Document of The World Bank FOR OFFICIAL USE ONLY Report No: 39472-CO PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$30 MILLION TO THE REPUBLIC OF COLOMBIA FOR A SECOND RURAL PRODUCTIVE PARTNERSHIPS PROJECT July 19,2007 Latin America and Caribbean Region Colombia and Mexico Country Management Unit Sustainable Development Sector Management Unit This document has a restricted distribution and may be used by recipients only in the performance o f 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: 39472-CO
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$30 MILLION
TO THE
REPUBLIC OF COLOMBIA
FOR A
SECOND RURAL PRODUCTIVE PARTNERSHIPS PROJECT
July 19,2007
Latin America and Caribbean Region Colombia and Mexico Country Management Unit Sustainable Development Sector Management Unit
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS (Exchange Rate Effective March 5, 2007)
Currency Unit = Colombian Peso 2,200 Colombian Pesos = US$ l
A I S CCI CGR CP DCP DDR DNP DA DP EIRR EMP FIRR FTA GCP GOC I C 0 IDB I I C A
IFC INCODER I P D M P MADR M&E N I C N G O OGA OGR PDO PEG PIT P I U PROEXPORT RIC SA SENA SIIF TOR
FISCAL YEAR January 1 - December 31
ABBREVIATIONS AND ACRONYMS
MADR Agricultural Program 2006-20 10 - Programa Agro Ingreso Seguro Colombia International Corporation - Corporacidn Colombia Internacional Public Auditing Office - Controloria General de la Repziblica Comercial Partners Productive Chain Directorate - Direccidn de Cadenas Productivas (del MADR) Rural Development Directorate - Direccidn de Desarrollo Rural (del MADR) National Planning Department - Departamento Nacional de Planeacidn Designated Account DNP National Development Plan 2006-20 10 Economic Internal Rate o f Return Environmental Management Plan Financial Internal Rate o f Return Free Trade Agreement Project Coordination Group - Grupo de Coordinacidn del Proyecto Government o f Colombia Internal Control Office (del MADR) Inter-American Development Bank Inter-American Institute for Agricultural Co-operation. Instituto Interamericano de Cooperacidn para la Agricultura Internacional Finance Corporation Colombian Rural Development Institute - Instituto Colombiano de Desarrollo Rural Integrated Pest and Disease Management Plan Ministry o f Agriculture and Rural Development - Ministerio de Agricultura y Desarrollo Rural Monitoring and Evaluation National Intersectoral Committee Non Government Organization Local Management Organization - Organizacidn Gestora Acompan'ante Regional Management Organization - Organizacidn Gestora Regional Project Development Objectives Productive and Entrepreneurial Group within the Ministry o f Agriculture Project Implementation Team Project Implementation Uni t National Export Promotion Institute Regional Intersectoral Committee Departmental Secretariat o f Agriculture (Secretaria de Agricultura Departamental) National Apprenticeship Service (Sewicio Nacional de Aprendizaje) Integrated Financial Information System Terms o f Reference
Vice President: Pamela Cox Country Director: Axe l Van Trotsenburg Country Manager
Task Team Leader:
Miguel Lopez - Bakovic
Pierre Werbrouck and Natalia Gomez Sector Director: Laura Tuck
SECOND RURAL PRODUCTIVE PARTNERSHIPS PROJECT
Local Govts. (Prov., District, City) o f Borrowing Country
Local Farmer Organizations Total:
Local Sources o f Borrowing Country
PROJECT APPRAISAL DOCUMENT
27.10 0.00 27.10
9.90 0.00 9-90 43.00 0.00 43.00
1 16.40 6.00 122.40
LATIN AMERICA AND CARIBBEAN
LCSAR
Date: July 19,2007
Country Director: A x e l Van Trotsenburg Sector ManagedDirector: Laura Tuck
Team Leader: Pierre Werbrouck and Natalia Gomez Sectors: Agro-industry (60%);General agriculture, fishing and forestry sector (40%) Themes: Rural markets (P);Rural policies and institutions (S) Environmental screening category: Partial Ass e s smen t
For Loans/Credits/Others: Total Bank financing (US$m.): 30.00 Proposed terms: The loan i s a Fixed Spread Loan, commitment-linked, with a custom, non-level repayment schedule with al l conversion options.
Borrower: Republic o f Colombia Ministerio de Hacienda y Credit0 Publico Carrera 7A No. 6-45 Bogota, D.C. Colombia Tel: (57 1) 297 13 10
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.
Responsible Agency: Ministry o f Agriculture Av. Jimenez 7-65 Bogota Colombia Tel: 57-1-341-9005 Fax: 57-1-284-1775 viceministerio@minagricultura. gov. co
Project implementation period: Start January 1,2008 End: March 29,201 3 Expected effectiveness date: January 15, 2008 Expected closing date: September 30, 201 3 Does the project depart from the CAS in content or other significant respects? Ref: PAD A.3 Does the project require any exceptions from Bank policies? Ref: PAD D. 7
I s approval for any pol icy exception sought from the Board? Does the project include any critical r isks rated “substantial” or “high’,? Ref: PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Ref: PAD D. 7 Project development objective Ref: PAD B.2, Technical Annex 3 T o increase rural competitiveness and build up rural entrepreneurship in poor rural communities in a sustainable manner through demand-driven partnership schemes with the commercial private sector.
[ No
[ ]Yes [XINO
[ ]Yes [ ] N o [ ]Yes [XINO
[XIYes [ ] N o
Have these been approved by Bank management? [ ]Yes [ IN0
Project description [one-sentence summary of each component] Ref: PAD B.3.a, Technical Annex 4 1. Partnership promotion and preparation. This includes the organization by the departmental agricultural secretariats o f competitive processes amongst farmer organizations and private sector to obtain project assistance, the preparation o f pre-investment studies and the initial organization o f the partnerships.
Partnership implementation. This includes the provision o f (i) financial incentives to farmer organizations to enable farmers to adjust to the competitive conditions o f national and international markets; and (ii) technical assistance to farmer organizations to obtain higher level o f productivity and entrepreneurship.
Management, monitoring and evaluation. This includes the administrative project management costs such as salaries, consultant fees, monitoring and evaluation, audits and operational costs.
2.
3.
Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 Environmental Assessment Pest Management Natural Habitats Forestry Indigenous Peoples
Significant, non-standard conditions, if any, for: Re$ PAD C. 7 Board presentation: None
Loadcredit effectiveness: None
Covenants applicable to project implementation: None
COLOMBIA Second Rural Productive Partnerships Project
CONTENTS
Page
STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 I . A . B . C .
I1 . A . B . C . D . E .
I11 . A . B . C . D . E . F .
I V . A . B . C . D . E . F . G .
Country and sector issues .................................................................................................... 1
Rationale for Bank involvement ......................................................................................... 1
Higher level objectives to which the project contributes .................................................... 2
Project development objective and key indicators., ............................................................ 3
Project components ............................................................................................................. 3 Lessons learned and reflected in the project design ............................................................ 5 Alternatives considered and reasons for rejection .............................................................. 6
Institutional and implementation arrangements .................................................................. 7
Monitoring and evaluation o f outcomes/results .................................................................. 8 . . . Sustainability ....................................................................................................................... 9
Critical r isks and possible controversial aspects ................................................................. 9
Loadcredit conditions and covenants ............................................................................... 11
APPRAISAL SUMMARY ............................................................................................. 11 Economic and financial analyses ...................................................................................... 11
Annex 11: Project Preparation and Supervision ..................................................................... 63
Annex 12: Documents in the Project File ................................................................................. 64
Annex 13: Statement of Loans and Credits .............................................................................. 65
Annex 14: Country at a Glance ................................................................................................. 66
Annex 15: M a p IBRD M a p Number 35463 .............................................................................. 67
I. STRATEGIC CONTEXT AND RATIONALE
A. Country and sector issues
1.
2.
3.
4.
5.
The proposed project will address two main issues in rural development: high rural poverty and low agricultural competitiveness. Colombia’s rural poverty rate i s 68% (2005) and affects 8 mil l ion people, most o f them small farm families. Rural poverty represents 36.5% o f national poverty and 49% o f the national extreme poverty. Colombia’s rural development and poverty reduction policy needs to address structural elements: low agricultural growth, weak human capital, low productivity and high informality.’ Agriculture can be a source o f substantial rural growth and reduce rural poverty particularly amongst small producers. To achieve this, the Government has to implement policies such as providing incentives to increase productivity, financing asset improvement (land tenure, irrigation) and promoting small producer access to markets, inputs and new technologies.2
The past agricultural subsidy pattern has worked against the sector’s comparative advantage and reduced agricultural competitiveness. This policy has not provided the expected benefits in terms o f sustainable employment creation, income generation and sector growth3, Subsidies have also benefited large-scale farmers rather than medium-scale farmers and smallholders. To improve competitiveness i t i s necessary to implement export instead o f import substituting policies, enhance human capital and increase access to capital, technology and land. Small farmers need also to be better integrated into competitiveness enhancing programs.
The proposed project i s aligned with Colombia’s rural development plan and strategy. The National Planning Department has submitted to Congress a Development Plan 2006-2010 (DP) that highlights two main sector objectives: (i) greater insertion in the international markets and expansion o f the internal market (through higher competitiveness, compliance with phytosanitary standards, productivity increases and enhanced access to production factors); and (ii) increasing rural income.
The proposed project i s strategically aligned with the growth and competitiveness pillar o f the DP, in particular with the objectives o f the Agro Ingreso Seguro Program ( A I S ) . This program has two main components: (i) direct income support to farmers, and (ii) enhancement o f agricultural competitiveness in response to globalization. The proposed project i s directly aligned wi th this second component. I t i s also aligned with the objectives o f DP’s equity pillar that seeks to improve income generation capacity o f the rural poor by increasing agriculture productivity, strengthening rural entrepreneurship, promoting agribusinesses and developing rural finance.
B. Rationale for Bank involvement
The lessons learned from the long-term involvement o f the Bank in the rural sector o f Colombia and the Bank’s international experience in implementing a diverse set o f rural development projects, give the Bank an advantage in the provision o f higher value-added to the Colombian program. While there are other financiers, the Bank i s a principal player in the rural sector o f Colombia.
’ Pobreza y Desigualdad en Colombia. Diagndstico y Estrategias. Informe final. Misidn para la Reduccidn de la Pobreza y la Desigualdad. Bogota, Junio de 2006.
Colombia, Rural Policy Notes, 2006 Colombia Agriculture and Rural Competitiveness, Report No. 27523-CO. World Bank, December 2003.
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6.
7.
8.
9.
11.
A.
Bank-assisted projects have managed to execute decentralized projects very effectively (for example, the Agriculture Technology Development Project, Productive Partnerships Support Project; Peace and Development APL I; Magdalena Medio Regional Development LILs I & 11; Peasant Enterprise Zones Project, Sierra Nevada Sustainable Development Project). Moreover, in the past couple o f years the Bank has led and completed sector studies on competitiveness (Colombia - Agricultural and Rural Competitiveness - Report No. 27523), land (Land Policy in Transition - Report No. 27942), and rural finance (Rural Finance - access issues, challenges, and opportunities - Report No. 27269) in Colombia.
The proposed project builds upon the success o f the ongoing Productive Partnerships Support Project (ID-PO4 1642) where 1 17 partnerships schemes with the commercial private sector have been created, benefiting 10,400 rural families, generating additional income and employment, stimulating social cohesion in rural areas, spreading entrepreneurial culture and generating local capacity to appraise, prepare and accompany rural partnerships.
This operation will build upon the experiences o f this project and other above-mentioned projects. In addition, (i) the Government requested the Bank to finance a follow-up project to the ongoing Productive Partnerships Support project; (ii) the proposed operation was originally included in the Country Partnerships Strategy 2007-20 1 1 ; the preparation was advanced into fiscal year FY07 but for practical reasons Board approval was delayed into the first trimester o f FY08; and (iii) the Bank gains substantial expertise through this competitiveness enhancing operation. Some expertise has been already transferred to other countries in the region and Africa (Ecuador, Peru, Bolivia, Panama, Haiti and Angola). Therefore, the Bank i s uniquely placed to further guide this process, to continue learning from this experience and to distribute lessons learned to other countries and regions.
C. Higher level objectives to which the project contributes
The overall goal o f the proposed project i s to reduce rural poverty and increase rural employment by enabling small rural producers to compete successfully in the national and global market place. Independent external evaluations o f the on-going project have shown that productive partnerships have a substantial impact on rural incomes and employment o f the beneficiary families (see Annex 9).
PROJECT DESCRIPTION
Lending instrument
10. The total project cost i s estimated at US$122.4 mil l ion over the period 2008-2013. The proposed lending instrument i s a Specific Investment Loan (SIL) in the amount o f US$30 million. The central Government wil l finance US$12.4 million. The local governments wil l provide $27.1 million, while the partners (producer associations and private sector) will contribute $43 mil l ion and other sources (credit, suppliers, institutions, carbon fund) are estimated to provide $9.9 million. The Borrower selected a Fixed Spread Loan, commitment-linked, custom, non-level repayment schedule, payable February 15,2013 thm February 15,2025, with all conversion options
Productive Partnerships are formal agreements between organizations o f small producers and the commercial private sector (agribusiness firms) to respectively produce and purchase agreed quantities o f produce o f a specific quality at an agreed reference price during a certain period.
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Financing Plan (US$ million)
B. Project development objective and key indicators
1 1. The development objectives o f the project are: to increase rural competitiveness and build up rural entrepreneurship in poor rural communities in a sustainable manner through demand-driven partnerships with the commercial private sector.
12. The project would finance 300 partnerships and reach 25,300 small and medium-sized farm families. The project activities will have national coverage but focus on the departments that have potential for development through agriculture.
13. The principal outcomes for the target group will be:
(i) Comuetitiveness obiective: total sales volume by the producer organizations under all partnerships reaches a cumulative Colombian $350 bil l ion in year 5;
(ii) Entrepreneurship obiective: seventy-five percent o f the participating producer organizations will have a manager, will maintain a system o f accounts and have their revolving fund in continuous rotation; and
(iii) Sustainabilitv Obiective: at least 80 percent o f regional management organizations have their contracts yearly renewed as MADR i s satisfied with their evaluation and supervision o f partnerships; local governments provide over a period o f five years at least 22 bi l l ion Colombian pesos as co-financing to the partnership investments, and at least 75 percent o f the producer organizations will remain linked to commercial partners 24 months after the end o f project support.
C. Project components
14. This project will have the same components as the ongoing one: (i) partnership promotion and preparation; (ii) partnership implementation; and (iii) management, monitoring and evaluation.
15. The project will finance consulting services, seminars, workshops and operational expenditures to promote and prepare partnerships. These activities include promotional activities such as information campaigns, national and regional business round tables with private sector and producer organizations, identification o f interested producer organizations and commercial partners and an outreach program for excluded groups (indigenous, afro-Colombian people) to increase their participation in the project.
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16. The component also covers yearly regional competitive invitations to submit partnership profiles, the evaluation and ranking o f the profiles, the preparation o f feasibility studies and structuring o f partnerships, preparation o f all legal documentation and agreements, the approval process for the government financial incentive (see below) as well as the establishment o f a business and operational plan o f each partnership. The objective i s to prepare at least 325 additional partnerships. The funds to finance t h i s component wil l originate from the loan, the central government contribution and some local expenditure by the Secretariats o f Agriculture or other institutions.
17. The project will finance the costs related to grants for investment, operational and technical assistance expenditures by producer organizations, technical assistance by service providers, studies, training and capacity building and operational costs for two subcomponents: (i) government financial incentives (grants) to producer organizations to enable producers to adjust to the competitive conditions o f national and international markets required under the partnership agreements; and (ii) technical assistance to producer organizations to obtain higher levels o f productivity and entrepreneurship and to regional institutional players that help promote and establish partnerships and monitor the development o f the partnerships.
18. The government financial incentives to producer organizations are capped at 4 mil l ion Colombian pesos per producer family. This amount could be increased up to a ceiling o f 6 mil l ion pesos, if the partnership obtains additional 2 mill ion pesos per family (with respect to the original government financial incentive) in commercial credit’. The operational manual w i l l specify more details o f the incentive mechanism. The financial incentive can be used for investment expenditures, operational costs and technical assistance and certifications. The objective i s to have 300 additional partnerships in operation by year 5.
19. The total financing package for typical partnerships w i l l be composed o f the government financial incentive (paragraph 18), the contributions o f the producers themselves including their labor costs and materials, the contributions o f the private sector partner (such as technical assistance, packaging materials, seeds, fertilizers), contributions by the departmental Secretariats o f Agriculture, eventually bank credit and support by other institutions such as the national service for apprenticeship (SENA). The financial (cash) contributions w i l l as much as possible be made into the producer associations’ trust account under the control o f a Trust Company. The producer organizations wil l use the funds in accordance with the partnership business plan and under the supervision o f the Trust Company and the Ministry o f Agriculture and Rural Development.
20. The socio-entrepreneurial strengthening will include technical assistance to the partnerships by national and local service providers, business management training o f the partnerships management committees and managers o f the partnerships and general technical and management training for the members o f the producer organizations.
2 1. Support to institutional players includes the training and capacity building for the project intermediaries such as Regional Management Organizations - OGR (para 33) and Local Management Organizations OGA (para 35). This subcomponent w i l l also defray some o f the staff and operational costs o f the departmental Secretariats o f Agriculture (para 32) and Productive Chain Councils related
If the partnership would obtain Colombian $100,000 per family in credit, the government financial incentive could be increased by Colombian $100,000 per family. This 1 : 1 relationship would be respected up to a maximum o f Colombian $2 mil l ion per family as the government financial incentive in the Modular Incentive Decree i s capped at Colombian $ 6 mil l ion per family.
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to the promotional and partnership preparation activities carried out by the Secretariats and the Councils.
22. This includes the administrative project management costs such as salaries, consultant fees, monitoring and evaluation, studies, audits and operational costs. This component wil l finance: (i) the salaries, fees and operational costs o f the project coordinating group (PIT) and MADR’s Rural Development Directorate (DDR) staff involved in the project; (ii) the operation o f the monitoring system; (iii) the yearly technical and financial audit; and (iv) evaluation studies and other activities that may be agreed upon during implementation.
