Stephen Brushett
FOR OFFICIAL USE ONLY
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
GUATEMALA PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM
TABLE OF CONTENTS
Page
A . STRATEGIC CONTEXT AND RATIONALE .................................................................. 1 Country and Sector issues .................................................................................................... 1
Rationale for Bank involvement .......................................................................................... 2
Higher level objectives to which the program contributes .................................................. 3
1 . 2 . 3 .
B . PROJECT DESCRIPTION .................................................................................................. 4 1 . 2 . 3 . 4 Lessons learned and reflected in the program design 9
5 .
Lending instrument .............................................................................................................. 4 Project development objective and key indicators .............................................................. 5
Annex 11: Program Preparation and Supervision ................................................................... 83
Annex 12: Documents in the Project Fi le .................................................................................. 85
Annex 13: Statement of Loans and Credits ............................................................................... 86
Annex 14: Country at a Glance .................................................................................................. 87
Map IBRD No 34499
.. 11
GUATEMALA PROJECT TO SUPPORT A RURAL ECONOMIC DEVELOPMENT PROGRAM
PROJECT APPRAISAL DOCUMENT LATIN AMERICA AND CARIBBEAN REGION
LCSEIULCSFP ~
Date: February 27,2006
Country Director: Jane Armitage Sector ManagerDirector: Laura Tuck and Makhtar Diop
Team Leaders: Pierre Werbrouck and Stephen Brushett Sectors: Telecommunications (50%); Agricultural marketing and trade (25%);General transportation sector (20Tb);General agriculture, fishing and forestry sector (5%) Themes: Rural services and infrastructure (P); Participation and civic engagement (P); Indigenous peoples (P); Small and medium enterprise support (S); Biodiversity (S) Environmental screening category: Partial Assessment
.
Project ID: PO94321
Lending Instrument: SDecific Investment Loan
For Loans/Credits/Others: Total Bank financing (US$m.): 30.00
INTERNATIONAL BANK FOR 20.00 10.00 30.00 RECONSTRUCTION AND DEVELOPMENT INTER-AMERICAN DEVELOPMENT BANK 20.00 10.00 30.00
60.00 Total: 40.00 20.00
Borrower: Ministry of Finance, Guatemala Responsible Agency: SEGEPLAN, 9 Calle 10-44 Zona 1, Ciudad de Guatemala, Guatemala, 01001 Tel: 502-5919 1544 [email protected]
>oes the project depart f rom the CAS in content or other significant respects? ref. PAD A.3 Ioes the project require any exceptions from Bank policies? Pef. PAD D. 7 loes the project Pef. PAD C.5 loes the project Vef PAD 0.7
[XIYes [ ] N o include any critical r isks rated “substantial” or “high”‘! ~
[XIYes [ ] N o meet the Regional criteria for readiness for implementation?
Project development objective Ref. PAD B.2, Technical Annex 3 The Project Development Objectives (PDO) are (i) to improve the competitiveness o f rural xoductive supply chains with strong indigenous participation; and (ii) to strengthen the institutional capacity o f the public entities participating in the program for the adoption o f a :erritorial management model wi th indigenous involvement. Project description Ref. PAD B.3.a, Technical Annex 4 The Project would have three components: (i) investments in productive supply chains; (ii) strengthening o f territorial public management capacities for competitiveness; and (iii) management, monitoring and evaluation. Component 1: Investments in Productive Supply Chains ($53.6 million; IBRD $27.3 million). The objective o f this component would be to increase the incomes o f the mostly indigenous rural population through time and space coordinated investments in favor o f productive rural organizations including: market access, technical assistance, seed capital, financial services, productive infrastructure investments and access to telecommunications in the Program area. Component 2: Strengthening o f the territorial public management capacities for competitiveness ($3.5 million; IBRD: $1.4 million). The overall objective o f this component i s to introduce in the institutions involved in the program a new model o f public management focused on territorial development. Component 3: Management, Monitoring and Evaluation ($2.8 million; IBRD $1.2 million). The objective o f this component i s to ensure program management capacity i s in place and that an effective monitoring and evaluation system i s established and maintained.
Which safeguard policies are triggered, i f any? Ref. PAD D.6, Technical Annex 10 Environmental Assessment and Indigenous Peoples Significant, non-standard conditions, if any: None Ref. PAD. 6. Covenants Board presentation: None Loadcredi t effectiveness : None Disbursement Conditions: The signature o f framework agreements between SEGEPLAN and respectively MINECO and C I V for disbursing their respective allocations.
Covenants applicable to project implementation: (1) SEGEPLAN to prepare annual program plans (2) SEGEPLAN and co-executing agencies to implement fiduciary action plans (3) SEGEPLAN to carry out, two years after effectiveness, a review o f program performance.
i v
GUATEMALA PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM
A. STRATEGIC CONTEXT AND RATIONALE
1. Country and Sector issues
1. Guatemala i s the Latin American country with the highest degree o f inequality. The proportion o f population l iv ing in rural areas (61%) and the proportion o f the population which i s indigenous i s also very high (39%). Seventy four percent o f the rural population i s poor, 24% extremely poor and 43% illiterate. Eighty percent o f indigenous peoples l ive in the rural areas where they account for 52% o f the population.'
2. The development o f a consensus on a national rural development strategy as wel l as on the implementation o f rural programs has been high on the political agenda since the signing o f the 1996 Peace Accords. The government i s developing a coherent, overarching strategy supported b y a we l l resourced and managed program to make a serious impact on poverty in the rural areas including Guate Solidaria Rural, Guate-Invierte, Registro Infomzacidn Catastral, strengthening o f the Secretariat o f Agrarian Affairs, the new Food Security and Nutrition Law, and the creation of the Food Security Secretariat.
3. To this end, a number o f recent studies and reports - including Wor ld Bank reports on rural infrastructure, on information, communications and technology (ICT), on drivers o f growth and on decentralization - have helped to provide guidance to the elaboration o f this strategy. Some of the principal conclusions o f these reports include:
* In order to generate substantial gains in poverty reduction and broad-based growth, complementarities between productive, social, and location-specific assets must be exploited.
* The high degree o f overlap between high poverty rates and high poverty densities - in areas such as the Western Altiplano - means that properly planned and coordinated investments there should reach a significant proportion o f the country's rural poor.
* Despite a significant increase in coverage (roads, electricity, communications), rural infrastructure quality remains low and large segments o f the rural population remain without access. Any new initiatives to expand supply must however be complemented by demand-generation activities.
* There i s lack o f coordination and planning in rural infrastructure, which i s financed by several social funds, sector programs, municipalities and non-government organizations (NGOs).
Source: World Bank documents mentioned in Annex 12 Project Files in particular CAS 2005-2009,
* The linkage between new infrastructure and productive economic activities i s very weak - productive end use o f existing or new infrastructure needs to be supported by specific institutional and funding mechanisms.
4. The Government’s efforts to improve coordination o f the various efforts in support o f rural development start from the creation o f a Cabinet level Rural Development Committee (GDR) under the chairmanship o f the Vice-president. The GDR i s responsible for strategic orientation and for coordination o f the implementation o f al l programs and activities envisaged in support o f the strategy. The vision and policy direction are set out in the Government’s Strategic Agenda for Integrated Rural Development ( “Agenda Estratkggica para el Desarrollo Rural Integral ”), developed following a participatory approach and approved by the Cabinet in March 2005.
5. The strategy seeks to go beyond the vision o f rural development as simply agricultural development and looks to adopt a more comprehensive, integrated approach through the development o f institutions and infrastructure and through the promotion o f broad-based growth opportunities in the rural sphere. The strategy has four main focal points (“enfoques de abordaje”) which are: (a) integrated rural development with equity, in regard to gender and culture; (b) decentralized management wi th a territorial focus; (c) linkages between the rural and the urban; and (d) rural development as a multi-sector endeavor.
6. One o f the programs supporting this strategy i s the rural economic development program (REDP), known as “Desarrullo Ecundrnico desde lo Rural”. The program - focused initially on those territories in the country with the highest incidence o f poverty - is to support income generation for the poorest, inter alia through employment generation in productive activities (“cadenas productivas”). The REDP i s also intended to have a complementary focus in two areas - effective indigenous participation in economic local development and developing the capacities to introduce a territorial focus into the planning, programming and policy making processes.
7. The four underlying principles o f the program are: (i) adoption o f a demand-driven approach emphasizing the fundamental role o f local actors in promoting economic development; (ii) encouragement o f public-private-civil society partnerships for local development planning and implementation; (iii) promotion o f intercultural relationships and the effective integration o f the indigenous population; and (iv) strengthening o f modern, democratic and plural public multi- sector institutions.
2. Rationale for Bank involvement
8. In March 2005, the Government requested the Wor ld Bank (IBRD) and the Inter- American Development Bank (IADB) to provide loans (each in the equivalent amount o f US$30 million) towards the financing o f the first phase o f the rural economic development program. The Bank and IADB have extensive, recent experience in rural development in Guatemala (see below and also Annex 2) so that both institutions could be expected to play an important role in helping the Government to apply a more coordinated and effective development approach at the
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local level. To this end, the Government has invited the two institutions to be partners to finalize the design o f the program as wel l as o f the detailed implementation arrangements. The Government had specifically requested help from the Bank Group through the preparation of a number o f sector strategy notes to give guidance to policy formulation. Among these i s the Rural Infrastructure for Rural Development Policy Note. The Note emphasized the importance of associating infrastructure programs with the provision o f financing (micro-credit) and technical assistance in order to develop local industries and micro-enterprises, through packaging at the territorial level. The Note also identified policy reforms where intervention was thought to be required including the passage o f a water law and a rural transport strategy and some second generation electricity and ICT reforms - noting that in the latter case the proposed project is expected to be a major vehicle for the implementation o f the program. This contribution has been supplemented by substantial recent work in the I C T sector. Bank-managed studies, which have been supported by grants f rom the Public-Private Infrastructure Advisory Facility (PPIAF) and Global Program on Output Based Aid (GPOBA) programs, has helped to identify the extent o f the under-provision o f I C T services in rural areas (the “digital divide”) - Guatemala has one o f the lowest internet penetration rates in the region - as wel l as to lay the foundation for a concerted Government strategy to improve access to the underserved population. The Government established a Commission for the Reduction o f the Digital Div ide in mid-2005 in order to improve coordination o f government I C T initiatives and to develop a national I C T strategy.
9. The relevance o f the Bank’s experience for this project also derives f rom ongoing activities in the project portfolio. In this regard, the Bank has long standing support for the rural development sector (land reform and administration in particular) and the roads sector wi th a particular focus on improving rural roads and transport - the projects have helped to develop new models for the delivery o f services and assurance o f maintenance through mancomunidades in San Marcos and Huehuetenango. In these same two Departments, the Reconstruction and Local Development Project has tendered support towards the planning, execution and maintenance o f small-scale social, economic and cultural projects, working in tandem with the National Peace Fund (FONAPAZ). Knowledge and experience o f the factors l ikely to help promote - or hinder - local development have also been generated through: the Competitiveness Project, which supports the Government’s national competitiveness program (PRONACOM) and which helps improve the environment for small and micro-enterprises. In addition, support has also been tendered through completed projects as follows: the Land Fund Project which helped ensure access o f the poor to land on a loan basis; and the Social Investment Fund (FIS) I1 Project aimed at strengthening rural infrastructure while promoting community participation.
3. Higher level objectives to which the program contributes
10. The FY2005-2008 Country Assistance Strategy (CAS) was developed with a view to supporting the economic pol icy program known as Vamos Guatemala! with the core objectives o f reducing poverty and inequality; and fostering sustained, equitable growth. The Bank intends to support the Government’s strategy through a balanced program o f investment lending and quick disbursing support, with the former focused on directly reducing poverty. Vamos Guatemala! rests on three strategic pillars - Guate Solidaria - aimed at reducing inequality and promoting social inclusion; Guate Crece/Compite - aimed at stimulating growth and enhancing
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competitiveness; and Guate Verde - aimed at mainstreaming environmental concerns. In the new CAS, the proposed project was envisioned primarily as contributing to the realization o f the Guate Solidaria agenda through contributing to increased coverage o f basic infrastructure services. The project as i t has subsequently evolved wil l certainly do this, but this i s no longer the primary focus. The project w i l l take a multi-sectoral approach to increasing local level empowerment, enhancing productive opportunities and ensuring rural access to key infrastructure services. As stipulated in the CAS, the project i s s t i l l grounded in the findings o f Bank reports on the Drivers o f Rural Growth, the Policy Note on Rural Infrastructure, PPIAF- GPOBA-supported reports on I C T and telecommunications and ongoing work on decentralization. The project is expected to have a positive impact on increasing the competitiveness of rural based productive activities which in turn w i l l impact enterprise expansion and export growth - and thus help to exploit the potential benefits to Guatemala o f the newly ratified Central American Free Trade Agreement (CAFTA) that i s a contribution also to the aims o f Guate Crece/Compite.
1 1. These CAS objectives are broadly consonant wi th the themes o f the earlier FY 1999-2003 CAS - promoting social cohesion, reducing poverty, improving economic management, and modernizing the public sector. Although not focused on the poorest o f the poor, the project is expected to make a significant contribution to addressing rural poverty. The project wi l l help the dynamic sectors in poor social groups and in this way create employment and income generation opportunities in those territories o f the country where most o f the poor reside. The project builds on earlier efforts to improve rural economic infrastructure and services, but as part o f a broader, coordinated effort to improve access o f the rural poor to productive assets. In this case, the project would build to the extent possible on existing mechanisms and institutions which have a proven track record on delivery, to ensure that some immediate impact is felt. The design o f the project however recognizes that the institutional framework for territorial planning - and for the effective implementation o f pro-poor programs at the territorial level - needs to be improved. The project thus would support a pilot initiative o f institutional strengthening to improve coordination and increase participation of the poor and the indigenous in planning and implementation, f rom which efforts the implementation o f subsequent phases o f the program is expected to benefit.
B. PROJECT DESCRIPTION
1. Lending instrument
12. The total project cost - in support o f the f i rs t phase o f the government’s program - is estimated at US$60 mi l l ion over the period, 2006-201 1. The proposed lending instrument is a Specific Investment Loan (SIL) in the amount o f US$30 mil l ion. The Borrower selected a Fixed Spread Loan, repayable in seventeen years wi th a grace period o f five years. The Inter-American Development Bank (IADB) would provide a loan o f US$30 million.
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Financing Plan. (US$’OOo)
No 1 2 3
COMPONENTS IBRD IADB T O T A L Investments in Productive Supply Chains 27,300 26,300 53,600 Strengthening o f Territorial Public Management 1,400 2,100 3,500 Management, Monitoring and Evaluation 1,225 1,600 2,825 Front -end fee 75 75
I I Total PROJECT COST I 30,000 I 30,000 I 60,000 1 13. one year before loan signing.
Retroactive Financing o f US$2 mi l l ion would be allowed for eligible expenditures up to
2. Project development objective and key indicators
14. The overall purpose o f the project is to increase the incomes o f the rural population participating in the productive supply chain program activities in the selected departments, wi th particular emphasis on indigenous groups.
15. The Project Development Objectives (PDO) are (i) to improve the competitiveness o f rural productive supply chains wi th strong indigenous participation; and (ii) to strengthen the institutional capacity o f the public agencies participating in the program for the adoption o f a participatory territorial management model with indigenous involvement.
16. T o achieve i t s purpose, the government program brings together public institutions that in partnership with the private sector w i l l provide access to markets and finance multi-sector investments that w i l l be coordinated in time and space. Such investments would be directly linked to the demands o f those rural productive organizations that have a market for their products and consequently a high potential to become a permanent member o f a supply chain.
17. The government program would in i t s first period focus i t s attention on those territories in Guatemala which have the conditions to generate short-term economic growth linked to poverty reduction (i.e., territories which combine both high densities of poor people and high rates o f indigenous population, with relatively well-distributed land and basic infrastructure, and with the presence o f relatively higher-than-average economic dynamism). In these territories, complementary investments to exploit the growth potential o f existing productive organizations can have strong impacts in poverty reduction. Territories with the highest indexes incorporating these characteristics were identified in the fol lowing departments: San Marcos; Huehuetenango; SolalB; Quetzaltenango; Totonicaphn; Chimaltenango; Sacatepequez; and Alta Verapaz. These departments are primarily rural and account for 30% o f the national population, 45% o f the poor and 50% o f the extreme poor. These are also the areas where people are very vulnerable to the impact o f natural disasters such as the recent Hurricane Stan that destroyed the livelihoods of numerous indigenous communities. In the territories selected for the program, outcomes would be measured by the co-executing agencies and b y independent, periodic external evaluations. The project would progressively cover these Departments on the basis of sector opportunities.
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18. The key indicators are: (Annex 3):
- increasing by US$50 mi l l ion the sales o f the productive supply chain partnerships;
and operating expenses;
improvements in rural roads have access during the whole year to critical markets;
departments have broadband internet access;
territorial management plan;
strategic investments derived f rom the territorial planning model in at least four departments.
10 percent o f supply chain enterprises access new sources of finance for capital
100 percent o f participating partners who have received approval for
100% percent o f municipalities (cabeceras municipales) in the program
30 percent o f the municipal planning offices participating in the program have a
the public investment program prepared by SEGEPLAN for 2009 reflects
3. Project components
19. (ii) strengthening of territorial public management capacities for competitiveness; and ’ (iii) management, monitoring and evaluation.
The Project would have three components: (i) investments in productive supply chains;
21. The objective o f this component would be to increase the incomes o f the mostly indigenous rural population through time and space coordinated investments in favor o f productive rural organizations including: market access, technical assistance, seed capital, financial services, productive infrastructure investments and access to telecommunications in the Program area.
22. To achieve this objective, this component would have the fol lowing subcomponents:
23. Subcomponent 1.1. Entrepreneur Development Services (US$13.5 mi l l ion o f which US$5.4 mil l ion financed by IBRD) which w i l l allow rural productive organizations to get access to markets and to link up with productive chains through market intelligence, technical assistance and seed capital. The Ministry o f the Economy (MINECO) - Vice Ministry for the Development of Micro, Small and Medium Enterprises - assisted b y private professional organizations, would implement the subcomponent. The subcomponent would: (i) finance consulting services for market intelligence and access, pre-investment studies, technical assistance in production, organization, administration, processing and commercialization, and formalization, certification and association o f small enterprises; and (ii) provide seed capital to eligible producer organizations for investments and variable costs supporting the supply chain.
24. Subcomponent 1.2. Access to Financial Services (US$ 8 mi l l ion financed entirely by IADB) of rural productive organizations by: (i) strengthening o f the capacity o f M I N E C O to help micro-enterprises to get access to financial services; (ii) technical assistance and incentives to
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intermediary financial institutions (IFI) to adjust their services to the needs o f rural productive organizations; (iii) technical assistance to rural productive organizations to comply with the requirements o f financial intermediaries; and (iv) a l ine o f credit to eligible financial intermediaries at market interest rates. ,
25. Subcomponent 1.3. Access to Productive Rural Infrastructure (public and collective) (US$16.4 million o f which US$6.2 mi l l ion financed by IBRD) by financing public rural infrastructure investments or collective investments needed to improve the competitiveness of the rural productive organizations participating in the program. This subcomponent aims to provide productive infrastructure to support both the development of new supply chain partnerships and the improvement o f existing partnerships. This covers both: municipal economic infrastructure such as small irrigation systems, rehabilitation o f existing roads and communications, construction o f small public tourism infrastructure, business zones, telecommunication centers and markets, and improvement o f electricity connections; as wel l as collective (private but owned by groups o f people) investments in economic infrastructure such as storage facilities and distribution centers, both o f which are needed to improve the competitiveness of supply chains. The subcomponent i s to be carried out by FIS. The demand for such investments would be generated b y the private sector (participating in supply chains) and/or by the municipalities in the program area. The municipal investments would be financed on a matching grant basis with municipal authorities and each investment would be required to have a maintenance plan.
26. Subcomponent 1.4: Information and communications technology investments (ICT) (US$15.7 mi l l ion financed entirely b y IBRD). This subcomponent aims to improve access to and use o f ICTs. in the program departments and municipalities. The subcomponent w i l l assist in building up key ICT in the program’s selected territories through the use o f output-based aid (OBA) mechanisms and to enhance the productive use o f I C T infrastructure and services by productive supply chains as wel l as b y local development organizations and indigenous people. The component would be carried out b y the Ministry o f Communications, Infrastructure and Housing (CIV) through the Telecommunications Development Fund (FONDETEL) and with the support of the Presidential Commission for Modernization and Decentralization o f the State (COPRE). The component would cover: the extension o f the provision o f basic infrastructure for telephony and broadband internet connectivity to small municipalities in rural areas; technical assistance services for the implementation o f the works program; and training and technical assistance programs to assist on the use o f ICT for increased productivity.
27. Coordination amonmt the sub-components. The above technical assistance and investments w i l l be coordinated through “business plans”. These plans wi l l be drawn up by the rural productive organizations and their commercial partners. The business plans w i l l stipulate the needs for entrepreneur development services, financial services, public and associative infrastructure and, where applicable, telecommunications. These business plans wil l be evaluated on the basis o f technical, economic, financial, social and environmental criteria by the Investment Coordination Committee and once they are approved they wil l also contain the commitments o f the co-executing agencies in terms o f technical assistance and investments. Hence, the different elements o f the component w i l l be coordinated into single business plans. Those plans w i l l be instruments o f demand capture, for feasibility studies, approval and planning
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of the project financed investments, and monitoring and evaluation of the integral program. Subcomponent 1.4 (telecommunications) w i l l be implemented in priority in the Departments selected under the program to provide overall telecommunications support to the program.
