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World Bank Document Document of The World Bank Public Disclosure Authorized Report No: 20434-CR PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED IBRD LOAN OF US$32.6 MILLION TO THE REPUBLIC OF COSTA RICA AND A GRANT FROM THE GLOBAL ENVIRONMENT FACILITY Public Disclosure Authorized TRUST FUND OF SDR 6.1 MILLION (US$8 MILLION EQUIVALENT) TO THE NATIONAL FORESTRY FINANCING FUND FOR THE ECOMARKETS PROJECT MAY 15, 2000 Public Disclosure Authorized Environmentally and Socially Sustainable Development Central American Department Latin America and the Caribbean Regional Office CURRENCY EQUIVALENTS Currency Unit = Colones 1US$ = 303 C IC = 0.0033 US$ FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AIJ Activities Implemented Jointly CAF Forest Credit Certificate (Certificado de Abono Forestal) CAFMA Forest Credit Certificate for Sustainable Forest Management (Certi)7cado de Abono Forestal para Manejo) CAS Country Assistance Strategy CCAD Central American Commission on Environrment and Development (Comisidn Centroamericano de Ambiente y Desarrollo) CCB Forest Conservation Certificate (Certificado de Conservaci6n del Bosque) CDM Clean Development Mechanism CEM Country Economic Memorandum CTO Certified Tradable Offset EIA Environmental Impact Assessment EMP Environmental Management Plan ESP Environmental Service Payments FONAFIFO National Forestry Financing Fund (Fondo Nacional de Financiamiento Forestal) FRER Fund for Renewable Energy Resources (Fondo de Recursos para Energia Renovable) GEF Global Environment Facility GHG Greenhouse Gas GTZ German Agency for Technical Cooperation (Gesellschaftfur Technische Zusammenarbeit) ICE Costa Rican Institute for Electricity (Instituto Costarricense de Electricidad) IDF Institutional Development Facility LACI Loan Administration Change Initiative MBC/CR Mesoamerican Biological Corridor in Costa Rica MINAE Ministry of Environment & Energy (Ministerio de Ambiente y Energia) OCIC Costa Rican Office for Joint Implementation (Oflcina Costarricense de Implementaci6n Conjunta) PMR Project Management Report SINAC National System of Conservation Areas (Sistema Nacional de Areas de Conservaci6n) SOE Statement of Expenses UNDP United Nations Development Programme UNEP United Nations Environment Programme Vice President: David de Ferranti Country Director: Donna Dowsett-Coirolo Sector Director: John Redwood Task Manager: John Kellenberg Costa Rica Ecomarkets Project CONTENTS A: Project Development Objective...................................................... 2 1. Project development objective: ............ 2..........................................2 2. Key performance indicators: ....................................................... 2 B: Strategic Context ...................................................... 2 1. (a) Sector-related Country Assistance Strategy (CAS) goal supported by the project: .2 2. Main sector issues and Government strategy: ....................................................... 3 3. Sector issues to be addressed by the project and strategic choices:............................... 5 C: Project Description Summary....................................................... 7 1. Project components: ...................................................... 7 2. Key policy and institutional reforms supported by the project:..................................... 7 3. Benefits and target population:...................................................... 7 4. Institltional and implementationarrangements: ....................................................... 8 D: Project Rationale...................................................... 11 1. Project altematives considered and reasons for rejection: .............................. 1.............I1 2. Major related projects financed by the Bank: ................................................ ...... 12 3. Lessons leamed and reflected in the project design:................................................... 12 4. Indications of borrower commitment and ownership: .................................................13 5. Value added of Bank and Global support of this project:................................. ...........13 E: Summary Project Analysis ...................................................... 14 1. Financial:...................................................... 14 2. Economic: ...................................................... 14 3. Technical: ...................................................... 15 4. Institutional:...................................................... 15 5. Social: ........ 1515..........................1..5........................... 6. Environmental assessment:............................. 16 7. Participatory approach:............................. 17 8. Safeguard Policies ............................. 