D. Lessons learned and reflected in the project design
23. The proposed operation will be based o n the lessons learned from the ongoing operation. The lessons and the proposed remedies include:
a. Strict adherence to the rules of the game and the competitive selection process of the partnerships has given a substantial level of credibility to the project in rural areas and reduced political involvement in the decision-making process. The adherence to the competitive process for the selection o f partnerships that benefit f rom project hnds will be maintained. Although the selection and approval o f partnerships will be delegated to the regions, the National Intersectoral Committee will have the right to object to regional partnership approvals o n the basis o f technical criteria.
b. The quality of the feasibility studies ensures a greaterprobability of success and sustainability of the partnerships. T o keep the quality o f feasibility studies high, the project wil l finance high level consulting services to partners to assist with the preparation o f feasibility studies and finance quality control o f the studies by the OGR.
c. The subproject’s cycle has proven to be long, complex and costly in terms of transaction costs. As a remedy, the project wil l delegate more responsibility to the regional level and partners for the pre-investment studies and partnership structuring; pre-investment wi l l also focus more o n the preparation o f the partnership operation such as legal documentation;
d. Delegating tasks to the private sector (NGOs and consultingjrms) has been hampered by the lack of capable organizations and skilled personnel at the sub-national level. The project will finance longer-term contracts with OGR and possibly OGA to assist with the partnership development process. Such contracts and their renewals wil l require the OGR and OGA to maintain employed a core number o f permanent high-quality staff.
e. Commercial private companies distrust the public sector and avoid risks associated with dealing with unknown and/or un-experienced small producers associations. The project intends to implement a private sector outreach strategy including the organization o f national and regional business round tables involving private sector and producer groups and use the main agri-businesses involved in the project as examples to attract additional private sector partners.
f. Partnerships need to be prepared and agreed by both partners although they remain sometimes fragile so that flexibility to change commercial partners during implementation is needed. The structuring o f the partnerships wil l be delegated more to the partners
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themselves. The project wil l focus o n developing entrepreneurship and marketing s k i l l s o f producer organizations so as to enhance their capacity in business negotiations and identification o f the right partners and products.
g. I n order to achieve sustainable partnerships, long term follow-up and assistance needs to be guaranteed. The project will finance technical assistance by OGA over a period o f two years for each partnership. Transfer o f management sk i l l s and technology to partnership managers and staff will be closely monitored.
h. The ongoingproject has not been very successful in mobilizing credit from thefinancial institutions. The design o f the proposed follow-up project includes mechanisms that provide incentives for the producer organizations and those who formulate partnerships to obtain credit f rom financial institutions.
i. Measuring impact on income, employment and social coherence requires a sophisticated and costly methodology--hence income increase or employment increase targets in the PDO indicators should be avoided. The P D O o f the proposed project are more concrete and more easily measurable. Income generation and employment creation are higher goals and objectives.
j. The project’s Project Implementation Uni t has operated very well but a deeper integration within the Ministry is recommended. The Project Implementation Team (PIT) will be slowly integrated into the MADR structure based o n a timetable that allows the Ministry to absorb the project into the right MADR Directorate without hampering i ts implementation.
E. Alternatives considered and reasons for rejection
24. One alternative considered was the transfer o f the project to a public-private entity to bring the project more into a private-sector sphere. The entity, however, showed a poor performance in the follow-up o f some particular partnerships and the idea o f transferring the project management to th is entity was discarded.
25. A second alternative considered was to integrate the project as part o f a larger Bank operation supporting the Ministry’s A I S program. The Government, however, has not shown much interest in Bank support for A I S . If A IS would be successful, the project management could s t i l l be integrated into the A I S structure during implementation.
111. IMPLEMENTATION
A. Partnership arrangements
26. Public funds to the project will be provided by the central government (through the IBRD loan and a budgetary contribution) and the local governments, in particular the departmental Secretariats o f Agriculture (SA). The central government finances the overall operation o f the project and the government financial incentive. This incentive will be used to leverage the S A contributions to obtain a maximum o f co-financing, to generate more local ownership and to develop a sustainable future financing mechanism for productive partnerships programs operated at the departmental level.
27. Private funds from producer associations and commercial private sector partners in cash or kind (labor) are part o f the total partnership investment package.
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B. Institutional and implementation arrangements
28. The Ministry o f Agriculture and Rural Development (MADR) will implement the project init ially through the Rural Development Directorate (DDR). MADR’s Productive Chain Directorate wi l l provide technical advice to the project through i t s participation in the National and Regional Intersectoral Committees (see below).
29. A National Intersectoral Committee, presided by MADR and composed o f representatives o f the private and public sector, will supervise the overall implementation o f the program including the definition o f policy priorities and monitoring.
30. Proiect Implementation Team (PIT) A team o f DDR staff and consultants wil l manage the day-to-day operations o f the project. P IT wi l l operate within the DDR according to a sustainability plan agreed upon between the Bank and the Government during appraisal (see para 43(ii): Sustainability and Annex 6). F rom loan effectiveness onwards P I T wil l be integrated into the DDR and the DDR Director will become the project director. From 2009 onwards the financial management and procurement tasks wi l l be transferred to the respective units o f the MADR. The technical management wil l be gradually transferred to DDR’s Productive and Entrepreneurial Group (PEG). After a positive Bank/MADR evaluation the project wi l l be managed entirely by DDR’s PEG with the assistance o f consultants (target date March 3 1, 20 10).
3 1. Regional Intersectoral Committees (RIC). For operational purposes the country wil l be divided into regions composed o f at least two administrative departments. In each region a R I C will be responsible for (i) defining the dates o f the launching o f the invitations to submit proposals and of the private sector-producer associations business round tables; (ii) the approval o f the profiles selected by the Secretariats o f Agriculture; and (iii) the approval o f the government financial incentive to each partnership. The R IC wil l be composed o f local representatives o f the institutions taking part in the national committee. The N I C wil l have the right to object to R IC partnership approvals o n the basis o f technical criteria.
32. Departmental Secretariats o f Agriculture will distribute information about the invitations to submit profiles and receive and rank the profiles in hnc t i on o f technical criteria. They wil l also participate in the RIC, co-finance partnerships and may also follow-up o n certain key partnerships.
33. Regional Management Organizations (Organizaciones Gestoras Regionales- OGR) are mainly private sector institutions such as development NGO, consulting f i rms , Chambers o f Commerce, Universities and other institutions that have developed capacity to manage the process o f structuring, preparing and supervising the implementation o f partnerships (see Annex 6 for more details). Some OGR have participated during several years in the implementation o f the ongoing project.
34. OGR will be contracted competitively o n a long-term basis to provide the fol lowing services: (i) to evaluate the partnership profiles presented to the Secretariats o f Agriculture; (ii) to supervise the partnership preparation and structuring; (iii) to supervise and monitor the implementation o f the partnerships; (iv) to review and approve changes in the composition o f the government financial incentive to the partnerships under their supervision; (v) to assess the performance o f the OGA providing technical assistance to the partnerships; and (vi) to function as a secretariat for the RIC. OGR wil l have to employ and maintain employed core permanent staff acceptable to DDWPIT.
35. Local ManaPement OrPanizations (Organizaciones Gestoras Acompan’antes - OGA) are private sector rural development organizations specialized in certain products and with knowledge o f local conditions. They assist the partnerships during preparation and structuring. During implementation
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they support the partnerships with management aspects and transfer o f management sk i l l s and technology. OGA are selected competitively by the partners f rom a roster o f OGA approved by OGR. Their services will be paid with project funds. Some OGA have participated during several years in the ongoing project.
36. Each partnership wi l l have a management committee that manages the partnership. I t i s composed o f representatives o f the producer organization and the commercial partners, the Secretariat o f Agriculture, the co-financiers and the OGA. Each partnership wi l l also have a manager preferably selected amongst the members o f the producer organization.
37. The Trust Comuanv i s a public or private company with regional representation specialized in the management o f funds given in trust. The Trust Company wil l be responsible to transfer the funds f rom MADR to the trust accounts o f the partnerships. The Trust Company will also be responsible for the supervision o f the management o f the trust accounts and will oversee the procurement procedures followed by the producer associations in the expenditure o f a l l partnership funds and contributions that are kept in the trust accounts. For more details see Annex 7- Financial Management.
C. Monitoring and evaluation of outcomes/results
38. The outcome indicators will serve to assess progress in achieving the project development objectives, based o n the three concepts o f competitiveness; entrepreneurship and sustainability (see paragraph 11). The results indicators wil l serve to measure progress in project implementation activities at component level, as they relate respectively to partnership preparation (Component I), partnership implementation (Component 2) and overall project management (Component 3) (procurement, financial management and M&E activities).
39. At national level, DDRPIT wi l l continue to assemble data concerning overall project implementation in terms o f aggregate number o f partnerships submitting profiles, total number o f pre-investment studies, as wel l as information o n the time taken to process partnerships until the first disbursement and the capacity o f the departmental Secretariats o f Agriculture involved in outreach and promotion. This wil l be done through the OGR.
40. At local/partnership level, the data concerning subproject implementation wil l be collected through the partnership accounts with the assistance o f the OGA. These data will come f rom the database maintained by the partnerships o n their Annual Business Plans, including data o n the technical, environmental and social management plans, as wel l as sales, financial and overall management data. The data will be regularly updated and summarized in the OGR reports. At national level, the data will be summarized in the DDRPIT semi-annual reports. The M&E system will also collect a l l the additional information o n partnership operations required by project management beyond what i s strictly needed to measure the project outcome and results indicators.
41. In addition to the above, independent impact evaluation studies will be conducted by external entities o n a punctual basis at mid-term and completion stages. The objective o f the studies will be to provide additional information o n the implementation o f the concepts underlying the project development objectives (competitiveness, entrepreneurship and sustainability). Another objective i s to summarize the lessons f rom the ongoing project through the preparation o f the Implementation Completion Report.
42. The impact evaluation studies will use a combination o f instruments, those already used during the first phase project (farmer surveys for the administration o f the IAPA index, and partnership case
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studies for the estimation o f the IGDE index’) and new instruments such as technical and managerial audits o f OGA and OGR to further probe into the project impact on institutional strengthening.
D. Sustainability
43. The design o f this project i s focused on sustainability. The sustainability plan i s as follows.
The partnerships are designed with financial, commercial, social and environmental sustainability in mind. Each feasibility study has a chapter on these five types o f sustainability and the implementation o f the commercial, social and environmental plans w i l l be closely monitored and reported on during OGR supervision. The PIT will be gradually integrated into the operation o f the MADR Rural Development Directorate (DDR) according to a plan agreed upon during appraisal (Annex 6). The objective i s that from March 3 1,20 10 onwards, DDR’s Productive and Entrepreneurial Group (PEG) w i l l fully run the project. DDR will attract financing by local government and credit sources into the financing schemes o f the partnerships so as to reduce the dependency on central public funding. Annual progress reports w i l l mention the degree o f credit and other co-financing. The assistance o f OGA wi l l focus on creation and transfer o f sustainable management systems and structures in the partnerships. Capacity building and training o f the partnership managers are priority activities. The training and capacity building in OGR and OGA i s aimed at establishing private institutions that have the capacity to work with other public and private institutions to implement the basic principals o f promoting market-oriented and client-driven development actions. A t the end o f this project the Government w i l l have a capable set o f private institutions that can continue the operations with public or private funding. Those institutions can be called upon by local governments to implement similar programs in the Departments. The project w i l l identify sources o f public and private finance to enable the continuation o f the program after the end o f the project. A first step w i l l be taken to obtain substantial co-financing from Departmental budgets to complement the financial incentive.
E.
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Critical risks and possible controversial aspects
The r isks faced by the project are judged to be modest in view o f the experience o f the on-going project. Few o f the risks mentioned in the PAD o f the previous project have materialized. Only the risk o f the banking sector not willing to provide financing remains a substantial one. Some modifications in the project design that are necessary to create efficiencies in the system also bring along some risks: they include transfer o f the project implementation unit to the Rural Development Directorate (MADR), the de-concentration o f the decision-making to the regions, and the delegation o f the responsibility for feasibility studies to the partners (instead o f OGR).
These two customized indexes were developed specifically for the project during the first phase. The hdice de Apropiacidn de Principios de Alianza (IAPA) is designed to measure the degree o f producers’ adhesion to the project’s basic principle that a l l “participate, take risks and gain”; i t comprises three components: support to social networks, trust and participation. The hdice de Desarrollo y Gestidn Empresarial- IDGE is designed to assess the degree o f entrepreneurship o f farmers’ associations; i t measures the aspects o f strategic planning as we l l as economic, financial social y environmental management, as we l l as the performance o f the OGA in providing technical support.
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Risk
Armed groups prevent partnerships from working effectively
Project benefits do not accrue to small producers due to the fact that partnerships reinforce asymmetry in power and producers find themselves in “patron-client” relationships wi th private f i rms .
Banking sector not wi l l ing to provide finance for crop production
Failure and lack o f sustainability o f some partnerships
Transfer o f PIT to MADR Directorate may reduce quality o f project management
De-concentration o f decision-making to regions and management by private sector may generate some non-technical decisions
Simplification o f pre-investment process and preparation o f feasibility studies by partners (instead o f OGR) may reduce quality o f studies and resulting in riskier partnerships
Co-financing from Departmental Governments may not be forthcoming in the quantities estimated
Decentralization o f procurement decisions i s riskier.
Financial Management: weak accounting in producer associations and risk o f ineligible expenses in decentralized entities
Overall Risk Rating (after mitigation)
Risk Minimization Measure
Partners to examine and evaluate this risk before entering in partnerships. Past experience indicates low risk.
Evaluation studies and experience indicates that small producers do benefit, targeting i s adequate and that producer organizations step out o f partnerships if conditions are no longer equitable.
Six measures w i l l be taken to increase to obtain credit from financial institutions (paragraph 52)
Emphasis on quality o f feasibility studies, technical assistance, training o f managers, monitoring
Transition pace w i l l be gradual; consequences to be clearly evaluated; training w i l l be provided
DDFUPIT and MADR to continue closely monitoring the regional decision-making process and to take corrective action where necessary
OGR to closely monitor quality; and to provide shortlist o f good individual consultants; additional training o f intermediaries (OGA)
Departmental Governments have shown great interest in co-financing. DDFUPIT to provide incentives to Departmental authorities to leverage co-financing
Procurement under supervision o f the Trust Company; MADR to carry out spot checks in the field.
Terms o f reference o f OGA to be adjusted and Trust Company controls procuremenddisbursement process o f funds in trust accounts.
Risk rating (after mitigation)
Low
Low
Substantial
ModestJSubstantial
Substantial
Modest
Modest
Low
Modest
Modest
Modest
There are no controversial aspects.
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F. Loadcredit conditions and covenants 45. There are no loan conditions or effectiveness conditions.
IV. APPRAISAL SUMMARY
A. Economic and financial analyses
46. Based o n the financial and economic analysis and conservative assumptions in Annex 9 the financial internal rate o f return (FIRR) o f the project i s estimated at 18 percent; the economic internal rate o f return (EIRR) i s estimated at 15 percent. The analysis estimates that the partnerships wi l l have on average a financial return o n investment o f 24 percent. Taking into account the costs for pre- investment and project management and monitoring as wel l as a delay in implementation the FIRR and EIRR o f the project are substantially lower. The switching points when the FIRR and EIRR reach 12 percent are when the average returns on investment o f the partnerships decrease to 18 percent and 2 1 percent respectively.
47. Distribution o f benefits: the benefits o f the project are distributed amongst the three actors: producers, commercial private sector, and project intermediaries. Producers are estimated to receive 59 percent o f the benefits, commercial private sector 37 percent and project intermediaries 4 percent.
48. These analyses show important lessons for the proposed project. The financial analysis methodology o f the partnerships contained in the present project operational manual i s adequate to estimate the profitability o f the partnership, to identify and introduce measures that guarantee the sustainability of the operation and to evaluate the risks. Nevertheless there are three aspects that need to be improved. The financial analysis needs to: (i) evaluate the credit worthiness o f the members o f the association and the l ikelihood that they can obtain credit; (ii) document the co-financing agreements with municipalities and regional governments so that during implementation it becomes easier to obtain such co-financing; and (iii) identify those actions that f rom the financial point o f view have to be included in the business plans and define at which moment these actions have to take place.
49. Moreover, there are weaknesses in the financial analysis itself that wi l l be addressed: (i) there i s a tendency to construct annual cash flows that do not necessarily correspond to the production cycle; (ii) there are frequently errors in the use o f the discount rate and the interpretation o f the rate o f return; (iii) there i s inexperience with fish farming and livestock production models, cash flows and production figures; these projects are atypical and incur r isks hard to estimate (diseases, food ratios); and (iv) the f i r m s that evaluate those projects need specialized staff in financial analysis.
50. T o address the above weaknesses the project team will train consultants in charge o f financial analysis to correct the critical points, assist with certain complex evaluations and business plans and become more critical o f the data that are being provided (yields, productivity, technological packages). Financial analysts also need to relate more with other evaluation team members so as to assess the technical, social and environmental r isks and include them into the analysis. The financial analysts must be directly involved in the negotiations o f the co-financing arrangements so as not to accept them at face value but o n the basis o f documentation and assess the possible delays or non- compliance that may occur. Overall, the financial analyst needs to interact more and better with the partners during the pre-investment period and be more informed about other possibilities o f more reliable co-financing (such as forward contracting).
5 1. The economic and financial analysis has also examined the issue o f access to commercial credit. Access to credit i s one o f the prerequisites for long-term financial sustainability o f the partnerships
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and for their expansion. Small enterprises (such as farm associations under the project) have a hard time obtaining credit in Colombia. Most o f the small enterprises are not considered credit-worthy by the financial sector and they pose a risk that financial institutions are not willing to take. Public sector financial institutions can provide some guarantees and operate as second-tier financial institutions, but they are also not willing to take the risk.
52. Access to credit i s a structural problem that will not be resolved during project implementation. But the project will take six steps to go forward in the direction o f credit financing: (i) the Trust Company can help the producer associations by facilitating access to banking services. Creating a banking history i s for the associations a first step towards obtaining commercial credit; (ii) more attention will be paid to the management o f the revolving fund, with follow-up to the amount and timeliness o f reimbursements. This could be considered as building a credit history; (iii) the associations should establish annual financial statements, and some form o f auditing should take place; (iv) instruments such as forward contracting should be established to obtain supplier credit; (v) existing first phase partnerships that need capital to expand will be assisted by a specialized person in their negotiations with the banking system; and (vi) the project team and OGR will approach institutions that offer credit to small enterprises such as banks, micro-credit institutions and NGOs.
B. Institutional
53. An institutional analysis was carried out to answer three basic questions: (i) how to institutionalize the project implementation unit within MADR; (ii) how can the institutional capacity o f key actors be strengthened? and (iii) how to get the private sector more involved in the partnerships.
54. Integration of Project Implementation Team into MADR. The Government and the Bank have agreed to gradually eliminate Project Implementation Units and the project’s present GCP i s one o f them. There are two Directorates that could absorb the project implementation team: the Directorate for Rural Development (DDR) and the Directorate for Productive Chains (DCP). The Government (MADR and DNP) has decided to integrate the implementation team within the Rural Development Directorate (DDR) and transition arrangements are described in Annex 6.
55. The project implementation scheme at the sub-national level wil l be further de-concentrated, The DDWPIT will gradually perform as a policy orientation instance, providing overall coordination o f project implementation and supervision, technical support, training and evaluation o f the project. Implementation responsibilities will be directly undertaken by decentralized entities (OGR, OGA and SA) under DDR overall supervision.
