Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

48702

PROJECT PAPER Public Disclosure Authorized

ON RESTRUCTURING THE

HONDURAS: LAND ADMINISTRATION PROJECT

September 13,2007 Public Disclosure Authorized

Sustainable Development Department Latin America and the Caribbean Region Public Disclosure Authorized

Honduras Land Administration Project Proposed Restructuring and Extension Project Paper Data Sheet

Date: September 13,2007 Team Leader: Enrique Pantoja Country: Honduras Sector Manager: Ethel Sennhauser Project Name: Land Administration Project Country Director: Jane Armitage Project ID: PO55991 Environmental Category: B

Does the restructured Project require any exceptions to Bank policies? No Have these been approved by Bank management? n/a Is approval for any policy exception sought from the Board? da

Revised Project development objective/outcomes: n/a Does the restructured Project trigger any new safeguard policies? L No Financinp Plan (US$m) Source I Local I Foreigfl I Total

Others

Honduras Land Administration Project Proposed Restructuring and Extension Contents

I. Introductory Statement

11. Background and Reasons for Extension

111. Proposed changes

IV. Analysis

V. Expected Outcomes

VI. Benefits and Risks

List of Annexes:

Annex 1 - Overview of Output Indicator Adjustments 9 Annex 2 - Project Results: Outcome and Output Indicators 13 CURRENCY EQUIVALENTS (Exchange Rate Effective September 13,2007) Currency Unit = US$ US$1.OO = Honduran Lempira 19.15 1 Honduran Lempira = US$O.OS FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS

APL Adaptable Program Loan DCA Development Credit Agreement GOH Government ofHonduras ICR Implementation Completion Report IDA International Development Association IP Property Institute (Instituto de la Propiedad) NDF Nordic Development Fund PCU Project Coordination Unit PDO Project Development Objective SGJ Ministry ofInterior (Secretaria de Gobernacih y Justicia) SEFIN Ministry ofFinance (Secretaria de Finanzas y CrCdito Publico) SINAP National Property Administration System (Sistema Nacional de la Administracih de la Propiedad) SINIT National Territorial Information System (Sistema Nacional de Informacih

Territorial) ' SINREC Integrated Registry Cadastre System (Sistema Integrado de Registro y Catastro) SURE Unified Registries System (Sistema Unificado de Registros) UNDP United Nations Development Program

Vice President: Pamela Cox Country Director: Jane Armitage Sector Manager: Ethel Sennhauser Task Team Leader: Enrique Pantoja

Honduras Land Administration Project Project Restructuring and Extension Project Paper

I. Introductory Statement

1. This Project Paper seeks the approval ofthe Regional Vice President to introduce the changes described below in the Honduras Land Administration Project (the Project, P055991) and amend the Project’s Development Credit Agreement (Credit 3858-HO) and Implementation Letter. The Project is the first phase of an Adaptable Program Loan (APL) to help modernize land administration in the Republic of Honduras (the Borrower), and this would be the Project’s first restructuring and closing date extension.’ The proposed restructuring falls under the category of “second order restructuring” since it does not involve revising the Project Development Objective (PDO) or associated outcome targets. Moreover, the proposed changes do not raise the environmental category ofthe Project, do not trigger any new safeguard policies, and do not involve any exceptions to Bank policies.

2. The proposed modifications include: (i)changing implementation arrangements, including changing the project’s implementing agency; (ii)replacing references to the SINREC agreement in the Development Credit Agreement (DCA) with references to the Property Institute and its functions under the 2004 Property Law;2 (iii)eliminating the option, included in the DCA, of having an external procurement agent to manage selected international bids and contracts financed by the Credit, and introducing the use of updated ProcurementKonsultant Selection Guidelines; (iv) adjusting selected output indicators for systematic land regularization, titling and registration (Component 2 of the Project); (v) clarifying that no activities requiring resettlement will be financed under the Project; and (vi) extending the Credit Closing Date for 16 months. The proposed restructuring and extension would provide appropriate arrangements and sufficient time for successful project implementation and achievement ofthe Project Development Objective (PDO), as well as a solid foundation to continue into the next phase ofthe APL.