28. Component 2: Strengthening o f the territorial public management capacities for competitiveness (US$3.5 mil l ion - IBRD: US$1.4 million)
29. The overall objective o f this component i s to introduce in the institutions involved in the program a new model o f public management focused on territorial development. This management model w i l l be expected to influence national and sector policies as wel l as public investment priorities so that they can contribute in a more efficient way to mobilize the territorial resources as a function of the development of strategic objectives and competitive advantages. Moreover, this territorial management model (TMM) w i l l be based on participation principles and the development o f public-private partnerships. These spaces o f collaborative interchange constitute mechanisms favoring the collective ownership o f local knowledge, the establishment o f a local consensus for the development o f territorial advantages and a long-term development strategy. This component i s o f a pi lot nature and seeks to explore several ways to reach the following objectives.
30. The specific obiectives are:
(i)
(ii) (iii)
(iv)
T o develop under SEGEPLAN a new Territorial Management Model (TMM) and establish the institutional and operational basis to implement it; T o incorporate the new model in public policies and investment programs; T o give public and private actors access to key territorial information needed for decision-making processes; and T o strengthen the capacity o f those institutions that wi l l be strategic for the success o f the new model.
31. The TMM would build on and better articulate already existing processes within SEGEPLAN, but under a new territorial approach, such as: (i) the National System o f Strategic Territorial Planning - SINPET; (ii) the National System o f Pre-investment Support - SINAPRE; and (iii) the National System of Public Investment - SNIP. Furthermore, these systems need to fit in with the processes of economic and social sector pol icy coordination and international aid orientation that also fal l within the activities o f SEGEPLAN.
32. The component has four subcomponents: (i) development o f the TMM for rural development; (ii) implementation o f the model in selected Departments; (iii) access to territorial strategic information through an integrated and decentralized territorial strategic information system; and (iv) disclosure, awareness and training.
33. interlinked at a later stage when the territorial development planning capacities are enhanced.
Component 1 and 2 run on parallel tracks and are not interlinked, although they may be
35. The objective of this component i s to ensure program management capacity i s in place and that an effective monitoring and evaluation system is established and maintained. Towards this goal, SEGEPLAN would lead an Investment Coordinating Committee comprising representatives from the co-executing agencies (SEGEPLAN, MINECO, FIS and C IVFONDETEL) and the Commission against Discrimination and Racism (CODISRA). Annex 6 provides detail on the responsibilities and arrangements. This specific component would finance a general management system, including monitoring and evaluation activities.
36. The objective o f the decentralized and centralized information management, monitoring and evaluation systems would be to verify and evaluate the accomplishment o f the Program’s objectives in an effective, efficient and transparent way. The specific objectives o f the project information management, monitoring and evaluation would be to: (i) generate information in real time regarding the different phases of each beneficiary application, including the achievement of procedures and deadlines; (ii) facilitate monitoring o f processes and outcomes b y each implementation agency of their respective componenthubcomponent; (iii) continuously evaluate the program in order to assess the project design and guide any necessary changes during implementation, (iv) measure and evaluate the impact o f the program on the target population. Objectives (i) and (ii) would primarily be carried out in a decentralized manner b y the individual co-executing agencies wi th al l information sent to the centralized project-wide information systems, under SEGEPLAN, which w i l l be responsible for (iii) and (iv).
4. Lessons learned and reflected in the program design
37. The program has been able to draw on a range o f lessons f rom the experience in Guatemala f rom a variety o f sources which include: ongoing and recently completed projects of the Bank and IADB which have attempted fully or partially to address integrated rural development; the various and aforementioned economic sector work concerning rural infrastructure, telecommunications, decentralization and drivers for growth; the newly agreed CAS and the completion report on the previous CAS; the recently completed Country Economic Memorandum (Report No. 29145-GT); and the Government’s documentation in relation to the preparation o f the rural development strategy. In addition, selective experiences in the development o f territorial based approaches to the provision o f infrastructure (in Chile and Peru for example), to more generally the territory-based approach to rural development (Colombia, European Union) as wel l as for rural I C T development strategy (Peru, Chile and Nicaragua) have been taken into account.
38. At the national level, the experience o f an AGEXPRONTLJSAID project to link small businesses to larger companies at the national and international level as a way to generate new sources of income and increase overall sales has been used. This program has been successful in generating new sources of income in rural areas, as wel l as increasing overall sales o f both rural groups and their buyers. This project i s the one that has inspired the core of this program. Other components have been added to make these business links more competitive.
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39. Key lessons relating to overall design include:
- In order to avoid the problem o f fragmentation o f policy actions that has burdened Guatemala’s social and economic progress, it i s necessary to ensure that the program i s clearly linked to a national policy framework and overarching rural development strategy.
- Rural development issues are very politically sensitive in Guatemala given the high incidence o f poverty in certain locations with high indigenous population and given the risk o f elite capture o f program benefits. The sustainability and legitimacy o f rural development actions thus requires effective participation o f c iv i l society in the design and implementation o f the program and supporting projects.
- A national policy and strategic framework for rural development cannot succeed without a strong public sector institutional framework at the local level to ensure effective selection o f programs and their sustainability. In turn, the local public sector cannot be effective in supporting rural development in the absence o f strong partnerships wi th the private sector.
40. Key lessons related to rural infrastructure provision include:
0 Territorial approaches to the provision of rural infrastructure can provide a means to improve co-ordination and complementarity o f investments and can also help build linkages to productive activities.
0 Participatory approaches in the design and implementation o f rural infrastructure projects are a means of enhancing ownership, tailoring to local demands and improving sus tainabili ty.
0 Design and implementation o f the proposed improvements in ICT infrastructure should be based on the successful experience in a number o f countries in regard to ensuring universal access through the roll-out o f a series o f output based aid mechanisms that are focused on stimulating improved and increased supply o f I C T infrastructure. This should be complemented by demand-stimulation measures, such as training and capacity-building.
41. Key recommendations for programs that drive rural growth include:
0
0
0
0
0
To adopt a multi sector and spatially differentiated public investment program. To invest in a variety o f household, community and local assets in high potential areas with high rural poverty densities. There i s a need for improving transport and communications infrastructure to lower transactions costs and improve competitiveness. T o redress longstanding exclusion from public services and economic opportunities by targeting interventions to areas with high proportions o f indigenous groups. Agriculture should form an integral part o f the rural growth strategy, but requires support for technical assistance, finance, market information, and improved access to markets.
10
0 Investment strategies should be formulated on a territorial basis, but tailored to local assets and other conditions. Central government should guide national priorities, but local planning and implementation i s key to success. Public investment programs should offer alternatives in function of local assets and regional conditions.
5. Alternatives considered and reasons for rejection
42. In view o f past experiences and in line with the Government’s current policy framework for rural development, no alternatives other than an integrated multi-sector approach to rural development were considered. Similarly i t was considered appropriate to focus on a number of targeted territories rather than to implement a national program. Scaling up the program i s an option to be reviewed later on the basis of the lessons learned from implementation in selected territories - the government generally envisages that the program should be implemented in a phased process, taking into account lessons learned from this f i r s t phase supported by the Bank project.
43. The Government had earlier decided not to sign the loan to finance the Western Altiplano Natural Resources Management Project (approved b y the Board o f Directors in 2003) to make fiscal space for other priority actions such as the Cadastre Information Registry and the financing o f a credit guarantee scheme for investments in the rural sector (GuateInvierte).
44. following results:
A number o f detailed design options were reviewed during program preparation wi th the
0 Financing the implementation o f existing area based development plans prepared in a participatory manner. The Government considered that the impact on growth and competitiveness o f these plans was insufficiently demonstrated. I t preferred a supply chain approach b y which investments in the supply chain and related infrastructure would generate sustainable growth patterns that would eventually lead to poverty reduction. Implementation o f the European Union LEADER-type development scheme that would provide funding to private, public and private-public partnerships for rural growth and territorial development. The Government considered that the institutional network in rural areas was s t i l l insufficiently developed to implement such program. Implementation o f the supply chain and related infrastructure investments by the Social Investment Fund (FIS), hereby further simplifying the institutional arrangements. The Government considered that the role o f the Ministry o f Economy (MINECO) to promote economic development in the rural areas would make it an important partner to include.
0 Linking the supply chain and infrastructure development part o f the program (component 1.1-1.3) to the development o f territorial development plans (component 2). Waiting for the preparation o f territorial development plans, however, would delay the investments too far in the future. Providing matching grants to the supply chains instead o f credit. The Government opted for a credit system (to be developed b y IADB) while providing some seed capital to potential beneficiaries that do not have access to credit f rom the start o f
0
0
0
11
their subproject, where i t i s clearly demonstrated that such seed capital i s needed and where the seed capital i s not a subsidy to make the subproject profitable. Pre-identifying beneficiaries as opposed to relying on a demand driven approach - Prior studies have identified particular sectors which hold potential - the program would support demand-driven initiatives in these sectors. Including employment generating activities in the selected territories other than productive supply chains - It was decided that the initial focus would be on productive supply chains to ensure sustainability b y responding to concrete market demands and opportunities. Dealing directly with municipalities rather than through FIS - or through an alternative intermediary to FIS. - An assessment o f alternative institutional options clearly revealed the advantages o f working through FIS for the types o f investments and the types o f beneficiary organizations under the program. De-linking the I C T component from the program as opposed to i t s inclusion. - Inclusion, on the grounds that improvement in ICT infrastructure and services i s seen as a critical element o f the package o f measures that need to be taken to improve competitiveness in the selected territories. After an extended review o f this design consideration, the Government wrote to the Bank in January 2006 confirming that i t intended to retain the telecommunications program as an integral subcomponent o f the project. Limiting the scope o f program interventions according to social and environmental impact. - T o avoid processing delays i t was decided not to support any activities that would be Category A for environmental impact and which would involve involuntary settlement.
a
a
a
a
a
C. IMPLEMENTATION
1. Partnership arrangements
45. The project i s being implemented through a parallel financing wi th the Inter-American Development Bank (IADB). The two institutions have agreed to adopt a common strategy in regard to their support to the Government’s program and would adopt the same Program Operations Manual. As o f October 2005, the two institutions use the same procurement procedures and documentation. Financial management arrangements would be streamlined. There would be one set o f monitoring indicators. Common audits and supervision missions would be carried out. Detailed arrangements are described in Annex 6.
2. Institutional and implementation arrangements
46. Program Board of Directors. The program wil l be overseen by a Program Board of Directors (PBD) composed o f the Secretary for Planning (SEGEPLAN), the Vice-Minister for Small and Medium Enterprises (MINECO), the Vice-Minister for Communications (CIV), the Manager o f FIS, a representative o f the indigenous private sector, a representative o f the private sector part o f PRONACOM, a representative o f Chamber o f Financial Institutions and a representative of the Center for Corporate Social Responsibility.
12
47. The PBD i s the highest decision-making body for the program. The objective o f creating the PBD is to: (i) have a body for strategic direction and private/public support; (ii) make decision-making within the program transparent for the indigenous community and private sector; and (iii) create an institutional space where public and private sectors can exchange knowledge, experience and ideas as well as create strategic alliances.
48. Program Coordination. SEGEPLAN w i l l coordinate the program and w i l l be responsible for planning, programming, implementation and financial administration, communications and monitoring and evaluation. N o new project implementation unit w i l l be created, but the existing units within SEGEPLAN w i l l be strengthened as necessary to fulfill the required functions, inter alia through recruitment o f consultants and advisors. A program coordinator w i l l be nominated and housed within SEGEPLAN with a small technical team responsible for technical issues, monitoring and evaluation and communications. The Directorate for Finance w i l l also be strengthened and a specialized procurement unit wi l l be set up to coordinate procurement and assist the co-executing agencies. The Administrative Directorate o f SEGEPLAN w i l l be strengthened with a procurement specialist to implement component 2.
49. Investment Coordination Committee. (ICC) The I C C comprises technical representatives o f the co-executing agencies o f the program. To create a direct channel o f communications between the project and the social partners, in particular indigenous entrepreneurs and groups, a member o f the Commission against Discrimination and Racism (CODISRA) would attend ICC meetings. ICC’s main functions are to be: (i) the supervision o f the implementation o f the investments; (ii) the elaboration o f annual operative plans; (iii) and review and approval o f the business plans proposed within the investment components 1.1-1.3.
50. Guidance Groups (“Gruaos Guia”). These groups are a mechanism for coordination, learning and social monitoring at the departmental level. To ensure involvement and participation o f indigenous people in the implementation o f the project, the government w i l l assist these facilitating groups o f indigenous leaders in three major towns (Quetzaltenago, Totonicapfin and Cobfin) in accordance to the major cultural and ethnic characteristics o f the program geographical area. These Guidance Groups w i l l be constituted by local organizations, enterprise incubators, producer groups, processors and commercial enterprises that w i l l be invited by SEGEPLAN to establish themselves as social interlocutors for the program as wel l as for the indigenous population.
51. Each agency - that i s SEGEPLAN, MINECO, FIS and CIV - would as much as possible use existing organizational units to implement their component or subcomponent. Each agency wil l : (i) elaborate an annual operational plan including the procurement plan and the means to assure i t s implementation; (ii) develop some specific procedures to be included in the operational manual; (iii) ensure adequate financial management and prepare inputs for the quarterly FMRs; (iv) ensure adequate monitoring; (v) facilitate the auditing process; and (vi) present al l the management, budgetary, financial and accounting reports required.
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Financial Management Arrangements
52. A Financial Management (FM) assessment has been carried out in accordance with OPBP 10.02, and i s in line with guidelines issued by the Financial Management Board on June 30, 2001 and revised on October 1, 2003 to determine whether the Project financial management arrangements are acceptable to the Bank. The financial management assessment report i s included in Annex 7.
53. Project administration w i l l be undertaken by SEGEPLAN, FIS, MINECO and C I V F O N D E T E L (co-executing agencies) for their respective (sub)components. SEGEPLAN w i l l be responsible for general FM coordination and financial reporting consolidation. Co- executing agencies for their referred components w i l l be directly in charge o f daily financial management (FM) tasks. These w i l l basically include: (i) budget formulation and monitoring; (ii) cash f low management (SEGEPLAN wil l process loan withdrawal applications); (iii) maintenance o f accounting records, (iv) preparation o f interim and year-end financial reports (SEGEPLAN w i l l consolidate them) ; (v) administration of underlying information systems; and (vi) arranging for execution o f external audits (SEGEPLAN w i l l contract them).
54. Among the co-executing agencies, some have experience and knowledge through the implementation o f previous Bank-financed operations. In each case, previous experience and knowledge were taken into account for this assessment. Sti l l , project-specific actions to be executed have been identified in a FM Action Plan. Annex 7 describes in detail the FM arrangements and the FM action plan, implementation o f which w i l l be closely supervised.
Procurement Management Arrangements
55. An assessment o f the capacity o f each o f the co-executing agencies to implement procurement actions for the project has been carried out in November 2005. The report and the proposed procurement management arrangements are given in greater detail in Annex 8.
56. SEGEPLAN would coordinate the daily workings o f the project and program. Each co- executing agency would be responsible for the physical implementation o f i t s own component. Each agency would carry out i t s own procurement. Experienced units within each agency would assist with the implementation o f more complex procurement.
57. The issues and risks concerning the procurement component for implementation o f the project have been identified. Corrective measures have been agreed and these would include: (i) a clear description in the procurement section o f the Operations Manual o f the mechanisms, procedures standard bidding documents (SBDs) etc to be applied in order to ensure fiduciary compliance b y al l co-executing agencies; (ii) SEGEPLAN to recruit a procurement specialist; (iii) C I V F O N D E T E L to be strengthened in al l aspects o f procurement including, but not l imited to, the application o f O B A contracting and to contract administration; (iv) ensuring that the funds for which FIS w i l l be accountable for--especially when transferred to others -- are used in compliance with the Bank’s fiduciary requirements and are properly managed and monitored; (v) ensuring that SEGEPLAN wil l hire an experienced procurement officer to monitor, advise and assist al l co-executing agencies on procurement issues; (vi) al l four co-executing agencies to
14
have experienced procurement staff to be dedicated fully to the project - the procurement officers wi l l be responsible for procurement planning, monitoring and implementation in their respective components; and (vii) a l l agencies to implement a procurement monitoring system.
58. The Operations Manual wi l l include, in addition to the procurement procedures, the SBDs to be used for each procurement method, as well as model contracts for works and goods to be procured. Adherence to the manual wi l l be closely supervised during implementation.
3. Monitoring and evaluation of outcomes/results
59. SEGEPLAN would be charged with program management as well as carrying out directly - or indirectly through consultants, f i r m s and/or NGOs contracted through competitive processes - all the necessary information systems, and monitoring and evaluation activities for the project. This would include (but not be limited to) preparation of an annual project plan and the preparation o f semiannual program monitoring reports which would be sent to the Bank and IADB. SEGEPLAN wi l l be responsible for managing the information systems and monitoring and evaluation activities.
60. SEGEPLAN is, with the help of the Bank, in the process of establishing, a unit for Monitoring and Evaluation o f Public Policies in Guatemala. The specific role of the proposed unit i s to strengthen the country’s capacity in: (i) collecting national and provincial social indicators data, (ii) developing social diagnostics and analytical tools for ex-ante program assessments, and (iii) improving real-time program output monitoring and ex-post outcome evaluations. The project i s expected to derive some benefits from these efforts to promote a national monitoring and evaluation program.
4. Sustainability
61. The design of the program i s intended to marry the capability to deliver improvements in targeted rural territories over the short and medium term with improvements in territorial planning and implementation - utilizing participatory methods - which would create long term durable management capacity. The program supports the first phase of the government’s program, lessons learned from which would be factored into improvements of program design to ensure sustainability.
62. A number of specific factors under each component of the program would contribute to ensuring sustainability. Eligibility of productive supply chains would be restricted to those whose business plan as a whole can demonstrate an overall financial rate of return of 12 percent or higher2. Such level of profitability would be sufficient to ensure the viability of investment proposals and the likelihood of their being able to be operated successfully. The provision of any public infrastructure improvements under the program require: co-sponsorship and matching financing being provided through municipal authorities as well as the preparation and sourcing of an appropriate maintenance plan during the l ife o f the asset. In regard to the ICT improvements under the program, the design of the projects should not pose any long term
This means that some components can show a lower rate of return as long as the overall plan shows a rate o f return of 12 percent or higher.
15
additional funding responsibilities on government at national o r local level. Contracts le t o n an OBA basis would have to be financially self sustaining for the private operators. Under the improvement of the territorial planning system, considerable attention wou ld be given to increasing capacity at a l l levels, including local level, to ensure functionality and relevance.
5. Critical risks and possible controversial aspects
63. The r isks faced by the program are judged to be substantial in v iew of the Government adopting a new approach to integrated rural development in the potentially volati le pol i t ical environment of Guatemala. M u c h wou ld depend on the success with wh ich participatory methods can be harnessed to secure widespread support in the targeted territories. Similarly much would depend o n the capacity o f SEGEPLAN to effectively coordinate the input o f the various co-executing agencies to carry out a l l the tasks required fo r successful program execution. In v iew of this situation, and in addition to the specific risk mit igation measures cited below, i t has been agreed that implementation arrangements should be reviewed after an initial period o f two years. The second part o f the program could then be implemented more effectively in the light of the lessons learned.
Risk The Government fails to maintain implementation of, and funding for, the rural development strategy and program The proposed implementation arrangements fai l to provide the capacity and direction to effectively manage the program
Insufficient institutional capacity to adequately implement the project Lack o f experience and capacity in fiduciary matters (financial management and procurement) in SEGEPLAN and some co- executing agencies
The program fails to gamer local support or to demonstrate benefits generated for the poor and the indigenous
The demand for investment in productive supply chains fails to match expectations There i s political interference in the selection o f subprojects and beneficiaries
Risk Minimization Measure Assurance of fiscal space to be confirmed for each co- executing agency before the beginning o f each fiscal year. Management Board involving private sector to ensure continuity. Effective involvement o f the program management committee to monitor performance and to “troubleshoot” problems encountered. Provision o f technical assistance and training to fill gaps.
Use of existing implementation mechanisms Some co- executing agencies w i l l contract staff and consultants to assist with implementation. FM and procurement action plan has been agreed upon and action plan implementation to be closely supervised.
Effective implementation o f an IEC strategy and frequent, effective consultations with stakeholders, especially indigenous population. Implementation o f the indigenous people’s development framework. Upfront technical and economic analysis has been carried out to determine capacity and interest in exploiting available resources under the program. Employment o f participatory processes for territorial planning and transparent policies and procedures for eligibility o f projects and o f their sponsors. Private sector in charge o f identifying subprojects.