56. Approval for pre-investment and for government financial incentive allocation will be delegated to Regional Intersectoral Committees. And SA wi l l enhance their participation as co-financers o f the partnerships and will continue mainstreaming the partnerships model into their agriculture and rural development agenda.
57. How can the institutional capacity of key actors be strengthened? The institutional analysis assessed the strengths and weaknesses o f the SA, OGR, and OGA and provided interesting recommendations.
58. Local Management Organizations (OGA). The institutional assessment indicates that major strengths o f OGA reside in: local knowledge and experience, high commitment, interdisciplinary assistance, administrative support and local presence. Identified weaknesses are: insufficient transfer o f capacities to the producer organizations, high costs; high staff rotation, low capacity to ensure the compliance o f the social and environmental plans, and lack o f coordination with other stakeholders.
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59. To rectify the weaknesses , the project wil l: (a) adjust OGA terms o f reference to better reflect the needs o f the producer organizations; (b) adjust the regional qualification mechanism for OGA; (c) detail in partnership business plans the transfer o f managerial s k i l l s (in particular financial management) to the producer organizations; (d) implement performance evaluation mechanism for OGA; and (e) develop institutional strengthening activities for OGA in administrative and financial management, commercial agreements and entrepreneurship o f producer organizations.
60. Regional Management Organizations (OGR). Main strengths o f OGR are: consistency in the evaluation o f partnership profiles; high quality o f financial and technical studies and capacity to recruit staff with local knowledge. Main weaknesses are: high staff rotation, delays in the submission o f pre-investment studies, low capacity to recruit high level social and environmental specialists, and weak capacity for leveraging co-financing and credit. Overall, the objective to build strong OGR during the ongoing project has only partially been achieved. The quality o f the work o f the OGR remains inconsistent and too much dependent on the quality o f their consultants.
61. In order to make use o f their strengths and overcome weaknesses, the project will: (a) change the way OGR are being contracted (requiring the presence o f permanent staff approved by DDWPIT); (b) adjust terms o f reference; (c) disseminate best practices in pre-investment and monitoring; (d) design and implement an OGR performance evaluation system; (e) strengthen OGR in supervision o f economic-financial pre-investment studies; and (f) OGR contracts w i l l be annually renewed on the basis o f performance.
62. Secretariats o f Agriculture (SA). Departmental SA are known by: (i) their commitment, (ii) their fiscal effort to provide additional financing to partnerships, (iii) their interest in the replication o f the partnership model; and (iv) in some few cases, effective adoption o f the model. Weaknesses o f SA reside mainly in: low coverage for project dissemination purposes, low technical capacity, bureaucratic procedures, and unfulfilled financial commitments.
63. To strengthen the capacities o f the SA, the proposed project wil l: (a) disseminate materials for project promotion and operative support to SA; (b) standardize methodologies to assess, prioritize and select partnerships; (c) design incentives to promote the adoption o f the partnerships model at the regional level; and (d) train SA in call for proposals o f partnerships.
64. How can the private sector participation in the Project be enhanced? The institutional analysis assessed the participation o f the private sector through the application o f a survey and secondary information. In order to make good use o f the commercial partners strengths and overcome some weaknesses, the project will: (a) implement a communication strategy to outreach the private sector, including the organization o f business round tables; (b) design incentives to increase private sector participation, including campaigns to reward private sector commitment with the rural sector; (c) train the private sector on different type o f commercial agreements that could better suit their supply needs; and (d) require a more active role for OGR in approaching directly the private sector as an actor that could be better suited to provide initial comfort and trust to private sector companies to participate in the project as well as identifying business opportunities at the regional level.
C. Fiduciary
65. Procurement. An assessment o f the procurement capacity o f the Project Implementation Team has been carried out by a procurement specialist in January 2007. The assessment reviewed the proposed organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and the Ministry’s relevant administrative and finance units.
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66. The key issues and risks concerning procurement for implementation o f the project have been identified (Annex 8 ) and risk mitigation includes: (i) DDRRIT shall organize and conduct training and workshops sessions for the organizations that wi l l function at the regional level; so they can guide and advise producer organization in terms o f procurement matters; (ii) the trust company wil l review, clear and be responsible for a l l procurement activity financed f rom the trust accounts; (iii) the DDRRIT wil l do spot checks o f procurement activities. In case o f discrepancy during those checks, an audit may be called for; and (iv) attendance o f the procurement consultants to Wor ld Bank Procurement Seminar this year was guaranteed by the Bank. The overall project risk for procurement i s AVERAGE.
Financial Management
67. A financial management assessment (see Annex 7) was carried out including a f ie ld visit to an ongoing partnership. The main conclusion o f the FM assessment i s that the financial management and control systems within MADR have improved considerably. The implementation o f FM arrangements described in Annex 7 and to be further detailed in the operational manual will lower the overall FM control risk and the residual FM risk rating, defined as the combination o f the project’s inherent and control r isks as mitigated by the client control frameworks and Bank supervision effort, to an overall MODERATE level.
68. An action plan has been carried out that included; (i) preparation and clearance w i th the Bank the FM contents o f the operational manual, the format o f Interim Financial Reports and reconciliation reports o f the government financial incentives and the template contracts with the Trust Company and the partnerships; (ii) preparation o f the terms o f reference for the external audit with the General Auditor (Controloriu General de la Nucidn) and (iii) strengthening the terms o f reference and requirements for the OGA, in terms o f sk i l l s to build financial management capacity in producer associations.
D. Social
69. A social analysis has been done o f the ongoing and proposed projects and i s summarized in Annex 10. The results o f the analysis relate to the experience o f social development in the producer organizations in the ongoing project and proposals for social development actions in the proposed project.
70. The objective o f the social component in the ongoing project i s to (i) identify eligible beneficiaries o f the government financial incentive including a socio-economic characterization o f the beneficiaries’; (ii) evaluate the organizational capacity o f the producer association; (iii) identify social risks; and (iv) elaborate a technical assistance strategy for the organizational strengthening o f each producer organization. The implementation o f this rather cumbersome methodology has not always provided the expected results.
7 1. At mid-term, the consulting firm Econometriu measured the achievement by the partnerships of a social index “IAPA”. On average, partnerships only achieved between 45 and 60 percent o f the index. A parallel evaluation was done by I I C A that introduced another index: IGDE (Index measuring entrepreneurial development and management). IICA found that the level o f entrepreneurship, although satisfactory in more than hal f o f the associations, should be more emphasized so as to create socially sustainable associations. These results could be points on a learning curve that has to evolve further. As part o f project preparation, a survey o f the commercial
The eligibility criteria for the beneficiaries o f the project (small farmers) include maximum land tenure and income depending on the geographical area and cropping patterns.
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partners was carried out. The results show that the commercial partners suggest the project to make greater effort to train the producers in organization, business management and commercial insight. The overall conclusion o f the above evaluations i s that the social component needs additional work in the proposed project.
72. An evaluation was made by the project team on how traditionally excluded groups participated in the project and how their proposals made i t to final implementation. The evaluation shows that the indigenous, afro-Colombian and displaced people participated for more than 20 percent in the project and that their proposals received adequate attention with a processing survival rate that i s not much different from non-excluded groups.
73. The social strategy for the proposed project will maintain the emphasis on the creation o f social capital and o f strong democratic and participatory organizations. The strategy, however, w i l l add the objectives o f enhanced entrepreneurship and closer linkages to the market.
74. Entrmreneurship. The social strategy w i l l focus on capacity building o f the associations to enhance entrepreneurship. This includes: (i) resolving the production problems that have an impact on marketing; (ii) improving marketing knowledge; (iii) identifying and benefiting from market opportunities and avoiding market risks; (iv) engaging in strategic planning; (v) keeping business accounts; and (v) obtaining sufficient income to pay for management expenditures. To build those capacities the associations need as a minimum: (i) a competent manager; and (ii) a simple accounting system.
75. Indigenous Peoples and Afro-Colombian Development Framework. The strategy to attract partnership proposals o f excluded groups (in particular indigenous and afro-Colombian people) through promotional activities and giving some priority to their proposals in the ranking system has worked adequately. Hence there are no structural elements in the project that reinforce exclusion.
76. Nevertheless, to make sure that the project keeps on attracting projects from those traditionally excluded groups, the project will implement the following strategy: (i) the project team and OGR will organize special consultative sessions with representatives o f the indigenous and afro-Colombian organizations to explain the project and the methodology to present profiles; (ii) the project staff will train staff o f the Secretariats o f Agriculture to ensure that they take into account the specifics o f indigenous and afro-Colombian organizations; (iii) during the business round tables OGR wi l l ensure that those producers get access to private sector representatives to discuss their proposals; (iv) the project will provide sensitivity training to consultants preparing pre-investment studies to structure the partnerships in accordance with the inherent characteristics o f those organizations; (v) where possible, NGO interested in helping those communities w i l l provide support to those communities in the preparation and implementation o f their partnership profiles; and (vi) the profiles originating from those groups w i l l receive some additional points in their evaluation to compensate for some deficiencies as was already the case in the ongoing project.
77. The above framework has been discussed on April 11,2007 with duly elected representatives o f the indigenous and afro-Colombian communities. The representatives are in full agreement with the proposed approach and have made a commitment to promote the project activities in their respective constituencies. The budget o f the indigenous and afro-Colombian development framework i s presented in Annex 10 and amounts to about US$2 million. The framework will be duly monitored through specific indicators (see Annex 3) and will be regularly consulted with indigenous and afro- Colombian organizations in the field to evaluate its effectiveness.
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78. Partnership Social Plan. The content o f the social plan for each partnership (to be agreed upon between the partners with the assistance o f the OGA) wil l be similar to the one applied in the ongoing project. T w o elements wil l be added: (i) a strategy to enhance entrepreneurship; and (ii) a strategy to improve the operation o f the management committee o f the partnership. The implementation o f th is plan will be monitored by the OGR and DDR/PIT. The cost o f the social plan i s included in the partnership investment plan. Specific studies will evaluate the outcomes o f the social plans in order to enhance the strategies and the outcome. Entrepreneurship i s a main project outcome indicator. The monitoring reports o f the Project will show the level o f participation o f traditionally excluded groups in the project
E. Environment
79. The project i s classified in the B category requiring an Environmental Analysis (EA) but not a full- scale environmental assessment. The environmental analysis o f the project noted a range o f small scale potential environmental impacts primarily related to land use. Neither large scale nor cumulated impacts are expected given the limited, locally-based and differing nature o f project activities.
80. On average the project i s expected to be positive f rom an environmental standpoint since i t wil l promote the implementation o f environmentally safe productive practices, particularly in terms o f Integrated Pest Management. Since the types o f partnerships to be eventually selected were not known at the time o f project appraisal, the EA and attendant Environmental Management Plans (EMP) at the project level take the form o f an environmental framework presenting the steps, processes and procedures to be followed for environmental management by each partnership.
8 1. The general prescriptions for environmental mitigation as part o f the EMP are already in place in the ongoing project and are included in the Operational Manual. During project implementation, the framework translates into specific measures ensuring that environmentally safe procedures are part of the implementation o f the Environmental Management Plan required for each partnership. The implementation o f these measures will be duly monitored through the project monitoring system. An Integrated Pest Management plan has also been developed and i s part o f the Operations Manual. A l i s t o f partnerships that are not eligible for financing (negative l ist) because o f environmental reasons i s also included. A summary o f the environmental analysis i s presented in Annex 10.
F. Safeguard policies
Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP 4.0 1) [XI [ I Natural Habitats (OP/BP 4.04) [XI [I Pest Management (OP 4.09) [XI [I Physical Cultural Resources (OP/BP 4.1 1) [ I [XI Involuntary Resettlement (OP/BP 4.12) [I [XI Indigenous Peoples (OP/BP 4.10) [XI [I Forests (OP/BP 4.36) [XI [I Safety o f Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP 7-60)' [I [XI Projects o n International Waterways (OP/BP 7.50) [ I [XI
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82. Natural Habitats (OP 4.04) and Forests (OP 4.36). Natural habitats may be encountered near the core areas o f the productive partnerships or in their area o f influence. Similarly the areas for the development o f productive partnerships may contain patches o f natural forests. The establishment o f productive partnerships near natural habitats and patches o f natural forests wil l be closely monitored.
83. Pest Management (OP 4.09). In Colombia there i s l i tt le experimental evidence related to the efficiency o f pesticides for specific pests or crops in specific production areas. Consequently, there are few precise guidelines for their use. A Pest and Disease Management Plan has been developed and i s described in Annex 10.
G. Policy Exceptions and Readiness
84. There are n o policy exceptions.
85. The project i s ready for implementation. A detailed operational manual i s already in place and the adjustments to implement the proposed project are being integrated into the manual.
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Annex 1: Country and Sector Background
COLOMBIA: Second Rural Productive Partnerships
K e y Development Issues and Rationale for Bank Involvement
Agricultural and Rural Sector
The Colombian agricultural and agro-entrepreneurial sector accounts for 2 1 percent o f GDP, 25 percent o f export revenues, and 30 percent o f employment in the country. Colombian agricultural activities are carried out in areas where high poverty levels, unequal income distribution, illiteracy, violence, and unequal land ownership prevail. Violence in the rural areas has forced displacement o f people and has had a negative impact o n the investment climate and o n j o b creation. Apart f rom a small percentage o f very large landowners, most landholdings are small with less than three hectares.
Colombia's rural poverty rate i s 68 percent (2005) and affects 8 m i l l i on people, most o f them small farm families. Rural poverty represents 36.5 percent o f national poverty and 49 percent o f the national extreme poverty. Colombia's rural development and poverty reduction pol icy needs to address structural elements: l o w agricultural growth, weak human capital, l o w productivity and high informality.8 Agriculture can be a source o f substantial rural growth and reduce rural poverty particularly amongst small producers. T o achieve this, the Government has to implement policies such as providing incentives to increase productivity, financing asset improvement (land tenure, irrigation) and promoting small producer access to markets, inputs and new techno l~g ies .~
The past agricultural subsidy pattern has worked against the sector's comparative advantage and reduced agricultural competitiveness. L i ke many countries in Lat in America, Colombia historically pursued economic policies that favored import substitution and regulated the domestic market. This policy has not provided the expected benefits in terms o f sustainable employment creation, income generation and sector growth". Subsidies have also benefited large-scale farmers rather than medium-scale farmers and smallholders. T o improve competitiveness it i s necessary to implement export instead o f import substituting policies, enhance human capital and increase access to capital, technology and land. Small farmers need also to be better integrated into competitiveness enhancing programs.
The Government has embarked along with i ts partner countries in the Andean Region o n the negotiation o f a Free Trade Agreement (FTA) with the United States and other countries such as the European Union. The ratification o f the FTA wil l lead to a more open sector with the need to be more competitive. GOC i s designing and implementing the Internal Agenda to face the challenges derived f rom the opening o f markets and profit f rom the benefits generated by th i s process. In this context, improving agricultural competitiveness, developing the rural areas, and improving the living standards o f the rural population i s key to Colombia becoming a peaceful country.
* Pobreza y Desigualdad en Colombia. Diagndstico y Estrategias. Informe final. Misidn para la Reduccidn de l a Pobreza y la Desigualdad. Bogota, Junio de 2006.
lo Colombia Agriculture and Rural Competitiveness, Report No. 27523-CO. World Bank, December 2003. Colombia, Rural Policy Notes, 2006
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Competitiveness of the Agricultural Sector
The World Bank study (2003) on agricultural and rural competitiveness in Colombia assessed the comparative advantage for different groups o f products. Colombia has comparative advantage in export products as opposed to import substitutes, in perennial crops as opposed to annual crops; and in the more labor-intensive crops. All regions have a comparative advantage in some lines o f production. In many cases realizing this comparative advantage w i l l require concerted efforts in areas such as agricultural technology development, marketing and food safety.
Fruit and vegetable crops have considerable comparative advantage. Their role in generating employment and poverty alleviation i s great. They also enjoy continuously increasing world demand. An export strategy for fruit and vegetables would include: (i) obtaining phytosanitary approvals in major export markets, (ii) a higher priority in programs o f technology development and transfer, (iii) market intelligence, (iv) stronger producer organization, and (v) a higher priority in international trade negotiations.
Coffee, sugar, palm o i l and cacao also have comparative advantage. These crops are highly labor intensive and have considerable capacity for creating employment. Another group o f crops covers cassava, potatoes, tobacco, and cotton. Processed forms o f these products have been increasing in importance in Colombia.
Colombia has a comparative advantage in all livestock products. I t i s strongest for poultry, eggs and milk and least for extensive livestock production. Milk i s competitive in the Andean regional context but, in the presence o f subsidies on dairy products in other countries, i t could not compete in the wider international market. Structural and sanitary barriers in world markets, for poultry, beef and milk, inhibit the possibilities for expansion o f Colombia’s exports o f these products, but were world conditions to improve these possibilities would increase.
Government’s Sector Development Framework
9. The National Planning Department has presented to Congress a Development Plan 2006-2010 (DP) that highlights two main objectives for the agriculture sector: (i) greater insertion in the international markets and expansion o f the internal market (including higher competitiveness through productivity increases, compliance with phytosanitary and sanitary standards, enhanced access to production factors); and (ii) improvement o f rural income through the promotion o f agriculture entrepreneurial activities, agribusinesses, rural tourism and microfinance.
10. The DP’s main five strategies for the rural sector are: (i) the completion o f the pending phases o f the free trade agreement with the USA and the subscription o f additional free trade agreements with other countries; (ii) the creation o f conditions for the development o f a competitive agricultural sector that generates income and wealth in rural areas - the Sector Internal Agenda”; (iii) the reduction o f production costs to increase income levels and reduce poverty; (iv) the modernization o f land distribution schemes including access to irrigation, technology, credit and other productive services;
’ ’ The “Sector Internal Agenda” i s part o f the “Colombia Internal Agenda for Productivity and Competitiveness”, a strategy prepared by the Colombian authorities addressing key barriers to competitiveness. The Internal Agenda was developed through a broad consultation including over 1,000 regional and 150 economic sector-specific meetings in 2004 and 2005.
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and (v) the creation o f a risk capital fund so the State can co-invest in innovative and promising initiatives.
1 1. T o support these strategies, the D P includes three main programs/projects: (i) the Agro Ingreso Seguro Program (AIS); (ii) the strengthening o f the Sanitary and Phytosanitary System; and (iii) successful interventions that improve income for the rural poor, such as the ongoing and proposed Productive Partnerships Project (I and 11) and the Rural Microjhance Project (financed by FAD).
12. The proposed Second Rural Productive Partnerships Project i s strategically aligned with the growth, competitiveness and equity pillars o f the DP, in particular with the objectives o f the A IS which i s the main pi l lar o f the Government’s rural development program. A IS seeks to improve the income o f poor and vulnerable rural producers and the competitiveness o f the Colombian agricultural sector in response to the challenges o f globalization and trade opening as result o f international treaties. A I S has two main components: (i) direct income support to producers, and (ii) enhancement o f agricultural competitiveness. The proposed project i s directly aligned with th i s second component that will put in place diverse instruments such as financial incentives for irrigation and new crop development, expansion o f rural financial markets and promotion o f national and regional produce auctions. Those instruments will modernize the rural sector, improve productive infrastructure and introduce new technologies. In addition, A I S will be complemented by technical assistance to promote an entrepreneurial approach to agriculture based on producer associations.
