-
Document of
The World Bank
Report No: 70624-CR
RESTRUCTURING PAPER
ON A
PROPOSED PROJECT RESTRUCTURING
OF THE
MAINSTREAMING MARKET-BASED INSTRUMENTS FOR ENVIRONMENTAL
MANAGEMENT PROJECT
LOAN AND
GRANT FROM THE
GLOBAL ENVIRONMENT FACILITY TRUST FUND
APPROVED BY THE BOARD OF DIRECTORS JUNE 8, 2006
TO THE
REPUBLIC OF COSTA RICA
June 28, 2012
Sustainable Development Department
Central America Unit
Latin America and the Caribbean Region
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
-
2
ABBREVIATIONS AND ACRONYMS
BNCR National Bank of Costa Rica (Banco Nacional de Costa
Rica)
DR-CAFTA Dominican Republic-Central America Free Trade
Agreement
FBS Sustainable Biodiversity Fund (Fondo Biodiversidad
Sostenible)
FONAFIFO National Fund for Forest Financing (Fondo Nacional de
Financiamento
Forestal)
GEF Global Environment Facility
PES Payments for Environmental Services
PSA Costa Rican Program of Payments for Environmental Services
(Programa
de Pagos por Servicios Ambientales)
SIAP Integrated Project Administration System (Sistema Integrado
de
Administración de Proyecto)
Regional Vice President: Hasan Tuluy
Country Director: C. Felipe Jaramillo
Sector Manager: Karin Kemper
Task Team Leader: Gunars H. Platais
-
3
COSTA RICA MAINSTREAMING MARKET-BASED INSTRUMENTS FOR
ENVIRONMENTAL
MANAGEMENT PROJECT
P093384
CONTENTS
Page
A. SUMMARY
...............................................................................................................
4
B. PROJECT STATUS
.................................................................................................
4
C. PROPOSED CHANGES
..........................................................................................
4
D. APPRAISAL SUMMARY
.......................................................................................
5
ANNEX 1: RESULTS FRAMEWORK AND MONITORING
.................................... 6
ANNEX 2: REALLOCATION OF PROCEEDS
........................................................... 8
ANNEX 3: EXTENSION OF CLOSING DATE
........................................................... 9
-
4
COSTA RICA
MAINSTREAMING MARKET-BASED INSTRUMENTS FOR ENVIRONMENTAL
MANAGEMENT PROJECT
RESTRUCTURING PAPER
A. SUMMARY
1. The proposed changes extend the closing date of both the loan
and the grant “Mainstreaming Market-Based Instruments for
Environmental Management” from July
31, 2012, to March 31, 2014, and reallocate funds from
components 1a and 3 to
components 1b and 2 of the GEF grant TF056666 as per the request
submitted by the
Government of Costa Rica on the 14th
of June, 2012. The extension of the closing date
seeks to accommodate the project’s two-year delay in
effectiveness to allow for the
sustainable and regular capitalization of Costa Rica’s Payment
for Environmental
Services (PSA) program and Sustainable Biodiversity Fund (FBS).
The restructuring will
allow the project to complete outstanding studies and finance
administrative costs for the
FBS not foreseen at project appraisal. There are no changes in
the components. The
extension will allow the project’s PDO and GEO to be
achieved.
B. PROJECT STATUS
2. The project loan and grant were approved by the Board of
Directors on June 8, 2006, and became effective only on July 31,
2008, the delay caused by a bottleneck in the
National Assembly resulting from debate of the DR-CAFTA Free
Trade Treaty with the
United States. Moreover, the timing of the effectiveness date
relative to the executing
agency’s (FONAFIFO) fiscal year then precluded use of project
resources for most of the
first year.
3. Despite this two-year delay, the project is making excellent
progress towards its development objectives, which are expected to
be met by the proposed closing date of the
project. The national PSA program, operational since 1997, has
already achieved many of
the project indicators, despite only having disbursed
approximately 54% of the IBRD
loan. The project has also successfully capitalized the FBS,
which will finance protected
areas with high levels of biodiversity that cannot be covered
under other modalities.