Risk Rating H
M
H
H
M
M
M
16
The anticipated improvements in territorial planning and implementation are delayed The establishment o f the monitoring and evaluation system i s delaved There i s fragmentation of public infrastructure funded through the program in terms o f scattered investments throughout different territories There i s a lack o f coherence in time and space o f the ICT infrastructure improvements in regard to the demand for local level communications investments
Overall Risk Rating H=High; S= Substantial; M=
Development o f work programs, assurance o f the necessary resources and staffing to carry out the vision for territorial planning. Initial requirements for the program would be set at a modest scale. Only in the future would consideration be given to integration into the proposed national system. Public infrastructure would be limited to local level interventions to address specific bottlenecks and to increase efficiency, reduce costs for supply chains.
ICT basic infrastructure improvements in the program territories are an integral element o f an agreed national strategy and there i s upfront agreement on the targeting and sequence o f OBA tenders. Investments in ICT would be supported by activities intended to encourage demand for telecom and internet services, funding for which would be provided in parallel to that for other public investments.
loderate; N= negligible
S
M
M
M
Substantial
6. Loadcredit conditions and covenants
EfSectiveness conditions:
64.
Disbursement Conditions
There are no effectiveness conditions.
65. Bank entered in to between SEGEPLAN and MINECO has become effective;
Fo r expenditures under component 1.1. until a Framework Agreement satisfactory to the
66. Bank entered into between SEGEPLAN and C N has become effective.
For expenditures for component 1.4 until a Framework Agreement satisfactory to the
Covenants:
(1) SEGEPLAN to prepare annual program plans inclusive of source o f funds, estimated expenditures and key benchmarks and activities and to give the Bank reasonable opportunity to review and comment o n said plans.
(2) SEGEPLAN and co-executing agencies wi l l carry out the action plans fo r procurement and financial management; maintain adequate procurement and financial management capacity at a l l times; and consult with the Bank and agree on any changes in key staff.
(3) SEGEPLAN should carry out, not later than two years after effectiveness, a review o f project performance and should give the Bank reasonable opportunity to review and comment o n said
17
report. Any resultant changes to program objectives and implementation arrangements would be subject to the agreement o f the Bank.
D. APPRAISAL SUMMARY
1. Economic and Financial (see Annex 9 )
67. Given that the program would support business opportunities to be identified during implementation as subproject proposals, i t does not lend itself to detailed ex-ante cost-benefit analysis. Although the strategic production supply chains are generally known in light o f national competitiveness assessments and experience o f producers’ associations and/or ongoing projects, i t would be the interested producer groups and market partners who would ultimately determine the product, scope and m i x o f investments.
68. T o obtain a broad picture, indicative models o f potential subproject initiatives were analyzed, based on primary and secondary information, involving some o f the sub sectors l ikely to be supported b y the program, such as the production and marketing o f handcrafts, coffee, lettuce, snow peas, tomato, lemon and honey, as well as anticipated public investment projects such as feeder road improvement and bridge construction. Standard procedures would be applied for ex-ante and ex-post subproject impact evaluation - and those for public and collective infrastructure investment would fol low what i s in place in FIS. Income generating subprojects independently or combined with public infrastructure subprojects would generally be supported as long as they generate an expected financial rate o f return o f not less than 12%.
69. The financial and economic benefits arising from the extension o f basic ICT infrastructure in the program territories have been calculated separately using a generally accepted methodology for carrying out costhenefit analysis. The financial benefits are derived from the incremental sales o f telephony and internet connections that the operator i s expected to obtain. The main direct economic benefits are the savings in travel time (reduction in journeys that need to be undertaken for telephone service) and in labor time (increase in labor productivity arising from access to information through internet connectivity). There are l ikely to be additional indirect benefits as access to and cost o f a range o f economic and social services in the community i s improved through higher connectivity rates.
70. An indicative analysis has been carried out for the costshenefits o f the first phase o f the program, which i s considered as reasonably representative o f the areas to be covered under the project. For the financial analysis, conservative estimates were employed for the l i fe o f the investment (10 years) and for service tariffs. Taking into account estimated investment costs and maintenance costs for the infrastructure, the subsidy required to implement the telephony component o f the program i s calculated as US$4.9 mi l l ion at a discount rate o f 15%. For the internet component, the subsidy i s US$5.7 mi l l ion at the same discount rate.
71. For the economic analysis, estimates o f benefits have been derived initially f rom a demand study carried out in four Departments, two o f which (Huehuetenango and Al ta Verapaz) are to be covered under the program. Travel time savings for telephony and labor time saving
18
from internet connectivity have been estimated. O n the basis o f these benefits and o f the economic investment and maintenance costs (adjusted for transfer payments and the value of labor), the economic rate o f return i s calculated as 14.7 to 16.1% for the telephony and 32.2 % for the internet component.
2. Technical
72. The subprojects expected to be funded through the support to the productive supply chains are not expected to pose any major technical issues. Design would fol low standards and technologies adapted to the features o f the selected territories for the program. All proposals would be subject to proper technical appraisal using the established procedures in MINECO - in regard to technical assistance - and in FIS - in regard to local public and collective investments in infrastructure.
73. In regard to I C T infrastructure, no major technical issues arise. Technological development i s rapid in the sector and this would be exploited to ensure cost reduction and greater affordability to potential users. Extension o f the I C T infrastructure would be carried out through competitively bid contracts using an O B A process to ensure high quality infrastructure for least subsidy. The model has been successfully employed in recent times in a number o f other countries.
3. Fiduciary
74. Financial Management. The assessment conclusion i s that the proposed FM implementation arrangements for the Project are generally adequate. However, the level o f readiness differs among the co-executing agencies, particularly in terms o f the availability o f qualified staff in appropriate numbers. The coordination needed for the four separate agencies and the current lack o f experience in SEGEPLAN, i s b y itself a relevant inherent risk to implementation. A FM action plan connected specifically to the new project has been agreed to help reduce identified risks. Annex 7 describes in detail the FM arrangements and action plan.
75. Procurement. An assessment o f the capacity o f each o f the co-executing agencies to implement procurement actions for the project has been carried out. The assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and the Ministry’s relevant central unit for administration and finance. A number o f issues have been identified: (i) very little experience, capacity and knowledge o f the Bank’s procurement rules and procedures by CIVFONDETEL, SEGEPLAN and MINECO; (ii) CIVRONDETEL i s weak in contract administration which i s the basis o f a successful O B A approach; (iii) FIS has experience in demand driven activities but needs a specific mechanism to ensure compliance with the Bank’s procedures, specifically implementation o f the supply chain scheme. Special attention must be paid to those cases where funds are going to be transferred to others who w i l l be responsible to carry out the productive investments but where FIS w i l l s t i l l be accountable for correct and transparent use o f the Bank funds. The corrective measures have been agreed and have been incorporated into the project implementation arrangements.
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4. Social (see Annex 10)
76. An indigenous people’s development framework has been prepared by the Government under terms o f reference agreed upon b y the Bank. Consultations with indigenous groups have taken place. The framework document i s in the project f i le and i s summarized in Annex 10.
77. The indigenous people’s framework proposes the following measures to increase participation and involvement of indigenous groups: (i) the geographical areas are chosen in function o f the high presence o f indigenous people; (ii) the eligibility criteria for participation in the project are biased in favor o f indigenous people; (iii) the economic activities supported under the project include those activities in which indigenous people have comparative advantage (agriculture, textiles, artisan activities); (iv) indigenous groups w i l l participate in the management of the Project through: the creation o f a Program Board o f Directors in which one indigenous entrepreneur participates: and in the Investment Coordination Committee which w i l l include representation o f the Commission against Discrimination and Racism; (v) participation in the promotion, identification o f clients, and social audits through the creation o f guidance groups (‘‘grupos guia ”) in (initially) three main cities o f the program area (Quetzaltenango, Totonicapan, and Coban), the role o f these guidance groups i s to provide information and involve indigenous producers in the Project and to help them with preparing proposals; (vi) participation in the monitoring and evaluation o f the Project through reporting to the national indigenous bodies (the Consejo Asesor a la Presidencia sobre Pueblos Indigenas, Coordinadora Institucional de Funcionarios Indigenas and Guidance Groups); and (vii) the Project to have specific monitoring indicators referring to indigenous participation and involvement.
78. In addition, SEGEPLAN would set up a transparent grievance mechanism to address and resolve complaints f rom (potential) beneficiaries to allow people access to information as to why their proposals have not been accepted.
79. implementation i s included in the Operational Manual.
All o f the above measures have now been included into the Project design and their
5. Environment (see Annex 10)
80. An environmental assessment has been carried out by the Government under terms o f reference agreed upon b y the Bank. The assessment i s available in the project files and i s summarized in Annex 10. This assessment includes the environmental management framework for the implementation o f the program. The program has been assessed overall as a Category B.
8 1. The environmental procedures consist basically o f the following:
(i) Subproject proposals (profiles) would include an environmental screening document (Initial Environmental Assessment - EA). MINECO and FIS would review the document. This E A would determine the potential environmental impact and the location o f the subproject relative to any fragile environmental zones or to territorial planning zones. In terms o f impact, the subproject would be classified into categories A, Bl, B2, and C, which are roughly the same categories as applied in the Wor ld Bank operational
20
(ii)
(iii)
(W
(VI
82.
directives. The distinction between categories B l and B2 i s defined in the national environmental legislation, B 1 meaning a higher risk level than B2. Infrastructure projects include improvement, rehabilitation and maintenance o f rural roads; capacity increase, rehabilitation and maintenance o f electricity generation and distribution; and construction o f antennae for cellular phones and distribution poles. All these subprojects are to be classified under environmental categories B1, B2 or C. These works have also to be classified on the basis o f the sensitivity of the local environment. The environmental assessment provides a l i s t o f “environmentally sensitive zones” where the environmental risk i s high (for instance in function o f the biodiversity), and where even works o f category B 1, B2 would not be financed. After screening, subprojects o f Category B1 and B2 w i l l be subject to Environmental Impact Analysis (EIA) to estimate the environmental impact and to introduce mitigation measures. For category C subprojects, only sector specific environmental manuals w i l l be applied. Subprojects o f Category A w i l l not be financed under the Project.
Proponents o f category B projects would (assisted by the Entrepreneurial Services Provider) submit the EIA to MARN that would inform the public about the contents o f the EIA and give 20 days to receive any observations or opposition manifestations. I t would also implement inspections and consultations as needed. After this process MARN would make a final resolution approving or disapproving the EIA.
83. Once approved by MARN, MINECO would establish an environmental Verification Report that includes al l activities involved in the environmental analysis and the mitigation measures that have to be implemented and budgeted for in the business plan o f the proponents. FIS operational manual has been approved by MARN and would be used as a baseline to design the environmental procedures for the subprojects financed under MINECO.
84. effectiveness in order to assess their impact and appropriateness.
The above environmental procedures w i l l be reviewed at the end o f the first year after
85. The environmental impact o f the I C T infrastructure improvement subprojects are expected to be limited in the construction phase and negligible in the operations phase. Environmental management obligations o f the I C T service provider would be covered under the contract. Respect o f these obligations would be monitored by CIV.
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6. Safeguard policies
Safeguard Policies Triggered by the Program Yes No Environmental Assessment (OP/BP/GP 4 .O 1 ) [XI [ I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, being revised as OP 4.1 1) [XI Involuntary Resettlement (OPBP 4.12) [I [XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I Forests (OPBP 4.36) [I [XI Safety o f Dams (OPBP 4.37) 11 [XI Projects in Disputed Areas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [ I [XI
[I
[XI
86. The social and environmental safeguards - and the policies and procedures to be adopted under the program - are described above. These safeguards take into account due compliance with Bank policies and requirements and are included in the program operational manual. Under environmental safeguards, i t has been agreed that no public investment or productive activities requiring a Category A designation for environmental impact would be supported by the program. Pesticides and insecticides wil l not be financed by the loan proceeds. Under social safeguards, i t has been agreed that no public investment or productive activities that require involuntary resettlement of the affected population would be supported by the program.
7. Policy Exceptions and Readiness
87. There are no policy exceptions and the program i s ready to be implemented.
* By supporting the proposed project, the Bank does not intend to prejudice the f inal determination of the parties' claims on the disputed areas
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Annex 1: Country and Sector or Program Background GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT
PROGRAM
Country Issues and Background3
1. With a multi-ethnic population o f about 12.6 mil l ion and a per capita GDP o f about US$2,200, Guatemala i s the largest economy in Central America. The country’s difficult colonial past and a debilitating c iv i l war - which ended in 1996 - have left a legacy o f high poverty and inequality, poor social indicators and deep social and political divisions. These are only slowly being overcome as the country continues to consolidate democracy and to address issues o f equity/inclusion, growth and the establishment o f credible public institutions.
2. Guatemala has enjoyed macroeconomic stability for much o f the recent past, although i t s growth performance has been poorer than for most other countries in the region. After an init ial surge fol lowing the 1996 Peace Accords - and even with the implementation o f structural reforms and pol icy improvements in a number o f social and economic sectors (education, health, infrastructure and financial sector) - growth rates declined in 1999 and remained low through 2003. This was due to internal factors - investment climate negatively affected b y a lack o f confidence in the former government - as well as to external factors - low coffee prices and a decline in the terms o f trade.
3. The current Government, in office since 2004, has demonstrated considerable commitment to the achievement o f national goals established in the 1996 Peace Accords in political and human rights, as well as in the socio-economic sphere. The main emphasis has been on fighting corruption, enhancing security and reactivating inclusive economic growth as a means o f reducing poverty and inequality. The Government’s development plan - Vamos Guatemala! - provides a viable framework for the country’s progress. The program i s based on three main pillars: (i) Guate Solidaria focused on human capital, basic services and rural infrastructure; (ii) Guate Crece/Compite aimed at accelerating growth through trade expansion, business climate improvements, private participation in infrastructure, financial sector reform and promotion o f small and medium enterprises; and (iii) Guate Verde concerning environmental sustainability o f all development programs.
4. Guatemala i s the Latin American country with the highest degree o f inequality, with the indigenous groups disproportionately represented among the poor and the extremely poor. 56% o f the total population i s classified as poor, whereas 76% o f the indigenous population i s poor. The proportion o f population living in rural areas (61%) and the proportion o f the population which i s indigenous i s also very high (39%). Seventy four percent o f the rural population i s poor, 24% extremely poor and 43% illiterate. Eighty percent o f indigenous peoples l ive in the rural areas where they account for 52% o f the population - comprising indigenous Maya (21 different linguistic groups), “ladinos” o f mixed descent and a small minority o f Afro-descendant “Garifuna” on the Caribbean coast.
Source: World Bank Country Assistance Strategy and other World Bank reports mentioned in Annex 12,
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5. The Government thus sees the contribution that an effective, coordinated rural development strategy - with supporting investment programs - could make to reducing poverty and inequality in Guatemala. Efforts to improve coordination o f the various efforts in support o f rural development start f rom the creation o f a Cabinet level Rural Development Committee (GDR) under the chairmanship o f the Vice-president. The vision and policy direction are set out in the Government’s Strategic Agenda for Integrated Rural Development, approved by the Cabinet in March 2005.
6. The strategy seeks to go beyond the vision o f rural development as simply agricultural development and looks to adopt a more comprehensive, integrated approach through the development o f institutions and infrastructure and through the promotion o f broad-based growth opportunities in the rural sphere. The strategy has four main focal points (“enfoques de abordaje”) which are: (a) integrated rural development wi th equity, in regard to gender and culture; (b) decentralized management with a territorial focus; (c) linkages between the rural and the urban; and (d) rural development as a multi-sectoral endeavor.
7. One o f the programs supporting this strategy is the rural economic development program (REDP), known as “DesarroZZo Econdmico desde lo Rural“. The program - focused initially on those territories in the country with the highest incidence o f poverty - i s to support income generation for the poorest, inter alia through employment generation in productive activities (“cadenas productivas”). The REDP i s also intended to have a complementary focus in two areas - effective indigenous participation in economic local development and developing the capacities to introduce a territorial focus into the planning, programming and policy making processes.
8. The four underlying principles o f the program are: (i) adoption o f a demand-driven approach emphasizing the fundamental role o f local actors in promoting economic development; (ii) encouragement o f public-private-civil society partnerships for local development planning and implementation; (iii) promotion o f intercultural relationships and the effective integration o f the indigenous population; and (iv) strengthening o f modern, democratic and plural public multi- sector institutions.
Sector Issues and Background
9. Recent research has been undertaken to understand the drivers o f sustainable growth and poverty reduction in Guatemala. This has notably underlined the strong spatial dimension o f rural poverty - with approximately three quarters o f the rural poor concentrated in one zone covering the Western Altiplano and the Northern Region. Poverty in rural Guatemala i s also seen as generally related to insufficient access to productive assets and to rural infrastructure, notably road networks.
10. effectively:
The research has lead to the following general conclusions to reach the poor more
- Move from geographically untargeted investments in single assets to an integrated, geographically based approach o f asset enhancement;
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- Invest in a variety of social and productive household assets in high potential areas with high rural poverty densities; Develop strategies to address exclusion o f indigenous people and their l ow level o f productive assets and returns on assets; Ensure agriculture forms an integral part o f the rural growth strategy in areas o f high agricultural potential and population density wi th access to infrastructure; Use differentiated rural strategies according to an area’s specific assets, markets and institutions in view o f the highly differentiated spatial distribution o f economic potential; and Work towards better strategic linking and convergence for investments and projects backed by the Wor ld Bank and other donors in diverse regions of the country.
-
-
-
-
11. In the Western Altiplano, the research suggested that the focus be on land access and productivity enhancements such as in forestry and water management, improved market and technical information, and diversification into high value-added activities. Improving feeder roads - rather than constructing primary or secondary roads - should also be a priority. T o reduce constraints to broader participation in the market economy, public interventions should enhance -the effectiveness o f public services, reduce transactions costs associated wi th l ow quality and scarce transport and communication infrastructure, increase access to technical assistance and reduce market related risk.
12. The Bank helped to put together for the incoming Berger administration a policy note on rural infrastructure for rural development to highlight the challenges for rural infrastructure provision and to provide policy and operational recommendations to the new administration. Key findings can be summarized thus:
Considerable resources have been allocated to rural development yet incomes and the quality o f l i fe in rural areas remain low; Whi le progress has been made in expanding rural infrastructure coverage, a large underserved population remains and the quality o f services is low; Infrastructure investments are an essential, though not sufficient input for rural development; Despite success in increasing coverage in the electricity and ICT sectors, investments there have been l imited contributions to broader rural development objectives; Rural water and sanitation and transport sectors face larger challenges to improve access, quality and sustainability of services; Whi le a variety o f funding sources provide significant support for rural infrastructure, the lack o f coordination and planning l i m i t s the efficiency o f investments; Decentralization has resulted in holding municipal governments legally responsible for the planning and provision o f a range o f infrastructure services without however the technical and financial capacity to provide these services.
13. support operations would thus be:
The strategic priorities to be pursued by forthcoming investment program and policy
(a) Increasing access to infrastructure services to those st i l l undersewed. Sub sector strategies are needed to respond to specific needs, but in al l cases there i s a requirement
25
for sectoral targets, sufficient funding, clear institutional arrangements, capacity and monitoring systems. There i s a need for planning and coordination across multiple institutions involved in the provision o f rural infrastructure services.
(b) Improving the quality, eficiency and sustainability of existing infrastructure services - Service quality improvements are sub-sector specific but wil l generally need the establishment or strengthening o f performance standards, cost recovery goals, regulatory responsibility, accountability and access to information at al l levels, and mechanisms to build capacity at local level.
(c) Maximizing the impact of rural infrastructure investments on economic development and poverty reduction - Infrastructure programs should not be developed in isolation, but be associated with the provision o f micro-credit and associated technical assistance for the development o f local industries and micro-enterprises. This can be achieved through: establishing clear cross-sectoral rural development objectives; promoting complementarities o f interventions within a given territory; ensuring the quality and capacity at local levels are adequate; providing information, micro-credit and business development services; and building on the mancomunidad model involving public- private partnerships in planning, delivering and sustaining rural infrastructure services.
26
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM:
Rural and Main Roads Project
Sector Issue (ISR) Rating
PDO IP S S
World Bank-financed Improving the provision o f local level tranmort infrastructure
Second Rural and Main Roads Proiect
Improving land administration and the access o f the poor to land Addressing infrastructure needs at community level Improving business environment for small and micro businesses Improving natural resources and biodiversity management and improving indigenous groups' incomes Other Development Agencies IADB
M S M S
GTZ
Reconstruction and Local Development Project Competitiveness Project
Western Altiplano Natural Resources Management Project (MIRNA)
SIDA
S MS
S S
Canceled Canceled
Project I Latest Supervision
I S Land Administration project I S
Recent projects include: Pet& Sustainable Development; Municipal Development Project; Road Rehabilitation and Modernization; A l to Rio Basin Sustainable Development; Integrated Urban Poverty; Rural Water and Sanitation Investment Program (reoriented to address emergency needs fol lowing Hurricane Stan) A1so:Cuencas Altas (canceled) Also: 2 past operations for FIS Municipal Development Project TA project to support the GOG program
First and Second Rural and Main Roads Projects
1. The overarching goal o f the projects is to contribute to reducing rural poverty and build social cohesion by improving and maintaining access in rural areas to markets, schools, health centers and other social and economic infrastructure through broadened community participation. The projects specifically also: (i) support the long term process o f building up the country's institutional capacity to administer and maintain rural roads; (ii) improve the rural
27
transport system in selected regions in the San Marcos and Huehuetenanago Departments; and (iii) continue to improve the efficiency o f the main and secondary networks.