13. The proposed project i s also aligned with the objectives o f DP’s equity pi l lar that seeks to improve income generation capacity o f the rural poor by increasing agriculture production, strengthening rural entrepreneurship, promoting agribusinesses and developing rural finance. This equity strategy wil l allow every Colombian to have equal opportunities to access quality social services as wel l as the conditions to generate and protect assets that enable their personal and social development. The proposed project i s directly aligned with the rural poverty reduction objective by increasing rural competitiveness, enhancing rural entrepreneurship in poor rural communities and hence generating additional income and employment in the rural sector.
14. The proposed project i s complementary to the IBRD Agricultural Transition Project that aims to strengthen the agricultural science and technology and sanitary and phytosanitary systems. I t wi l l also benefit f rom economic sector work, such as “Policies to Improve Sub-Regional Competitiveness in Colombia ”, that aims to help GOC fine-tune the policy-mix o f regions in meeting challenges and grasping opportunities f rom trade integration.
15. Project’s methodology has been integrated into the agricultural policy instruments o f territorial governments and i t s philosophy has been adopted by international cooperation programs such as USAID-MIDAS Program. Teams f rom public (INCODER) and private institutions (OM) and Projects (Peace and Development Project) have been trained in the partnership’s model.
Rationale for Bank Involvement
16. The lessons learned f rom the long-term involvement o f the Bank in the rural sector o f Colombia and the Bank’s international experience in implementing a diverse set o f rural development projects, give the Bank an advantage in the provision o f higher value-added to the Colombian program. Whi le there are other financiers, the Bank i s a principal player in the rural sector o f Colombia.
17. Bank-assisted projects have managed to execute decentralized projects very effectively (for example, the Agriculture Technology Development Project, PRONATTA; Productive Partnerships Support Project; Peace and Development APL I; Magdalena Medio Regional Development LILs I & 11;
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Peasant Enterprise Zones Project, Sierra Nevada Sustainable Development Project). Moreover, in the past couple o f years the Bank has led and completed sector studies on competitiveness (Colombia - Agricultural and Rural Competitiveness - Report No. 27523), land (Land Policy in Transition - Report No. 27942), and rural finance (Rural Finance - access issues, challenges, and opportunities - Report No. 27269) in Colombia.
18. This operation will build upon the experiences o f these decentralized projects, and will particularly build upon the lessons learned from the current Productive Partnerships Project. In addition, (i) the Government requested the Bank to finance a follow-up project to the ongoing Productive Partnerships Support project; (ii) the proposed operation was originally included in the Country Partnerships Strategy 2007-201 1 but the preparation was advanced into fiscal year FY07; for practical reasons Board approval was delayed into the first trimester o f FY08; and (iii) the Bank gains substantial expertise through this competitiveness enhancing operation. Some expertise has been already transferred to other countries in the region and Africa (Ecuador, Peru, Bolivia, Panama, Haiti and Angola). Therefore, the Bank i s uniquely placed to further guide this process, to continue learning from this experience and to distribute lessons learned to other countries and regions.
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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
Bank Financed: Agriculturemural Development Projects
promote social cohesion of poor rural To strengthen the National Agricultural Science and Technology and Sanitary and Phyto- sanitarv svstems.
I P PDO”
Assist vulnerable, low income and displaced populations in rural and urban communities in the conflict-affected reeions
Productive Partnerships Support Project
Agriculture Transition Project
Peace and Development Project
Agriculture Technology Development
Peasant Enterprise Zones Development
Project To change the agricultural research culture
S S
S S
S 8
S S
S S To develop a replicable methodology for the establishment and operation of a Peasant Enterprise Zone, PEZ (Zona de Resevva Campesina), in areas o f colonization affected by violence and i l l ic i t activities. To conserve the biological and cultural diversity of the Sierra Nevada and to use i ts natural resources in a sustainable manner, To improve business environment including efforts on quality and innovation and financial deepening To develop the operational capacity of the Consortium, the citizens’ network and other to reduce poverty and increase peaceful
Sierra Nevada Sustainable Development S Project
Business Environment DPL series S
S
S
Project.
2nd. Magdalena Medio Regional Development Project
S S
To help consolidate Colombia’s national Capacity building for the implementation of capacity for the implementation of the Cartagena Protocol on Biosafety,
the Cartagena Protocol; GEF TF052 187 S S
To contribute to the reduction of greenhouse gas (GHG) emissions from the “panela” (whole brown sugar), sector in Colombia,. Other Development Agencies To support entrepreneurial development of small rural enterprises
To promote and generate new sources of alternative sustainable development,
To improve the income o f poor and vulnerable rural producers and improve the productivity and competitiveness o f the Colombian agriculture sector in response to the challenges o f the opening o f commerce as result o f recent international treaties.
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FURATENA
Rural Micro-Enterprise Development Program (IFAD)
MIDAS - Agribusiness Component USAID:
Agro Ingreso Seguro Program (MADR)
Annex 3: Results Framework and Monitoring
COLOMBIA: Second Rura l Productive Partnerships
Results Framework
Reduced rural poverty and increase rural employment by enabling small rural producers to successfully
Increase rural competitiveness and build up rural entrepreneurship in poor rural communities in a sustainable manner through demand-driven partnerships with the commercial pnvate sector
Results
Component 1 : Partnership promotion and preparation
Component 2: Partnership implementation
Component 3: Management, and Monitoring & Evaluation
1 global market ,lac; -
Project Outcome Indicators
Competitiveness: total sales volume by the producer organizations under al l partnerships reaches a cumulative Colombian $350 bi l l ion in year 5 Entrepreneurship: seventy-five percent o f the participating producer organizations w i l l have a manager, w i l l maintain a system o f accounts and have their revolving fund in continuous rotation. Sustainabilitv: eighty percent o f regional management organizations have their yearly contracts renewed as MADR i s satisfied wi th their evaluation and supervision o f partnerships; local governments provide at least Colombian $22 bi l l ion over five years as co-financing to the partnerships investments; and 75% o f producer organizations linked to commercial partners (including those partnerships already operating) 24 months after end o f Droiect assistance.
Re r s
1 Profiles and pre-investment studies received
1 Training events for Secretariats o f Agriculture . Partnerships in operation and beneficiary families reached
1 Co-financing and credit obtained 1 Partnerships financial rate o f return 1 Training events 1 Environmental and social management
1 M&E system properly operating 1 Timely and unqualified audits 1
1
plans satisfactory implemented
Adherence to operational manual and audits Timely preparation o f progress reports
Use of Project Outcome Monitoring
Ongoing assessment o f project design and appropriateness o f inputs to achieve PDOs as basis to making necessary changes during project implementation
Use of Results Indicators Monitoring
Ongoing assessment o f status o f partnership preparation process and appropriateness to improve performance by OGR and SA Ongoing assessment o f status o f partnership implementation process and appropriateness as basis to improve performance by OGRs,, OGAs and partnership management
Ongoing assessment o f overall project management as basis to improve performance o f MADR and CGP
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Annex 4: Detailed Project Description
COLOMBIA: Second Rural Productive Partnerships
1. The project has three components: (i) partnership preparation; (ii) partnership implementation; and (iii) management, monitoring and evaluation.
The partnership preparation phase consists o f partnership promotion, invitations to submit proposals, evaluation and selection, feasibility studies and partnership structuring, and final approval o f the government financial incentive.
The promotion o f uartnerships will focus on attracting the private sector, generating interest with rural producer organizations and reaching out to the excluded groups (indigenous and afro-Colombian people). A national communication and relationship strategy would help to guide the project interventions.
Business Round Table meetings in each region w i l l be organized to attract the private sector. These meetings wil l bring together members o f producer organizations, the regional and national private sector and representatives o f the value chain councils and national business promotion organizations such as PROEXPORT, the Colombian International Corporation (CCI) , the National Association o f Exporters (ANALDEX), and the national Association o f Industrialist (MI). The objective i s that the private sector and producer organizations get to know each other and evaluate the different offers so that ideas for new partnerships can develop before the invitation to submit proposals i s launched. An information system about business opportunities and specific private sector demand w i l l be available. .
One OGR role would be to strengthen the function of: (i) business opportunities identification and (ii) getting active participation o f private companies to the Regions. OGR should incorporate experts from the private sector as a part o f its staff, in order to generate trust in private companies and ensure their participation in Productive Partnerships.
OGR will (i) map active private companies interested in the region in order to identify business opportunities for local producers; (ii) elaborate business profiles o f the region including information o f existing and potential supply: type o f products, climate, security situation, cost o f transport to agro- processing regional o national centers, etc.; (iii) encourage individual contacts with companies to ensure setting up o f trusted relationship; and (iv) enhance the business and market analysis o f the profiles submitted to evaluation to review the strategic aspect o f the business and companies,
OGR wi l l draw up l is ts o f local producer organizations interested in cultivating new products for the internal and export markets. Several producer organizations have shown interest in diversification o f their product base. Such organizations are ideal partners o f f i r m s that want to increase their primary produce suppliers and to form partnerships.
The regional OGR and project staff will also meet with representatives o f national and local indigenous and afro-Colombian people organizations (see Annex 10 -social analysis) to explain the workings o f the project, the invitations to submit partnership profiles and the opportunities for participating.
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9. Invitations to submit Partnership Profiles. Evaluation and Selection. Instead o f national invitations, OGR will launch regional invitations in accordance with the policy priorities determined by the national Intersectoral Committee. The departmental Secretariats o f Agriculture will rank the partnership profiles resulting f rom an official “invitation to submit partnership proposals”. OGR will evaluate the technical, financial, economic, environmental and social soundness o f the profiles and submit the profiles that comply with the agreed criteria to the Regional Intersectoral Committee. This committee will review the evaluation by the OGR and approve the profiles for further elaboration; or reject them with a justification. The rejected profiles can be resubmitted for the next round o f profi le evaluation.
10. Pre-investment Studies and Structuring: o f Partnerships, This phase will examine the profiles, conf i rm the technical, financial, environmental and social viabil ity o f the partnership, firm up the business relationship and the business plan, establish the revolving fund management scheme, and obtain the necessary documentation for the legal establishment o f the partnership (in particular compliance with requirements o f the Trust Company - Annex 7).
1 1. The proponents (producer groups and private sector) are responsible for the pre-investment phase and feasibility studies’2. The complexity o f the pre-feasibility studies wi l l depend on the type o f partnerships. In case the proponents do not have the technical capacity to carry out th is phase, MADR will finance the assistance o f specialists up to a financial ceiling established in the Operations Manual (OM). The proponents will select the specialists f rom a roster o f pre-qualified individual consultants or f i r m s having followed training by the project staff. The roster will be annually updated. OGR wil l be responsible for the quality control o f the pre-investment documents.
12. From in the beginning o f partnership preparation, the management committee o f the partnerships wi l l be established. This committee, composed o f representatives o f the producers and the private sector, wil l be responsible for pre-investment and partnership structuring. The management committee will also select the most appropriate technical assistance provider (OGA) f rom a register o f pre-qualified OGA. The OGA i s expected to participate actively in the establishment o f the partnership. During this period the management committee o f the partnership and the OGA wil l start the selection process o f the partnership manager by identifying leaders within the producer organizations or elsewhere that have administrative and management s k i l l s and can undergo some additional training.
13. Approval o f Government Financial Incentive. The Regional Intersectoral Committee will give f inal approval o f the financial assistance on the basis o f the above documentation, the funds budgeted and allocated to the region, the Modular Incentive DecreeI3 and the operations manual. MADR wil l have the right to object to RIC partnership approvals o n the basis o f technical criteria.
14. On the basis o f the decision by the Regional Intersectoral Committee, DDIUPIT will order the Trust Company to elaborate the trust fund contracts with the producer organizations. These contracts stipulate the procedures to be followed to spend the funds o f the trust accounts. OGR will check whether al l documentation i s in order, the commercial agreements are signed, the OGA has been formally recruited, operational plans are updated, the revolving fund management rules are established and the producer organization has a manager.
l2 This i s a radical change with the first project, where the OGR were responsible for the pre-investment studies. l3 Presidential Decree N o 321102, dated February 5,2002
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15. The implementation o f the partnerships includes two subcomponents: (i) investment in partnerships; and (ii) socio-entrepreneurial strengthening o f the partnerships and institutional strengthening o f the organizations that support the partnerships to ensure sustainability.
A. Investment in partnerships.
16. The partnership starts its implementation with the signing o f the partnership agreement between the producer organization, the private partner and the MADW (DDWIT). This agreement contains the business agreement between the producer organization and the private partner as well as MADR’s commitment to co-finance the partnership through the government financial incentive for a maximum o f 30 p e r ~ e n t ’ ~ o f the investment cost. The financial incentive i s allocated to the producer organization in amounts not exceed 4 mil l ion Colombian pesos per participating small producer family.” An exception i s made where the partnership plans to obtain credit: the producer organization can obtain a higher amount per family equivalent to the amount o f credit obtained (as an incentive to obtain credit from financial institutions) with a maximum o f 6 mil l ion Colombian pesos per family.
17
18,
19
20
The financial incentive to the producers will be provided through commercial trust contracts between the producer organizations and a Trust Company. The Trust Company wil l receive the funds from MADR and w i l l forward the funds to the trust accounts (patrimonio autbnomo) o f the producer organizations. The Trust Company w i l l supervise the spending by the producer organizations and partnerships including supervision o f procurement decisions. The producers have to reimburse the financial incentive into a partnership revolving fund that i s to be used to expand and consolidate the partnership. The financial incentive can be used for all types o f expenditure except the reimbursement o f past debts by the producer organization.
Additional financial contributions to the investment or operational costs o f the partnerships come in different ways. Departmental Secretariats o f Agriculture and municipal government contribute in cash or kind (for instance provision o f building plots, rent-free offices or technical assistance). Cash contributions have typically been late to arrive in the ongoing project. Under the proposed project all cash contributions will as much as possible be channeled through the producer associations trust accounts under the supervision o f the Trust Company. Although this may not resolve the delayed co- financing problem entirely, i t facilitates the procurement processes. Once the funds are in the trust accounts o f the producer associations, the Trust Company enforces the procurement procedures o f the project’s operational manual. These procedures are far less complex than the local government procedures.
Other contributions such as credit financing and private sector contributions follow the procedures o f the contributing entity. Nevertheless an effort w i l l be made to ensure that cash contributions pass through the producer associations’ trust account so as to make procurement planning and implementation easier
The partnerships that are formed on the basis o f similar processes in departments wil l also be able to benefit from project support if the National Intersectoral Committee approves o f its procedures and if the activities are in line with the project development objectives.
l4 Under the ongoing project, the maximum percentage was 40 percent equivalent to the Incentivo de Capitalizacibn Rural, ICR, a credit subsidy small farmers can benefit from when talung up credit for new technology investments.
Small farmer families are defined in the Operational Manual. The other ceilings o f the Government Financial Incentive (article 8 o f the Modular incentive Decree) that are related to land tenure will no longer be applied.
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B. Institutional Strengthening.
2 1. The institutional strengthening component focuses o n socio-entrepreneurial strengthening o f the producer organizations and the capacity building within the organizations that support the establishment o f partnerships.
B. 1. Socio-entrepreneurial Strengthening
22. Socio-entrepreneurial strengthening o f the partnerships includes the strengthening o f the partnerships management and the producer organizations.
23. Partnership Management. The management o f partnerships wil l preferably be carried out by a member o f the producer organization who has shown leadership, motivation and administrative and management sk i l ls . This manager will be contracted by the producer organization and lead the implementation o f the partnership’s business plan. The management committee o f the partnership and the OGA will evaluate the manager’s performance. The manager wil l be financed with proceeds o f the Government financial incentive up to three years, but the producer organization has to contribute to the manager’s salary f rom the second year onwards. The managers wil l also receive further formal professional training f rom regional management training institutes so as to ensure continuous local capacity building.
24. Technical assistance. All partnerships wi l l receive technical assistance f rom a technical assistance provider (OGA). OGA will assist the partnership in the implementation o f the technical, financial, management, social and environmental aspects o f the partnership. OGA will train the manager and the management committee o f the partnerships. The performance o f the OGA will be evaluated by the OGR and the partnerships management committee.
25. Strengthening of the Producer Organizations, T o ensure the financial and business sustainability o f the partnerships, every partnership will have a strategy to strengthen entrepreneurship as wel l as the business relationships in the partnership. This strategy has to make sure that the producer organizations become real business ventures. The strategy includes business and management training and coaching from the early beginning o f the partnership. This training will be provided by public and private local, regional and national agencies such as the national apprenticeship service (SENA) and the departmental administration o f social economy (Dansocial) through agreements that wi l l be signed with DDWPIT.
B.2. Capacity Building in the Institutions
26. Capacity building in institutions involved in the establishment o f partnerships includes: (i) capacity building in the Secretariats o f Agriculture; (ii) technical support to the regional value chain organizations and (iii) training o f the OGR and OGA.
27. Te enable the Secretariats o f Agriculture and Regional Value Chain Councils to carry out the promotional work that i s required to engage more producers and private sector into partnership schemes, the project will co-finance some o f the operational costs o f the Secretariats and Councils. The amount wi l l be in relation to the number o f partnerships that are being established. DDRPIT will also train the staff o f the Secretariats and the Councils in the identification o f possible partnerships, identification o f business opportunities and other aspects o f the promotional task.
28. Capacity Building of the OGR and OGA. The capacity o f the OGR and OGA to evaluate, develop, supervise and accompany partnerships i s crucial for the success o f the program. OGR and OGA will
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be trained through national and regional workshops, field visits and the creation o f an information network for knowledge transfer amongst OGR and OGA.
29. This component contains the activities involved in the promotion, management, coordination, monitoring and evaluation, and auditing o f the operation. These activities w i l l be carried out by DDRPIT. The loan wil l finance the cost o f consultants, training, seminars, workshops, operational costs and studies.
30. The monitoring wil l be done by several instances. The OGA will carry out the monitoring at the level o f partnerships in coordination with the partnership management committee. The OGA wi l l report to the OGR and the partnerships management committee. The OGR and the partnership management committee will supervise the work o f the OGA, but will visit the partnerships on a regular basis and report on the supervision visits to the DDWPIT. The monitoring will be done on the basis o f the partnership business plan and performance indicators.
3 1. A t the national level, the GCP has established a monitoring system including the collection o f data, the organization, the processing and the analysis o f the information collected at the level of the OGA and OGR. Evaluation studies w i l l be done by external agencies to be contracted in due course. The loan amount also includes an extensive evaluation o f the first phase.