4. The outstanding challenge for the program is a combination of
ensuring the sustainability and continuity of the area under
conservation contracts and improving the
efficiency of the program. A challenge for the PSA program is
ensuring that a consistent
and sufficient flow of resources is available to make
conservation payments, since each
new contract implies a five-year financial commitment. This
complicates the budgeting
process for FONAFIFO as their budget depends on revenues from
the gasoline and water
taxes, and those revenues received must be spent each fiscal
year. By extending the
project, FONAFIFO will be able to use project financing to help
stabilize the number of
contracts and hectares of land under administration, reducing
the dramatic annual swings
-
5
in area under conservation and administrative burdens that have
characterized the
program to date due to uncertainties regarding budgeting.
Furthermore, four studies are
being contracted (with drafted TORs) that cannot be contracted
unless the closing date of
the project is extended.
C. PROPOSED CHANGES
Results/indicators
5. Recognizing that many project indicators have been
successfully met, the Bank has revised and raised the targets
expected at project closing for indicators one and four,
GEF indicator one, and intermediate indicators two and three of
component two. These
changes and the progress to date are elaborated in Annex 1.
6. As was also found in other countries (e.g. Mexico, Brazil),
tracking the ‘improved efficiency of the environmental services
program, as measured by indices of services
generated per dollar spent’ (PDO Indicator 3) is extremely
difficult. This is primarily due
to the technical difficulty of quantifying the changes in the
level of environmental service
provision. The lack of an M&E system makes it even more
challenging to track this.
Therefore this indicator will be dropped.
7. Likewise, GEF Indicator 1, ‘effective biodiversity
conservation in globally significant areas measured by vegetation
cover and indicator species of conservation
interest’, has also proven difficult to measure and will be
removed as a project indicator.
Given that the FBS will continue to finance biodiversity
initiatives after project closure, a
study financed by the GEF grant will be carried out by the
country’s premier biodiversity
research institution, INBio. The study will establish a baseline
allowing FONAFIFO to
better calculate its biodiversity going forward, but this will
not be measurable before
project closure.
8. PDO indicator two (‘at least half of the newly-contracted
area is financed by funding from service users’ by the end of the
project) needs to be revised downward from
its original target of 50%, in part because generating financing
from service users has
proven much more challenging than expected (particularly so in
the case of carbon
financing), but primarily because fuel tax revenues have
increased dramatically due to the
increase in traffic, resulting in an automatic increase in
government funding to the PSA
program. Thus user financing has covered only about 25% of new
areas in the last two
years, despite having quadrupled since project implementation
began. The changes in
government financing also suggest that an indicator based on
share of total area is not the
most appropriate. The revised indicator will therefore be that
‘conservation of at least
35,000 ha is financed annually by financing from service users’
by the end of the project.
The target reflects a 10% increase over current levels (the
average has been about 32,000
ha in the last two years), and a more than quadrupling of the
area financed by funding
from service users since the start of the project (about 7,400
ha in 2008).
Reallocation
-
6
9. The requested reallocation of funds to Category (2) will
cover administrative fees unforeseen at project appraisal which
would otherwise need to be paid for by FBS
revenues. the administrative arrangements of the FBS were
determined after project
approval and the Banco Nacional de Costa Rica (BNCR) now manages
the fund. The
BNCR charges a US$4,000/month commission for the fund’s
administration, which the
reallocation of the grant proposes to finance. As reflected in
the legal agreement
establishing the FBS, the BNCR, recognizing the importance of
the capitalization of the
Fund and in the spirit of contributing to its biodiversity
efforts, allowed for a two-year
grace period for administrative fees, which ended in May 2012.
Now that the grace
period has ended, a request has been made to reallocate funds
among categories of
expenditure to cover the $100,000 of administrative costs of the
Fiduciary Agent
managing the Fund. It is expected that as the Fund capitalizes
it will be able to generate
sufficient revenues from interest that it will be able to pay
for these fees. The possibility
of hiring an asset manager is being explored.