Land Administration Project
2. The project serves to increase legal security o f land tenure in the Pet& Department. The project w i l l also contribute towards strengthening the legal and institutional framework for land registry and cadastre services.
Reconstruction and Local Development Project
3. The project supports improvement in l iv ing standards and self-development in the municipalities of San Marcos and Huehuetenango through support for the planning, execution and maintenance o f small-scale social, economic and cultural projects. The project also helps strengthen the capacity o f local governments and local community organizations.
Competitiveness Project
4. The project supports the Guatemala National Competitiveness Program (PRONACOM) to advance the nation's international competitive standing and accelerate i t s economic growth. The project also helps primarily small and micro businesses to generate higher income. The Project supports initiatives on two levels: (a) for the business environment, seek to increase the competitiveness of product and factor markets via regulatory changes and new public-private institutional partnerships; and (b) at the firm level, a im to broaden small business participation in national economic growth.
Western Altiplano Natural Resource Management Project
5. The project aimed to improve the management and conservation o f natural resources and biodiversity and the incomes o f the people in the Western Altiplano o f Guatemala. The project would have helped alleviate rural poverty and improved management o f the natural resources base by: (a) increasing social capital around natural resources management,; (b) increasing opportunities to improve productivity and diversify farming and other (non-farm) livelihood systems; (c) extending and strengthening efforts o f indigenous communities to establish permanent conversation areas within broader zones o f biodiversity; and (d) establishing and piloting a framework for environmental services markets.
6. The principal factors that led to the cancellation o f the Western Altiplano Natural Resources Management Project were: (i) government's failure to gain consensus and obtain the legislative approvals required for project effectiveness prior to the national elections and change of administration; and (ii) the very difficult fiscal situation the new government inherited, requiring austerity measures that forced the sectoral ministries to reassess their priorities.
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Annex 3: Results Framework and Monitoring GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT
PROGRAM
Increase incomes o f the rural population participating in the productive supply chain program 20% activities in the selected departments, with particular emDhasis on indieenous E~OUDS
Increased incomes of 20,C participating rural households by
" " 1
Project Development Program Outcome Indicators Objectives
To improve the competitiveness of rural productive supply chains with strong indigenous
Increase in total sales o f the rural productive supply chain partnerships with US$50 million
participation during the project period To strengthen the institutional 30% of the municipal planning capacity o f the public entities offices participating in the
term productive supply chain partnerships between rural productive organizations and
market access, technical assistance and seed capital.
- 10% o f supply chain enterprises
operating expenses and capital
- one new financial product
(SMEs) that are part o f productive supply chain partnerships
obtain credit for participating rural
Subcomponent 1.3 I - 100% of participating partners
Use of Program Outcome Information
Ongoing assessment o f program design and appropriateness o f inputs to achieve PDOs Utilize results for design o f subsequent program phases
Use of Program Outcome Information
Utilize results for design o f subsequent phases o f the program
Confirm "buy-in" from national and local governments for this new approach -- Identify advantages andor shortcomings o f a territorial approach to
Ongoing assessment o f productive supply chain strategy as a driver o f rural development Annual review o f expected demand for technical support for productive supply chain partnerships Ongoing monitoring o f targeting effectiveness toward indigenous groups and women
Ongoing assessment o f role o f finance in supporting productive supply chain strategy as a driver o f agriculture-led rural development
Ongoing assessment o f program
29
Provide the participating partnerships with public and associative productive infrastructure to improve competitiveness as defined in the business plans.
Subcomponent 1.4 Provide access to telephone and telecenters with broadband in rural areas with access.
Train users o f internet services and beneficiaries o f the program
Component 2 Strengthening the institutional capacity o f the public entities participating in the program to adopt the territorial management model with indigenous participation
Component 3 Ensure program management capacity i s in place and that an effective, monitoring and evaluation (M&E) system i s established and maintained.
whose improvement in rural roads have been approved have access during the whole year to critical markets - 90% of the infrastructure approved implemented on time - 100% of infrastructure investments have a funded maintenance plan - 100% of municipalities (cabeceras municipales) in program Departments have broadband internet access. -100% of the rural communities > 400 people have telephone access -90% of approved demand for internet training in the selected departments i s being serviced - the Public Investment Program prepared by SEGEPLAN for 2009 reflects strategic investments derived from the territorial planning model in at least four Departments; -SEGEPLAN has a strategic territorial management information system in each o f the eight Departments - preparation of half-yearly project monitoring reports within 45 days o f the end o f each semester and a coordinated annual project plan at least 3 months prior to the beginning o f the fiscal year -preparation of annual program results reports for 10% of participating municipalities -improved perception o f the rural population (in particular indigenous organizations) of the economic potential of rural areas.
lesign and role of productive nfrastructure investments to ;upport supply chains and other ural economic activities
4nnual monitoring o f :omponent by CIV.
3ngoing assessment o f design If ICT strategy
Confirm commitment of Governments at national, departmental and local levels to new Territorial Management Planning approach
Review o f effectiveness and equity o f interventions supported by program
Utilize results o f M&E for ongoing improvements o f program design, and program targeting o f indigenous groups and women
30
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Annex 4: Detailed Program Description
GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM
1. The Project would finance in parallel wi th the IADB the Government’s Rural Economic Development Program (REDP). The REDP has been designed as the investment response to the National Cabinet’s Rural Development Strategic Agenda and the National Competitiveness Agenda. REDP’s overarching goal i s to enhance the income o f the rural population, wi th a special emphasis on indigenous peoples, o f the selected Departments. This would be accomplished by strengthening or establishing supply chains and b y investments oriented to remove the existing infrastructure bottlenecks to higher competitiveness, therefore improving both territorial and rural enterprises’ competitiveness.
2. In order to accomplish the above, the Program promotes a territorial approach to public management, and would bring together four public agencies that, in alliance with the private sector, would provide coordinated geographically focused multi-sector investments demanded b y rural supply chains with high indigenous participation.
3. The overall purpose o f the project i s to increase the incomes o f the rural population participating in the program’s activities in the selected departments, with particular emphasis on indigenous groups.
4. The Project Development Objectives (PDO) are (i) to improve the competitiveness of rural productive supply chains with strong indigenous participation; and (ii) to strengthen the institutional capacity o f the public entities participating in the program to adopt a participatory territorial management model wi th indigenous involvement .
5. Based on indigenous population, poverty, agricultural potential and productive infrastructure indicators, SEGEPLAN has defined eight Departments where the Program would focus: San Marcos, Huehuetenango, Sololii, Quetzaltenango, Totonicapiin, Chimaltenango, Sacatepequez and Alta Verapaz. These departments are primarily rural and account for 30% of the population, 45% o f the poor and 50% o f the extreme poor. The proportion of indigenous populations i s 78%.
6. The Program would include three components: (i) investments and technical assistance for productive rural supply chains, construction and rehabilitation o f rural public and collective productive infrastructure and establishment o f rural telephone and internet services; (ii) enhancement o f public management towards territorial competitiveness; and (iii) program management, monitoring and evaluation.
33
Component 1: Investments in Productive Supply Chains (US53.6 million, of which the WB would finance US$27.3 million)
7. The objective o f this component would be to increase the income o f the mostly indigenous rural population through time and space coordinated investments in favor o f productive rural organizations including: market access, technical assistance, seed capital, financial services, and productive infrastructure investments in the Program area. T o achieve these objectives, this component would have the following subcomponents:
a) Subcomponent 1.1. Entrepreneur Development Services which wil l allow rural productive organizations to get access to markets and to link up wi th productive chains through market intelligence, technical assistance and seed capital. This subcomponent would be implemented b y MINECO with the assistance o f specialized private sector organizations.
b) Subcomponent 1.2. Access to Financial Services o f rural productive organizations by: (i) strengthening o f the capacity o f M INECO helping micro-enterprises to get access to financial services; (ii) technical assistance and incentives to financial intermediaries to adjust their services to the needs o f rural productive organizations; (iii) technical assistance to rural productive organizations to comply wi th the requirements o f financial intermediaries; and (iv) a line o f credit to eligible financial intermediaries at market interest rates;
c) Subcomponent 1.3. Access to Productive Rural Infrastructure (public and associative) b y financing public rural infrastructure investments (such as rehabilitation o f roads and bridges) or associative investments (such as storage centers, packing centers, irrigation infrastructure) needed to improve the competitiveness o f the rural productive organizations under paragraph 7.a. FIS would implement this subcomponent.
d) Subcomponent 1.4. Information and communications technology investments (ICT). This subcomponent aims to improve access to and use o f ICTs in the program departments and municipalities. The subcomponent w i l l assist in building up key ICT in the program’s selected territories through the use o f output-based aid (OBA) mechanisms and to enhance the productive use of ICT infrastructure and services by productive supply chains as well as by local development organizations and indigenous people. The component would be carried out b y the Ministry o f Communications, Infrastructure and Housing (CIV) with the support o f the Telephone Development Fund (FONDETEL) and the Presidential Commission for Modernization and Decentralization o f the State (COPRE). The component would cover: the extension o f the provision o f basic infrastructure for telephony and broadband internet connectivity; technical assistance services for the implementation of the works and capacity building program; and training and technical assistance programs to assist on the use o f ICT for increased productivity.
’
8. Coordination mechanism between the four subcomponents. The above technical assistance and investments w i l l be coordinated through “business plans”. These plans w i l l be drawn up by the rural productive organizations and their commercial partners. The business
34
plans w i l l stipulate the needs for entrepreneur development services, financial services, public and associative infrastructure and telecommunications. These business plans wil l be evaluated on the basis o f technical, economic, financial, social and environmental criteria by the Investment Coordination Committee and once they are approved they w i l l also contain the commitments o f the co-executing agencies in terms o f technical assistance and investments. Hence the different elements of the component w i l l be coordinated into single business plans. Those plans wil l be instruments o f demand capture, for feasibility studies, approval and planning o f the project financed investments, and monitoring and evaluation o f the integral program. Subcomponent 1.4 (telecommunications) w i l l be implemented in priority in the Departments selected under the program to provide overall telecommunications support.
9. The objective o f this subcomponent i s to help rural productive organizations that have strong indigenous participation to become permanent members o f national or global supply chains, b y improving their capacities for incremental competitive production and their insertion into professional networks. T o this effect, the project wi l l promote partnerships between rural productive organizations, commercial partners and an entrepreneurial service provider. The Ministry o f Economy (MINECO) - Vice Ministry for the Development o f Micro, Small and Medium Enterprises - assisted by private professional organizations would implement the subcomponent.
10. services:
The subcomponent w i l l provide the rural productive organization with three basic
market access through connections with potential domestic and international buyers; access to technical assistance to obtain access to the market, organize the production and marketing, reach the required quality criteria, obtain new technology; and access to seed capital for new technology, working capital and other expenditures facilitating business start-up.
.
.
. 11. The total project contribution per partnership w i l l not exceed US$30,000; o f this amount only US$lO,OOO can be used for seed capital. The eligible business plans would have an overall rate o f return o f 12 percent or higher.
12. The rural productive organization would be: (i) a group producing goods and services that has been active for over one year working as an association; (ii) legally established or willing to establish themselves legally; (iii) whose members have an income below the national GDP per capita; (iv) established in the Departments selected under the program; (v) whose activities b y getting access to markets w i l l provide income for people that in the majority are indigenous; and (vi) other priority criteria established in the program operational manual. The rural productive organizations should not have assets exceeding US$1.5 mil l ion.
35
13. The commercial partner w i l l be (i) a national or international company specialized in the production and sale o f goods and services; (ii) prepared to co-invest wi th partners in Guatemala to establish a long term commercial relationship; (iii) a company that has good and reliable distribution channels; and (iv) economically, financially and legally solvent. As the project is looking for long-term partnerships, the commercial partners w i l l have to co-invest into the partnership, which wil l screen out firms that are only looking for temporary suppliers o f produce.
14. The entrepreneurial services provider should be an NGO, institution or other entity with access to market intelligence and experience in cluster development. The organization wil l have to adopt an ethics code to operate as an “honest broker”.
Implementation mechanism
15. MINECO wil l implement the program through the Vice-Ministry o f the Development of Micro, Small and Medium Sized Enterprises. The operational manual w i l l describe in detail the different activities involved. Below i s a summary.
16. M INECO w i l l recruit the entrepreneurial services providers through a competitive process. With the support o f the contracted firm, MINECO w i l l invite companies and rural productive organizations to participate in the program and to present partnership profiles. Such invitation wi l l be done with the active participation o f the guidance groups (see indigenous development framework).
17. M INECO w i l l receive the partnership profiles f rom companies and rural productive organizations. It wi l l review the profiles according to eligibility criteria and w i l l assign an environmental category to each eligible profile. I t w i l l then transfer the eligible profiles to the entrepreneurial services provider that w i l l try to establish partnerships and help to prepare a “business plan” for each partnership.
18. The business plans w i l l be drawn up between the three partners (company, rural productive organization and entrepreneurial service provider) and w i l l include the objectives of the partnerships, the implementation mechanisms, the requirements in technical assistance, seed capital, credit, public and associative infrastructure, telecommunications and a budget, terms o f reference o f the technical assistance, prof i t indicators and a preliminary environmental screening sheet.
19. MINECO w i l l review the business plans and assign the final environmental category and indicate additional studies if needed. If the business plan includes infrastructure investments, the entrepreneurial services provider wi l l forward the plan to FIS for a detailed feasibility study. If the plan includes needs for credit, the entrepreneurial services provider wi l l help to identify the best option for additional finance. If i t needs specific telecommunication infrastructure or internet training, C IVRONDETEL wil l be informed.
20. Once the proposal i s approved by MINECO a task manager o f the proposal w i l l be appointed who w i l l process the proposal through SEGEPLAN and the Investment Coordination Committee, composed of representatives o f the co-executing agencies and where a decision w i l l
36
be made. The Investment Coordinating Committee can decide to finance the whole business plan or not or in phases. The business plans financed w i l l be profitable ventures and have a minimum rate o f return o f 12 percent.
21. Once approved b y the Investment Coordination Committee, the task manager w i l l be further responsible to get the implementation going. The entrepreneurial services provider w i l l initiate i t s implementation services specifically to help organize the technical assistance (to be recruited in agreement wi th the three partners) and to pay out the seed capital in due time so i t can be used adequately.
Institutional Strengthening of MINECO.
22. To help with the implementation o f this subcomponent, the project w i l l strengthen two existing regional centers o f MINECO and the start-up of two new regional centers. The project w i l l finance additional staff, strengthen the procurement entity and the financial management entity as well as provide the equipment for the operations under the project.
Output of the Subcomponent
23. The output f rom this subcomponent would be: (i) 300 new supply chain alliances wi th 45,000 participants in the new supply chains o f which at least 20,000 show an increase in revenue; (ii) 80% o f the participants are indigenous people; (iii) U S $ 5 0 mi l l ion increase in sales; and (iv) 25% o f rural firms that participate in the program become members of national producer organizations.
Subcomponent 1.2: Financial Support to Productive Supply Chains (US$8.0 million, financed by the IADB only).
24. The objective o f this subcomponent i s to provide financial resources to small and medium enterprises that are part o f the supply chains. This subcomponent would assign financial resources and develop new financial products that are adequate to the needs o f participating small rural enterprises. These resources would be put at the disposal o f financial providers complying with program eligibility criteria.
25. Ongoing studies are indicating that the major constraints for credit are: the lack o f real estate guarantees, high interest rates, lack o f appropriate credit instruments that take into account the production cycles in the rural areas, the difficulties o f the rural productive organizations to comply with the requirements o f the financial entities such as the formalities during the application, legal documentation and fiscal documentation.
37
26.
27.
The project would assist M INECO to:
a. Design a set o f financial services for supply chains in rural areas with strong indigenous participation such as: (i) technical assistance to financial intermediaries (IFI) to adjust their credit instruments; and (ii) technical assistance to producer organizations to comply with the formalities o f the IFI.
b. Provide a credit line for rural productive organizations through eligible IFI. M I N E C O would subcontract the management o f this credit l ine to a financial institution on a competitive basis. This institution would then transfer financial resources to other I F I s that would finance the rural enterprises directly.
The outputs from this subcomponent would be: (i) a reduction o f 50% in the time to obtain credit; (ii) one new financial product that i s appropriate for the needs o f the rural productive organizations involved in the program and (iii) 10% o f the o f rural productive organizations have access to new sources o f financing to operate and invest.
Subcomponent 1.3: Local public and collective investments in economic infrastructure (US$16.4 million, o f which the WB would finance US$6.2 million).
28. The objective o f the subcomponent i s to provide productive infrastructure to the supply chains supported under subcomponent 1.1, in order to enhance their competitive capacity and that o f the territory where they are located. FIS would implement the subcomponent.
29. The infrastructure to be financed can be public (being the State the owner) or collective (for a legal association, with more than 20 adult members). Other private infrastructure would not be financed by this subcomponent, but would be eligible for credit under subcomponent 1.2.
30. The subcomponent would finance construction works and general basic equipment (furniture, computers, etc.). Before financing, every infrastructure would have to have a maintenance mechanism defined, including regulations and financial sources. The responsible entity for maintenance would always be the owner: municipality, federation o f municipalities or the producer association.
3 1. For collective infrastructure the eligibility conditions would be:
- Proposals originating in the business plans (subcomponent 1.1) have to include a description o f the infrastructure needed, profitability expected and sustainability.
- The maximum investment amount would depend upon the number of beneficiaries and the market volume o f the link. Maximum total investment per capita would be defined by the Investment Coordination Committee.
- Beneficiaries belong to or are wi l l ing to form any kind o f legal entity (cooperative, producer group, association or private firm.
- More than 50% o f the proponents are under the poverty line4.
The ICC would approve a proposal made by SEGEPLAN on the criteria to define “poor direct beneficiary”, under a simple and objective methodology.
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32.
33.
34.
35.
For local public infrastructure the eligibility conditions would be:
- Proposals originating in the investment plans (subcomponent 1.1) have to include a description of the infrastructure needed, profitability expected and sustainability.
- Proposals have to be presented together by a producer group and the municipality or municipalities where the infrastructure would be built (better i f they have formed a federation of municipalities).
- More than 50% of the private proponents are under the poverty line. - Maximum total investment per capita would be defined by the Investment Coordination
Committee.
The subcomponent would finance:
- Proposal formulation, including economic and financial feasibility. - Construction, execution. - Basic equipment. - Works Supervision. - Training and capacity building of the owner in order to assure proper infrastructure
maintenance and that permanent legal status i s obtained. In the case of associations with indigenous majority, training wi l l be given in Mayan language.
- Seed capital for the preventive maintenance fund.
The following type of subprojects would be eligible for funding: -Warehouses. - Processing facilities. - Irrigation systems, including well drilling for irrigation systems. - Electrification (network connection, mini power stations and renewable power sources). - Telephone and Internet connections. - Rehabilitation of rural roads and bridges. - Construction and equipment of labor training facilities. - Nurseries. - Tourism facilities (trails, viewpoints, hostels, etc.); and - Other projects demanded, allowed by the eligibility criteria.
The subcomponent would not finance: land purchases or registration; water wells for drinking water; pesticides and insecticides; and FIS operational costs.
36. For local public infrastructure, municipalities would have to co-finance at least 10% o f the total investment cost, plus 10% of the maintenance fund. For collective infrastructure, the beneficiary would contribute with land, passage permit or water sources, and with the non- qualified labor required for the construction5.
37. Construction could be done directly by the community or by contracting a firm, depending on the level o f complexity. For collective projects, resources would be transferred to
Beneficiary groups can also contribute with money and materials. In any case, contributions have to be taken into account in the budget proposal.
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the association and the construction would be done directly by the producer group. I f the subproject i s complex, FIS would ensure that the producer group would contract a firm.
38. Procedures: FIS would evaluate the technical and economic viability of the infrastructure proposed in the investment plan and notify i t s conclusions to the Investment Coordination Committee. Once the Committee ratifies the resolution, FIS would begin disbursements. I f the resolution i s negative, FIS would return the investment plan to the marketing information provider together with a report indicating reasons of rejection. The provider and proponents could then reformulate the infrastructure proposal.
FIS Institutional Strenethening
39. The program wil l finance FIS institutional strengthening up to US$500,000 for the following activities: (i) decentralization of the departmental delegations in the departments where the program operates; (ii) equipment and vehicles for those delegations; (iii) capacity to prevent and resolve conflicts; (iv) capacity to work in a multi-cultural environments and (v) expansion of the menu of productive infrastructure projects as well as their inclusion into the FIS monitoring system.
Outputs of the subcomponent:
40. The subcomponent wi l l have the following outputs: . . .
100% of the rural productive organizations whose improvements in the rural roads have been approved, have access during the whole year to key markets; 90% of the infrastructure approved by the Investment Coordination Committee i s implemented on time; 100% of the infrastructure approved by the Investment Coordination Committee has maintenance plans.
Subcomponent 1.4: Information and Communications Technologies (USS 15.7 million, financed by WB only).