3. This restructuring proposal was developed while a full Inspection Panel Investigation on the Project was underway. The Panel Inspection Investigation Report was issued on June 12,2007, and the Management Response and Recommendation finalized on August 3, 2007, taking into consideration the changes included in the restructuring proposal. As detailed below, the proposed restructuring focuses on key changes on Project implementation arrangements and output targets needed to facilitate project performance

A minor amendment was processed in December 2004 to increase the authorized allocation of the Project’s Special Account. ’ The SINREC (Sistema Integrado de Registro y Catastro) Agreement was signed between the executive branch (responsible at the time for cadastre administration), the judicial branch (responsible then for real estate registry), and civil society representatives, whereby the two branches committed themselves to integrate the cadastre and registry, and coordinate land administration activities in the country. Under the Property Law, the Property Institute is responsible for both cadastre and registry in an integrated manner. 2

improvement and ensure PDO achievement. The Bank’s Board will discuss the Panel’s Report and Management Response on October 4,2007.

11. Background and Reasons for Restructuring and Extension

4. Background. Total project costs were estimated at US$38.9 million at appraisal, to be financed by an International Development Association (the Association) Credit .of SDR 16.9 million (US$25 million equivalent), a Nordic Development Fund (NDF) Credit of EUR6.0 million (US$7.9 million equivalent), and Borrower’s counterpart funding. The Credit from the Association was approved by the Bank’s Board on February 26, 2004, and became effective on December 2, 2004, with a closing date ofApril 30,2008. As of June 30, 2007, the undisbursed amount of the Credit was US$5.50 million equivalent. In addition, all the funds from NDF remained undisbursed.

5. Project Design and Scope: As stated in the DCA, the PDO is to establish and operate (as part of the broader program) an integrated and decentralized land administration system, composed ofpublic and private entities, which provides users in the Project Area with accurate information on urban and rural land parcels and effective land administration services (e.g., purchases, mortgages, cadastral and registry certifications) in a timely and cost-effective manner. Three components support the achievement of the PDO: (i)development of the policy framework and institutional strengthening to support the establishment and operation of SINAP (National Property Administration System); (ii) systematic land regularization, titling, and registration in the Project Area; and (iii)project management, monitoring and evaluation. Component 1 has a national scope and supports increased transparency and improved governance of the Borrower’s main land administration institutions. Component 2 is directly benefiting the population living in the areas targeted by the Project through massive land regularization and registration. Component 3 covers the costs associated with project management and the monitoring and evaluation ofactivities.

6. Project Performance to Date: The Project is in the RVP’s and Corporate risk lists. After an initial satisfactory period, the Project has faced delays resulting in a Moderately Unsatisfactory rating for Implementation Progress (IP) and a Moderately Satisfactory rating for PDO achievement for several months3 Several output targets related to Component 2 are lagging behind. IP and PDO ratings are mainly due to: (i)insufficient allocation of counterpart funds, which affected the disbursement of the Credit and the ability of the implementing agency to execute the Project at the expected rate; (ii)slow down and political interference due to the elections period followed by the government transition after the 2006 elections; (iii)weak operational leadership, largely due to the failure of the Borrower to appoint a permanent Project Coordinator (the Project operated with an interim Coordinator from July 2006 until March 2007); (iv) weak fiduciary oversight resulting in several instances of lack of compliance with procurement and

The baseline ratings correspond to the ISR no. 4 dated December 13, 2005, and the updated ratings reflect the latest ISR, dated April 20,2007. The Project ratings were downgraded for the first time in the ISR no. 5 of June 24,2006. 3

financial management guidelines, as evidenced by several fiduciary reviews undertaken by the A~sociation;~and (v) ineffective inter-institutional coordination. Disbursements slowed down significantly after a satisfactory pace in FY05, but recently picked up, amounting to US$l.94 million in FY07.