10. Category 2 will finance “Capitalization Payments”, including
the administrative costs of the fiduciary agent of the FBS.
Additionally, considering the positive results
achieved under Component 1, which were achieved to a large
extent with counterpart
funds, it is proposed that funds be reallocated to other
activities under Component 1 and
2. These activities are to: (1) cover the operating costs for
the Biodiversity Trust Fund;
(2) increase the capitalization of the FBS; and (3) complete
proposed studies under
Component 2.
Category of Expenditure
Allocation % of Financing
Current Revised Current Revised
1. Goods, consultant services, non-
consulting services, training and operating
costs under Component 1.A, 1.C and Part
1.D of the Project .
$700,000 $103,298 100% 100%
2. Capitalization Payments $7,500,000 $8,012,702 100% 100%
3. Goods, consultant services (including
audits), non-consulting services, training,
and operating costs under Component 2.
$1,300,000 $1,546,900 100% 100%
4. Goods, consultant services, non-
consulting services, and training under
Component 3
$500,000 $337,100 100% 100%
Total $10.000.000 $10.000.000
Closing date
11. The proposed extension is necessary in order to support
FONAFIFO in stabilizing the annual area under conservation at its
target of 310,000 ha. The extension would also
make it much likelier that a large portion of the US$30 million
loan would be disbursed
(which would be impossible under a shorter extension, except by
exacerbating even
further the imbalance in area enrolled). Under reasonable
assumptions of contract mixes,
it is likely that the entire loan would be disbursed.
-
7
12. The justification for this extension originates in the
fluctuation of areas conservation contracts due to the variation in
the budget available to FONAFIFO year to
year. FONAFIFO receives an annual budget that corresponds to
3.5% of fuel tax
revenues and 25% of water tariff revenues in each given year;
however most of its
conservation contracts have a duration of five years. Variations
in funding levels from
one year to the next thus affect the ability to enroll new areas
in subsequent years. Higher
than average funding in one year results in a large enrolled
area which then consumes a
greater portion of the available budget in the subsequent four
years of the contract and
when revenues fall, it reduces the amount of new area enrolled.
This has meant that the
new area contracted has varied substantially from year to year
(from as little as 25,000 ha
to as many as 75,000 ha). From a conservation perspective this
is not ideal as there is no
assurance that the most valuable contracts can be renewed when
they expire. This
fluctuation also results in a highly variable administrative and
monitoring burden for
FONAFIFO.
Implementation schedule
13. The revised implementation schedule for the IBRD loan (see
below) reviews the revised disbursement schedule into the PSA
fund.
Semester 1
2012
Semester 2
2012
Semester 1
2013
Semester 2
2013
Semester 1
2014
Loan 7388 $3,000,000 $2,467,072 $3,500,000 $3,905,000
$3,951,215
TF 56666 $688,459 $967,183
Safeguards
14. The restructuring will not change any Project activities and
therefore will not alter the environmental or social safeguards
category.
D. RECOMMENDATION
15. Upon review of the proposed changes we feel confident that
with the requested extension the project will fully disburse and
that the Action Plan laid forward will be
followed through. The team therefore recommends that the
extension be granted in order
for this innovative project to be able to fully accomplish its
objective.
-
8
-
ANNEX 1:
Results Framework and Monitoring
COSTA RICA: MAINSTREAMING MARKET-BASED INSTRUMENTS FOR
ENVIRONMENTAL MANAGEMENT PROJECT
Project Development Objective (PDO):
The Project Development Objective is to enhance the provision of
environmental services of a national and global significance and
secure their long-term sustainability through a scaled-up
payment for environmental services system in Costa Rica.
The Project Global Environmental Objective is to enhance the
conservation of globally significant biodiversity and ensure its
long-term sustainability by supporting the development and
implementation of market-based instruments to promote forest
conservation in buffer zones of protected areas and biological
corridors connecting them.