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Annex 5: Project Costs COLOMBIA: Second Rural Productive Partnerships
Local Foreign Total U S $million US $million U S $million Project Cost By Component and/or Activity
Total Project Costs' 1 16.4 6.0 122.40 Front-end Fee
Total Financing Required 122.40
'Identifiable taxes and duties are US$16.4 million, and the total project cost, net o f taxes, i s US$106.6 million
Proiect Budget and Financing Plan ~1,000.000 Colombian Pesos)
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Annex 6: Implementation and Institutional Arrangements
COLOMBIA: Second Rural Productive Partnerships
A. Implementation Arrangements
1. The project will be implemented by the Ministry o f Agriculture and Rural Development (MADR) through the Rural Development Directorate (DDR) with the assistance o f a Project Implementation Team (PIT). As under the ongoing project, MADR’s Productive Chains Directorate w i l l facilitate the connection with the productive chains policy and institutions and provide technical assistance (see paragraph 16).
2. The Proiect Implementation Team (PIT) will be part o f the DDR and consist o f a small core group o f high-level professionals (a coordinator, a financial analyst, a sociologist, an environmental specialist, a monitoring specialist and an agribusiness specialist) and an administrative team including a procurement specialist, a financial management/accountant and a logistician. I t s functions are to: (i) promote the productive partnership model with the private sector and the producers organizations; (ii) develop and implement the communications strategy; (iii) oversee the selection, evaluation and implementation o f partnerships; (iv) train the participants (OGWOGA); (v) coordinate and monitor project implementation; (vi) coordinate the impact evaluations; (vii) carry out financial control; and (viii) be the technical secretariat o f the National Intersectoral Committee (see below).
3. The DDR Director wil l be the project director. The PIT w i l l work under the responsibility o f the DDR Director who can delegate some functions to the PIT coordinator. Initially it will consist o f consultants but gradually regular staff o f the Productive and Entrepreneurial Group (PEG) (see paragraph 17(iv)) within DDR wi l l assume more and more functions and responsibilities o f PIT.
4. A National Intersectoral Committee (NIC) supervises the overall implementation o f the project including the definition o f policy priorities that w i l l give some orientation to what type o f partnerships will be encouraged, review and approve the annual operative plan and budget, review the project reports, evaluation studies and audits. The N IC w i l l delegate the approval o f partnerships and i ts funding to the Regional Intersectoral Committees. In order to ensure rigorous application o f technical criteria for the regional approvals o f the government financial incentives, the NIC could review and object to certain regional approvals. If the Regional Intersectoral Committees would not perform adequately, the NIC could withdraw its approval delegation for those regions.
5. NIC i s presided by MADR and composed o f representatives o f the public and private sector. The composition o f the Committee i s as follows: the Minister or Vice-Minister (chair), the Director o f Sustainable Rural Development in the National Planning Department (DNP), the Agro-industrial Sector Manager o f PROEXPORT, the Director o f Sustainable Development Sector o f the Ministry o f Environment, Housing and Territorial Development (MAVDT), de Director o f the National Service for Apprenticeship (SENA), the Director o f Productive Projects in the Presidential Agency for Social Action and International Cooperation (ACCION SOCIAL), the Deputy Director for Social and Productive Development o f INCODER, a representative o f the financial sector, a representative o f the producers and a representative o f the entrepreneurs. The Project Director serves as the Technical Secretariat o f the NIC. The Productive Chains Director i s always invited to the N I C meetings.
6. RePional Intersectoral Committees (RIC). For operational purposes the country wil l be divided into regions composed o f at least two administrative departments. In each region a Regional Intersectoral Committee (FUC) will, under delegation by NIC, be responsible for (i) defining the dates o f the launching o f the invitations to submit proposals and o f the private sector-producer associations
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business round tables; (ii) the approval o f the profiles selected by the Secretariats o f Agriculture and vetted by OGR (see paragraph 9); and (iii) the approval o f the government financial incentive to each partnership within the funds available. MADR's Productive Chain Directorate will provide technical clearance to partnerships pr ior selection by RIC. If the R I C would not be able to comply with i t s responsibilities, the NIC will take over those responsibilities (in particular the approval o f government financial incentives).
The RIC wil l be composed o f local representatives o f the institutions taking part in the National Intersectoral Committee. The R IC wil l be chaired by a representative o f the central MADR, a regional SENA representative, a representative o f the Regional Autonomous Corporations (CARS), a regional representative o f PROEXPORT, a regional representative o f INCODER and the local Secretary for Agriculture, a regional representative o f the financial sector, a local representative o f the Productive Chain Councils, a representative o f the local producers and a representative o f the local entrepreneurs.
Departmental Secretariats of Amiculture (SA) wil l distribute information about the invitations to submit profiles and receive and rank the profiles in function o f technical criteria. They will also participate in the RIC, co-finance partnerships and follow-up o n certain key partnerships.
RePional Management Organizations (Organizaciones Gestoras Regionales- OGR) are mainly private sector institutions such as development NGO, consulting f i rms, Chambers o f Commerce, Universities and other institutions that have developed capacity (some o f which during the ongoing project) to oversee the process o f structuring, prepare and supervise the implementation o f partnerships. They wil l be selected competitively by DDRRIT and contracted o n a long-term basis to provide the fol lowing services to: (i) organize the business round tables, set up a business opportunities data base and promote the project in the region; (ii) evaluate the partnership profiles presented to the SA; (iii) supervise the partnership preparation and structuring; (iv) supervise and monitor the implementation o f the partnerships; (v) review and approve changes in the composition o f the government financial incentive to the partnerships under their supervision; (vi) assess the performance o f the OGA that provide technical assistance to the partnerships; and (vii) operate as a secretariat for the RIC.
10. OGR will have to employ and maintain employed a core permanent staff acceptable to D D W P I T as wel l as a number o f specialists (consultants). OGR contracts will be renewed annually o n the basis o f performance. DDRPIT will monitor OGR performance and manage the contractual aspects o f their relationship with the project. The successful renewal o f their annual contracts i s an indicator for project sustainability.
Local Management Orpanizations (Organizaciones Gestoras Acompaiiantes - OGA) are mainly private sector rural development organizations specialized in certain products and with knowledge o f local conditions. They assist the partnerships during preparation and structuring: in feasibility studies and wi th document processing. During implementation they provide management expertise, help with the development and implementation o f the business plan, ensure the transfer o f management sk i l l s and technology to the producer organizations and monitor the implementation o f the partnerships. They also make sure that the environmental and social plans are implemented and approve the disbursements o f the government financial incentive. OGA are selected by the partners themselves from a register o f O G A approved by OGR. Their contract i s signed with the Trust Company (on behalf o f the MADR) but their performance i s supervised by OGR.
I L. Partnerships ManaPement Committee. Each partnership wi l l have a Management Committee that manages the partnership. I t i s composed o f representatives o f the producer organization and the
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commercial partners, the SA, other co-financiers and eventually the OGA (without vote). The role o f the Committee i s to take leadership in the preparation o f the partnership venture, discuss and agree on partnership implementation issues and ensure coordination.
13. Each partnership will also have a manager init ially and preferably selected amongst the members o f the producer organization. Experience shows that partnerships without a strong manager become too dependent o n the OGA for the solution o f implementation issues. Therefore each partnership will have to select a manager, responsible for the day-to-day operations. The manager, or managers, once selected, will be specifically coached and trained for the j o b by the OGA and through formal training by participating institutions such as SENA. The manager will work under the orders o f the management committee.
Fimre 1: Proiect Organization Chart
/ National Intersectoral Committee [ I (Policy decision and monitoring) I I I
Ministry of Agriculture and Rural Development
Rural Development Directorate - PIT (Manages overall project implementation)
I Regional Intersectoral Committees I I (Select partnerships) ! I I
14. The project preparation team carried out an institutional analysisI6 to provide elements for the design the proposed project, to understand the institutional context in which the project wi l l operate and define the institutional arrangements for project implementation. This analysis i s structured to respond to three key questions that the second project wi l l face: (i) how to institutionalize the project within the Ministry o f Agriculture and Rural Development (MADR); (ii) how can the institutional
l6 The complete institutional analysis can be consulted in the project files.
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capacity of key actors be strengthened, and (iii) how can the private sector participation in the project be enhanced.
How to institutionalize the Project within MADR?
15. T w o main institutional challenges for the project are: (i) to institutionalize the project within the MADR’s pol icy and institutional structure and (ii) to generalize the project’s intervention model at the decentralized level. These challenges are oriented by the general principle o f the Colombian public administration that provides for sector ministries roles in the formulation and coordination o f sector public policies, while the implementation o f programs and projects are mainly responsibility o f executing agencies at the national andor sub-national levels.
16. The ongoing project i s being executed by the MADR through a Project Coordination Group (GCP) that responds to a National Intersectoral Committee (NIC) providing overall project’s orientation. So far, the GCP has worked as a relatively independent unit within MADR, conformed by specialists financed by the project. The Rural Development Directorate (DDR) has been responsible o f project’s administrative and financial supervision. The Productive Chain Directorate (DCP) has provided ad- hoc pol icy and technical support to the project. Financial and administrative support to the project has been subcontracted by the MADR with IICA and a Trust Company. Decentralized agencies such as the SA, OGR and OGA have been promoting, structuring and supervising partnerships at the regional and local level, respectively.
17. For institutional sustainability purposes, a project integration plan into the MADR will be gradually implemented during project execution. The Rural Development Directorate (DDR) wil l become responsible for project implementation w i th the support o f consultants, while the Productive Chains Directorate (DCP) will provide some technical advice and assistance”. Fol lowing Resolution No . 277 o f November 1, 2006, the DDR i s composed by staff distributed into 4 Technical Groups:
i. Territorial Development and Regional Planning Group (TDRPG) in charge o f disseminating, coordinating and developing synergies among various rural development programs and projects at the territorial level. Human and Social Development Group (HSDG) in charge o f promoting rural communities’ participation and access to rural development pol icy instruments and programs; Infrastructure and Social Services Group (ISSG), in charge o f facilitating rural communities access to land, housing and other productive and social assets; and
ii.
... 111.
l7 Additional technical support to the project wi l l be provided by the Productive Chain Directorate (DCP). The Productive Chain Directorate (DCP) i s in charge o f (a) achieving productive chain competitiveness; (b) creating conditions conducive to the generation o f strategic alliances among chain agents; (c) lowering transaction costs; (d) ensuring the timely and ongoing availability o f produce; (e) building social capital; and (0 creating the conditions to strengthen chain development. The ongoing project has, in fact, put into operation the productive chains policy through the partnership agreements reached among participants in the productive chain. The DCP would continue providing technical support to the project on a more formal basis: (a) facilitating the connection o f the project with the productive chains policy; (b) providing technical clearance to partnerships prior their selection by the RICs; (c) providing technical assistance to partnerships following the productive chain policy and agreements; and (d) using the productive chains institutional set-up at the national and sub-national level through the Productive Chain Councils (25 at the national level and 5 5 at the regional level) to contribute to the dissemination o f the project and promote linkages between small producers and the commercial private sector. On a case by case basis, the Regional Productive Chain Councils will provide support to the project.
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iv. Productive and Entrepreneurial Group (PEG) in charge o f promoting rural entrepreneurial capacities, structure rural productive subprojects, promote producer associations and coordinate the implementation o f rural productive development projects financed with external credit or international cooperation grants.
18. From loan effectiveness onwards, the PIT will be inserted into the DDR. Within DDR PIT’s responsibilities will be gradually assumed by the PEG. Activities, such as training on project’s procedures and requirements, team building activities, etc. to strengthen the project implementation capacity o f the DDR, particularly addressed to PEG’S key staff w i l l be undertaken. Transition arrangements agreed upon during appraisal comprise:
Year 1 (2008):
Year 2 (2009):
Year 3 (2010):
Year 5 (2012):
DDR i s responsible for project execution with PIT support. PIT Coordinator reports to DDR Director. Coordinator o f the PEG i s informed o f and participates in all project activities. Operational responsibilities start to be delegated to OGR.
PIT’s consultants staff i s reduced by 25%. DDR and OGR provide administrative and operational support to project implementation. PEG staff receives training to assume project supervision tasks. Accounting and procurement specialists start assuming their responsibilities under the correspondent Units within MADR.
-An evaluation to assess DDRPEG and OGR’s capacity wil l be undertaken prior continuation o f the integration process. Positive results wil l allow for: PIT responsibilities to be assumed entirely by PEG with the support of consultants (target date March 3 1,2010). Regional operational project implementation to be assumed entirely by OGR.
-Regular PEG staff assume all responsibilities in connection with project implementation and closure and continues providing orientation and assistance to regional stakeholders to expand the productive partnership model.
Decentralization of the partnerships model.
19. The project implementation scheme at the sub-national level w i l l be further de-concentrated. The following six features wil l be incorporated:
(i)
(ii)
(iii)
(iv)
implementation responsibilities will be directly undertaken by decentralized entities (SA,OGR,OGA) under the overall supervision o f the DDRPIT; approval for pre-investment and for government financial incentive allocation w i l l be delegated to Regional Intersectoral Committees (RIC); partners will be responsible for the structuring o f the partnerships and OGR wi l l guarantee the quality o f the pre-investment studies; OGA wi l l ensure the transfer o f management responsibilities to the producer organization;
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(v) the productive chains institutional set-up at the sub-national level through the Productive Chain Councils wi l l be used to disseminate the project and promote linkages between small producers and the commercial private sector. Technical Secretariats or other representative o f the Productive Chain Councils will participate in the RIC; and S A will enhance their participation as co-financers o f the partnerships and will continue mainstreaming the partnerships model into their development agenda.
(vi)
How can the institutional capacity of key actors be strengthened?
20. The institutional analysis assessed the strengths and weaknesses o f the SA, OGR, and OGA and provided interesting recommendations. In general, the analysis shows that institutional strengthening o f these organizations continues to be key for project success. A detailed diagnosis o f these organizations can be consulted in the institutional analysis document archived in the project files.
2 1. Local Management Organizations (OGA). The institutional assessment indicates that major strengths o f OGA reside in: (i) local knowledge and experience, (ii) high commitment, (iii) interdisciplinary assistance, (iv) administrative support and (v) local presence. Among the identified weaknesses the fol lowing can be mentioned: (i) not sufficient transfer o f capacities to the producer organizations, (ii) high costs for the project, (iii) high staff rotation, (iv) l o w capacity to ensure the compliance o f the social and environmental plans, and (v) lack o f coordination with other stakeholders.
22. In order to make good use o f their strengths and overcome some o f the main weaknesses, the proposed project wi l l : (a) adjust OGA terms o f reference to better reflect the partnerships’ accompanying needs in terms o f frequency and qualified personnel; (b) adjust the operative manual to redesign the roster and qualification mechanism o f OGA at the regional level; (c) incorporate in partnership operative plans the transfer o f managerial and accounting sk i l l s to the producer organizations; (d) implement OGA performance evaluation mechanism; and (e) develop institutional strengthening activities for OGA in administrative and financial management, commercial agreements and entrepreneurship o f producer organizations.
23. Regional Management Organizations (OGR). M a i n strengths o f the OGR are: (i) consistent assessment o f partnerships profiles, (ii) high quality o f financial and technical studies, and (iii) capacity to recruit staff with local knowledge. M a i n weaknesses encountered are: (i) high staff rotation, (ii) delays in the submission o f pre-investment studies, (iii) l o w capacity to recruit high level social and environmental specialists, and (iv) weak capacity for leveraging co-financing and credit.
24. In order to make good use o f their strengths and overcome some o f the main weaknesses, the project wi l l : (a) adjust OGR terms o f reference to better reflect the subproject’s supervision needs; (b) disseminate best practices in the preparation o f pre-investment studies and in the supervision o f investments under the partnerships; (c) design and implement a performance evaluation mechanism to better assess the OGR performance; (e) develop institutional strengthening activities o f OGR in supervision o f economic-financial pre-investment studies; (0 strengthen OGR capacity to enhance the capacity o f partners structuring subprojects in doing business and market analysis, through the preparation o f and training o n guidelines to assess subprojects business aspects.
25. Moreover the competitive OGR selection process will put more emphasis o n the quality o f the proposed staff rather than on the financial capacity o f the OGR. The OGR will need to have a core permanent staff acceptable to the DDWPIT. OGR contracts wil l annually be up for renewal o n the basis o f a performance evaluation.
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26. Departmental Secretariats of Agriculture (SA). Weaknesses o f SA reside mainly in: (i) low coverage for project dissemination purposes, (ii) low technical capacity, (iii) bureaucratic procedures, and (iv) unfulfilled commitments. On the positive side, SA are known by: (i) their moral support and commitment, (ii) their fiscal effort to provide additional financing to partnerships, (iii) their interest in the replication o f the partnerships model; and (iv) in some few cases, effective adoption o f the partnerships model.
27. To strengthen the capacities o f the SA, the proposed project will: (a) disseminate materials for project promotion and operative support to SA; (b) standardize methodologies to assess, prioritize and select subprojects; (c) design incentives to promote the adoption o f the partnerships model at the regional level under the leadership o f the SA; and (d) train SA in call for proposals and supervision o f partnerships.
How can the private sector participation in the Project be enhanced?
28. The institutional analysis assessed the participation o f the private sector through the application o f a survey to a sample o f 15 commercial partners (CP) involved in the project and the assessment o f secondary information. CP were characterized by size, market orientation, product and sector. They were asked about the factors that motivate their participation in the project and the conditions that could enhance their participation.
29. In order to make good use o f the CP strengths and overcome some o f the main weaknesses, the second project wil l: (a) design a communication strategy to outreach the private sector, including business round tables; contacts with PROEXPORT, CCI, chambers o f commerce, chain councils, private enterprises; cooperation agreements for knowledge and information sharing, and promotion o f motivational materials using among others, web page services; (b) design incentives to increase private sector participation, including campaigns to reward private sector commitment with the rural sector; and (c) train the private sector on different type o f commercial agreements that could better suit their supply needs.
30. In addition, the second project will provide for a more active role for OGR in (i) approaching directly the private sector as an actor that could be better suited to provide initial comfort and trust to private sector companies; and (ii) identifying business opportunities at the regional level which wil l imply for OGR to have an in depth knowledge o f the opportunities that the regions can offer (infrastructure, services, products, soils, costs o f transport, security, etc.) to develop agro-businesses using the partnerships model.
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A n n e x 7: F inancia l Management and Disbursement Arrangements
COLOMBIA: Second Rural Productive Partnerships
Country Issues The Bank i s currently engaged with the Government to enhance across-the-board project financial management (FM) by: (a) improving the operation o f Special Accounts held at the central bank and related mechanisms for receiving and managing cash, and (b) decreasing the incentives to employ parallel FM structures through the increased use o f country systems.