7. On January 10, 2007, the Association issued a Notice of Threatened Suspension of Disbursement in response to the non-compliance with several covenants of the DCA largely as a result of the above problems, in addition to the Borrower’s signing of a Memorandum of Understanding apparently dissolving the consultation mechanism for Garifhas (an Afro-Honduran group) targeted by the Project. Previously, in March 2006 the Board approved a full Inspection Panel Investigation into the Project, largely in relation to regularization in ethnic lands, and particularly among Garifha communities. The Panel assessed whether the Bank complied with the following operational policies and procedures: Environmental Assessment (OP/BP 4.0 l), Natural Habitats (OP/BP 4.04), Indigenous Peoples (OD 4.20); and Project Supervision (OP/BP 13.05). The Panel’s Report, issued on June 12, 2007, and the Management Response, completed on August 3, 2007, will be discussed by the Bank’s Board later in the year.

8. Reasons for Project Restructuring and Extension: The main focus of the proposed restructuring is on ensuring that the original project outcome targets are achieved. While maintaining the same PDO, the proposed restructuring responds to the urgent need to update project implementation arrangements in order to reflect the current national legal and institutional framework, and to modify selected outputs under Component 2. Since the Project’s Board approval, the legal and institutional framework regulating land property rights in Honduras has changed substantially. At the time of Project preparation, cadastre administration was under the responsibility of the Borrower’s executive branch (its Ministry of Interior - Secretaria de Gobernacibn y Justicia, or SGJ) while the Borrower’s judicial branch was responsible for the real estate registry. Therefore, the SGJ was selected as implementing agency and an agreement between SGJ and the Borrower’s judicial branch was established (the SINREC Agreement). The Property Law (Congressional Decree 82-2004), published in the Official Gazette on June 29, 2004, established a new legal regime for land administration, and created a new entity, the Property Institute (Instituto de la Propiedad or IP), to oversee land administration in the country in an integrated manner, including cadastre administration and real estate registry. As a result, the Borrower is now requesting that SGJ be replaced with IP as implementing agency for the Project.

9. Simultaneously, several output targets related to Component 2 need to be adjusted in light of more precise estimates of baseline data, implementation capacity and constraints, and remaining Project funds. During the supervision missions conducted

Lack of compliance included, inter alia, use of funds from the Special Account to finance expenditures related to counterpart funding, and delays in submission of financial audit reports and FMRs. In response to this, three reviews have been conducted: a post-review by Bank staff and an independent procurement review by an international consultant, for which findings and recommendations are available, and an investigation by the Department of Institutional Integrity (INT) that is still pending completion. 4

between December 2006 and February 2007, the Task Team refined with the Borrower the details of the proposed restructuring. On March 20, 2007, the Association received a formal request from the Borrower to restructure the Project, and on August 27, 2007, a request to extend the Credit Closing Date. As reflected in the Borrower’s Action Plan, the extension would help ensure (i)the completion of key activities that suffered delays and whose implementation cannot be accelerated for technical andor logistical reasons (e.g., aerial photography, surveying, and social mobilization); and (ii)the fulfillment of the original triggers to continue into the next phase ofthe APL.’

10. The Project is ready to undergo the restructuring. The Borrower has recently taken actions that have effectively provided the conditions to improve project implementation, and successfully met the conditions to avoid suspension of disbursements. For instance, a Project Coordinator and all the consultants needed in the PCU for 2007 have been contracted. The PCU has already been streamlined, and its Fiduciary Unit strengthened, according to the Action Plan being proposed to complete the Project. As confirmed in the national budget, sufficient counterpart funding has been allocated for 2007. The Council of Governors, an inter-institutional body which will provide strategic guidance to the Project and facilitate coordination across agencies participating in the Project, is finally active, along with its Technical Committee. In addition, the National Agrarian Institute (Instituto Nacional Agrario, or INA), has re-launched the process to finalize the regularization manual for ethnic areas and revitalize activities related to these areas. The effectiveness ofthese actions depends on formalizing the urgently needed institutional and implementation changes through Project restructuring.