PDO Level Results
Indicators* Core
D=Droppe
d
C=Contin
ue
N= New
R=Revised
Unit of
Measure Baseline
Cumulative Target Values**
Frequ
ency
Data Source/
Methodology
Responsibi
lity for
Data
Collection
YR 1
(2008)
YR 2
(2009)
YR 3
(2010)
YR4
(2011)
YR5
(2012)
YR6
(2013)
YR7
(2014)
Indicator One: By
the end of the
project, at least
288,000 ha of land
with environmental
service contracts
generating
environmental
services of local,
national and/or
global importance.
Revised Ha of land
being
compensate
d under the
PSA
regime
250,000
ha
Target:
245,500
Target:
265,000
Target:
272,500
Target:
280,000
Revised
Target:
310,000
Revised
Target:
310,000
Revised
Target:
310,000
Annua
lly
Sistema
Integrado de
Administracion
de Proyecto
(SIAP)
FONAFIFO
Actual:
331,177
Actual:
249,102
Actual:
268,590
Actual:
321,325
Indicator Two: By
the end of the
Revised
(see below)
Percentage
of total
0% 0% 0% 20% 30% Annua
lly
Sistema
Integrado de
FONAFIFO
-
10
PDO Level Results
Indicators* Core
D=Droppe
d
C=Contin
ue
N= New
R=Revised
Unit of
Measure Baseline
Cumulative Target Values**
Frequ
ency
Data Source/
Methodology
Responsibi
lity for
Data
Collection
YR 1
(2008)
YR 2
(2009)
YR 3
(2010)
YR4
(2011)
YR5
(2012)
YR6
(2013)
YR7
(2014)
project, at least half
of the newly-
contracted area is
financed by funding
from service users.
projects Administracion
de Proyecto
(SIAP)
Revised Indicator
Two: By the end of
the project,
conservation of at
least 35,000 ha is
financed annually
by funding from
service users
Revised Area under
conservatio
n contracts
financed
with
funding
from
service
users (ha)
7,400 33,000 34,000 35,000 Annua
lly
Sistema
Integrado de
Administracion
de Proyecto
(SIAP)
FONAFIFO
7,400 6,000 42,900 21,500
Indicator Three:
Indicator Three:
Improved efficiency
of the environmental
services program, as
measured by indices
of services generated
per dollar spent.
Dropped Annua
lly
Indicator Four: By
the end of the project
50% increase (from
current 1,900 to
2,850) of the number
Revised # of
landholders
1,900
landhold
ers
(small-
and
Target:
2,100
Target:
2,300
Target:
2,450
Target:
2,675
Target:
3,500
Target:
3,500
Target:
3,500
Annua
lly
Sistema
Integrado de
Administracion
de Proyecto
(SIAP)
FONAFIFO
Actual:
3,564
Actual:
2,843
Actual:
3,164
Actual:
3,730
-
11
PDO Level Results
Indicators* Core
D=Droppe
d
C=Contin
ue
N= New
R=Revised
Unit of
Measure Baseline
Cumulative Target Values**
Frequ
ency
Data Source/
Methodology
Responsibi
lity for
Data
Collection
YR 1
(2008)
YR 2
(2009)
YR 3
(2010)
YR4
(2011)
YR5
(2012)
YR6
(2013)
YR7
(2014)
of small- and
medium-sized
landholders (less than
100-hectare farms)
participating in the
PSA Program.
medium-
sized
GEF Indicator One:
Effective biodiversity
conservation in
globally significant
areas measured by
vegetation cover and
indicator species of
conservation interest
Dropped Hectares of
land
No targets were established Annua
lly
FONAFIFO FONAFIFO
GEF Indicator
Two: At least
190,000 ha (2,000
contracts) in
productive
landscapes in the
buffer zones of
protected areas and
biological corridors
in the MBC are
maintained annually
under PSA contracts
of 20 years.