During the CPPR in December 2005, the GOC and the Bank agreed to develop the previous issues, under the country systems framework, conceiving that success can be achieved by including institutional capacity building as wel l as implementation arrangements in the dialogue at country level and in the Country Assistance Strategy process, and monitoring results. The agreements reached may be potentially be applied to the programs o f other donors, including IDB, with whom the WB has increased collaboration in order to achieve harmonized approaches around Colombia's existing systems.
As documented in the CPPR held in February 2007, important progress in the use o f country FM systems has been made: a) F rom June 2006 project interim financial reports (IFRs) have been generated in the nation's integrated financial information system (SIIF); b) a Memorandum o f Understanding (MOU) and Terms o f Reference (TORS) for project audits were agreed among the Ministry o f Finance (MHCP), the Contraloria General de la Republica (CGR) and the Bank; c) a MOU, among MHCP, the Department o f National Planning (DNP) and the Bank, was agreed to define that project executing entities wi l l be directly responsible for financial and project management, stating that strengthening for the entities might be required. Specific circumstances that depart f rom these arrangements have to be properly justified, analyzed and approved during project preparation.
Financial Management Assessment
4. A Financial Management Assessment (FMA) of the MADR was carried out during pre-appraisal in accordance with Bank policy. The assessment concluded that MADR has improved the internal controls and financial management procedures since the time the Bank carried out the FMA for the Agricultural Transition project (Loan 73 13), so that MADR can manage the proposed project financial matters and administer loan funds. Project financial management responsibilities will fa l l under the responsibility o f the Finance Sub-Directorate, with the support o f the personnel mentioned in the OrganizatiodStaffing section below. The main responsibilities wi l l include the coordination o f financial and administrative procedures related to project budgeting, treasury (in conjunction with the Trust Company), general accounting and reporting.
5. According to the institutional analysis and a f ie ld visit to a producer organization o f the ongoing project, the producer organizations demonstrate generally weak financial capacity. T o achieve the project objectives, the FM recommendation i s that the qualifications o f OGAs to provide assistance to the producer organizations need to be strengthened, e.g. through the model o f an "enterprise incubator'' or any other specialized entity that can help in the development o f management capacity.
Implementing Entities and Flow of Funds (see Chart o n the next page)
6. MADR wil l be the project implementing entity. MADR will enter into agreements with producer organizations, a Trust Company and other donors for the partnership implementation component.
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Details are provided in the funds flow and cash management section below.
7.
8.
9.
OrganizatiodStaffing. To support MADR’s Finance Sub-Directorate with project transactions, a financial analyst and an accountant (as well as a procurement specialist) w i l l report to the Finance Sub-Director under terms o f reference acceptable to the Bank. The integration o f these consultants under the MADR’s finance Sub-Directorate w i l l take place by the second project year as detailed in Annex 6, paragraph 18. The FM section o f the operational manual will include detailed FM responsibilities for each member o f the team.
Trust Company. As arranged for the ongoing project, component 2 w i l l be disbursed through transfer to a trust account in the name o f the MADR. From this trust account and based on the cash flow needs, the MADR wi l l request the Trust Company to transfer the funds to producer organizations’ trust accounts (patrimonios autbnomos) in three disbursements. A first part o f the government financial incentive will be transferred after the signature o f the partnership agreement and completion o f al l formalities, a second part after documentation o f 70 percent o f the expenditures of the f irst disbursement (as well as other conditions specified in the Operational Manual) and a third payment after documentation o f the remaining 30 percent o f the first disbursement and 70 percent of the second disbursement (as well as other conditions specified in the Operational Manual). The Trust Company w i l l process the payments directly to the producer organizations’ suppliers and w i l l provide documentary evidence o f the full amount at the end o f the disbursement cycle. The detailed procedure i s included in the operational manual.
The Trust Company contract includes the administration o f all projects funds as justified by the Government during appraisal.
Budget Planning 10. On the basis o f the annual budget, MADR will prepare the annual operational and procurement plans
and monitor their execution through monthly and semi-annual financial reports. This task w i l l be an integral part o f the MADR’s budget cycle management and processed through its budgetary system integrated into SIIF. These reports will be distributed to the relevant stakeholders. The Bank will review the annual operational and procurement plans.
Accounting and Information Systems.
1 1. Project accounting records wil l be maintained on an accrual basis, under the public accounting system, complemented with controls and registries for management o f advances, as well as fixed assets acquired during the project period. Project accounting wil l be integrated into the entity’s integrated financial information system (SIIF) through an “on line internal allocation” (cost center) that w i l l be created for the project. MADR has already implemented th is procedure with the accounting for the ongoing Productive Partnership and Agricultural Transition projects. Details o f expenditure for producer organizations w i l l be managed and reported by the Trust Company.
Internal Controls
12. The internal control system o f the project would incorporate the policies and procedures established by the Internal Control Office (ICO) o f MADR. A report issued by the I C 0 dated January 3 1,2006, followed up on the activities o f the financial area and all the departments where economic transactions take place. The report showed progress in implementation o f the improvement plans as o f 12/31/2005 o f 95.40%.
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13. In the context o f i t s regular activities vis-a-vis MADR’s budget, the I C 0 would collaborate during project execution in order to achieve i t s objectives and assure i t s efficient execution, including incorporation o f the administrative policies, the safeguard o f goods, the prevention and detection o f fraud and errors, the complete and timely presentation and registration o f financial transactions, and the reliable financial information.
Chart 1: Flow of Funds
LOAN ACCOUNT I (at the WORLD BANK)
MHCP per MADR ’s request submits disbursement requests to the Bank. 1
BORROWER’S DESIGNATED ACCOUNT
(Special Account held by the MHCP - National Treasury at the Central Bank)
P A )
MADR submits disbursement requests to MHCP for transfer officnds to Trust Company
at TRUST COMPANY)
MADR requests payments to third-parties accounts
I I
GOODS & SERVICE PROVIDERS PARTNERSHIP PARTNERSHIP
ACCOUNT (I) ACCOUNT (2)
( COMPONENT 3 * PROVIDERS (n)
14. The procedures o f the internal control system would ensure that: (a) the procurement process has followed the procedures established in the loan agreement and the project’s operational manual; (b) documents files are reliable and functional; (c) the project i s executed according to administrative processes and legally and fiscally val id norms; (d) the financial and accounting system supplies information according to established accounting norms, i s accessible to users, supplies adequate information for audits, and provides reliable and suitable information; (e) the financial archives are
40
periodically and effectively done and secure systems are used to control the deposits and disbursement o f funds; and (f) the GCP has established the procedures for planning and monitoring i ts activities, including procurement o f goods, works, and consultants, and the projection o f cash flow o f loan and local counterpart funds.
15. Written Procedures. Project financial procedures are described in the Operational Manual (OM), which defines the roles and responsibilities o f the project FM team. The O M includes among other financial procedures: (a) accounting policies and procedures including basis o f accounting; (b) cash flow charts with detailed processes with the Trust Company entity and producer organizations; (c) reporting requirements based on the agreements made between the finance ministry (MHCP) and the Bank in September 2006, which will be part o f the OM; (d) internal control procedures including criteria and procedures for processing payments; (e) records management, (f) audit arrangements; and (8) the specific norms and template agreements regulating disbursement, monitoring and reporting o f grants to producer organizations.
Financial Reporting
16. The Finance Sub-Directorate o f MADR wi l l prepare Interim Financial Reports (IFRs), in conformity with a memorandum signed by the MHCP and the Bank, in September 2006. The IFRs generated in SI IF include: a) reports o f instructions and payment details from the designated account held in the Central Bank; b) report o f commitments; c) balance sheet; d) cumulative investment statement (with actual and budgeted figures) and cash balances; e) summary statement o f subprojects and cost sharing transfers, including summary reconciliation o f advances pending documentation; and f ) notes to the financial statements.
17. IFRs wi l l be sent to the Bank semiannually within 45 days after the end o f each such period (Le. by August 15 and February 15). The IFRs wi l l serve as a basis for the annual audited financial statements. These financial statements w i l l also include project management’s assertion that loan funds were used in accordance with the intended purposes as specified in the Loan Agreement. The annual financial statements, once audited, w i l l be submitted to the Bank not later than six months after the end o f each calendar year.
18. The supporting documentation o f the financial statements will be maintained by MADR (and the Trust Company) and made easily accessible to Bank supervision missions and to the external auditors. All financial reports will be made public, including through posting in the web pages o f the MADR.
Funds Flow and Cash Management.
19. The Bank would disburse the proceeds o f the loan into a Designated Account (DA) in U S dollars or Colombian pesos depending on the M A D R M H C P request, in the name o f the project, held by the National Treasury in the Central Bank. If the DA i s opened in U S dollars, the Finance Sub Directorate at MADR will request the National Treasury to convert the deposits into pesos and to transfer them to the Trust Company where trust accounts w i l l be opened in the name o f each partnership. The detailed cash flow including counterpart founding wil l be included in the operational manual.
Disbursement Arrangements
20. The following table summarizes, by component the agreement on the amount o f the Loan, the use o f funds, and when the Bank wil l recognize expenditures, for the activities to be financed with loan funds.
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Componenthbcomponent
1, Partnership promotion and preparation (IBRD US$3.2) Partnership promotion, invitations to submit proposals, evaluation and selection, feasibility studies and partnership structuring 2. Partnershiu implementation (IBRD 24.8 mil l ion) Costs related to grants for investment, operational and technical assistance expenditures by producer organizations, technical assistance by service providers, studies, training and capacity bui lding and operational costs for two subcomponents: (i) financial incentives (grants) to producer organizations; and (ii) technical assistance to producer organizations, OGR, OGA, Secretariats o f Agriculture, Productive Chain Councils.
3. Management. monitoring and evaluation (IBRD US$2.0 mil1ion)This includes the administrative project management costs such as consultant fees, monitoring and evaluation, studies, audits and operational costs.
Responsible
MADR
MADR
Trust Company
Partnerships
MADR
Description (use)
Consulting services, seminars, workshops and operational expenditures to promote and prepare partnerships
Government Financial Incentives (Cost-sharing transfers)
Technical assistance by service providers, studies, training and capacity building and operational costs; and
Technical assistance to producer organizations and to regional institutional players who help promoting and establishing partnerships and the monitoring o f the development o f the partnerships. Goods, consultants, training, audits and operating costs.
Recognition o f Expenditures
U p o n payment to consultants and suppliers
U p o n transfer to producer organizations accounts under the financial incentives subcomponent (with ex-post reconciliation).
U p o n payment to contractors, suppliers, consultants, and travel and per diem to trainees under the TA subcomponent
U p o n payments to consultants, MADR staff and suppliers o f goods and services
21. In the case o f financial incentives for producer organizations, whi le these wil l be recognized upon the transfers to the partnerships, the use o f these transfers wi l l be documented ex-post through reconciliation reports that in a simple format should attest to the adequate use o f grant funds against the criteria and requirements o f the subproject agreements. These reports will be subject to the MADR’s supervision and to the external audit. Should instances o f ineligibil i ty be brought up by these reports or by Bank supervision, the correlated amounts will be returned by the MADR to the Designated Account or directly to the Bank.
22. Disbursement Mechanisms and Documentation. The project wil l have access to funds advanced by the Bank to a Designated Account in U S dollars for processing disbursements for eligible expenditures under project activities. Funds deposited into the Designated Account as advances will follow the Bank’s disbursement operating policies and procedures established in the Disbursement Letter.
23. An authorized ceiling, i.e. the maximum amount that may be on deposit pending the provision to the Bank o f documentation evidencing the use o f advanced funds made into the Designated Account, wil l be set at US$ 3 million.
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24.
Inherent risk i. Country specific
All withdrawal applications will be fully supported by appropriate supporting documentation (Le. invoices, receipts, and any other evidence o f payment) except for those expenditures for contracts not subject to pr ior review and for which the Bank has approved the use o f Statement o f Expenditures (SOEs), as wil l be referred to the Disbursement Letter. The MADR will be responsible for preparing and submitting withdrawal applications to the Bank. All supporting documentation o f withdrawal applications (including those for which SOEs are used) should be retained at i t s central location (and that o f the Trust Company) and be available for review by the Bank supervision missions and independent auditors.
Commentdmitigation
framework M Country Issues are being addressed under the Country Systems
Retroactive Expenditure.
25. A maximum amount o f US$ 3 mi l l ion may be financed by the Loan for eligible payments made after project appraisal and within 12 months o f the date o f the legal agreement.
External Audit 26. The audit reports o f the ongoing project included an unqualified (“clean”) opinion o n the project
financial statements as o f December 3 1, 2005.
27. For the proposed project, the annual financial statements, SOEs, and deposits and withdrawals f rom the Designated Account would be audited each year by the Contraloria General de la Republica (CGR), under terms and conditions satisfactory to the Bank. In addition to the audit o n the annual financial statements, the audit report would include comments o n the accuracy and propriety of a l l expenditures, project management, eligibil i ty for financing in terms o f the project’s legal agreements, including the execution o f the financial incentives and standards o f record keeping and internal controls related to the foregoing, and o n the extent to which supporting information could be relied upon as a basis for requesting disbursements f rom the loan using SOEs. Audit reports and related statements would be submitted to the Bank within six months of the end o f the Borrower’s fiscal year.
Financial Management Risk.
28. The Risk Assessment Matr ix in the Table below presents the items o f potential risk for the program from a financial management standpoint.
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v. Financial reporting
vi. Auditing
29. The implementation o f FM arrangements described in this Annex (and to be detailed in the operational manual) intend to lower the overall FM control risk and the residual FA4 risk rating, defined as the combination o f the project’s inherent and control risks as mitigated by the client control frameworks and Bank supervision effort, to an overall moderate level.
external audit. Should instances of ineligibility be brought up by these reports or by Bank supervision, the correlated amounts will be returned by the MADR the Designated Account or directly to the Bank. IFRs will be generated in the entity’s integrated financial systems SIIF. Pilots (in other projects) will be carried out to the SIIF I1 to be implemented from year 2008. TORS have been agreed with the CGR. Training and TA i s being provided by WB and IDB.
M
M
Financial Management Action Plan
Action
Prepare and clear with the Bank the FM contents o f the operational manual, the format o f IFRs and reconciliation reports o f grants, and the template contracts with the fiduciary entity and partnerships Prepare terms o f reference for the external audit with the CGR Strengthen the Terms o f Reference and requirements for OGAs, in terms o f sk i l l s to build financial management capacity in producer organizations.
Responsible Entity
MADR
MADR /WB
MADR
Completion Date
June 20,2007
June 20,2007
June 20,2007
30. Bank FM Supervision Plan. The FM team wil l review the semi-annual IFRs and annual audit reports, and will carry out at least one financial management supervision per year.
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Annex 8: Procurement Arrangements
COLOMBIA: Second Rural Productive Partnerships
A. General
1. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank 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: Minor civi l works may be expected under specific subprojects, including, inter alia, expansion and rehabilitation o f small warehouses; construction and rehabilitation o f greenhouses, nurseries, irrigation infrastructure and other production-related minor works. The procurement will be done using the procurement documents agreed with or satisfactory to the Bank and following procedures acceptable to the Bank reflected in the Operations Manual, basically shopping for contracts below $150,000 as described in the Operations Manual.
3. Procurement of Goods: Goods procured under th i s project would include IT hardware, printers and their peripherals; software, licenses and patents, publications, office and communication equipment. ,
The procurement wil l be done using the Harmonized SBD for al l ICB and National SBD agreed with or satisfactory to the Bank (or i t s harmonized version, when available). For smaller goods purchases, a model o f Invitation to Quote under shopping procedures wi l l be agreed with the Bank. In subprojects, shopping procedures, as described in the Operations Manual, wil l be applied for purchase o f goods below $150,000 per contract.
4. Procurement of non-consulting services: Basically printing and reproduction services; fund management; logistics services, and dissemination o f project results.
5. Selection of Consultants: Consulting services with f i r m s w i l l basically include technical assistance, including, inter alia, studies; advisory and implementation services; monitoring and evaluation; financial, management, fiduciary, audit services; training and workshops. Individual consultants w i l l be hired to provide -as needed- advisory services in different fields o f expertise. Short l is ts o f consultants for services estimated to cost less than $350,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. Also, given the project's characteristics, the participation o f universities, research institutions, public training institutions and NGOs in some specialized fields o f expertise i s expected.
Most contracts for firms are expected to be procured using Quality and Cost Based Selection Method (QCBS). Consultant assignments o f specific types as agreed previously with the Bank in the Procurement Plan may be procured with the use o f the following selection methods: (i) Quality Based Selection (QBS); (ii) Selection under a Fixed Budget (SFB), especially for works supervision contracts; (iii) Least Cost Selection (LCS); (iv) Selection Based on Consultants' Qualifications
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6.
7.
8.
B.
9.
10
(CQS), for contracts estimated to cost below U S $200,000 equivalent; and, exceptionally (v) Single Source Selection (SSS), under the circumstances explained in paragraph 3.9 o f the Consultants’ Guidelines. The harmonized RFP must be used.
Individual consultants wi l l be hired to provide technical advisory and project support services and selected in accordance to Section V o f the Guidelines.
Operating Costs: Operating Costs wil l basically include travel related expenses for personnel commissioned under the Project; expenses related to training and workshop logistics; office consumables, communications and utilities; office equipment maintenance; insurance and banking costs and other office-related costs incurred should the project not exist. The Project Implementation Team will use the Team’s o w n internal procedures, satisfactory to the Bank, to procure the above operating costs.
Others: Trust companies will receive the money and transfer it to the eligible producer organization trust accounts. The procurement wi l l be conducted by those producer organizations as per the Operations Manual and the control and supervision for this procurement i s by the Trust Company. Also scholarships and grants are possible within the framework o f this project, but always o n the basis o f an Annual Plan, previously approved by the Bank.
The procurement procedures, SBDs and procurement documentation to be used for each procurement method, as wel l as model contracts for works and goods procured, are presented in the Project Operations Manual agreed w i th the Bank.
Assessment of the agency’s capacity to implement procurement
Procurement activities wi l l be carried out by the Project Implementation Team (successor o f GCP under the existing Productive Partnerships Support Project) integrated into the Ministry o f Agriculture and Rural Development. The team has a consultant experienced in Bank-funded procurement, mainly in procurement o f consulting services, and also another consultant who will be involved in the review o f procurement actions under this project.
An assessment o f the capacity o f the MADR to implement procurement actions for the project has been carried out by Jose M. Martinez in January 2007. The assessment reviewed the proposed organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and the Ministry’s relevant administrative and finance units.
1 1. The key issues and risks concerning procurement for implementation o f the project have been identified and risk mitigation includes: (i) DDRRIT shall organize and conduct training and workshops sessions for the organizations that wi l l function at the regional level (OGR and OGA); so they can guide and advise producer organization in terms o f procurement matters; (ii) the Trust Company wil l review, clear and be responsible for a l l procurement activity; (iii) DDRRIT will do spot checks o f procurement activities. In case o f discrepancy during those checks, an audit may be called for; (iv) procurement staff attended the 2007 Wor ld Bank Procurement Seminar.