41. The program would finance part of the national network for information and communications technology (ICT) infrastructure and services in the rural areas. This subcomponent would be implemented in phases, prioritizing the territories to be covered under this Program.6 The subcomponent would be divided into two parts. The connectivity element (US$12 million) would increase private sector investment in ICT infrastructure in rural areas, while the access and content element (US$3.5 million) would finance activities to increase productive use o f ICTs in rural areas and strengthen institutional capacity in CIVFONDETEL and to provide training.
Since this component wi l l be using output-based aid (OBA) tenders that wi l l be awarded to the company that wil l provide infrastructure and services that request the lowest OBA subsidy, any OBA subsidy amounts that are not used for the Departments covered by this project wi l l be used to carry out similar OBA tenders in other Departments to be proposed by CIV, subject to non-objection from the Bank.
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42. The extension o f ICT infrastructure in rural areas would be achieved primarily through a competitive award o f subsidies through an output-based aid (OBA) tender process to private operators who would be responsible for installing, operating, and maintaining the new ICT infrastructure on a commercial basis. O B A mechanisms have been successfully used by more than a dozen Bank projects to build-out infrastructure in countries such as Bolivia, Guatemala, Uganda, T a n ~ a n i a . ~ C I V F O N D E T E L has already carried out O B A tenders - though the process wil l have to be modified to match the Bank's procurement guidelines. The OBA tenders would be carried out in two to four phases over a two-year period. Each O B A tender would target Departments grouped into areas large enough to be attractive for operators, yet small enough to enable different companies to w i n O B A tenders and to foster competition in Guatemala's telecommunications markets.'
43. Specifically, the connectivity element would have the following elements:
. Telephony Element to provide at least one public payphone in rural communities wi th populations greater than 400 people that currently do not have public payphones, were not included in prior C I V F O N D E T E L projects' and are situated in the Departments targeted by this Program." The telephony element would also increase rural tele-density o f individual or business subscribers. They would be able to obtain mobile or fixed residentialbusiness telephones in areas where there i s currently no supply o f individual or business telephone service or where the quality o f service i s very poor. As a result, the percentage o f people living in rural communities with public payphones and/or cell phone/private phone coverage would increase by at least 30%. The telephony element would be designed to encourage private operators to provide as many individual or business connections as possible. The direct beneficiaries o f this initiative would be more than 3.5 mi l l ion people nationwide that, according to a recent GPOBA-PPLAF financed study, l ive in these un-served or underserved rural communities.
. Internet Points of Presence Element would establish a network o f 100 internet points o f presence (Internet POPS) with small telecenters o f up to f ive personal
OBA mechanisms basically entail the government identifying priority rural areas where the private sector has no; provided or built infrastructure due to higher capital costs or greater risks. The government then estimates the amount o f capital investment subsidy that i s needed in order to attract private sector investment with a reasonable rate o f return and then holds a tender. The operator that wins the O B A tender i s the operator that requests the lowest subsidy (most widely used mechanism) or that commits to provide the greatest amount o f lines for a given subsidy (recently used in Bolivia). For more information on Bank OBA projects see www.gpoba.org. * FONDETEL's current plans are to simultaneously put out two tenders - one for the provision o f telephony services and one for Internet POP services - for a given number o f Departments that w i l l be divided into areas. Companies wi l l be able to bid to provide either or both services to each area. FONDETEL's 2-2005 tender, for example, divided 3 Departments into 8 service/geographic areas and allowed operators to bid on the geographic areas that were most attractive to them. The geographic areas are designed to take advantage o f economy o f scale and technical characteristics for I C T technologies. The OBA tender w i l l have mechanisms that w i l l enable an objective and quantitative comparison o f tender proposals. '.Nationwide there are 5,234 such rural communities in Guatemala. lo As previously noted, the OBA subsidies financed by this project w i l l f irst be used in the Departments targeted by this project. If at the end o f the tender process there remain some unused OBA funds, these be used to carry out similar OBA tenders in other Departments to be proposed by CIV, subject to non-objection from the Bank.
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computers in 100 rural municipalities in the eight Departments covered b y this Program and that currently do not have access to broadband internet services. In these Departments, all head municipalities (cabeceras municipales) would have Internet POPs that are connected to Guatemala’s national internet backbone. Experience in other countries indicates that companies or institutions do not use the internet if the service i s too slow or too expensive’ ’. This i s the case currently in Guatemala. Furthermore, a recent GPBOA-PPIAF study estimated that broadband internet (i.e. speeds greater than 256 kbps) i s available in only 43 out of Guatemala’s 33 1 municipalities. The internet POPs would enable public entities, NGOs, businesses (including commercial telecenterskyber-cafes) and individuals in the 288 municipalities to connect to the internet at rates comparable with the costs o f connecting to the internet in Guatemala City. The companies that win the Internet POPs tenders w i l l be required to install and manage infrastructure that enables all customers to connect to the Internet POP using wireline and/or wireless technologies (i.e.loca1 access networks) on a commercial basis and at a price and with a quality o f service comparable to that found in larger Guatemalan cities. These local access networks should enable any business, municipal government, school, NGOs, etc. to connect to the Internet POP. Furthermore, and as is described in the section below, the companies that w in the Internet POP tenders w i l l also be required to provide, on special terms, the local access network connectivity to the telecenter financed by this project. The tender documents for the Internet POPs w i l l contain technical specifications detailing these requirements.
44. As a result, the population l iv ing in al l the head municipalities o f the targeted Departments would have access to the broadband internet for the first time and at an affordable rate. The goal o f this component i s to use O B A mechanisms to build the infrastructure to enable individuals and institutions to connect to the internet and to stimulate demand for the internet so that by the end o f the Program, internet connectivity would be provided on a commercially- sustainable basis in rural municipalities.
45. The second type o f internet serviceshnfrastructure that would be provided i s that the company that wins the internet POP tender would be required to finance the equipment and connectivity costs for the establishment o f one “public use telecenter” in each municbal i ty where an internet POP i s established. Specifically, the company would have to pay for the capital costs o f equipping one telecenter with five computers, a local area network (LAN) as wel l as al l key hardware and software required to connect and provide broadband Internet service to the telecenter via the Internet POP. The company that wins the OBA tender would also be responsible for paying for the monthly costs o f connecting to the internet for the public telecenter during the f i rst year o f operations. The connectivity costs would include the costs of physically connecting the telecenter via wireline or wireless to the internet POP.
46. The entity that would hostkouse each telecenter would be responsible for the building space and for establishing programs to educate users, local business, producer groups and NGOs on the use o f the Internet. During the second year o f operations, the entity would also be
I’ “Chile. Expansion o f Broadband Internet Access to Rural Areas”, Josbert Kester and Jorge Fritis, 2003
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responsible for paying the monthly subscriber rate of connecting to the Internet though these would be capped, at a rate that i s paid for s im i la r service in Guatemala City. At the end of two years, al l subscribers would have to pay market rates.
47. The telecenters would be located in a government office, private sector company or NGO (i.e. telecenter host) that would be selected by the Commissidn Presidencial para la Refomza del Estado, la Decentralizacidn y la Participacidn Ciudadana (COPRE). COPRE would select the location based on clear, transparent and competitive guidelines that i t would develop regarding the selection of telecenter hosts that would include criteria such as: (a) maximizing economic and social impact; (b) ensuring public access to the telecenter for at least eight hours a day, (c) ability to provide training on the use of ICTs; (d) linkages to local supply chains, producer organizations, NGOs, with special emphasis on indigenous-based producer organizations and NGOs, (e) have in place a viable plan to ensure the telecenter would be financially sustainable after the end of the Program; (f) ability and willingness to pay the monthly subscriber fees.12
48. Private operators would be interested in participating in the OBA tender because i t would provide financing for the capital investment costs associated with establishing an Internetldata network in Guatemala. By providing funding for the construction of internet access, this element creates an incentive for the operator to quickly use the Internet POP to provide service to private companies and individuals.
49. The access and content element would be formally implemented by CIV for simplification reasons. However, day-to-day implementation of this component would be delegated to COPRE it involves coordinating and taking advantage of programs and resources of a number of government, private sector and NGO entities (such as COPRE, PRONACOM, CONCYT, INTECAP, universities, etc). l3 COPRE has already established agreements with these entities on a wide-range of programs and i s best positioned to coordinate this component. This element would have two parts: (a) a training and local capacity-building part; and (b) content. These parts would be implemented in the 100 municipalities in the 8 Departments targeted by this Program. l4 COPRE, based on pilot initiatives implemented in other communities, would design a program aimed at fostering community ownership, use and management of ICTs by each of the municipalities targeted by this Program.
50. Access. Training and local capacity building would be provided by a combination of existing ICT training programs supplied by a number of government agencies (INTECAP, MINECO, CONCYT), universities as well as private sector/NGO training institutions. COPRE would maximize the use of existing or recently established training programs such as those of
l2 COPRE, with assistance from PRONACOM, i s the process o f hiring a consultant to develop more detailed telecenter selection guidelines and procedures that w i l l be published and consulted with local organizations. Once the guidelines are finalized, COPRE wi l l establish a committee that w i l l review and select proposals for the establishment o f each telecenter based on the telecenter selection guidelines. l3 PRONACOM i s the acronym for the Programa Nacional de Competitividad, CONCYT i s the acronym for the Consejo Nacional de Ciencia y Tecnologia, and INTECAP i s the acronym for the Instituto TCcnico Nacional de Capacitacidn y Productividad. l4 The first served Departments served w i l l be those targeted by this project. Since most o f these funds wi l l be allocated using OBA mechanisms, if there remain any unused funds, these w i l l be used to implement this element in other Departments to be selected by C I V subject to non-objection from the Bank.
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CONCYT, MINECO and INTECAP. CONCYT, for example, has already begun to train 15 ICT community trainers while MINECO has a training program aimed at SME leader that includes the use of ICTs.” COPRE, in each targeted community, would determine whether training can be best provided by a government agency, a university or a private sector/NGO institution. In those communities where COPRE determines training can be best provided by the private sector or NGOs, COPRE would carry out a transparent and competitive public tender to select the provider.
51. The ICT training provided would be a four-step training program comprised of basic training (PC operation, internet navigation, e-mail, word process and spreadsheet training), second level training (presentations and specialized applications aimed at SMEs), third level training (web page development); and, fourth level training (PC repair and multimedia applications). Some of the basic training programs that do not require Internet connection would be provided locally using existing institutions such as CEMUCAFS (Centros Municipales de Capacitacih y Formacih Humano) y NUFEDS (Ndcleos educativos familiares para e l desarrollo). For training that requires connection to the Internet, trainees would be given vouchers that would enable them to use the telecenters for a limited period of time in order to access the Internet. Online / remote training would be coordinated and take advantage of distance education programs, such as those of INAP (Instituto de Administracih Pdblica), Ministry of Education, Vice-Ministry of SMEs, INTECAP, etc. For the more advanced courses, training would be provided in the Department capitals and lodging would be provided to participants using existing programs.
52. Content. CONCYT would play the lead role in implementing these activities and ensure coordination with other key entities, including COPRE, MINECO, municipal governments, universities and private sector companies. This component would seek to generate online content for the supply chain companies targeted by this Program. For example, a l l SMEs that participate in the training program (previous element) would be trained to and required to produce a web page and set up an e-mail account on the CONCYT’s host.
Component 2. Public management towards territorial competitiveness (US$3.5 million - WB: US$1.4 million)
53. The overall objective of this pilot component i s to introduce in the institutions involved in the program a new model of public management focused on territorial competitiveness and development. This management model w i l l influence the national and sector policies as well as public investment so that they can contribute in a more efficient way to mobilize the territorial resources in function of the development of strategic objectives and competitive advantages. Moreover, the territorial management model would be based on participation principles and the development of public-private partnerships. These spaces of collaborative interchange constitute mechanisms favoring the collective ownership of local knowledge, the establishment o f a local consensus for the development o f territorial advantages and a long-term development strategy.
l5 These trainers are being instructed on ICT technology, networks, administration, e-commerce, e-government and online training.
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54. The specific objectives are:
.
.
.
to develop the new SEGEPLAN’s Territorial Management Model (TMM) and establish the institutional and operational basis to implement it; to incorporate the new model in public policies and investment programs; to give public and private actors access to key territorial information needed for decision-making processes; and to strengthen the capacity o f those institutions that w i l l be strategic for the success o f the new model.
55. The new Territorial Management Model would try to further develop and articulate already existing processes within SEGEPLAN, but under a new territorial approach, such as: (i) the National System o f Strategic Territorial Planning - SINPET; (ii) the National System o f Pre- investment Support- SINAPRE; and (iii) the National System o f Public Investment - SNIP. Furthermore, these systems need to fit in with the processes o f economic and social sector policy coordination and international aid orientation that also fa l l within the activities o f SEGEPLAN.
56. In order to have more flexibility to respond to demands and challenges coming from a territorial approach, the model would also promote a management structure within SEGEPLAN, which would match the central systems with those at regional, departmental and municipal levels.
57. Subcomponent 2.1. Development o f the Territorial Management Model for rural development. This subcomponent seeks to conceptually strengthen the new model that i s being proposed b y SEGEPLAN, and to design the rules, procedures and inter-institutional mechanisms to implement it. Towards this objective, the Project would finance national and international consultancies to assist SEGEPLAN in: (i) the elaboration o f the conceptual framework; (ii) the validation of the model by the relevant public institutions, with a special emphasis on the other co-executing agencies of this Program; (iii) the elaboration o f a legal framework for the TMM; and (iv) the elaboration o f rules, methodologies and other operational instruments for the implementation o f the TMM.
58. Through the implementation of this sub component, SEGEPLAN -in consultation wi th relevant public institutions- would lead the development o f a Territorial Management Model, including procedures and operating instruments, to be incorporated into the planning units o f municipal governments, Consejos de Desarrollo Urbano y Rural, l ine ministries and other relevant public institutions.
59. Subcomponent 2.2. Model institutionalization and implementation. This subcomponent seeks to implement the model and to incorporate the territorial approach in the planning and management procedures o f public institutions operating at the local level. Towards this objective, the Project would finance: (i) the elaboration o f participative Strategic Territorial Plans (PETS); (ii) the promotion o f public-private partnerhips that support the implementation o f the plans; (iii) the process of pre-investment studies contracting; and (iv) the elaboration, implementation and monitoring o f rules and procedures for the formulation, ex-ante evaluation, programming and monitoring o f public investments.
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60. Once the Strategic Territorial Plans are prepared, SEGEPLAN would elaborate territorial pre-investment and public investment plans (PIPS). Within the National System of Public Investment (SNIP) these PIPs would be sent to the Ministry o f Finance, as an input to elaborate the National Budgetary Project. The Strategic Territorial Plans would also help to validate pre- selected “territories” and identify new ones where component 1 would focus on.
61. Through the implementation o f the second sub component, municipal governments, Consejos de Desarrollo Urbano y Rural, and other relevant public institutions at the local level would benefit f rom an institutional capacity building program for territorial management. In addition, local public and private actors would conduct strategic territorial planning and budget programming processes with the technical support o f SEGEPLAN. The Territorial Pre- investment and Investment Plans derived from the territorial planning would then become part o f the National Public Budget formulation process which i s conducted annually by SEGEPLAN and the Ministry o f Finance.
62. Subcomponent 2.3. Access to territorial strategic information. This subcomponent would develop the territorial management information system. Towards this objective, the Project would finance the development o f a system in SEGEPLAN that i s able to integrate the information systems o f SINPET, SINAPRE and SNIP, and co-ordinate the existing territorial information needed b y decision makers. The output of this subcomponent would be an integrated and decentralized territorial strategic information system working in SEGEPLAN. *
63. Through the implementation o f this subcomponent, SEGEPLAN would coordinate the development o f a decentralized territorial information system which would: (i) integrate management information derived from the territorial planning, pre-investment and investment systems manager b y SEGEPLAN; (ii) capture and organize strategic territorial information produced by third parties in the country; and (iii)facilitate access to such information in a decentralized manner to decision makers, researchers and the general public through an electronic system and an active information dissemination strategy.
64. Subcomponent 2.4. Disclosure, awareness and training. This subcomponent would create awareness and train key public institution’s staf f (Municipal Planning Units, Departmental Councils, Ministerial Planning Units, etc) and relevant private actors in the implementation o f the Territorial Management Model. The Project would finance: awareness campaigns directed to political actors; training to public institution’s technical staff and NGOs; and the active disclosure o f territorial strategic information to private and public actors.
Outputs of Component 2
The 2009 Public Investment Program proposal reflects strategic investments derived from the Territorial Planning in at least four o f the Program Departments; 30% o f the participating Municipal Planning Offices have a Territorial Management Plan; and SEGEPLAN has a strategic information management system operating in a decentralized manner in the eight Program Departments.
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Component 3: Management, Monitoring and Evaluation (US$2.82 million, WF3 would finance US$1.22 million).
65. The objective o f this component i s to ensure that program management capacity i s in place and that an effective monitoring and evaluation system i s established and maintained. Towards this goal, SEGEPLAN would lead an Investment Coordinating Committee comprising representatives f rom the Ministry o f Finance, the co-executing agencies (SEGEPLAN, MINECO and FIS) and the Commission against Discrimination and Racism (see Annex 6 for a description o f responsibilities and arrangements). This specific component would finance a general management system, including monitoring and evaluation activities.
66. Management, Monitoring and Evaluation System (US$1.9 million, WB would finance US$0.9 million). The overall objective o f this component i s to monitor and evaluate the program in an effective, efficient and transparent manner. The M&E system w i l l also broaden capacity in the respective co-executing agencies and provide a platform for participation by stakeholders. In addition, the M&E system should be accessible to the public.
67. The Program’s diversity o f components and activities, execution by several institutions, and broad geographical coverage has implications for the M&E system. T o the extent possible, the Program’s M&E system w i l l draw upon capacity (human, equipment, data and other information) o f existing M&E systems in the respective co-executing institutions. Design and implementation o f the M&E system w i l l be coordinated with ongoing M&E efforts for WB and other programs, and national initiatives to improve M&E systems. I t is also anticipated that this program w i l l have a significant “learning-by-doing” dimension. Thus, the M&E system should provide real time infomation on individual components and activities and be aggregated in a systematic manner, thereby providing feedback to help adjust (if needed) aspects o f the program in order to maximize i t s effectiveness. Establishing relevant baselines w i l l be a critical part o f the M&E system.
68. M&E Management: as part o f the program coordination team, to be housed in SEGEPLAN, there w i l l be a group responsible for coordinating and assisting (where needed) M&E efforts at the respective co-executing institutions (including the collection o f al l studies, surveys, indicators) and also responsible for overall program-wide M&E. Each co-executing institution wi l l have a M&E unit. By nature o f i t s focus on community investment programs, FIS has an experienced M&E unit. The other co-executing institutions have only very limited M&E capacity and w i l l require technical and financial assistance to upgrade their systems.
69. Monitoring: the focus o f monitoring w i l l be to assure the transparency, efficiency and equity o f Program expenditures, and to track key input and output indicators for individual components and activities. Special attention needs to be devoted to monitoring the processes involved in selecting beneficiaries and for beneficiaries selecting the project - notably wi th relation to indigenous groups. The monitoring w i l l be carried out using budget information and periodic surveys.
70. Evaluation: the focus o f project-wide impact evaluation w i l l be to measure the impacts o f the project’s individual components and activities and the overall project on project participants
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in the selected areas - especially among indigenous groups. I t was decided that evaluations focus specifically on the before and after conditions for project participants.
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Annex 5: Program Costs GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT
PROGRAM
IADB WB Total us us us Program Cost B y Component and/or
Component 2: Public Management 2.1 1.4 3.5 for Competitiveness
Component 3: Management, 1.6 1.2 2.8 Monitoring and Evaluation, Audits
Total Cost 30.0 29.9 59.9 Front-end Fee 0.1 0.1
Total Financing Required 30.0 30.0 60.0 Figures are rounded
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Annex 6: Implementation Arrangements
GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM
Partnership arrangements
1. The program would be implemented through a parallel financing with the Inter-American Development Bank. Both Banks would work wi th the same Operational Manual, the same financial management and procurement procedures that have been agreed during project preparation. A common audit would be carried out. Both Banks w i l l carry out together an annual project supervision mission during which the annual implementation plan would be discussed and agreed upon with SEGEPLAN and the co-executing agencies. During the same mission, the expenditures to be financed by each Bank would be identified.
Institutional and implementation arrangements
2. The Program Board o f Directors (PBD). The Government Program w i l l be overseen by a Board o f Directors composed o f the Secretary for Planning (SEGEPLAN), the Vice-Minister for Small and Medium Enterprises (MINECO), the Vice-Minister for Communications (CIV), the Manager o f FIS, a representative o f the indigenous private sector, a representative o f PRONACOM (Private Sector), a representative o f the Center for Cooperate Social Responsibility and a representative o f Chamber o f Financial Institutions. The program coordinator w i l l be the executive secretary o f the Board.
2. The PBD i s the highest decision-making instance o f the program. The objective o f creating the PBD is : (i) to have an instance for strategic direction and private/public support; (ii) make decision-making within the program transparent for the indigenous community and private sector; and (iii) create an institutional space where public and private sectors can exchange knowledge, experience and ideas as wel l as create strategic alliances.
3. The principal functions o f the PBD are: (i) provide political support to the program; (ii) approve annual operational plans and budgets; (iii) promote collective learning experiences; and (iv) advise on the strategic directions o f the program.