Revised Hectares of
land
100,000
hectares
of land
with PES
contracts
in
biologica
l
corridors
Target:
100,000
Target:
150,00
Target:
175,000
Target:
190,000
Target:
190,000
Target:
190,000
Target:
190,000
Annua
l
FONAFIFO InBio
Actual:
175,904
Actual:
126,097
Actual:
141,241
Actual:
171,792
-
12
PDO Level Results
Indicators* Core
D=Droppe
d
C=Contin
ue
N= New
R=Revised
Unit of
Measure Baseline
Cumulative Target Values**
Frequ
ency
Data Source/
Methodology
Responsibi
lity for
Data
Collection
YR 1
(2008)
YR 2
(2009)
YR 3
(2010)
YR4
(2011)
YR5
(2012)
YR6
(2013)
YR7
(2014)
INTERMEDIATE RESULTS
Intermediate Result (Component One): Developing and implementing
sustainable financing mechanisms ($8m GEF)
Promoting watershed conservation via application of the new
water tariff
Implementing and capitalizing the Trust Fund for Sustainable
Biodiversity Conservation (FBS)
Revised Intermediate Result (Component One):
Intermediate Result
indicator One: 3.5%
from fuel-tax
revenues and 25%
water-resource-usage
tariffs to finance
PSA.
Continue % of fuel-
tax
revenues
and % of
tax used
from water-
resource
tariff and
colones (₡ ) of revenue
received
from tax
3.5% of
fuel tax
and 0%
of water
tax.
Target:
3.5% fuel;
0% water
Target:
3.5% fuel;
25% water
Target:
3.5% fuel;
25% water
Target:
3.5% fuel;
25% water
Target:
3.5%
fuel; 25%
water
Target:
3.5% fuel;
25% water
Target:
3.5% fuel;
25% water
Annua
lly
Finance
Department
FONAFIFO
FONAFIFO
Actual:
2.3% fuel
(₡ 6.521m); 25%
(₡ 114m)
Actual:
2.3% fuel
(₡ 6.921m); 25%
water(₡ 78.7m)
Actual:
3.7% fuel
(₡ 11.218m); 25%
water
(₡ 924.3m )
Actual:
3.5% fuel
(₡ 11.779m); 25%
water
(₡ 551.8m)
Intermediate Result
indicator Two: FBS
with capital
participation of at
least US$15 million,
of which US$7.5
Continue USD
capitalizing
the
Biodiversit
y Fund
(FBS)
None (0
USD)
Target:
$2m
Target:
$6m
Target:
$10m
Target:
$14m
Target:
$15m
Target:
$15.5m
Target:
$15.5m
Annua
lly
Finance
Department
FONAFIFO
FONAFIFO
Actual: $0 Actual: $0 Actual:
$8m
Actual:
$15.5m
-
13
PDO Level Results
Indicators* Core
D=Droppe
d
C=Contin
ue
N= New
R=Revised
Unit of
Measure Baseline
Cumulative Target Values**
Frequ
ency
Data Source/
Methodology
Responsibi
lity for
Data
Collection
YR 1
(2008)
YR 2
(2009)
YR 3
(2010)
YR4
(2011)
YR5
(2012)
YR6
(2013)
YR7
(2014)
million contributed
by GEF.
Intermediate Result (Component Two): Scaling-up the
Environmental Services Program ($30m IBRD, $1.4m GEF)
Strengthening capacity to implement the expanded PSA Program
Increasing the efficiency of environmental service
contracting
Strengthening technical monitoring capacity
Contracting landholders to provide environmental services
Intermediate Result
indicator One: At
least 75% of PSA
Program resources
are placed in PSA
contracts.
Revised Percentage
of program
resources
reinvested
Not
applicabl
e
Target:
90%
Target: 75% Target:
75%
Target:
75%
Target:
75%
Target:
75%
Target:
75%
Annua
lly
Finance
Department
FONAFIFO
FONAFIFO
Actual:
83%
(₡ 9.974m)
Actual: 83%
(₡ 8.775m) Actual:
81%
(₡ 10.151m)
Actual:
84%
(₡ 12.157m)
Intermediate Result
indicator Two:
Contract system for
PSA with
differentiated
payments applied.