111. Proposed Changes

11. Change of implementation arrangements. The Borrower confirmed that the IP will become the new Project’s implementing agency. The IP will be required to enter into a Subsidiary Agreement with the Borrower (represented by the Ministry of Finance - Secretaria de Finanzas y Crkdito Pliblico, or SEFIN)) and into Co-Execution Agreements with participating government agencies and municipalities. The Association is currently reviewing the drafts of such agreements. The Project description will also need to be adjusted slightly to conform to the new institutional arrangements. Moreover, as part of the restructuring process, an assessment of IP and the PCU’s fiduciary unit was carried out between May 14 and 18, 2007, and an action plan agreed, reflecting the findings of the assessment and the recommendations from the Independent Procurement Review (IPR). At the same time, the Operational Manual is being updated (and will be a condition of effectiveness for the proposed amendment) to reflect changes in implementation and fiduciary arrangements, and ensure compliance with Bank guidelines and procedures.

These triggers include: (i)creation of a new institutional framework and completion of an agreed transition plan from the current structure; (ii)achievement of 80 percent or better results of end-of-Phase Ioutcome (PDO) indicators; (iii) adoption of legal / regulatory framework on land rights for indigenous and Afro-Honduran peoples; and (iv) completion ofbaseline data collection for Phase 11. 5

12. Update of provisions related to cadastre administration and real estate registry. References to the SINREC Agreement in the DCA will be replaced with references to the Property Institute and its hctions under the Property Law.

13. Elimination of procurement agent option and introducing use of updated Procurement Guidelines / Consultant Selection Guidelines. As agreed with the Association, the Borrower has ended its agreement with UNDP to act as Procurement Agent for selected international bids. The option of having a Procurement Agent was included in the DCA. Going forward, the PCU will be directly responsible for all procurement matters under the Project. Moreover, the Procurement and Consultant Selection Guidelines ofMay 2004 will now apply to the Project.

14. Adjustment of selected output indicators for systematic land regularization, titling and registration (Component 2 of the Project). After estimating baseline information more accurately, and assessing the Project remaining resources and the implementation technical and logistical constraints of some activities, the Borrower is proposing to adjust the following six output indicators included under Component 2 in the Project Implementation Letter: (i)Percentage of land parcels in the Project that are registered in SINAP under a parcel-based system (folio real): 30 percent, from an original target of 70 percent; (ii) Percentage of land transactions in the Project area that are registered in SINAP under folio real: 40 percent, from an original target of 70 percent; (iii)Number of land parcels in the Project area surveyed: 525,000 parcels from an original target of 745,000;6 (iv) Number of protected areas that are demarcated and incorporated in SINAP: 8 protected areas, from an original target of 12 (which brings the estimated total area to 223,000 ha); (v) Number of municipalities demarcated: 25 municipalities, from an original target of 40, and kilometers of inter-municipal boundaries defined: 1,352 kilometers, from an original target of 2,800; and (vi) Number of ethnic communities in the Project area whose land is demarcated and surveyed by tenure category: 12 communities, from an original target of 16; and number of ethnic communities in the Project area whose land is titled and registered: 8 communities, from an original target of 12. (See Background on Adjustments in Annex 1 and revised Project Results Matrix in Annex 2).

15. ClariJication regarding resettlement. It will be clarified in the DCA that no activities requiring resettlement (as defined in OP 4.12) may be carried out under the Project.

16. Extension of Credit Closing Date: The Borrower is requesting a 16-month extension ofthe closing date, from April 30, 2008 to October 30,2009.

