World Bank Document

Document of The World Bank Public Disclosure Authorized FOR OFFICIAL USE ONLY Report No: 33009-NI PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED CREDIT IN THE AMOUNT OF SDR 8.3 MILLION (US$12 MILLION EQUIVALENT) TO THE REPUBLIC OF NICARAGUA FOR A SECOND AGRICULTURAL TECHNOLOGY PROJECT Public Disclosure Authorized November 1,2005 Environmentally and Socially Sustainable Development Central America Country Management Unit Latin America and the Caribbean Region Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Public Disclosure Authorized World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective 4 July, 2005) Currency Unit = Cordoba 16.72 Cordobas = US$1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan ATP Iand I1 Agricultural Technology Project Iand I1 AS1 Agricultural Sector Institutions BCN Central Bank of Nicaragua CAS Country Assistance Strategy CCAD Central American Commission of the Environment and Development CFF Common Fiduciary framework ATLMP Agricultural Technology and Land Management Project CFAA Country Financial Accountability Assessment CFF Common Financial Framework CGR Comptroller's General Office CGIAR Consultative Group on International Agricultural Research CONAGRO National Advisory Council for (agricultural) Production CTI Investments Technical Committee CUT Treasury Single Account DAC Development Assistance Committee DANIDA Danish International Development Agency DGAF General Financial Management Directorate DR-CAFTA Dominican Republic-Central American Free Trade Agreements EFA/FTI Education for All Fast Track Initiative FAITAN Support Facility for Nicaraguan Agricultural Technological Research FA0 Food and Agriculture Organization FAT Support Facility for Technical Assistance (Fondo de Asistencia Tecnica) FISE Social Emergency Investment Fund FM Financial Management FMR Financial Monitoring Report FONADEFO Sustainable Forest Management Facility FUNICA Nicaraguan Agricultural Technology Development Foundation GEF Global Environment Facilities GoN Government of Nicaragua HA&A Harmonization, Appropriation and Alignment IADB Inter American Development Bank IDR Rural Development Institute IFAD International Fund for Agricultural Development IDA International Development Association IICA Inter-American Institute for Agricultural Cooperation IMF International Monetary Fund INAFOR National Forestry Institute INATEC National Technology Institute INIFOM Nicaraguan Institute of Municipal Development INTA Nicaraguan Agricultural Technology Institute IPSAS International Public Sector Accounting Standard IRR Internal Rates of Return JFA Joint Financing Agreement LSMS Living Standards Measurement Survey MAGFOR Ministry of Agriculture, Livestock and Forestry MARENA Ministry of Environment and Natural Resources M&E Monitoring and Evaluation MHCP Ministry of Finance and Public Credit MIC Integrated Crops Management Plan MIFIC Ministry of Development, Industry and Commerce MINREX Ministry of Foreign Affairs MOE Ministry of Education MOU Memorandum of Understanding MTEF Medium Term Expenditure Framework NDP National Development Plan NPV Net Present Value OECD Organization for Economic Cooperation and Development PA Protected Area PAG Government Action Plan PAM Performance Assessment Matrix PIP National Public Investment Plan PDO Project Development Objective PND National Development Plan PND-0 Operational National Development Plan PROFOR Sustainable Forestry Investment Promotion Project PRORURAL Sector-wide Productive Rural Development Program PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper QER Quality Enhancement Review RAAN North Atlantic Autonomous Region RAAS South Atlantic Autonomous Region R&E Research and extension SA Social Assessment SDC Swiss Development and Cooperation Agency SECEP Secretary for Coordination and Strategies of the Presidency SIA Agricultural Information System S IGFA Integrated System for Financial Management and Auditing SIL Specific Investment Loan - iv - SINIA National System for Environmental Information SINTAR National System for Agricultural and Rural Technology SISEVA Monitoring, Evaluation and Learning System SNIP National Public Investment System SPAR Agricultural and Rural Public Sector SWAp Sector Wide Approach program TGR National Treasury TF Trust Fund UPOV Union for the Protection of New Varieties of Plants Vice President: Pamela Cox Country Managermirector: Jane Armitage Sector Manager: John Redwood Task Team Leader: Pierre Werbrouck -v- NICARAGUA Second Agricultural Technology Project CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE ..................... 1 1. Country and Sector Issues .................................................... 1 2 . Rationale for Bank Involvement ............................................. 4 3 . Higher Level Objectives to which the Project Contributes ................. 4 B. PROJECT DESCRIPTION ............................................ 5 1. Lending Instrument ............................................................ 5 2. Project Development Objective and Key Indicators ........................ 5 3 . Project Components ........................................................... 6 4 . Lessons Learned and Reflected in the Project Design ..................... 9 5 . Alternatives Considered and Reason for Rejection ......................... 11 C. IMPLEMENTATION .................................................. 11 1. Partnership Arrangements ................................... 11 2. Institutional and Implementation Arrangements ........................... 11 3 . Monitoring and Implementation of Outcomes/Results ...................... 12 4 . Sustainability .................................................................... 13 5 . Critical Risks and Possible Controversial Aspects ............................ 14 6 . Loan / Credit Conditions and Covenants ..................................... 15 D. APPRAISAL SUMMARY ............................................. 15 1. Economic and Financial Analysis ........................................... 15 2. Technical ...................................................................... 16 3 . Fiduciary ....................................................................... 19 4 . Social ........................................................................... 20 .vi . 5 . Environment ................................................................... 21 6 . Safeguard Policies ............................................................ 21 7 . Policy Exceptions and Readiness .......................................... 22 Annex 1: Country and Sector or Program Background ........................ 23 Annex 2: Major Projects Financed by the Bank and/or other Agencies ....... 29 Annex 3: Results Framework and Monitoring .................................. 30 Annex 4: Detailed Project Description ........................................... 36 Annex 5: Project Costs ............................................................ 46 Annex 6: Implementation Arrangements ........................................ 48 Annex 7: Financial Management and Disbursement Arrangements ............ 51 Annex 8: Procurement Arrangements ........................................... 59 Annex 9: Economic and Financial Analysis ..................................... 65 Annex 10: Safeguard Policy Issues ................................................ 75 Annex 11: Projects Preparation and Supervision ................................. 83 Annex 12: Documents in the Project File .......................................... 84 Annex 13: Statement of Loans and Credits ....................................... 86 Annex 4: Country at a Glance .................................................... 87 Annex 5: Monitoring and Evaluation ............................................ 88 Map IBRD No 34322 -1- A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues Nicaragua’s 2004 per capita GDP of US$813 is the second lowest in Latin America. In 2001 46 percent of people lived in poverty - 15 percent in extreme poverty. Poverty in rural areas (64 percent) was more than double that of urban areas (29 percent) (IDA-IFC 2005). And although the percentages of poor and extremely poor people have both declined, the absolute number of people in poverty has increased. The agricultural sector. Nicaragua has one of the most agriculture-dependent economies in Latin America, with agriculture accounting for about 20 percent of GDP and 40 percent of employment. World Bank work suggests that agriculture strongly contributed to economic growth and poverty reduction in the past decade. However, the basis of this growth - high export commodity prices, the availability of unoccupied land and the return to normalcy after a decade of civil war - cannot be expected to sustain growth without new stimuli. The reason is that increased production has not come from improved productivity through technology and innovation but from the use of marginal lands. This has caused watershed destruction and deforestation. Buffer zones around protected areas such as the Bosawas Reserve are particularly at risk. Trade integration. There is consensus that the country needs to integrate economically with its neighbors and improve basic economic and social infrastructure: roads, energy, telecommunications, water and others. The Nicaraguan General Assembly ratified

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