Continue Does a
differentiat
ed system
exist?
No
system
exists.
System
designed
System in
operation
System in
operation
System in
Operation
System in
Operation
Annua
lly
FONAFIFO FONAFIFO
Intermediate Result (Component Three): Removing barriers for
Small Landholders’ Participation in the PSA Program ($0.6 GEF)
Strengthening the incorporation of low-income landholders in the
PSA Program
Piloting improved watershed management in low-income areas
Monitoring social and economic impacts
Intermediate Result
indicator One: PSA
Continue Number of
watersheds
0 Target: 0 Target: 1 Target: 2 Target: 3 Target: 3 Target: 3
Target: 3 Annua
lly
Finance
Department
FONAFIFO
-
14
PDO Level Results
Indicators* Core
D=Droppe
d
C=Contin
ue
N= New
R=Revised
Unit of
Measure Baseline
Cumulative Target Values**
Frequ
ency
Data Source/
Methodology
Responsibi
lity for
Data
Collection
YR 1
(2008)
YR 2
(2009)
YR 3
(2010)
YR4
(2011)
YR5
(2012)
YR6
(2013)
YR7
(2014)
activities are
integrated through
participatory
planning on land use
in at least 3 (micro-
watershed)
communities.
Actual: 0 Actual: 0 Actual: 1 Actual: 1 FONAFIFO
Intermediate Result
indicator Two:
Female landholders
maintained at least to
the current level
Revised Number of
female
landholders
474 Target: 474 Target: 474 Target: 474 Target:
474
Revised
Target:
800
Revised
Target:
800
Revised
Target:
800
Annua
lly
FONAFIFO FONAFIFO
Actual: 901 Actual: 717 Actual: 790 Actual:
870
Intermediate Result
indicator Three:
Indigenous
community owned
lands in the program
will be maintained at
least to the current
level
Continue
(but
displayed
separately)
Hectares of
land that
belong to
indigenous
communitie
s
25,125 Target:
25,125
Target:
25,125
Target:
25,125
Target:
25,125
Target:
43,000
Target:
43,000
Target:
43,000
Annua
lly
FONAFIFO FONAFIFO
Actual:
37,201
Actual:
33,997
Actual:
36,804
Actual:
42,736
-
ANNEX 2:
Reallocation of Proceeds
COSTA RICA — MAINSTREAMING MARKET-BASED INSTRUMENTS FOR
ENVIRONMENTAL MANAGEMENT PROJECT
P093384 {LOAN 7388/ TF 56666}
16. Proceeds for Costa Rica, GEF Mainstreaming Market-Based
Instruments for Environmental Management Project, [TF 56666. 7388],
P093384 will be reallocated as
follow:
Category of Expenditure
Allocation % of Financing
Current Revised Current Revised
1. Goods, consultant services, non-
consulting services, training and
operating costs under component 1.
$700,000 $103,298 100% 100%
2. Capitalization of the Biodiversity
Conservation Trust Fund
$7,500,000 $8,012,702 100% 100%
3. Goods, consultant services
(including audits), non-
consulting services, training, and
operating costs under component
two.
$1,300,000 $1,546,900 100% 100%
4. Goods, consultant services,
non-consulting services, and
training under Component 3
$500,000 $337,100 100% 100%
17. The project was approved by the Board of Directors on June
8, 2006 and became effective on July 31, 2008. Despite this two
year delay, the project is making excellent
progress towards its development objectives, which are expected
to be met by the
proposed closing date of the project. The national payment for
environmental services
program, operational since 1997, has already seen the
achievement of many of the project
indicators, despite only having an approximately 54%
disbursement rate of the IBRD
loan. The project has also successfully capitalized the National
Biodiversity Fund, which
will finance protected areas with high levels of biodiversity
that cannot be covered under
other modalities.