4. Program Coordination. The Program would be coordinated by SEGEPLAN that w i l l be responsible for program planning, programming, implementation and financial administration, communications and monitoring and evaluation. No project implementation unit w i l l be created, but the existing units within SEGEPLAN wil l be strengthened wi th consultants and advisors. The program coordinator w i l l be housed within SEGEPLAN and w i l l have a small technical team responsible for technical issues, monitoring and evaluation and communications. The Directorate for Finance w i l l also be strengthened and a procurement advisor wi l l assist the Administrative Directorate.
5. Investment Coordination Committee. (ICC) comprises technical representatives of the co- executing agencies o f the program. ICC wil l be composed o f technical staff f rom SEGEPLAN, MINECO, FIS and FONDETEL/ COPRE/CONCYT as wel l as the program coordinator. T o
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create a direct channel o f communications between the project and the social partners, in particular indigenous entrepreneurs and groups, a member o f the Commission against Discrimination and Racism (CODISRA) would attend ICC meetings.
6. ICC’s main functions are: (i) the supervision of the implementation o f the investments; (ii) the elaboration o f annual operative plans; and (iii) to review and approve the business plans proposed within the investment components 1.1- 1.4.
7. Guidance Groups are a mechanism for coordination, learning and social monitoring at the departmental level. To ensure involvement and participation o f indigenous people in the implementation of the project, the government w i l l assist these facilitating groups o f indigenous leaders in three major towns (Quetzaltenago, Totonicaphn and Cobhn) in accordance to the major cultural and ethnic characteristics o f the program geographical area. These Guidance Groups w i l l be local organizations, enterprise incubators, producer groups, processors and commercial enterprises that wi l l be invited by SEGEPLAN to establish themselves into social interlocutors for the program as well as for the indigenous population. These groups w i l l be main channels o f communication, participation and involvement o f the indigenous groups (see indigenous development framework in Annex 10). A grievance mechanism i s being developed and w i l l be reflected in the operations manual.
8. For the implementation of each component or subcomponent, each agency SEGEPLAN, MINECO, FIS and C I V would as much as possible use existing organizational units to implement their component or subcomponent. Each o f the organizational units in charge o f the component wi l l : (i) elaborate an annual operational plan (POA) including the procurement plan and assure i t s implementation; (ii) develop some program specific procedures to be included in the operational manuals; (iii) ensure adequate financial management and prepare quarterly FMRs; (iv) ensure adequate monitoring; (v) facilitate the auditing process; and (vi) present al l the management, budgetary, financial and accounting reports required b y the P M C and the Banks, The fol lowing units w i l l implement the component:
9. Subcomponent 1.1 : Investments in Productive Supplv Chains. MINECO - The Vice- Ministry o f Micro, Small and Medium Enterprises would carry out this subcomponent. The Vice Ministry w i l l subcontract al l activities to specialized institutions, consulting f i r m s or NGOs. This includes the provision o f market intelligence, selection and evaluation o f proposals, presentation of the proposals to the I C C and follow-up on the implementation o f the approved proposals. The Vice-Ministry to carry out the sub-contracting process w i l l be strengthened with some consultants to oversee the implementation o f the contracts.
10. Subcomponent 1.2. Financial Support to Productive Supply Chains MINECO - The Vice-Ministry o f Micro, Small and Medium Enterprises would establish a trust fund (fdeicorniso) responsible for channeling funds to eligible financial institutions and for monitoring the use o f such funds.
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DIAGRAM 1
I
Program Board of Directors
Program Coordination in SEGEPLAN
+
Market intelligence technical
assistance, seed capital , financial
services
Public and Collective Productive
Infrastructure
Installation of phone and
internet connections in
rural areas
New Territorial Management Model and
communication
t T T
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11. Subcomponent 1.3. Local public and collective investments in economic infrastructure. FIS would implement the component according to the same rules and regulations as i t s main program. FIS would transfer funds to municipalities, federations o f municipalities and producer associations to carry out the productive investments. FIS w i l l use i t s own operations manual, the management information system, the existing support mechanisms for community capacity building and the environmental monitoring system.
12. FIS w i l l make some modifications to i t s implementation manual to adjust i t s procedures, tools and project cycle processing to fit the needs o f the program. Changes include: (i) eligibility criteria for proposals; (ii) the content o f the proposal application template; (iii) the maintenance requirements; (iv) the co-financing arrangements for municipal investments; (v) the conditions in which the investments have to be carried out b y the municipalities and the communities; (vi) the different steps in the processing of the program cycle; (vii) the adoption o f the FIS capacity building program to the Maya cosmo-vision and the use o f indigenous languages; (viii) the form, opportunity and quantity o f information to be provided to the SEGEPLAN; and (ix) monitoring and evaluation mechanisms.
13. Subcomponent 1.4. Information and communications technology investments This subcomponent wi l l be formally implemented by C I V E O N D E T E L which wil l recruit additional staff to oversee and manage all administrative, procurement and financial arrangements implemented under this subcomponent. FONDETEL wi l l add some additional staf f on a contract basis to assist with the implementation o f the telephony and Internet POP elements, especially the O B A activities. Discussions are underway in the Digi ta l Div ide Commission (Le. FONDETEWCIV, COPRE, CONCYT, PRONACOM and SEGEPLAN) regarding details o f the scope, nature, financing, management and implementation o f the pi lot telecenters. COPRE wil l play a leading role in the selection o f where the Internet POP pi lot telecenters w i l l be located. This element would also assist FONDETEL to restructure and to be able to more effectively carry out and supervise the implementation, including monitoring and evaluation activities o f the OBA tenders, which i s a substantial increase in work load. Institutional arrangements for this subcomponent are detailed in the framework agreements and in the operational manual.
14. Component 2 - Management for Territorial Competitiveness SEGEPLAN - the Sub- secretariat o f Territorial Policies would be in charge o f implementing this component and would contract the staff, consultants, f i r m s or NGOs to carry out al l program-related activities.
15. Component 3: Management, Monitoring and Evaluation The participating co-executing agencies would send al l information collected for the respective subcomponents, including monitoring and evaluation results, to the SEGEPLAN for consolidation. Project-wide impact evaluations w i l l be carried out by consultants, andor f i rms, NGOs, Universities. SEGEPLAN w i l l take primary responsibility for the elaboration o f this component that w i l l support the program’s objectives as well as the effective implementation o f al l components. The proposed program for managing information systems and monitoring and evaluation w i l l be formally endorsed b y the Board and carried out by consultants, andor f i rms, NGOs, universities through competitively awarded contracts supervised by SEGEPLAN. In view o f the particular importance o f inter-cultural communication and o f indigenous participation in the program,
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SEGEPLAN w i l l organize periodic consultations wi th stakeholders, including representatives of indigenous groups.
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Annex 7: Financial Management and Disbursement Arrangements
GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM
Organizational Arrangements
1. The Borrower w i l l be the Republic o f Guatemala, represented by the Ministry o f Finance (MINFIN). Overall project coordination and administration w i l l fal l under SEGEPLAN, but specific components w i l l be executed directly b y SEGEPLAN, FIS, M INECO and C I V E O N D E T E L (co-executing agencies) and they w i l l be directly in charge o f financial management (FM) tasks for their respective components. These w i l l basically include: (i) budget formulation and monitoring; (ii) cash f low management (SEGEPLAN wil l process loan withdrawal applications); (iii) maintenance o f accounting records, (iv) preparation o f interim and year-end financial reports (SEGEPLAN w i l l consolidate them), (v) administration o f underlying information systems, and (vi) arranging for execution o f external audits (SEGEPLAN wil l contract them).
2. Each agency w i l l carry out FM implementation o f their part o f the project; SEGEPLAN w i l l be the first contact point in FM matters with the Project and w i l l carry out financial consolidation, overall internal control, and FM supervision functions for the project.
3. On the whole, the financial management arrangements for the proposed Project are sound, but the co-executing agencies w i l l need different levels o f strengthening to implement a Bank financed operation. This, together wi th the project complexity (four separate leading co- executing agencies wi th additional institutions involved) and the fact that SEGEPLAN has no relevant FM coordination experience, puts the FM risk at a substantial level. The proposed mitigation measures and supervision plan are designed to help reduce identified r isks and weaknesses. FM risk assessment for each agency and mitigation measures included in the FM action plan are detailed in Annex 7A.
Budget Planning
4. The project’s annual budget formulation and monitoring processes w i l l be prepared annually b y the co-executing agencies (including i t s multi-annual budget), as follows: The aggregate medium-term project expenditures w i l l be incorporated by each co-executing agency into i t s multi-annual budget, which wil l inform the annual budget formulation process. Between January and April o f each year, each co-executing agency w i l l prepare its tentative investment program for the next year. The program should be consistent wi th the budget pol icy provided b y MINFIN, be incorporated into the national public investment system (SNIP), and -once approved- be reflected in each entity’s budget proposal. This budget, in turn, w i l l be incorporated b y MINFIN into the general State budget for i t s submittal to Congress in September .
5. The annual budget information w i l l be consolidated by SEGEPLAN which w i l l accordingly inform the Bank.
55
Flow o f funds
6. WB Disbursement Method. At the time of the FM assessment, existing capacity i s not to the point where the advance method can be accepted; however, there i s in place a minimum FM capacity to support disbursing under direct payments or reimbursement against records. The advance method should however not be discarded because the Borrower has expressed its interest in using i t for i t s obvious benefits, which in turn are inherent incentives for the Borrower to upgrade i t s current FM capacity. Hence, the following disbursement methods are proposed:
(1) For OBA contracts: Direct payments against records. O B A tenders w i l l be paid over 3-4 payments on the basis o f milestones. First payment i s about 20% subject signing contract and bond. The remaining percentages are paid over 2-3 payments linked to meeting build-out and service requirements. Each payment i s made after FONDETEL verifies compliance with the milestone and provides the required/associated documents -- Le. signing o f contract, certificatiodverification build-out requirements. Detailed payment procedures are incorporated in the Framework Agreement between the coordinating entity - SEGEPLAN - and the implementing agency - C I V F O N D E T E L and are in the Operational Manual.
(2) For other expenditures, until the Borrower has strengthened the financial management system for the Project, so as to manage advance disbursements supported b y summary reports, in form and substance satisfactory to the Bank: direct payments or reimbursements against records.
(3) For other expenditures, after the Borrower has strengthened the financial management system for the Project, so as to manage advance disbursements supported by summary reports, in form and substance satisfactory to the Bank: Advance payments to designated account against summary reports.
7. WB Designated Account. Under method (3) , MLNFIN’ s National Treasury Directorate (Treasury) w i l l open and maintain a segregated account in U S Dollars in the Bank o f Guatemala (BANGUAT), to be used exclusively for deposits and withdrawals o f loan proceeds for eligible expenditures. After the designated account has been opened, SEGEPLAN w i l l submit its f i rst disbursement request to the WB for the advance. For subsequent withdrawals, SEGEPLAN w i l l submit each disbursement request along with the summary report (statement o f expenditure - SOE-) documenting eligible expenditures made. At any time, the undocumented advance to the designated account cannot exceed the authorized allocation to be established in the WB’s Disbursement Letter (indicatively US$3 million, which could be modified in accordance with changing circumstances and the Bank’s authorization via amendment to the Letter).
8. Each agency would open an operational account in Quetzales (“cuenta hija”) that would receive transfers of funds from the Designated Account for subsequent payment to providers o f eligible expenditures. The operational accounts would function as rotating funds with periodic advances and documentation o f expenditures.
9. one year before signing o f the Loan Agreement.
Retroactive Financing of US$2 mi l l ion wi l l be allowed for eligible expenditures up to
56
Disbursement Schedule
1. Goods, services, consulting services and
2. Goods, works, services,‘consulting community grants under Component 1.1.
services and community grants under ComDonent 1.3
10. Loan proceeds will. be disbursed against the expenditure categories:
5,200,000 100%
6,000,000 100%
I
3. Goods, works, services and consultants’ services under Component 1.4 4. Goods, consulting services and operational costs under Component 2 5. Goods, consulting services and operational costs under Component 3 6. Unallocated 1 1. Front-end fee
Loan Amount
(US$)
% of Expenditures to be Financed Category
15,400,000 100%
1,200,000 100%
900,000 100%
1,225,000 75.000
Total 1 30,000,000 1 1 1. Community Grants for component 1.1 are grants by MINECO (through entrepreneurial service providers) to producer organizations as seed capital for investments and variable costs included in the business plans.
12. collective and public infrastructure investments foreseen in the business plans. Services are non-consulting services such as training.
Community Grants for component 1.3.are grants by FIS to producer groups to finance the
13. Operating costs are costs for the operation o f the co-executing agencies such as: transport costs, utilities, office supplies, travel and per diem, communications, operational salaries and labor, repairs and maintenance.
Accounting and Financial Reporting
14. Accounting Policies and Procedures. The main FM regulatory framework for the project w i l l consist o f (i) the Organic Budget L a w (LOP) and i t s Regulations, which norm the public sector FM systems, i.e. budget, accounting, treasury, and public credit; (ii) the annual L a w o f the General State Budget; and (iii) the co-executing agencies’ manuals based upon the cited laws. Project-specific FM arrangements that are not contemplated in the documents cited above w i l l be documented in a concise FM section o f the project’s operational manual. Among others, specific reference w i l l be made to: (i) the role of SEGEPLAN to consolidate expenses incurred and submit justification o f expenditures to the Bank; (ii) the inter-institutional internal controls (e.g., financial records and reporting consolidation terms and timing and format o f those reports)
57
related to the participating agencies; (iii) management o f subprojects; and (iv) the formats o f project financial and audit reports.
15. Information Systems. All co-executing agencies should record transactions into the Integrated FM System (SIAF), and i t s integrated accounting system (SICOIN-WEB). The transactions w i l l be recorded ex-post (“regularizaci6n”) into the Government’s system. Some agencies (notably the FIS) already have project-specific systems that would be used for the Project, but always making sure that transactions are reflected in SICOIN-WEB. For consolidation and supervision purposes, SEGEPLAN should establish an information system to keep aggregate project accounts.
16. The proposed Project f low o f information i s presented below:
World Bank u (in FM
coordinating role)
1.1 and 1.2
17. Financial Reports. On a semiannual basis, SEGEPLAN w i l l prepare and submit to the WB an unaudited interim financial monitoring report (FMR) containing: (i) a statement o f sources and uses o f funds and cash balances (with expenditures classified by subcomponent); (ii) a statement o f budget execution per subcomponent and co-executing agency (with expenditures classified by the major budgetary accounts); and (iii) a special account activity statement (including a copy o f the bank statement). The FMRs w i l l be submitted not later than 45 days after the end o f each semester.
18. On an annual basis, SEGEPLAN w i l l prepare project financial statements including cumulative figures, for the year and as o f the end o f that year, o f the financial statements cited in the previous paragraph. The financial statements wi l l also include explanatory notes in accordance with the Cash Basis International Public Sector Accounting Standard (IPSAS), and Borrower’s assertion that loan funds were used in accordance with the intended purposes as specified in the Loan Agreement. These financial statements, once audited, wi l l be submitted to
58
the WB not later than four months after the end o f the Government’s fiscal year (which equals the calendar year).
19. The supporting documentation o f the quarterly and annual financial statements wi l l be maintained in each co-executing agency’s premises, and made easily accessible to WB supervision missions and to external auditors. SEGEPLAN w i l l keep adequate records to identify each transaction made by the co-executing agencies.
Audit Arrangements
20. Internal Audit. In the course o f their regular internal audit activities vis-a-vis the institutional budget, co-executing agencies’ internal auditors may include project activities in their annual work plans. Each agency w i l l provide the SEGEPLAN and WB with copies o f internal audit reports covering project activities and financial transactions. The SEGEPLAN should have a project-specific internal auditor as well.
21. SEGEPLAN should present the above mentioned internal control reports for the consideration o f the Program Board o f Directors and i t should fol low up on the auditors’ recommendations.
22. External Audit. The annual project financial statements prepared by SEGEPLAN w i l l be audited following International Standards on Auditing (ISA), b y an independent firm (or the Controller General o f Accounts, subject to prior agreement wi th the Bank) and in accordance with terms of reference both acceptable to the WB. The audit opinion covering project financial statements w i l l contain a reference to the eligibility o f expenditures.
23. In addition, memoranda on internal controls (“management letters”) w i l l be produced on a semiannual basis. The interim internal control reports should be presented b y SEGEPLAN for the consideration o f the Program Board o f Directors and SEGEPLAN should follow up on co- executing agencies compliance with the external auditor’s recommendations.
24. The audit work described above can be financed with loan proceeds. SEGEPLAN w i l l arrange for the first external audit within three months after loan effectiveness. Each audit engagement i s expected to cover at least two years.
25. (Annex 7.A) has been established to complete project readiness in FM aspects.
Financial Management Action Plan. As part o f project preparation an Action Plan
26. FM Supervision Plan. A FM Specialist should perform a supervision mission prior to effectiveness. After effectiveness, the FM Specialist must review the annual audit reports, should review the financial sections o f the semiannual FMRs, and should perform at least one supervision mission per year.
59
Annex 7.A.: Financial Management Action Plan
No specific mitigation measure identified
Provide Bank related training to administrative staff involved in project execution
a) Review reporting function and budgetary classification of SICOIN-WEB for project purposes.
b) Set up operational account and related controls (reconciliation of balances and advances)
No specific mitigation measure identified
Strengthening of Financial Administration Unit to handle project incremental transactions.
Project execution period exceeds current lifetime of co-executing agency..
No specific mitigation measure identified
a) Set up system for swift access to SICOIN-WEB.
b) Set up operational account
No specific mitigation measure identified
No specific mitigation measure identified
?io specific mitigation measure identified
Provide Bank related training to administrative staff involved in project execution.
a) Review reporting function and budgetary classification of SICOIN-WEB for project purposes.
b) Set up operational account and related controls (reconciliation of balances and advances)
No specific mitigation measure identified
Strengthening of Financial Administration Unit to handle project incremental transactions.
No specific mitigation measure identified
Provide Bank related training to administrative staff involved in project execution
a) Review reporting function and budgetary classification of SICOIN-WEB for project purposes.
b) Set up operational account and related controls (reconciliation of balances and advances)
Fi l l Internal Audit position
Strengthening of Financial Administration Unit to handle project incremental transactions.
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FM Risk Matrix
Substantial Moderate
Legal Structure
Experience in Bank financed projects Accounting & Financial Reporting Framework Internal Control System/ Internal Control Mechanism
Staffing and organizational FM structure
Moderate
SEGEPLAN (Coordination
role) SEGEPLAN FIS Substantial
Moderate (has Substantial experience with
other financiers) Substantial Substantial
Substantial
Moderate
Substantial
Substantial
Substantial
Substantial
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Annex 8: Procurement Arrangements
GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM
A. General
1. Procurement for the proposed project would be carried out in accordance with the Wor ld Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004; and “Guidelines: Selection and Employment o f Consultants b y Wor ld Bank Borrowers” dated M a y 2004, and the provisions stipulated in the Legal Agreement. The general description o f various items under different expenditure categories are described below. For each contract to be financed b y the Loan, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan w i l l be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
2. Procurement of Works: Works procured under this project, would include: warehouses, processing facilities, irrigation systems (including wel l drilling), electrification (network connection, mini power stations and renewable power sources), telephone and internet connections infrastructure, rehabilitation o f rural roads and bridges, labor training facilities, nurseries, tourism facilities (including trails, viewpoints, hostels, etc.). The procurement w i l l be done using the Bank’s Standard Bidding Documents (SBD) for al l ICB and National SBD agreed with (or satisfactory to) the Bank for National Competitive Bidding and Shopping.
3. Subcomponent 1.4 would be achieved primarily through a competitive award o f subsidies through an output-based aid (OBA) tender process to private-sector operators that would be responsible for installing, operating and maintaining the new ICT infrastructure on a commercial basis. The OBA tenders would be carried out in two to four phases over a two-year period. Procurement w i l l be done using the Bank’s approved documents to ensure that the Bank’s procurement guidelines are adhered to. O B A mechanisms wil l be clearly described in the Operational Manual.
4. Procurement of Goods: Goods procured under this project would include: general basic equipment for premises, furniture, computers, office equipment, vehicles, etc. The procurement w i l l be done using Bank’s SBD for all I C B and National SBD agreed with (or satisfactory to) the Bank for National Competitive Bidding and Shopping.
5. Procurement of non-consulting services: N o n consulting services include: training related activities such as hotel, transport catering services. Also, some services related to the communication/awareness campaign are considered non-consulting services. The Bank’s draft bidding documents for non-consulting services wil l be used for NCB and the Requests for Quotations for goods w i l l be adapted when shopping procedures apply.
62
6. Selection of Consultants: Services to be contracted under this project would include: awareness campaigns; training to public institution’s technical staff and NGOs; capacity building on infrastructure maintenance; strategic information; market intelligence either through a specialized firm or an NGO; pre-investment studies; technical assistance in production, organization, administration, processing and commercialization; formalization, certification and association o f small enterprises; supervision .of works and technical assistance; communications strategy; impact evaluation (either b y f i r m s or Universities); economic and financial feasibilities studies, etc.
7. contract may be composed entirely o f national consultants in accordance wi th the provisions o f paragraph 2.7 o f the Consultant Guidelines.