12. The overall project risk for procurement i s AVERAGE.
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C. Procurement Plan
Ref. No.
13. 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 May 7,2007 and i s available at MADR. I t wil l also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
Estimated Procurement P-Q Domestic Review Expected Comments Contract (Description) Cost Method Preference by Bank Bid-Opening
(yedno) (Prior / Post) Date
D. Frequency of Procurement Supervision
4
Selection Method
14. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended annual supervision missions to visit the field to carry out post review o f procurement actions.
5 6 7
Review Expected Comments by Bank Proposals (Prior Post) Submission
Date
E. Details of the Procurement Arrangements Involving International Competition
1. Goods, Works, and Non Consulting Services
(a) List o f contract packages to be procured following ICB and direct contracting:
(b) ICB contracts for goods estimated to cost U S $300,000 equivalent per contract and above, and ICB contracts for civi l works estimated to cost U S $5,000,000 and above and all direct contracting o f goods and works will be subject to prior review by the Bank.
2. Consulting Services
(a) List o f consulting assignments with short-list o f international f i r m s .
Ref. No. Description o f Estimated
(b) Consultancy services estimated to cost above U S $200,000 equivalent per contract and up, and any single source selection o f consultants (f irms) wil l be subject to prior review by the Bank.
(c) Short l is ts composed entirely o f national consultants: Short l is ts o f consultants for services estimated to cost less than U S $350,000 equivalent per contract and up may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
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Annex 9: Economic and Financial Analysis
COLOMBIA: Second Rural Productive Partnerships
Variable Net family farm income Net non-farm fami ly income Total net fami ly income
Experience o f the first phase, lessons and recommendations:
Direct Impact (increase) Indirect Impact (increase) 29% 5 yo 36% 9% 31% 6%
1. During the f i rs t phase o f the project an ex-ante financial appraisal o f each partnership has been carried out by external consultants. Such appraisals helped to determine the size o f the partnership investment, the amount o f the Government financial incentive (incentivo modular), the amounts of co-financing required, the overall cash flow, the level o f risk o f the proposal, the possibility o f the producers to reimburse the financial incentive f rom their revenue and the financial internal rate o f return. A standard appraisal document has been developed over time and already more than 50 appraisals have followed the latest version o f the standard document.
2. All partnerships have an ex-ante estimated minimum internal rate o f return o f 15 percent. As the project objective i s to increase producer income, the monthly estimated net revenue o f each producer has to be larger than two monthly minimum salaries.
Table 1 : First Phase Partnerships with ex-ante estimated IRR
Source: Project Documentation
3. During the implementation o f the first phase an independent external impact evaluation has been carried out by the firm “Econometria” o n a sample o f seven partnerships. The results o f this evaluation are summarized in table 2.
Table 2: Partnerships Impact o n Family Income
4. The study estimates the direct impact o n the income o f participating families and the indirect impact o n neighboring families that are copying the technology o f the direct participants. The direct impact on family income derived f rom the farm i s a 29 percent increase. The partnerships have also an impact on family income outside the farm, as the new technologies save farm labor and liberate
48
5.
6.
7 .
8.
9.
Product
Fish
family labor to work outside the farm. The direct impact on family income derived from activities outside the farm i s a 36 percent increase. The total direct impact i s estimated at 3 1 percent. The partnerships have effects that spill over to neighboring families. This indirect impact i s estimated at an increase o f 5 and 9 percent respectively with a total impact o f 6 percent.
Estimated Real Variation FIRR FIRR 15% 21% +6%
The partnerships had also a significant impact on employment that rose by more than 20 percent. There was also a positive indirect impact on employment o f neighboring farm families. The study could not identify statistically significant impact on auto consumption or overall farm productivity.
Onion Sugar Derivate
As part o f project preparation, a financial and economic analysis o f the proposed project has been carried out on the basis o f a sample o f an additional eight partnerships for which sufficient and reliable ex-post data are available. The eight partnerships cover products with a short, medium and long-term maturity cycle and are under implementation since 2005 or earlier.
22% 19% -3% 31% 61% +30%
Table 3: Ex-post analvsis o f eight partnerships
Mandarines Milk
36% 15% -2 1 Yo 5 0% 33% -17%
Cacao Afr ican Palm (1 )
24% 22% -2% 18% 16% -2%
I A f r i canPa lm (2) I 15% I 15% I - I
Only two o f the eight partnerships show a higher real rate o f return than the estimated one, five show a lower rate o f return. The reasons are that most partnerships start with long delays (reducing the FIRR), while the production forecasts and short-term effects o f new technologies are generally overestimated during appraisal.
Only the partnerships in African Palm benefit from bank credit and this only after prolonged negotiations with the banks. Experience with bank credit in the first phase has shown major impediments to obtain bank credit. First, obtaining credit lengthens substantially the pre-investment period (6-8 months). I t often requires the association to shop around with several banks. Second, credit increases the debt o f the association members significantly. Apart from the bank loan, the Government financial incentive also has to be reimbursed by the members to the revolving fund. Third, banks often need additional real guarantees such as farm mortgages. Moreover, the banks are only inclined to provide credit if the commercial partner can be relied upon to collect the credit payments through their marketing channel. This means only associations with products that have a monopsony market are really eligible for credit. Fourth, the cost o f a credit planner'' i s three percent of the credit amount to be added to the project cost. And fifth, to obtain credit the association needs personal connections that facilitate credit approval.
The analysis also shows two other important points: (i) five o f the eight associations have a form o f associative financial record keeping; and (ii) four partnerships have started reimbursing the financial
A credit planner i s a financial intermediary who knows the red tape to obtain credit,
49
incentive into a revolving fund. The financial recordkeeping i s somewhat complex as the associations may have multiple activities beside the partnerships while not keeping separate accounts.
10. The partnership appraisals during the ongoing project contain an exhaustive risk analysis o n prices, costs and yields and social and environmental risks. Nevertheless, the risk o f delays in the f l ow o f funds coming f rom co-financing partners such as municipalities i s hard to measure. These r isks are insufficiently dealt with, occur very often, delay the process and have a negative impact o n the rate o f return.
1 1. U n t i l now, only 3.4 percent o f the partnerships had to be closed before the end o f implementation for reason o f public order (in areas where the guerilla are s t i l l active) and for non-compliance with the objectives o f the partnership. This i s a l o w figure that i s l ikely to increase over the next years.
12. This analysis and the impact evaluation mentioned in paragraph 3 show important lessons for the second phase. The financial analysis contained in the project operational manual i s adequate to estimate the profitability o f the partnership, to identify and introduce measures that guarantee the sustainability o f the operation and to evaluate the risks. Nevertheless there are three aspects that need to be improved. The financial analysis needs to: (i) evaluate the credit worthiness o f the members o f the association and the l ikelihood that they can obtain credit; (ii) document the co-financing agreements with municipalities and regional governments so that during implementation it becomes easier to obtain such co-financing; and (iii) identify those actions that f rom the financial point o f v iew have to be included in the business plans and define at which moment these actions have to take place.
13, Moreover, there are weakness in the financial analysis itself that need to be addressed: (i) there i s a tendency to construct annual cash flows that do not necessarily correspond to the production cycle; (ii) there are frequently errors in the use o f the discount rate and the interpretation o f the rate o f return o n an annual basis; (iii) there i s inexperience with fish farming and livestock production models, cash flows and production figures; these projects are atypical and incur risks hard to estimate (diseases, food ratios).
14. T o address the above weaknesses the project team DDRRIT wil l train consultants in charge o f financial analysis to correct the critical points and assist with certain complex evaluations and business plans. These consultants need to become more critical o f the data that are being provided (yields, productivity, technological packages). They also need to relate more with other evaluation team members so as to assess the technical, social and environmental r isks and include them into the analysis. The financial analysts must be directly involved in the negotiations o f the co-financing arrangements so as not to accept them at face value but o n the basis o f documentation and assess the possible delays or non-compliance that may occur. Overall, the financial analyst need to interact more and better with the partners during the pre-investment period and be more informed about other possibilities o f more reliable co-financing (such as forward contracting).
Economic and Financial Evaluation o f the Proposed Proiect
15. Table 4 shows the results o f the financial evaluation o f the proposed second phase. The estimated overall financial internal rate o f return i s 18 percent. The assumptions are the following. Three hundred partnerships will be financed for a total investment amount o f US$ 108 mi l l ion. This amount will be financed by contributions o f the partners (commercial partners and producer associations) - 40%, co-financing from municipalities and Departmental governments - 22%, the Government financial incentive and technical assistance --27%, credit and contributions f rom NGOs, companies and institutions. T o be eligible, each partnership will have a minimum rate o f return o f 15
50
16.
percent and a net monthly return to the participating families o f at least two monthly minimum salaries. The rates o f return in the partnerships used to calculate the financial rate o f return are similar to the ones in the ongoing project but higher estimates have been reduced to provide a rather conservative estimate.
Based o n past experience the distribution o f the partnerships, the total investment cost, the number o f families involved (25,300), the jobs to be created (15,800), the estimated rates o f return per product group o f partnerships and the net present value o f the investment at 12 percent discount rate are provided in table 5. These figures take already into account a f ive percent mortality rate o f the partnerships.
Table 5: Estimated financial rate o f return o n investment o f the partnershius
1 Products 1 Partner I Families 1 Investment I Jobs 1 Ha I FRR 1 NPV**
* animal heads ** at 12 percent discount rate
Economic Rate o f Return
17. Since some products s t i l l receive some price protection f rom foreign competition and a conversion factor o f 0.9 (Source DNP) was used. The economic internal rate o f return i s estimated at 15%.
Sensitivity analysis
18. Sensitivity analysis has been carried out o n the rate or return by reducing the average rate o f return o f the partnerships. The ex-post average real financial rate o f return may indeed be lower than the estimated ones. Although the estimates are based o n experience, the ongoing project does not have sufficient partnerships that have completed a full investment cycle to give the above figures a high degree o f confidence.
19. The switching point by which the financial internal rate o f return becomes 12 percent i s when the financial rates o f return o f the partnerships are lowered to an average level o f 18 percent (instead o f 24 percent in the assumptions). The switching point o f the economic internal rate o f return i s when the economic rates o f return o f the partnerships are reduced to 21 percent.
20. The rates o f return depend o f course also very heavily o n the macro-economic conditions o f the country and the region and the investment climate in Colombia (which are not under the control o f project management). But the quality o f the pre-investment studies i s under control o f project management. By improving the financial analysis and the quality o f the partnerships, the above figures are within reach.
5 1
Table 4: Financial and Economic Cash Flow (US$l,OOO)
21. The distribution of the benefits amongst the three main actors has been e ~ t i m a t e d . ' ~ The producers are estimated to receive a margin o f 18 percent o n the sales o f their products. The margins o f the commercial private sector vary much in relation to the value added o f the purchased product and are estimated at 1 1 percent o f the purchases from producers. The OGR and OGA obtain respectively a margin o f 14 and 20 percent o n the sales price o f the services provided.
2013-2023 4,660 2,932
158 0
7,750
BENEFIT DISTRIBUTION
Producers
us$ l .ooo YO Average Average
2008 - 2023 2008 - 2023 60.574 59%
OGA TOTAL
I 2.926 Commercial Private Sector OGR (pre-investment and monitoring)
1.145 1 Yo 102.766 100%
37% 3 yo
The possibilities for Access to Credit and how the Proiect wi l l deal with it.
22. Access to credit i s one o f the prerequisites for long-term financial sustainability o f the partnerships and for their expansion. Small enterprises have a hard time obtaining credit in Colombia. Most o f the small enterprises are not considered credit-worthy by the financial sector. They pose a risk that
The margins estimated in Mision de Preparacion de Estudios de Apoyo para la Evaluacidn de Medio TPrmino by 19
financial institutions are not willing to take. Public sector financial institutions can provide some guarantees and operate as second-tier financial institutions, but are not willing to take the risk.
23. A study by the Andes University *’ indicates that: a. The banking sector participates only for 7 percent in the financing o f small enterprises.
Small and micro-enterprises cannot provide sufficient guarantees and lack credit history. In the few financial institutions that provide credit to small enterprises, their lending portfolio for such enterprises i s very small compared to the overall portfolio.
b. The Colombian financial system requires substantial quantities o f information f rom the enterprises before providing credit. If an entrepreneur cannot provide such information, the credit rating goes down to “B” and credit becomes more expensive for the borrower.
c. The high risks that l i m i t s bank credit i s justif ied as about 50 percent o f the small enterprises fail in the first year and 75 percent in the second year after start-up. Where banks participate, they consider it rather as a social responsibility than a business l ine that i s worth pursuing.
d. The regulatory framework for small credit i s diff icult as there are maximum interest rates, high capital requirements and competition with subsidized financing f rom public sources. The latter i s a result o f a vicious circle by which the public sources provide financing whi le micro-credit i s in i ts infant period.
e. The study recommends providing venture capital or seed capital financing instead o f credit. This i s exactly what the proposed project i s providing through the Government financial incentive.
24. Access to credit i s a structural problem that will not be resolved during project implementation. But the project will take six steps to go forward in the direction o f credit financing: (i) the Trust Company (Fiduciaria) can help the producer associations to get access to banking services. Creating a banking history i s for the associations a first step towards obtaining credit; (ii) more attention will be paid to the management of the revolving hnd, wi th follow-up to the amount and timeliness o f reimbursements. This could be considered as building a credit history; (iii) the associations should establish annual financial statements, and some form o f auditing should take place2’; (iv) instruments such as forward contracting should be established to obtain supplier credit; (v) existing f irst phase partnerships that need capital to expand wil l be assisted by a specialized person in their negotiations with the banking system; and (iv) the project team will approach institutions that offer credit to small enterprises: Banco Agrario, Bancolombia, Banco Colmena BCS y Megabanco, Finamdrica, Banco de la Mujer and NGOs that provide micro-credit such as Fundacidn Carvajal and Fundacidn Mario Santodomingo.
2o Mejoramiento de las Condiciones de Acceso a1 Credit0 para Microempresarios, Maria Lorena Gutierrez y Javier Serrano Rodriguez - Fundacih Corona, 2004
The PITiMADR intends to identify local accountants who can be contracted by the associations, 21
53
Annex 10: Safeguard Policy Issues COLOMBIA: Second Rural Productive Partnerships
A. Environment. The project triggers four operational policies on environment.
1.
2.
3.
4.
5 .
6.
7.
Environmental Assessment (OP 4.01) The Project i s classified as environmental category B as the productive partnerships are small, widely scattered and have litt le potential negative impact. The Government has prepared an Environmental Analysis (EA) under terms o f reference agreed upon by the Bank. The EA i s available in the project files, the Ministry o f Agriculture and Rural Development website and the Bank’s Infoshop. A l i s t o f partnership investments that are deemed ineligible to financing under the project i s in Appendix 2 (Negative List).
The Environmental Analysis notes a range o f potentially small environmental impacts primarily related to land use. Neither large scale nor cumulated impacts are expected given the limited, locally- based and differing nature o f project activities. On average the project i s expected to be positive f rom an environmental standpoint since it will promote the implementation o f environmentally safe productive practices, particularly in terms o f Integrated Pest Management and organic production.
Natural Habitats (OP 4.04) and Forests (OP 4.36). Natural habitats may be encountered near the core areas o f the productive partnerships or in their area o f influence. These habitats could possibly be negatively impacted at a very local level. Similarly the areas for the development o f productive partnerships may contain patches o f natural forests. The establishment o f productive partnerships near patches o f natural forests may constitute a factor contributing to their degradation.
Pest Management (OP 4.09). In Colombia there i s l i tt le experimental evidence related to the efficiency o f pesticides for specific pests or crops in specific production areas. Consequently, there are few precise guidelines for their use. In addition, proper diffusion o f knowledge concerning pesticides to producers i s lacking. Hence, there i s a risk that pesticides may not be adapted crops and conditions prevailing in the areas where they are being used, andor that they may not be used properly.
Environmental Procedures. The project wi l l finance about 300 small partnerships whose objectives, size, scope and location are not yet known since they emerge f rom the demand driven competitive process. Each partnership proposal undergoes an environmental screening during the pre-investment phase. The screening process assesses the negative environmental impacts and proposes mitigation measures for the main impacts. The set o f mitigation measures becomes an “environmental management plan” (EMP) for the partnership and the cost o f i t s implementation i s included in the investment costs. Once the partnership approved, the implementation o f the environmental management plan i s monitored by the OGA and OGR.
Environmental Management Capacity. One EA conclusion i s that the environmental management capacity o f the OGA providing supervision and technical assistance to partnership in the design o f the E M P and implementation o f mitigation measures remains weak. Therefore, actions to strengthen environmental management capacity at each implementation layer (training) have been included in the project design.
Pest Management (OP 4.09). The following measures will be taken as part o f the project to comply with OP 4.09 on Pest Management: (i) general awareness campaigns and dissemination o f legal and technical information. The DDWPIT wil l organize campaigns to disseminate information to partnerships about pesticide use and impact, including the effects o n human and animal health and the
54
environmental damages that may be caused by inadequate application practices; (ii) preparation o f Lntegrated Pest and Disease Management Plans (IPDMP). Such plans wil l be prepared as part o f the pre-investment studies. They w i l l be integrated into the Environmental Management Plan (EMP) and their implementation will be monitored as part o f the overall project monitoring process.
8. The IPDMPs wi l l include amongst other things: (i) an analysis o f the current phytosanitary status o f the productive systems being used in the areas where partnerships are being developed; (ii) specification o f the types o f pesticides to be used and directions for proper use o f recommended pesticides (amounts, rotation o f active ingredients, etc.); and (iii) specification o f measures on occupational hazards and industrial security in the course o f pesticide storage and application with a view to protect human health (products with low toxicity, protective clothing, safe storage o f products and their residues.
9. Identification o f training on aspects specific to IPDM for technical staff, both for OGR staff in charge o f preparing the technical and environmental components o f the pre-investment studies and for the OGA staff in charge o f providing technical assistance to the partnerships.
10. Cost of mitigation measures. The costs o f the environmental mitigation measures prescribed under the proposed project are similar to the costs incurred during the ongoing first phase project. These costs are integral part o f the partnership investment costs and are estimated at about $750,000 for the entire project, corresponding to about 1% o f total partnership investments, or an average cost per partnership o f about $2,500.
55
Auuendix 2: Negative List o f Suburoiects
The project w i l l not finance any subproject which w i l l be classified as Category A under the Bank's EA policy, or subprojects which are implemented in violation o f Colombia's environmental laws and environmental impact assessment procedures, or activities that according to Colombia's environmental laws require an environmental license to be implemented. Specifically, subprojects involving the following activities w i l l be excluded from financing:
1.
2. 3. 4.
5.
6. 7. 8. 9.
10.
11.
12.
13.