18. The outstanding challenge for the program is a combination
of ensuring the sustainability and continuity of hectares of PES
contracts financed by the project and
improving the efficiency of the program. A challenge of the fund
is ensuring that a
consistent and sufficient flow of resources is available to
capitalize the fund seeing as
each new contract implies a five year financial commitment. By
extending the project,
the PES fund will ideally be able to maintain a more regular
number of contracts and
hectares of land under administration. Furthermore, a number of
studies are being
contracted (with drafted TOR) but that cannot be processed
unless the closing date of the
project is extended.
-
16
19. The proposed reallocation is necessary to contract
consulting services for 2012 and 2013, which are already foreseen
in the project’s procurement plan but for which
more funds are needed to assess important studies related to
FONAFIFO’s future. These
studies include a study on the Socioeconomic Impact of the
Payment for Environmental
Service program, analytics related to the operation of the
Sustainable Biodiversity Fund
and changes to the differentiated payment system.
20. Given the costs assumed by FONAFIFO for the two years before
the loan and accompanying grant became effective, resources are
reassigned to component 1b to
further capitalize the Sustainable Biodiversity Fund.
21. Furthermore, the Banco de Costa Rica, the fiduciary agent
for the FBS has assessed a new fee structure since appraisal of the
project and therefore funds are
reallocated to component 1a to cover approximately $100,000 of
administrative fees
charged for the administration of the fund. The newly defined
Category 2 will finance
“Capitalization Payments”, including the administrative costs of
the fiduciary agent of the
FBS.
-
17
ANNEX 3:
Extension of Closing Date
COSTA RICA — MAINSTREAMING MARKET-BASED INSTRUMENTS FOR
ENVIRONMENTAL MANAGEMENT PROJECT
P093384 {LOAN 7388/ TF 56666}
22. The closing date for the Costa Rica Mainstreaming
Market-Based Instruments for Environmental Management Project,
[Loan 7388 and Grant TF56666] P093384, will be
extended from July 31, 2012 until March 31, 2014. This will be
the first extension of the
project.
23. The project was approved by the Board of Directors on June
8, 2006 and became effective on July 31, 2008. Despite this two
year delay, the project is making excellent
progress towards its development objectives, which are expected
to be met by the
proposed closing date of the project. The national payment for
environmental services
program, operational since 1997, has already seen the
achievement of many of the project
indicators, despite only having an approximately 54%
disbursement rate of the IBRD
loan. The project has also successfully capitalized the National
Biodiversity Fund, which
will finance protected areas that characterized by high levels
of biodiversity but which
cannot be covered under other financing modalities.
24. The proposed extension is necessary to ensure the fiscal
sustainability of the national Payment for Environmental Services
project. One of the challenges facing
FONAFIFO is the trend of peaks and troughs in payments to
beneficiaries (see annex
one). Each new PES contract signed implies a five year period of
payments; however,
financing from the fuel and water tariffs is somewhat irregular
and resources transferred
must be committed each fiscal year. A steady flow of financing
from the IBRD loan will
ensure a steady disbursement schedule and the ability to
continue adding hectares of land
to the project. It will also provide confidence in the
sustainability of the PES fund in light
of the country’s fiscal crisis.
25. The extension of the GEF grant will enable three pieces of
analytical work to be prepared. Their terms of reference have been
drafted; however, they cannot be submitted
for ratification by the Comptroller’s office, until the project
is extended, as they exceed
the current life of the project.
26. The undisbursed balance for Loan 7388 was $13,824,447.25 and
the undisbursed balance of TF 56666 was $ 1,655,642.00 as of May
21, 2012. The revised schedule of
disbursements is:
Semester 1
2012
Semester 2
2012
Semester 1
2013
Semester 2
2013
Semester 1
2014
Loan 7388 $3.000.000 $2.467.072 $3,500,000 $3,905,000
$3,951,215
TF 56666 $688,459 $967,183