Short l i s ts o f consultants for services estimated to cost less than $200,000 equivalent per
8. Operational Manual.
The process for contracting the Technical Assistance wil l be clearly described in the
9. Community Participation: Goods, works and technical services under Community Subprojects located in remote rural areas estimated to cost less than $10,000 equivalent per contract, when national shopping i s not possible may be procured through direct contracting o f providers available in the area.
10. Construction could be done directly b y the community or by contracting a firm, depending on the level o f complexity. For collective projects, resources would be transferred to the association and the construction would be done directly by the producer organization. If the sub-project i s complex, FIS would ensure that the producer organization would contract a firm.
11. Operational Costs: Operational costs which would be financed by the project would be procured using the co-executing agency’s administrative procedures which were reviewed and found acceptable to the Bank.
12. Others: Seed capital for investments and variable costs under Subcomponent 1.1; and seeds capital for the preventive maintenance fund (subcomponent 1.3). The process wi l l be clearly described in the Operational Manual, including the l i s t o f ineligible costs.
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Table A Prior Review Thresholds
Contract value threshold( US$ thousands)
Expenditure category
Procurement method ICB
Contracts subject to pr ior review All contracts > 1,500
< 1,500 and 2250 .........................................................
NCB All contracts Works ( Including OBA contracts)
1250 Shopping First two processes each calendar year (request for quotations and evaluation reports)
~~
Goods
>150 1150 and >SO ......................................................... Al l contracts ICB
>200 1200 and >lo0 ......................................................... QCBS
QCBS/QBS/LCS LCSICQ
.................................................
.................................................
Whole process for each contract above $100,000 and all single source contracts First two processes each calendar year for each selection method.
Consulting (firms) 1100
Consulting (individual)
Section V in the Guidelines
All cases above US$50,000 and all single- source contracts
Direct contracting All cases L US$ 10,000
All cases regardless of the amounts involved Agreements
s: Thresholds for consulting include the sum ( N theoriginal contract and all extensions.
13. All single-source selection o f goods and works, regardless of the amount of the contract, w i l l be subject to prior review b y the Bank, except for the procurement by communities o f works, goods and other items when national shopping i s not possible and in amounts not to exceed US$lO,OOO. Internal Audit o f the concerned institution must monitor these cases closely. On a quarterly basis a detailed report including the relevant justification must be submitted to the Bank for review. Those cases which are not justified wi l l not be eligible for financing.
14. experience in Bank’s rules and regulations.
The prior review thresholds wi l l be increased when the co-executing agencies gain
64
B. Assessment of the agency’s capacity to implement procurement
15. SEGEPLAN would coordinate the daily workings o f the program. In order to comply with these functions, SEGEPLAN would be strengthened by: a coordinator, a monitoring and evaluation specialist, an indigenous specialist, a rural development specialist, a financial management specialist and a procurement specialist.
16. Each co-executing agency (SEGEPLAN, MINECO, FIS and CIVEONDETEL) would be responsible for the physical implementation o f i t s own component. Each agency would carry out i t s own procurement. Experienced units within each agency would assist wi th the implementation o f more complex procurement.
Component 1 : Productive Chains
17. SubcomDonent 1.1 : Entrepreneurial Development Services. M I N E C O - The Vice- Ministry o f Micro, Small and Medium Enterprises would carry out this Subcomponent. The Vice Ministry w i l l subcontract all activities to specialized institutions, consulting firms or NGOs. This includes the provision o f market intelligence, selection and evaluation o f proposals, presentation o f the proposals to the Investment Coordination Committee (ICC) and follow-up on the implementation o f the approved proposals.
18. Subcomponent 1.3. Productive Investments b y the Social Investment Fund. FIS would implement the component according to the same rules and regulations as i t s main program. FIS could transfer funds to producer associations to carry out the productive investments or hire contractors.
19. Subcomponent 1.4. Information and communications technology investments This subcomponent w i l l be formally implemented by C IVRONDETEL that w i l l recruit additional staff to oversee and manage al l administrative, procurement and financial arrangements implemented under this subcomponent. C IVRONDETEL wil l add some additional staff on a contract basis to assist with the implementation o f the telephony and Internet POP elements, especially the O B A activities.
20. Component 2 - Territorial PlanninR SEGEPLAN the Sub-secretariat o f Territorial Policies would be in charge o f implementing this component and would contract the staff, consultants, f i r m s or NGOs to carry out al l program-related activities.
21. Component 3: Management, MonitorinP and Evaluation would be implemented b y al l the participating agencies that would send al l the monitoring results to SEGEPLAN for consolidation. External impact evaluations w i l l be carried out by consulting f i r m s or Universities.
22. The Operations Manual w i l l include, in addition to the procurement procedures, the SBDs to be used for each procurement method, as wel l as model contracts for works and goods procured.
65
An assessment o f the capacity o f each o f the co-executing agencies to implement procurement actions for the project has been carried out on November 2005. The assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and the Ministry’s relevant central unit for administration and finance.
C. Issues and risks concerning procurement
23. The issues and risks concerning the procurement component for implementation o f the project have been identified and include: (i) very little experience and knowledge o f the Bank’s procurement rules and procedures b y CIVFONDETEL, SEGEPLAN and MINECO. In general these agencies are very weak in procurement; (ii) although C I V F O N D E T E L has l imited experience with OBA contracting they are weak in contract administration which i s the basis o f a successful O B A approach; and (iii) in the case o f productive investments by the Social Investment Fund (FIS), although the entity has experience in demand driven activities, a mechanism w i l l have to be devised to ensure compliance with the Bank’s procedures, specifically implementation of the supply chain scheme. Special attention must be paid to those cases where funds are going to be transferred to others who wil l be responsible to carry out the productive investments but where FIS w i l l s t i l l be accountable for correct and transparent use o f the Bank funds.
Corrective measures
24. The corrective measures which have been agreed include: (i) a clear description in the procurement section o f the Operations Manual o f the mechanisms, procedures standard bidding documents, etc to be applied in order to ensure fiduciary compliance by all co-executing agencies; (ii) CIVFONDETEL w i l l have to be strengthened in al l aspects o f procurement including but not l imited to the application o f O B A contracting but especially in contract administration; (iii) ensure that the use funds for which FIS w i l l be accountable for, especially when transferred to others are in compliance with the Bank’s fiduciary requirements and are properly managed and monitored; (iv) ensure that SEGEPLAN hires an experienced procurement officer to monitor, advice and assist a l l co-executing agencies on procurement issues; (v) all four co-executing agencies must have experienced procurement staff to be dedicated ful ly to the project. The procurement officers w i l l be responsible for procurement planning, monitoring and implementation in their respective components; and (vi) a l l agencies must implement a procurement monitoring system.
25. The Borrower w i l l ensure that the co-executing agencies are staffed before starting the implementation o f the Project and at all times thereafter, with professional staff, including a procurement officer, in numbers and with experience and qualifications acceptable to the Bank, operating under terms o f reference satisfactory to the Bank.
26. The overall project risk for procurement i s HIGH
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Procurement Plan
1 2
Ref. Contract No. (Description)
Telephone and Internet Services
27. The Borrower, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on February 23, 2006 and i s available at SEGEPLAN. I t w i l l also be available in the Project’s database and in the Bank’s external website. The Procurement Plan w i l l be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
US$12.0 Output- N o N o Yes Aug-6,2006 Five mi l l ion Based Aid separate
lots
D. Frequencv of Procurement Supervision
28. In addition to the prior review supervision to be carried out f rom Bank offices, the capacity assessment o f the co-executing agency has recommended 2 supervision missions the first year and once a year thereafter to visit the field to carry out post review o f procurement actions.
Attachment 1
Details of the Procurement Arrangement involving international competition.
Goods and Works and non consulting services.
(a) L i s t o f contract Packages which w i l l be procured following ICB and direct contracting:
(b) All I C B Contracts and al l direct contracting for Goods and works wi l l be subject to prior review by the Bank.
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Consulting Services.
- 1 2 3 4 5 6 7
Ref. No. Description of Estimated Selection Review Expected Comments Assignment Cost Method by Bank Proposals
(Prior I Submission Post) Date
None
(a) List of Consulting Assignments with short-list of international f i rms.
(b) Consultancy services estimated to cost above U S $ 200,000 per contract and all Single Source selection o f consultants (firms) w i l l be subject to prior review by the Bank.
(c) Short l ists composed entirely of national consultants: Short l i s ts of consultants for services estimated to cost less than U S $ 200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.
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Annex 9: Economic and Financial Analysis
Indicators
GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT PROGRAM
Present Value o f Flows in Base-line Scenario Economic Analvsis Financial Analvsis
(1) Cost Benefit Analysis - Productive Supply Chains and Infrastructure
US$4.4 M i l l i on Net Benefits US$6.7 M i l l i on
13% Internal Rate of Return 9-13%
Introduction
1. Given that the program would support business opportunities to be identified during implementation as subproject proposals, the program does not lend itself to detailed ex-ante cost- benefit analysis. Although the strategic production chains are generally known in light of national competitiveness assessments and experience o f producers’ associations and/or ongoing projects, i t would be the interested producer groups and market partners who would ultimately determine the product, scope and m i x o f investments. To obtain a broad picture, indicative models o f potential subproject initiatives were analyzed, based on primary and secondary information. However, more accurate and representative economic and financial estimates should be generated, during program start-up activities, wi th primary information f rom a larger sample o f preliminary subproject proposals. Standard procedures should be applied for ex-ante and ex-post subproject evaluation. Income generating subprojects and/or public infrastructure subprojects would be supported as long as their estimated rate o f return i s 12 percent or higher. Thus, appropriate productiodvalue added indicators should be identified arid empirically estimated even for public infrastructure subprojects, in l ine with production-chain analysis.
Ex-ante Evaluation
2. Indicative models o f potential subproject initiatives were analyzed based on primary and secondary information. Indicative economic, financial and fiscal impact estimates were obtained. Estimated parameters include: annual net benefitdincome; labor generated; Net Present Value (NPV) o f benefit flows (at a 10% annual discount rate); and Internal Rate o f Return (IRR). Economic and financial switching values16 of output prices were calculated. Economic feasibility analysis considered different labor costs, depending on the region and productive activity involved. Financial feasibility analysis essentially excludes in-kind contributions (such as family labor) and includes taxes. Fiscal impact analysis essentially considers a Net-Income Tax o f 30%. The results o f the analysis are shown in Tables 1, 2 and 3. Indicative models were selected and defined based on experience o f successful associative enterprises, their market prospects and
l6 Percentage changes which turn economic and financial NPV equal or lower than zero.
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future investment plans. Subproject benefits included essentially: increased net income and employment for community/group entrepreneurial subprojects; and increased benefits due to reduction o f post-harvest losses for public infrastructure subprojects. Subproject costs included purchased goods and services, contracted labor and family labor. Flows o f net benefits were calculated, from 5 to 20 years, considering the expected l i fe o f the main investment items for each model.
Handcrafts Production and Marketing. The proposal involves an associative enterprise o f 500 artisans that intends to produce around 120,000 handcrafts annually. Investments essentially involve storage facilities, basic equipment for 500 artisans and technical/marketing assistance Coffee Post-harvest Processing and Marketing. This subproject aims at increasing rural income b y adding value to coffee production, in l ine wi th requirements o f special coffee markets. The proposal involves an associative enterprise that hires work f rom 2,600 families who process around 23,200 quintals o f coffee. Investments essentially involve post-harvest facilities, machinery, vehicles and technical/ marketing assistance Coffee Production and Marketing. This subproject aims at increasing rural income by recovering coffee plantations, and establishing alliances wi th post-harvest and marketing partners. The proposal involves 25 hectares owned by 2,600 families o f various communities - eventually linked to subproject initiative described above. Investments essentially involve re-establishment o f coffee plantations and technical/marketing assistance. Lettuce Packing and Marketing. This subproject aims at increasing rural income by adding value to lettuce production, in l ine with requirements o f international markets. The proposal involves an associative enterprise that would pack and export around 200,000 kg o f lettuce. Investments essentially involve storage and packing facilities, cooling and packing machinery, vehicles and technical/marketing assistance. Potential beneficiaries would de around 260 families. Snow-Peas Packing and Marketing. This subproject aims at increasing rural income b y adding value to snow-peas production, in line wi th requirements o f international markets. The proposal involves an associative enterprise that would pack and export around 30 tons o f snow-peas. Investments essentially involve storage and packing facilities, cooling and packing machinery, vehicles and technical/marketing assistance. Potential beneficiaries would de around 200 families. Snow-Peas Production and Marketing. This subproject aims at increasing rural income b y introducing existing producer groups with water resources to snow-peas production, in line with requirements o f U S market. The proposal involves an associative enterprise that cultivates 4 timeslyear in 14 hectares, owned by 200 families. The enterprise could produce around 40 tons o f snow-peas. Investments essentially involve storage and cooling facilities, community/group irrigation systems, vehicles and technical/marketing assistance. Greenhouse Tomato Production and Marketing. This subproject aims at increasing rural income b y introducing producers with l imited land and water resources, to greenhouse tomato production for local and national markets. Greenhouse facilities would cover around 28,000 m2 and would involve 30-40 families. The enterprise could produce around 20 tons o f
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tomato, and investments would involve greenhouse facilities and technical/marketing assistance.
8) Creole Lemon Drying and Marketing. This subproject aims at increasing rural income b y establishing expanding dehydration facilities. The proposal involves an associative enterprise owned b y 430 families that would process and export around 500 tons o f dehydrated lemon. Investments essentially involve sun-drying, packing and storage facilities, vehicles and technical/marketing assistance.
9) Creole Lemon Production and Marketing. This subproject aims at increasing rural income b y establishing Creole lemon plantations. The proposal involves around 630 hectares owned by 430 families o f various communities - eventually linked to subproject described above. Investments essentially involve the establishment o f lemon plantations and technical/marketing assistance.
1O)Honey Production and Marketing. The subproject i s aimed at increasing rural income by expanding honey production wi th providing technical assistance. The proposal involves 2,000 beehives, owned by 340 families supported by an associative enterprise. Investments essentially involve the establishment o f beehives and technical/marketing assistance.
4. Indicative public infrastructure subproject models include:
1) Feeder Roads Improvement in Horticultural Production Area. This subproject would rehabilitate 10 km o f a rural road in bad conditions. The proposal envisages the establishment of a committee among beneficiary communities, which would be responsible for fund raising and road maintenance planning. The road improvement i s expected to reduce snow-peas transport losses b y 15% o f around 2,600 families with a total production area o f 84 hectares. Investments essentially include road improvement materials, machinery services and labor costs.
2) Bridge Construction in Horticultural Production Area. Harvest losses in a given season can be 100% if vehicle mobilization i s interrupted for weeks due to r iver rises or floods. Thus, building a vehicle bridge in horticultural production areas would reduce harvest losses considerably. I t i s estimated that a whole season harvest could be saved once every 10 years of 2,600 families with a horticultural production area (generally snow-peas production) o f 84 hectares. Investments essentially include bridge construction materials, services and labor costs.
71
Preliminary Program Estimates
5. Investment Demand. In Table 1, weighted average investment and credit needs were calculated per potential beneficiary family. For community/group entrepreneurial subproject models: total investment per family was US$1,520; direct program contribution per family was US$250 (of whichUS$40 or 17% was for pre-investment support and start-up technical assistance); beneficiaries’ matching contribution was US$200; medium to long-term credit demand was US$1,070; and working capital was US$780. For public infrastructure subproject models: total investment per family was US$180; program contribution per family was US$160 (of whichUS$2 or 1% was for pre-investment support and technical assistance); and beneficiaries’ matching contribution was US$20. If beneficiary population target i s 10,000 families: total investment would be US$17 Mi l l ion; direct project contribution would be US$4.1 M i l l i on (US$0.7 M i l l i on for technical assistance); beneficiaries’ matching contribution would be US$2.2 Mil l ion; medium to long-term credit demand would be U S 1 0 . 7 Mi l l ion; and working capital needs would be US$7.8 M i l l i on - i.e. US$2.0 M i l l i on if one-year short-term loan repayment periods are foreseen during a 4-year execution time span.
6. Economic Analysis. In Table 2, economic feasibility indicators and family weighted averages were calculated. In summary, average Economic IRR would be: 13% for entrepreneurial subproject models, and 13 % for public infrastructure subproject models. Average Economic NPV per family would be: US$200 for entrepreneurial subproject models; and US$20 for public infrastructure subproject models. Average employment generated would be: equivalent to 0.3 person/years for entrepreneurial subproject models; and negligible for public infrastructure subproject models. If beneficiary population target i s 10,000 families: aggregate Economic NPV would be US$2.2 Mil l ion; and aggregate employment generated would be equivalent to 3,000 persodyears.
7. Financial and Fiscal Analysis. In Table 3, financial feasibility indicators and family weighted averages were calculated. In summary, average Financial IRR would be: 13% for entrepreneurial subproject models and 9% for public infrastructure subproject models. Average Financial NPV per family would be: U S 6 5 0 for entrepreneurial subproject models; and U S 2 0 for public infrastructure subproject models. Average Fiscal NPV per family would be: US410 for entrepreneurial subproject models; and U S 7 0 for public infrastructure subproject models. I f beneficiary population target i s 10,000 families: aggregate Financial NPV would be US$6.7 Mil l ion; and aggregate Fiscal NPV would be US$4.8 Mi l l ion.
72
m u W e ,
% m U S
(2) Cost-Benefit Analysis - ICT Component
8. The fol lowing economic and financial analysis i s based on a detailed demand study that was conducted in four o f Guatemala’s poorest and most isolated rural regions (i.e. Huehuetenango, A l to Verapaz, Quiche and Peten), two o f which are included in the current program. The study i s based on the Government’s universal access strategy that seeks to reduce the digital divide in Guatemala b y eventually providing public payphones, expanding cellular phone coverage and providing Internet Points o f Presence (POPs) in al l territories. As is detailed below, the economic and financial found positive results o f the both the telephony and the Internet POP elements o f the program.
9. as shown in the following chart.
Public community phone and private lines services element i s divided into three phases
SUMMARY OF INDICATORS BY PHASE (US DOLLARS)
Phase I: Pilot Phase II Phase 111 Total Public cmmunity payphones 1,577 2,009 1,648 5,234 Private lines 6,315 6,639 5,331 18,285 POPs Internet Access 79 129 80 288 Population beneficiated 1,194,823 1,276,649 1,020,419 3,491,891
10. For the financial analysis, a 10-year evaluation period i s used, wi th a’one- to two-year o f build-out o f the infrastructure necessary to provide the services during each phase. Public community payphones and private lines program include 5,234 payphones and 18,285 private lines installed for public and development institutions in the rural villages. The Internet POPs element considers the installation o f 288 POPs in municipalities to provide broadband Internet access.
11. The estimations assume a tariff cap for long distance calls o f Q 80 cents and monthly tariff at 64 kbps access o f US$75, at 128 kbps access o f US$140 and at 256 kbps access o f US$ 270. The total benefits o f the element include the potential sales for the operators derived from the expanded access to telecommunications both in public telephones and internet POPs in rural areas. Leveraging rural funding would yield significant returns over the longer term.
12. The total costs consist o f investment costs, using a combined cellular network for 90% satellite technology and 10% for community payphone and private lines element. In case o f the Internet access POPs element the technology used i s a combination o f wireless (microwave) 90% and optical fiber in 10%. The operational, and maintenance costs o f the systems were established for each o f the elements. The subsidy necessary to implement the telephony element (separated in phases) and obtains a Net Present Value (NPV) equal to zero, using a 15% discount rate for community payphone and private lines element i s US$4.9. mi l l ion for Phase 1, US$ 7.7 mi l l ion for Phase 2 and US$7.4 million for Phase 3. In the case o f the Internet access POPs element, the necessary subsidy amount i s US$5.7 million.
76
13. For the economic analysis, the main assumptions made to calculate benefits are the savings from telephony and the savings from connectivity. This assumption i s represented b y the potential savings in transportation to a community with telephone service and the related labor time saving. This assumption implies the number o f times the inhabitant would need to travel to a community with telecommunications services wi th the only purpose o f using the service. From the demand study, an estimation o f US$2.8 per US$1 i s the saved money in transportation to a community with telephone. In case o f Internet POP’S the estimation correspond to household which declare to use Internet. The estimation o f the benefit i s US$1.25 per US$1 spent in internet access. I t i s important to mention that the potential benefit for internet access i s underestimated because this ratio does not include other important indirect benefits arising from improved access.
Telephony Costs: Phase I : US$4,9 M
Phase 11: US$7,7 M
Phase 111: US$7,4 M
Internet POP Costs: US$5,7 M
14. Taking into account these main assumptions, the economic model calculates an Economic Rate o f Return (ERR) o f 14.7% - 16.1% for the Telephony element and 32.2% for the internet POPs access element. Information technology services have wide-ranging applications in health care and education, and these are more affordable as prices fall. These indirect benefits are difficult to quantify.
Projecting revenues generated b y the commercialization o f telecommunications services in rural areas. - U S Dollar cash f low analysis - A 10-year implementation period. Net Present Value based on 15% discount rate. Based on mixed cellular and satellite technology (90-10%) and mixed microwave - satellite technology for Internet POPs component (90- 10%).