18 F: Sustainability and Risks ............................. 18 1. Sustainability:............................. 18 2. Critical Risks: ............................. 20 3. Possible Controversial Aspects: ............................. 20 G: Main Loan and Grant Conditions ............................. 21 1. Effectiveness Conditions: ............................. 21 2. Other: .............................................................21 H. Readiness for Implementation ................................................................... 22 I. Compliance with Bank Policies................................................................... 22 Annex 1: Project Design Summary............................................................. 23 Annex 2: Project Description............................................................. 26 Annex 2a: Project Description............................................................. 30 Annex 2b: Project Description............................................................. 31 Annex 3: Estimated Project Costs............................................................. 32 Annex 4a: Cost-EffectivenessAnalysis Summary.......................................................... 33 Annex 4b: Incremental Cost Analysis............................................................. 41 Annex 5: Financial Summary............................................................. 48 Annex 6: Procurement and DisbursementArrangements ................................................ 49 Annex 7a: Social Analysis and Participatory Approach.................................................. 62 Annex 7b: Monitorable Action Plan for Indigenous Participation.................................. 67 Annex 8a: Summary of Environmental Analysis............................................................ 70 Annex 8b: Eligibility Criteria for Beneficiaries and Environmental Service Contracts.. 73 Annex 8c: Minimum Requirements for Drafting Management Plans for ESP ................77 Annex 9: Institutional Analysis and Implementation Arrangements............................... 81 Annex 10: Project Processing Budget and Schedule....................................................... 85 Annex 11: Documents in the Project File....................................... ......................86 Annex 12: Statement of Loans and Credits.................................... ......................... 88 Annex 13: Country at a Glance..................... 89 Maps 30865 Conservation Areas 30867 Protected Areas and Present Environmental Service Contracts 30868 Priority Areas in the MBC Identified in the GRUAS Report Costa Rica Ecomarkets Project Appraisal Document Latin America and the CaribbeanRegional Office Costa Rica Date: May 12, 2000 Task TeamLeader/Task Manager: John Kellenberg CountryManager/Director: Donna Dowsett-Coirolo SectorManager/Director: John Redwood A Project ID: CR-PE-52009 Sector: Environment Program ObjectiveCategory: EN GEF SupplementID: CR-GE-61314 Focal Area: Forest Ecosystemsand MountainEcosystems (OperationalPrograms: Nos. 3 & 4). Lending Instrument: TechnicalAssistance Loan Programof TargetedIntervention: [ ] Yes [X] No ProjectFinancing Data [X] Loan [ Credit [ ] Guarantee [XI GEF [] Other Grant For Loans/Credits/Others: Amount(US$m/SDRm): US$32.6 million IBRD; SDR 6.1 million (US$8 million equivalent)GEF Proposedterms: [ Multicurrency [X] Singlecurrency, specify US Dollars Graceperiod (years): 5 [ StandardVariable [ Fixed [X] LIBOR-based Years to maturity: 17 Commitmentfee: 0.75 % Front-endfee: 1.00 % (US$326,300) Financing plan (US$m): Source Local Foreign Total Governmentof CostaRica 8.6 8.6 IBRD 32.6 32.6 GEF 2.4 5.6 8.0 Total 43.6 5.6 49.2 Borrower: Republicof Costa]ica Recipient: National ForestryF inancing Fund Responsibleagency: Ministry of Environmentand Energy Estimateddisbursements (PYfUS$M): PYI PY2 PY3 PY4 PY5 IBRD: Annual 6.8 6.4 6.4 6.5 6.5 Cumulative 6.8 13.2 19.6 26.1 32.6 GEF: Annual 1.6 1.8 1.9 1.8 0.9 Cumulative 1.6 3.4 5.3 7.1 8.0 TOTAL: Annual 8.4 8.2 8.3 8.3 7.4 Cumulative 8.4 16.6 24.9 33.2 40.6 Project implementationperiod: 5 years Expectedeffectiveness date: November 1, 2000 Expectedclosing date: June 30, 2006 Total project duration:5.5 years OCS PAD Form: October 9, 1998 Page 2 A: Project Development Objective 1. Project development objective: (see Annex 1) The development objective of the proposed project is to increase forest conservation in Costa Rica by supporting the development of markets and private sector providers for environmental services supplied by privately owned forests. As such, the project directly supports the implementation of Forestry Law No. 7575: providing market-based incentives to forest owners in buffer zones and interconnecting biological corridors
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