It was also agreed under this indicator to eliminate the reference “and regularized” since this number is measured through the first output indicator. 6

IV. Analysis

17. The Task Team’s assessment is that the proposed changes do not substantially affect original economic, financial, technical, and social aspects of the Project. More specifically, the proposed adjustments to selected output indicators are not likely to affect adversely the economic viability of the Project. Overall, while there will be some reductions in the total number ofparcels surveyed and regularized, the establishment of the SINAP and modernization of registries are likely to have a larger impact than expected. The original economic analysis, although based on conservative assumptions, indicated a very high internal rate of return (44 percent) for investments in regulari~ation.~This rate was higher than most land projects, thus comparing favorably with, for instance, 34 percent in a similar and highly successful program in Thailand and 17 percent in previous programs in Honduras. This high rate of return was plausible given the largely urban character of the Project, which will not be changed fundamentally under the proposed restructuring. The second main area ofbenefits expected fiom the Project is not affected by the proposed adjustments in outputs, since this refers to the reduction of titling transaction costs and the consequent savings to the economy from increased efficiency of service delivery, which are related to activities under Component 1.

18. The Project will, at the same time, maintain its positive institutional impact through its support to IP and the establishment of SINAP, as well as its positive social and economic impact through the regularization ofrural and urban land parcels, modernization of registries, the demarcation of indigenous territories and protected areas, and the support to conflict resolution mechanisms.

19. Based on the assessment of the Borrower’s Action Plan, the Task Team is satisfied that all main criteria for Project restructuring and extension have been met. By taking the actions described above, the Borrower has demonstrated a renewed commitment to the Project, and the performance of the PCU continues to improve with direct and increased support from the Ministry of Finance. The PDO and its associated outcome targets remain achievable (see below), while the proposed restructuring and extension make the Project’s output targets more realistic and attainable.

20. The request to extend the Credit Closing Date should be considered given that:

(a) The extension supports the restructuring’s purpose of ensuring the achievement ofthe PDO and outcome targets.

(b) This is the first extension sought for the Credit, and it meets the criteria set in OPBP 13.30.

’ The economic analysis indicated that, for instance, further analysis of land price, ideally with a panel data set, was needed to measure the project’s impact more accurately. 7

The proposed restructuring includes a feasible/satisfactory action plan and a schedule to complete the Project within the proposed extension period, to which the Borrower and the Bank have agreed.

Currently, neither the Credit nor the country is subject to an ongoing suspension of disbursements, and there are no outstanding Audit Reports.

The co-financing being provided by the Nordic Development Fund (EUR 6 million or US$ 7.9 million equivalent) would continue throughout the extension period, as the NDF is also considering extending the closing date ofits Credit Agreement with the Borrower.

V. Expected Outcomes

21. The proposed restructuring does not affect the PDO or associated outcome targets. The PDO will continue to be the one presented in Section I1 above. As shown in Annex 2, and consistent with the PDO, the six original outcome targets reflect institutional, technological and efficiency impacts resulting mainly from activities that are not directly affected by the proposed adjustment in selected output indicators. These activities include, inter alia, development and institutionalization of SINAP and its sub-systems; modernization and decentralization of national registry, including support at the municipal level; capacity building at the central and local level; and development of conflict resolution mechanisms related to national lands. In brief, the expected levels of quality, efficiency, satisfaction and confidence related to the improved national property system, as established through the outcome target indicators, remain valid and achievable.

VI. Benefits and Risks

22. As noted above, the proposed restructuring will ensure the achievement ofthe PDO and its associated outcome targets, as well as meeting of the triggers for Phase I. Moreover, through the restructuring, institutional strengthening support to the IP will be provided more directly, thus helping the IP to prepare better not only to implement Phase I1 of the APL, but also to support the long term efforts of the Borrower to modernize land administration in the country.