Main Assumptions of Economic Analysis
0
0
Inhabitants per household = 5; Savings per trip: Transport savings + Labor time savings = $2.8; Number o f trips per household per month = 2; Trips that represent savings = 1 Savings for information access = $1.25
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Annex 10: Safeguard Policy Issues GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT
PROGRAM
A. INDIGENOUS PEOPLES DEVELOPMENT FRAMEWORK
1. Since the objective o f the Program i s directly linked to Indigenous Peoples, the GOG has carried out an Indigenous People’s Development Framework under terms o f reference agreed upon by the Bank. The goal o f this social assessment was to evaluate the program’s potential impact on the Indigenous Peoples, to examine project alternatives where adverse effects may be significant and to prepare proposal to increase the involvement o f indigenous people into the program.
2. The Framework provides information on the indigenous population in the Program area, summarizes the legal framework related to indigenous peoples, describes the positive and negative impacts that potential beneficiaries perceive f rom the Program, and proposes some organizational arrangements to ensure their access to the benefits o f the Program. The entire document i s available in the project files, SEGEPLAN’s website, the Bank’s Infoshop and i s summarized in this annex.
3. Indigenous peoples represent 67.82% o f the population in the Program areal7, wi th the highest proportions in Sololi, Totonicapin and Alta Verapaz, where they represent more than 90%. They belong to different Mayan groups, being more numerous the KichCs, Q’eqchi, Kaqchikel, M a m and Tz’utujiles.
4. The region i s characterized by its: (i) high rurality (67.39% o f the population), (ii) high poverty levels (71.4% o f the population i s poor and 32.5% extremely poor); (iii) high land ownership inequity and subsistence farming (96% o f the producers are subsistence farmers who own 20% o f the land); (iv) lack o f skilled labor and high informality (64.5% o f the economically active population); (vi) high dependence on agriculture (57.5% o f the economically active population), followed by commerce (29.1%) and textiles (9.7%); and (vi) high dependence on local markets.
5. In order to describe the perception o f potential beneficiaries towards the Program, 15 randomly selected indigenous entrepreneurs were individually interviewed, and two focal group interviews in Quetzaltnenago and Coban were conducted. Under IADB financing a very extensive study and consultation process was carried out in the Sololi, Totonicapin areas.
6. activities. The main positive impacts are:
In general, the potential beneficiaries agree with the Program’s objectives and type of
l7 Since the Program area was not definitively defined at the moment, the social assessment was carried out in the Departments of Huehuetenango, QuichC, San Marcos, Quetzaltenango, TotonicapBn, Chimaltenango, SololB, Suchitepequez, Retalhuleu and Alta Verapaz. Seven o f them correspond to the actual Program area, and only Sacatepequez wasn’t included.
78
the association o f small producers w i l l enable them to participate in the markets where they have not had any access until now and reduce their production and marketing costs; the association o f small producers w i l l allow them to carry out social proyects w i th the profits o f the business activities; w i th the employment generation in the rural areas, there wi l l be less youth emigration to the towns and the USA and less crime; the project w i l l increase purchasing power, access to education, reduce analphabetism, and w i l l increase food security: (availability o f food, purchasing power, nutritional behavior); they w i l l be able to participate actively in decision-making and in the development process o f the municipalities; i t w i l l improve social integration b y avoiding ethnic, political and religious friction; and i t wi l l create new opportunities for the indigenous people.
7. But they are skeptical toward i t s implementation, due to past experiences where the government didn’t comply wi th i t s commitments. Employment and income generation are very high on their agenda, but they fear that the Program wil l :
(i)
(ii) (iii)
be imposed by the Government without taking into account their suggestions and wishes during design, execution and evaluation; use the indigenous people for furthering political interests; pose high barriers towards their participation (red tape, offices far f rom their locations and legal requirements that they cannot comply with, specially relating to credit and legal property); impose productive techniques not in accordance wi th their traditions; not reach communities located in distant rural areas, unless local radios and their languages are used; and not last long enough and therefore not support the necessary long term processes indigenous people need.
(iv) (v)
(vi)
8. Indigenous entrepreneurs also stated that some indigenous groups have a negative attitude towards some professional organizations of entrepreneurs (gremiales) and that there i s a lack of real partnerships between producers and middle-persons (where supply chains are operating, they heavily depend upon outside individual entrepreneurs wi th weak links to the regions).
9. framework proposes the fol lowing main recommendations:
In order to ensure access o f indigenous peoples to the benefits o f the Program, the
(i)
(ii)
To define participatory mechanisms wi th real decision making capacity and with the possibility to monitor the implementation; To give indigenous producer groups the possibility to select wi th whom to form partnerships;
79
(iii)
(iv)
To put a strong emphasis on training and capacity building o f indigenous organizations in entrepreneurial and administrative ski l ls ; and T o recognize and take into account indigenous customs, their organizations, their language, their property rights and natural resources management.
10. involvement o f indigenous groups into the Project:
Finally, the framework proposes the following measures to increase participation and
The geographical areas o f the Project are chosen in function o f the high presence o f indigenous people; The eligibility criteria for participation in the project are biased in favor o f Indigenous people; The economic activities supported by the Project are activities in which indigenous people have comparative advantage (agriculture, textiles, artisan activities); Indigenous groups w i l l participate in the management o f the Project through: (a) The creation o f a Project Management Board in which one indigenous
entrepreneur participates. (b) An Investment Coordination Committee which includes representation o f
the Commission against Discrimination and Racism. Participation in the promotion, identification o f clients, and social audits through the creation o f indigenous guidance groups in three main cities o f the program area (Quetzaltenango, Totonicapan, and Coban). The role o f these guidance groups i s to provide information and involve indigenous producers into the Project and to help them with preparing proposals; Participation in the monitoring and evaluation o f the Project through reporting to the national indigenous instances; and The Project has specific monitoring indicators referring to indigenous participation and involvement;
1 1. Other measures to increase indigenous participation include: FIS staf f w i l l undergo specific training in cultural sensitivity; the invitations to submit proposals for the project (MINECO subcomponents 1.1-1.2) w i l l be done in indigenous languages; SEGEPLAN w i l l organize a specific program information campaign focusing on indigenous people.
80
B. ENVIRONMENTAL MANAGEMENT FRAMEWORK
12. In order to help ensure the environmental soundness and sustainability o f the Program, an environmental assessment has been carried out b y the GOG under terms o f reference agreed upon b y the Bank. The assessment i s available in the project files, SEGEPLAN’s website and the Bank’s Infoshop and i s summarized in this Annex. The assessment results have been presented to a group o f environmental NGOs and institutions that have provided comments.
13. finance any category A projects proposed by the beneficiaries.
In order to have an overall environmental category B rating, the Program would not
14. The Ministry o f Environment and Natural Resources (MARN) i s the responsible agency for environmental supervision and enforcement in Guatemala. The Government has introduced the following environmental categories: category A (high environmental impact potential or risk - not financed under this program), B1 (moderate to high impact), B 2 (moderate to l ow impact) and C (low impact). The project w i l l fol low the same categorization and wi l l only finance investments o f category B 1, B 2 and C.
15. procedures o f the Project.
The Ministry o f Environment and Natural Resources has approved the environmental
16. consist basically in:
The environmental procedures that subprojects proposed by beneficiaries would fol low
Subproject proposals (profiles) would include an environmental screening document (Initial Environmental Assessment - EA). MINECO and FIS would review the proposed screening. This E A determines the possible environmental impact and the location o f the subproject ‘relative to fragile environmental zones or to territorial planning zones. In terms o f impact, i t classifies the subproject into categories Bl, B2, and C. Annex 2 in the environmental assessment provides the environmental impact classification by type o f project, work or activity.
Infrastructure projects include improvement, rehabilitation and maintenance of rural roads; capacity increase, rehabilitation and maintenance o f electricity generation and distribution; and construction o f antennae for cellular phones and distribution poles. All these subprojects are to be classified under environmental category B 1, B 2 or C.
These works have also to be classified on the basis o f the sensitivity o f the local environment. The environmental assessment provides a l i s t o f “environmentally sensitive zones” where the environmental risk i s high (for instance in function o f the biodiversity), and where even works o f category B1, B2 would not be financed.
After screening, subprojects o f Category B l and B 2 w i l l be subject to Environmental Impact Analysis (EIA) to estimate the environmental impact and
81
to introduce mitigation measures. For category C subprojects, only sector specific environmental manuals w i l l be applied.
17. Proponents of category B projects would (assisted by the Entrepreneurial Services Provider) submit the EIA to MARN that would inform the public about the contents o f the EIA and give 20 days to receive any observations or opposition manifestations. I t would also implement inspections and consultations as needed. After this process MAW would make a final resolution approving or disapproving the EIA..
18. Once approved b y MARN, MINECO would establish an environmental Verification Report that includes all activities involved in the environmental analysis and the mitigation measures that have to be implemented and budgeted for in the business plan o f the proponents. FIS operational manual has been approved by MARN and would be used as a baseline to design the environmental procedures for the subprojects financed under MINECO.
19. The environmental impact o f the I C T infrastructure improvement projects i s expected to be limited in the construction phase and negligible in the operations phase. Environmental management obligations o f the I C T service provider would be covered under the contract. These obligations would be monitored by C N .
Pest Management
20. The procedures for integrated pest management have also been established. Where the subproject would introduce new technologies that involve the introduction o f insecticides and pesticides, the Unit for Norms and Regulations o f the Ministry o f Agriculture, Livestock and Food would have to review the proposed subproject on the basis o f the fol lowing criteria:
a. Respect for the norms and regulations o f unprocessed agricultural products, animal health,
b. Integration o f environmentally acceptable pest and insect control; and c. The type and quality o f insecticides and pesticides.
21. and Bank’s negative l ist.
The subprojects w i l l use neither pesticides nor insecticides that are on the Government’s
22. The Bank w i l l finance neither insecticides nor pesticides.
82
Annex 11: Program Preparation and Supervision GUATEMALA: PROJECT TO SUPPORT THE RURAL DEVELOPMENT ECONOMIC
PROGRAM
Ana Patricia Orantes Maria Stella Pacheco L ic Rudy Galvez Dr. JosC Monsanto Juan Jose Ramirez
Planned Actual PCN review June 2,2005 Initial PID to PIC July 1,2005 Initial ISDS to PIC July 1,2005 Appraisal March 13,2006 February 6,2006 Negotiations April 10,2006 February 16-23,2006 Board/RVP approval May 16,2006 March 28,2006 Planned date o f effectiveness Planned date of mid-term review Planned closing date January 31,2012
July 2006 June 2008
Government coordinator SEGEPLAN Private sector coordinator Entrepreneurial Services and Credit MINECO Director for Infrastructure FIS Consultant CIVFONDETEL
Consultant for SEGEPLAN
Government staff and consultants who worked on the project included:
Bank staff and consultants who worked on the project included:
Name Title Unit Pierre Werbrouck Lead Agricultural Economist LCSES Stephen Brushett Lead Transport Specialist LCSFP Robert Stephens Telecommunications Specialist CITPO Pablo Bandeira Institutional Development Consultant LCSER Zhong Tong Agricultural Economist LCSER Paul B. Siege1 Rural Development Specialist LCSER Manuel Vargas Financial Management Specialist LCOAA Luis Prada Procurement Specialist LCOPR Irma Yolanda Aguila Social Development Specialist LCCGT Victor Vergara Municipal Development Specialist WBI Carlos Miranda Project Design Specialist IADB Nohora Alvarado Social Development Specialist IADB Carlos Perafan Indigenous Development Specialist IADB Sarah Almonte Financial Sector Specialist IADB Marco Zambrano Consultant Environmental Specialist Maria Clara Rodriguez Rene Rodriguez Consultant, Social Funds Dino Francescutti Economic and Financial Analyst FAO/CP Xiomara Morel Senior Finance Officer L O A G l Maria Constancia Mal10 Team Assistant LCSFP
Consultant Agricultural Specialist
83
Bank funds expended to date on program preparation: 1. Bank resources: US$322,000 2. Trust funds: U S $ 3 1,000 3. Total: US$353,000
Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$20,000 2. Estimated annual supervision cost: US$160,000
84
Annex 12: Documents in the Project File
GUATEMALA: PROJECT TO SUPPORT THE RURALOCAL DEVELOPMENT AND RURAL GROWTH PROGRAM
Bank mission reports: Identification, April 2005 Preparation, June/July 2005 Pre-Appraisal, December 2005 Appraisal, February 2006
Bank economic and sector work: Social Sectors Strategy Note, April 2004 Guatemala Policy Notes: Rural Infrastructure for Rural Development, March 2004 Implementation Completion Report for the Second Social Investment Fund Project (Report No. 29098-GU), June 2004 Guatemala Country Economic Memorandum - Challenges to Higher Economic Growth (Report No. 29145-GT), March 2005 Country Assistance Strategy for the Republic of Guatemala (Report No. 31776-GT), April 2005
Agenda EstratCgica - Gabinete de Desarrollo Rural: Gobierno de Guatemala 2005
Un Arbol Fuerte de Muchas Raices - Programa Desarrollo Econ6mico desde l o Rural: SEGEPLAN, November 11,2005 Drivers of Sustainable Rural Growth and Poverty Reduction in Central America - Guatemala Case Study, October 2004: Alwang, Siegel, Raine, Pichon (LCSES) Spatial Analysis of Rural Economic Growth Potential in Guatemala, February 2005: Alwang, Siegel, Wooddall-Gainey (LCSES)
Informe sobre e l Gasto miblico en e l FIS, FONAPAZ y FSDC
Evaluaci6n Ex Post de Los Proyectos Financiados por el F IS con Recursos Prkstamos BIRF, KfW y OECF: Consultores Multiprofessional S.A., September 2001
Marco Conceptual Ambiental: Programa de Desarrollo Econ6mico desde l o Rural: SEGEPLAN, Byron Contreras Marin (consultant), December 2005
Marco Conceptual y Estrategia de Participacidn de Actores Indigenas del Programa de Desarrollo Econ6mico desde lo Rural: SEGEPLAN, Osberto Godinex, Robin Orozco, Arlindo Fuentes y Ricardo Cardona (consultants), December 2005
85
Annex 13: Statement of Loans and Credits GUATEMALA: PROJECT TO SUPPORT THE RURAL ECONOMIC DEVELOPMENT
PROGRAM
Original Amount in US$ Millions
Difference between expected and actual
disbursements
Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d
PO55085
PO66175
PO74530
PO76853
PO48652
PO55084
PO47039
PO49386
PO496 16
PO35737
PO48654
2003
2002
2002
2002
2001
2001
1999
1999
1999
1998
1998
GT SECOND RURAL AND MAIN ROADS PROJ.
GT INTEGRATED FINANCIAL MNGT
GT Financial Sector Adjustment Loan
GT Financial Sector TA Loan
GT UNIVERSALIZATION OF BASIC EDUCATION GT COMPETITIVENESS PROJECT
GT JUDICIAL REFORM
GT RECONSTRUCTION & LOCAL DEV. GT LAND ADMINISTRATION (APL)
M o s t recent es t imate ( latest year available, 1997-03)
Po vert y (x o f populatio n below natio nal po verty line) Urban population (%of totalpopulation) Life expectancyat birth (pars) hfant mortality(per tW0livebirths) Child malnutntion (%ofchildrenunder5) Access to animprovedwtersource (Xofpopulation) #literacy (99 of population age EiJ Gross pnmary enrollment (Aofschool-age population)
Male Female
56 46 65 36 24 92 30 D3 D7 99
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1983 1993
GDP (US$ billions) 9.1 114 Gross domestic InvestmentIGDP 111 7.2 w o r t s Of goods andservaes/GDP 0 0 17.7 Gross domestic savingsIGDP 9.5 6 9 Gross national savings/GDP 8.6 D 7
Current account balance1GDP -2.5 Interest paymentdGDP 1.0 Total debtlGDP 202 Total debt serviceleworts 15 5 Present value of debt/ GDP Present value of debffexports
-6.6 0.8
28.0 0.8
534 3260 1,741
15 2.1
77 71 28
86 11
P9 0 1 P6
2002
23.3
16.5 7.4 14.6
18.7
-5.1 0.6
20.1 7.4 8.3 82.3
2,655 1480
3,934
0.9 12
50 69 32
81 D le 10
n
m
DeveloDment diamond'
Life eqectancy
T
GN I
capita per
1 Access to improvedwatersource
-'Guatemala ~ Lowr-mlddle-income group
2003
24.7 Economic rat ios '
Trade
investment I 1983-93 1993-03 2002
(average annualgrowth) GDP 2 9 3.7 2 2
2003 2003-07 I I -Guatemala
STRUCTURE of the ECONOMY
(%ofGDP) Agriculture 25.3 24.9 Industry 20.5 8.9 8.3
lgE3 lgg3 2o02 *Oo3
22.5 22.3 8.3
Growth of inves tment and GDP ( O h )
40
20 Manufacturing 15.9 14.5 P.6 e .8
65.0 90.0
Services 542 55.3 58.2 58.5 o
.20 Private consumption 62.9 84.8
imports of goods and services 14.6 26.1 27.8 27.9 -GDI I O - G D P General government consumption 7.6 6.4 7.6 4.9
(average annualgrowth) Agriculture Industry
Services
Private consumption General government consumption Gross domestic investment Imports of goods and sewices
Manufacturing
87
I In f is t ton 1%)
C to
n
Composition af 2003 debt (USS rntll.)
Map IBRD No 34499
89
HUEHUETENANGOHUEHUETENANGO
Q U I C H EQ U I C H E
BAJA VERAPAZBAJA VERAPAZ
I Z A B A LI Z A B A LA LTA V E R A PA ZA LTA V E R A PA Z
Z A C A P AZ A C A P A
CHIQUIMULACHIQUIMULA
JALAPAJALAPA
JUTIAPAJUTIAPA
ELELPROGRESOPROGRESO
GUATEMALAGUATEMALA
TOTONICAPANTOTONICAPAN
SANSANMARCOSMARCOS
SOLOLASOLOLA
RETALHULEURETALHULEU
SANTASANTAROSAROSA
SACATE-SACATE-PEQUEZPEQUEZ
E S C U I N T L AE S C U I N T L A
SUCH
ITEPE
QUE
Z
SUCH
ITEPE
QUE
Z CHIM
ALTE
NANGO
CHIM
ALTE
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P E T E NP E T E N
PaxbánPaxbán
MelchorMelchorde Mencosde Mencos
SayaxchéSayaxché
San LuisSan Luis
El NaranjoEl Naranjo
La LibertadLa Libertad
TikalTikal
BarillasBarillas
CahabónCahabón
ChajulChajul
ModestoModestoMéndezMéndez
El EstorEl Estor
LívingstonLívingston
MoralesMorales
Los Amates Los Amates
EsquipulasEsquipulas
CobánCobán
JalapaJalapa
SololáSololá
ZacapaZacapaSalamáSalamá
FloresFlores
CuilapaCuilapa JutiapaJutiapaEscuintlaEscuintla
RetalhuleuRetalhuleu
ChiquimulaChiquimula
San MarcosSan Marcos
MazatenangoMazatenango
El ProgresoEl Progreso
TotonicapánTotonicapán
ChimaltenangoChimaltenango
HuehuetenangoHuehuetenango
PuertoPuertoBarriosBarrios
AntiguaAntiguaGuatemalaGuatemala
Santa CruzSanta CruzDel QuichéDel Quiché
GUATEMALAGUATEMALAQQUUEETTZZAALLTTEENNAANNGGOO
QuetzaltenangoQuetzaltenango
EL SALVADOREL SALVADOR
Q U I C H E
BAJA VERAPAZ
I Z A B A L
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GUATEMALA
RETALHULEU
SANTAROSAE S C U I N T L A
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HUEHUETENANGO A LTA V E R A PA Z
TOTONICAPAN
SANMARCOS
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IMAL
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GO
QUETZALTENANGO
Paxbán
Melchorde Mencos
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San Luis
El Naranjo
La Libertad
Tikal
Barillas
Cahabón
Chajul
ModestoMéndez
El Estor
Lívingston
Morales
Los Amates
Ocós
Champerico
Sipacate San José
Las Lisas
Esquipulas
Cobán
Jalapa
Sololá
ZacapaSalamá
Flores
Cuilapa JutiapaEscuintla
Retalhuleu
Chiquimula
San Marcos
Mazatenango
El Progreso
Totonicapán
ChimaltenangoQuetzaltenango
Huehuetenango
PuertoBarrios
AntiguaGuatemala
Santa CruzDel Quiché
GUATEMALA
BELIZE
EL SALVADOR
HONDURAS
M E X I C O
M E X I C O
Negro
Motagua
Sarstún Cancuén
Mac
haquilá
Mop
án
Usumacinta
Pasión
Ixcá
n
Salin
as
Chiyú
Selegua
San Pedro
Cahabón
Polochic
Motagua
Suchiate
L. Atitlan
PACIFIC OCEAN
Gulfof
Honduras
L. deIzabal
L. Petén Itzá
To Tuxtla Gutiérrez
To Tonalá
To La Unión
To La Unión
To El Progresso
92ºW13ºN
14ºN
15ºN
16ºN
17ºN
13ºN
14ºN
15ºN
16ºN
17ºN
18ºN 18ºN
91ºW 90ºW 89ºW 88ºW
92ºW
91ºW
90ºW 89ºW 88ºW
GUATEMALA
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.