Dam construction or rehabilitation wi th the exception o f irrigation dams no more than 3 meters in height, with a reservoir size o f no more than 10 hectares. Land reclamation (Le., drainage o f wetlands or fil l ing o f water bodies to create land). Land clearance and leveling (when affecting critical natural habitats and natural land contours). Pesticides that are eligible to be financed are limited to those that are approved by the Colombian Agriculture Institute (Instituto Colombiano de Agricultura - ICA), are not prohibited by Colombian Law, are not in the World Health Organization (WHO) lists (i.e., are not formulated products within Classes I A and IB, or are formulations o f products in Class I1 o f WHO Guidelines), and are not know threats to wildlife or public health. Modification o f river beds (i.e., realignment, contraction or deepening o f an existing river channel, or excavation o f a new river channel). Activities involving construction and rehabilitation o f large-scale industrial plants or estates, New road construction or major upgrading or realignment o f roads. New irrigation, drainage and flood control works which have a command area greater than 200 hectares. Mariculture or large-scale aquaculture activities, or aquaculture which would introduce aggressive non- native species to any natural water bodies where they are not already long-established, Conversion or degradation o f critical natural habitats (as defined in the Bank's Operational Policy (OP) 4.04 on natural habitats). Any civi l works which would adversely affect significant cultural property, including archeological and historical sites. Activities relating to, or in preparation for, exploitation o f any plant or animal species listed in the Convention o f International Trade in Endangered Species o f Fauna and Flora (CITES), except that such activities may be carried out as part o f a Productive Partnership Subproject if the individual plant or animal specimens in question: (i) are o f a species not l isted in CITES Appendix I or qualify as part o f CITES Appendix I1 pursuant to CITES Article VI1 (4); (ii) qualify for the issuance o f certificates pursuant to CITES Article VI1 (5) and are bred or propagated from parent specimens that also qualify for the issuance o f such certificates; and (iii) are to be placed in trade or otherwise disposed o f in a manner consistent wi th the terms o f CITES. Activities that involve the use o f Genetically Modif ied Organisms (GM0s)Livestock activities in areas o f humid forest ecosystems (more than 3500 millimeters), heavy rainfall ecosystems (more than 5000 millimeters) and high altitude grasslands (pciramos).
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B. Social
1 1. A social analysis (in project files) has been carried out as preparation o f the proposed project. This analysis includes an evaluation o f the social component in the ongoing project and proposals to improve the social impact in the proposed repeater project as well as an indigenous peoples and afro- Colombian development framework. The following i s a summary o f this analysis.
Evaluation o f the social component in the ongoing project
12. The objective o f the social component in the ongoing project i s to (i) identify eligible beneficiaries o f the Government financial incentive including a socio-economic characterization o f the beneficiaries; (ii) evaluate the organizational capacity o f the producer association; (iii) identify social risks; and (iv) elaborate a technical assistance strategy for the organizational strengthening o f each producer organization. To do this an initial and quite elaborate survey o f the beneficiaries’ income, assets, age, education level was carried and a social plan for each partnership was developed.
13. The implementation o f this methodology was quite cumbersome and costly and has not always provided the expected results. A t mid-term, the consulting firm “Econometvia” carried out an evaluation o f the social achievements o f a sample o f partnerships. This evaluation focused on a social index called “IAPA” (index measuring the appropriation o f the partnership principles by the partners). The index measures in how far the producer group acts like an association o f producers, the level o f participation in decision-making and the thrust between the partners. The general conclusion o f this measurement i s that, on average, partnerships achieved between 45 and 60 percent o f the index. I t i s important to recognize that true partnerships are built over time. Thus, the level achieved at the point o f the mid-term evaluation needs to be assessed as a point on the learning curve.
14. A parallel evaluation was done by I ICA that introduced another index: IGDE (Index measuring entrepreneurial development and management). I IC A found that the level o f entrepreneurship, although satisfactory in more than half o f the associations, should be more emphasized so as to create socially sustainable associations. The study also concluded that the quality o f the pre-investment studies and the technical assistance to the associations are crucial for their social sustainability. Here again, this evaluation marks a point on the learning curve.
15. As part o f project preparation, a survey o f the commercial partners was carried out. The results show that the commercial partners are mostly dissatisfied with the low level o f organizational capacity and business understanding o f the producer associations. They suggest the project making a greater effort to train the producers in organization, business management and commercial insight. Without those assets, the relationship between commercial partners and the associations will remain one o f social responsibility by the commercial partners, not a real business relationship.
16. An evaluation was made by the project team on how traditionally excluded groups participated in the project and how their proposals made i t to final implementation. Table 1 shows that the indigenous, afro-Colombian and displaced people participated for more than 20 percent in the project and that their proposals received adequate attention with a processing survival rate that i s not much different (although somewhat lower) from non-excluded groups. This difference can be explained by some favorable ratings o f the proposals at entering the processing pipeline after which they received a more equal treatment in the processing o f the proposals. The social analysis (see project file) provides some good examples o f how proposals by traditionally-excluded groups have materialized into very viable partnerships with the private sector (fish farming, hat weaving from raw materials).
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Table 1 : Results o f the invitations to propose partnerships in the ongoing proiect (2004-2006)
Social stratew for the proposed proiect
17. Taking into account the results and lessons learned from the ongoing project that are presented in a very detailed way in the social analysis, the social strategy o f the proposed project wil l maintain the emphasis o n the creation o f social capital and o f strong democratic and participatory organizations. The overall strategy, however, will add the objectives o f enhanced entrepreneurship and closer linkages to the market. Through their associative cohesion the producers can exercise a greater control o f production in the quantities and qualities required and increase their negotiation capacity. Through enhanced entrepreneurship they wil l be able to consistently benefit f rom market opportunities.
18. Entrepreneurship. The social strategy wil l focus o n capacity building o f the associations to enhance entrepreneurship. This includes: (i) resolving the production problems that have an impact o n marketing; (ii) improving marketing knowledge; (iii) identifying and benefiting f rom market opportunities and avoiding market risks; (iv) engaging in strategic planning; (v) keeping business accounts; and (v) obtaining sufficient income to pay for management expenditures. T o build those capacities the associations need as a minimum: (i) a competent manager; and (ii) a simple accounting system. As business develops, those capacities will also have to grow and diversify in accordance with the complexity o f the business and the capacity o f the organizations to address the business requirements.
19. Such capacity building will also change the role o f the OGA which until know have done most of the administrative and business-related tasks in the partnerships. OGA will f rom now o n delegate more tasks to the manager o f the associations and play the role o f technical advisors and trainers o f the association. OGA wil l now be trained specifically to carry out those functions. OGA will fo l low f ive days o f training per year in business matters and in know-how transfer methodology.
20
21
Pre-investment studies (social part) wi l l focus o n providing: (i) a socio-economic characterization o f the producers to examine how the partnership f i t s within their productive strategy; (ii) a diagnostic o f the organizational conditions o f the producers to examine in how far social capital can develop and be maintained; (iii) a social characterization o f the commercial partner; (iv) a draft o f the social plan to mitigate social r isks and to address those factors that favor the association o f the producers and the development o f entrepreneurship; and (v) a proposal o f indicators to monitor the implementation o f the social plan.
establi-shment and management. T w o klements $11 however be added: (i) a stratigy to enhance
Partnership Social Plan. The content o f the social plan for each partnership individually (to be agreed upon between the partners w i th the assistance o f the OGA) wil l be similar to the one applied in the ongoing project with the objective to form social capital, strengthen the producers organization and the requirements for additional on-the-job training o f the producers in terms o f organizational
60
entrepreneurship within the organizations; and (ii) a strategy to improve the operation o f the management committee o f the partnership.
22. Imulementation o f the partnership social plan will be the responsibility o f the associations and the technical assistance providers (OGA). At the onset o f the implementation, the OGA and the partnership management committee w i l l have to update the draft social plan and include i t s implementation into the business plan o f the partnership. The implementation o f this business plan wil l be monitored by the OGR and DDWPIT. The cost o f the social plan i s included in the partnership investment plan. Specific studies will evaluate the outcomes o f the social plans in order to enhance the strategies and the outcome. Entrepreneurship i s a main project outcome indicator.
23. Indigenous and Afro-Colombian Develoument Framework: promotion o f the uroj ect vis-&vis excluded ~ O U D S o f Producers. The strategy to attract partnership proposals o f excluded groups (in particular indigenous and afro-Colombian people) through promotional activities and giving some priority to their proposals in the ranking system has worked adequately (paragraph 16 and table 1). Hence there are no structural elements in the project that reinforce exclusion.
24. Nevertheless, to further ensure that the project keeps on attracting partnerships from those traditionally excluded groups, the Indigenous and Afro-Colombian Development Framework o f the project w i l l implement the following strategy: (i) the project team and OGR will organize special sessions and consultations with representatives o f the indigenous and afro-Colombian organizations, including Cabildos, Traditional Indigenous Authorities Associations (AATI) and Consejos Mayores to explain the project and the methodology to present profiles; such consultations have contributed to a change in focus o f the partnerships social plans and w i l l be continued during project implementation on a regular basis to evaluate the effectiveness o f the framework and the outreach strategy; (ii) the project staff will train staff o f the Secretariats o f Agriculture to ensure that they take into account the specifics o f indigenous and afro-Colombian organizations; (iii) during the business round tables OGR will ensure that those producers get access to private sector representatives to discuss their proposals; (iv) the project will provide sensitivity training to consultants preparing pre-investment studies to structure the partnerships in accordance with the inherent characteristics o f those organizations and generally with the Planes de Vida o f indigenous peoples and afro-Colombian communities; (v) where possible, NGO interested in helping those communities will provide support to those communities in the preparation o f their partnership profiles; and (vi) the profiles originating from those groups w i l l receive some additional points in their evaluation to compensate for some deficiencies as was already the case in the ongoing project.
25. The project will further assist the beneficiary groups with their pre-investment studies and technical assistance during implementation. This assistance i s similar to the assistance provided to other groups, but will be adjusted so that the traditional customs and social characteristics o f the indigenous and afro-Colombian communities are fully respected and taken into account during implementation.
26. Reporting. The monitoring and evaluation reports o f the Project will show the level o f participation o f these traditionally excluded groups in the project as in Table 1. If important discrepancies in the success rate o f the indigenous and Afro-Colombian proposals would emerge, the framework w i l l be reviewed to correct such discrepancies.
61
Promotion and communication visits and brochures addressed to indigenous and afro-Colombian people Assistance in the formulation and evaluation o f partnership profiles Technical assistance in pre-investment studies, implementation, training in
I entremeneurshin midance I I
$15,000
$25,000 $480,000
Co-financing o f the partnerships
62
$1,500,000 Total $2.020.000
Annex 11: Project Preparation and Supervision
COLOMBIA: Second Rural Productive Partnerships
Planned Actual PCN review 1/29/2007 1 I2912007 Initial PID to PIC 1/31/2007 1/31/2007
1/31/2007 2/4/2007 Init ial ISDS to PIC Appraisal 4/9/2007 5/08/2007 Negotiations 4/16/2007 611 9/2007 BoardRVP approval 6/2 1 /2007 8/21/2007 Planned date o f effectiveness Planned date o f mid-term review
1 / 1 I200 8 3/31/2010
Planned closing date 3/31/2013
Key institutions responsible for preparation of the project: The Ministry o f Agriculture and Rural Development
Bank staff and consultants who worked on the project included:
Name Title Unit Pierre Werbrouck Sr. Agricultural Economist LCSAR Natalia Gomez Rural Development Specialist LCSAR Jean Claude Balcet Sr. Natural Resources Economist LCSAR Dianelva Montas Sr. Program Assistant LCSAR Jairo Arboleda Lead Social Development Specialist LCSSO Jeanette Estupinan Financial Management Specialist LCSFM Jose Martinez Procurement Specialist LCSPT Juan Carlos Alvarez Sr. Legal Counsel LEGLA Regis Cunningham Sr. Finance Specialist LOAG 1 Juan Pablo Ruiz Safeguard Specialist LCSEN Beatriz Elena Franco Staff Assistant L C 1 co Maria Clara Rodriguez Project Coordinator MADR-Bogota Adriana Bello Financial Analyst MADR-Bogota Gonzalo Paredes Sociologist MADR-Bogota Maria Juliana Ramirez Environmental Analyst MADR-Bogota Alvaro Villarreal Monitoring Specialist MADR-Bogota Karen Ezpeleta Legal Specialist MADR-Bogota Alejandro Mesa Commercial Specialist MADR-Bogota
Bank funds expended to date on project preparation: 1. Bank resources: $84,000
Estimated Approval and Supervision costs: 1. Remaining costs to approval: $13,000 2. Estimated annual supervision cost: $85,00O/year
63
Annex 12: Documents in the Project Fi le COLOMBIA: Second Rural Productive Partnerships
Held and Disbursed Portfolio In Millions o f U S Dollars
Committed Disbursed
IFC IFC
FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.
Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic
Total pending commitment: 0.00 0.00 0.00 0.00
65
Annex 14: Country at a Glance
COLOMBIA: Second Rural Productive Partnerships
66
Annex 15: Maps
COLOMBIA: Second Rural Productive Partnerships
MAP No 35463
67
Cor
di l ler
a Orie
nta l
Cor
dil le
ra C
entr
al
Cord
i l lera O
ccident a
l
PicoPicoCristóbal ColónCristóbal Colón(5,775 m)(5,775 m)
C A Q U E T ÁC A Q U E T Á VA U P É SVA U P É S
G U AV I A R EG U AV I A R E
M E T AM E T A
H U L AH U L AC A U C AC A U C A
C H O C ÓC H O C Ó
A N T I O Q U I AA N T I O Q U I A
VALLE DELVALLE DELCAUCACAUCA
RISARALDÁRISARALDÁ
QUINDIOQUINDIO
C U N D I N A -C U N D I N A -M A R C AM A R C A
DISTRITODISTRITOCAPITALCAPITAL
G U A I N Í AG U A I N Í A
V I C H A D AV I C H A D A
C A S A N A R EC A S A N A R E
C E S A RC E S A R
NORTE DENORTE DESANTANDERSANTANDER
A R A U C AA R A U C A
A M A Z O N A SA M A Z O N A S
N A R I Ñ ON A R I Ñ O
P U T U MAYO
CALD A S
CÓRDOBA
BOL Í
VA
R
BO
YAC
Á
SUC
RE
LA G
U J I RA
S A N TA N D E R
TOL IMA
La PedreraLa Pedrera
PuertoPuertoSantanderSantander
PuertoPuertoPizarroPizarro
PuertoPuertoLeguízamoLeguízamo
PuertoPuertoHuitotoHuitoto
MacujerMacujer
CalamarCalamar
MapiripanaMapiripana
Santa RitaSanta Rita
PuertoPuertoNuevaNueva
ChavivaChaviva
San JuanSan Juande Aramade Arama
GarzonGarzonGuapíGuapí
IpialesIpiales
GaviotasGaviotasSan PedroSan Pedro
MirafloresMiraflores
San VicenteSan Vicentedel Caguándel Caguán
GiradotGiradot
PalmiraPalmira
BugaBuga
CartagoCartago
ChiquinquiráChiquinquirá
SocorroSocorro
TurboTurbo
YarumalYarumal
QuibdoQuibdo
PuertoPuertoAsisAsis
El EncantoEl Encanto
Locas deLocas deCahuinariCahuinari
LéridaLérida
YavarateYavarate
TabaquénTabaquén
BrujasBrujas
San RafaelSan Rafael
El BaneoEl Baneo
OcañaOcaña
MaganquéMaganqué
LeticiaLeticia
MituMitu
PuertoPuertoInirídaInirída
PuertoPuertoCarreñoCarreño
FlorenciaFlorencia
NeivaNeiva
PopayanPopayan
CaliCali
PastoPasto
San JoséSan Josédel Guaviaredel Guaviare
VillavincencioVillavincencio
MocoaMocoa
ArmeniaArmeniaPereiraPereira
TunjaTunjaYopalYopalManizalesManizales
BucaramangaBucaramanga
MonteriaMonteria
SincelejoSincelejo
ValleduparValledupar
CúcutaCúcuta
MedellinMedellin
IbaqueIbaque
BOGOTÁBOGOTÁ
MA
GD
ALE
NA
La Pedrera
PuertoSantander
PuertoPizarro
PuertoLeguízamo
PuertoHuitoto
Macujer
Calamar
Mapiripana
Santa Rita
PuertoNueva
Chaviva
San Juande Arama
GarzonGuapí
Tumaco
Ipiales
GaviotasSan Pedro
Miraflores
San Vicentedel Caguán
Giradot
Palmira
BugaBuenaventura
Cartago
Chiquinquirá
Socorro
Turbo
Acandí
Yarumal
Quibdo
PuertoAsis
El Encanto
Locas deCahuinari
Lérida
Yavarate
Tabaquén
Brujas
San Rafael
El Baneo
Ocaña
Maganqué
Puerto Bolívar
Leticia
Mitu
PuertoInirída
PuertoCarreño
Florencia
Neiva
Popayan
Cali
Pasto
San Josédel Guaviare
Villavincencio
Mocoa
ArmeniaPereira
TunjaYopalManizales
Bucaramanga
Monteria
Sincelejo
Cartegena
BarranquillaSanta Marta
Valledupar
Cúcuta
Ríohacha
Medellin
Ibaque
BOGOTÁ
C A Q U E T Á VA U P É S
G U AV I A R E
M E T A
H U L AC A U C A
C H O C Ó
A N T I O Q U I A
VALLE DELCAUCA
RISARALDÁ
QUINDIO
C U N D I N A -M A R C A
DISTRITOCAPITAL
G U A I N Í A
V I C H A D A
C A S A N A R E
C E S A R
NORTE DESANTANDER
AT L Á N T I C O
A R A U C A
A M A Z O N A S
N A R I Ñ O
P U T U MAYO
CALD A S
CÓRDOBA
BOL Í
VA
R
BO
YAC
Á
SUC
RE
MA
GD
ALE
NA
LA G
U J I RA
S A N TA N D E R
TOL IMA
R.B. DEVENEZUELA
BRAZIL
PERU
ECUADOR
PANAM
A
Guaviare
Negro
Cauc
a
Atrato
Vichada
Patía
Ptumayo
Casanare
Atacavi
Meta
Vaupés
Caquetá
Caguán
Magdalena
Caribbean Sea
Lago deMaracaibo
PACIFICOCEAN
To Maracaibo
To Mérida
To Guasdualito
To Ibarra
Cor
di l ler
a Orie
nta l
Cor
dil le
ra C
entr
al
Cord
i l lera O
ccident a
l
PicoCristóbal Colón(5,775 m)
75°W 70°W
75°W 70°W
5°N
10°N
0°N
5°N
0°N
COLOMBIA
0 80 160 240
0 1208040 160 200 Miles
320 Kilometers
IBRD 35463
APRIL 2007
COLOMBIARURAL PRODUCTIVE
PARTNERSHIPS PROJECT I ISELECTED CITIES AND TOWNS
DEPARTMENT CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
DEPARTMENT BOUNDARIES
INTERNATIONAL BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.