23. Nevertheless, several risks will require continued attention:

(a) IP’s lack of implementation experience. As noted above, the IP is a new entity and has no previous experience implementing an IDA-financed Project. The IP will receive assistance in institutional strengthening and capacity building, to ensure that the Project is implemented satisfactorily, but this process is likely to be lengthy. At the same time, the PCU has been strengthened by bringing on board the required skills and expertise, while several good performing consultants with experience in Bank procedures have remained. As a result, PCU implementation capacity has increased. 8

Weak fiduciary capacity. Strong fiduciary capacity is critical as well, particularly considering IP’s lack of experience. To strengthen this capacity, the Action Plan agreed during the fiduciary mission mentioned above includes training for the IP and PCU, as well as mechanisms to strengthen internal controls.

Safeguard compliance: Safeguard issues will continue to pose risks to the impact and credibility of the Program and reputational risks for the Association. Although the resettlement policy (OP/BP 4.12) does not apply,’ the public need- based land titling process in urban areas is being undertaken in the country for the first time and serious challenges remain to ensure that vulnerable households benefit fully from this process. Moreover, with regard to the indigenous peoples policy (OP 4.20), the social and political context of regularization of indigenous lands in the Atlantic Coast and Mosquitia makes it difficult to achieve results on the ground at the desired pace and to meet communities’ expectations. In this respect, a regularization manual for urban areas has been finalized, while a manual for ethnic areas is being prepared following a broad-based consultation process and with close supervision of Bank specialists. These manuals will be added to the Operational Manual.

24. The risks listed above point to the need for intense Project supervision and availability of Bank expertise to provide timely advice on fiduciary and safeguard issues to the Borrower.

* Footnote 8 ofOP 4.12 provides that the policy does not apply to disputes between private parties in land titling projects, although it is a good practice for the borrower to undertake a social assessment and implement measures to minimize and mitigate adverse social impacts, especially those affecting poor and vulnerable groups. Under the Project, a socio- economic assessment is carried out as part of the regularization process, and the Operational Manual includes screening mechanisms to prevent physical or economic displacement. 9

Annex 1 Overview of Output Indicators Adjustments

The following output indicators under Component 2 have been adjusted after considering (i)more accurate estimates of baseline indicators and costs of some activities; (ii) remaining resources under the Project, including from the Credit, the NDF, and the Government; and (iii)better understanding of technical and logistical constraints faced by the Project, based on actual implementation experience. Specific discussion ofthe rationale for each adjusted output indicator is presented below. These adjustments do not affect the achievement ofthe original PDO or its associated outcome targets.

Original Oulmut Indicator: 70% ofthe land parcels in the Project area are registered in SINAP (National Property Administration System) under the parcel-based system yblio real).

Adiustment: This target is adjusted to 208,423 parcels, or 30 percent of the total estimated initially under the Project area (745,000 parcels).

This adjustment reflects the implementation potential for land regularization activities within the new circumstances established by the modalities set forth in the 2004 Property Law, which was not yet approved during the appraisal of the Project, and actual implementation capacity in relation to such modalities. The new legal framework under the 2004 Property Law clearly defined what a folio real is, and established a process of parcel regularization underpinning a folio real with requirements that were not known at the moment ofproject appraisal. As established, this process is more complex and lengthy than initially assumed, and slightly costlier.

OriPinal Output Indicator: 70% of land transactions in the Project area are registered in SINAP underfolio real.

Adiustment: This target is revised to 40 percent oftransactions.

Similar to the previous indicator, the total amount of potential transactions was initially overestimated. Moreover, this figure was established during project appraisal without having a good estimate of the total number ofregistries that should be modernized in order to achieve the established target.

Project implementation experience to date has confirmed that modernization of property registries is an essential preliminary step in the process to generate folios reales in a massive, systematic way or based on demand. Considering what is feasible under current circumstances, it was determined that eight registries can be modernized by the end of the Project. On this basis, it was estimated that a realistic target for this indicator was 40 percent of land transactions registered in SINAP by end ofproject. 10

Original Output Indicator: 745,000 land parcels in the Project area surveyed and regularized:

Adiustment: This target is reduced to 521,500 land parcels in the Project area surveyed. As explained below, the words “and regularized” are eliminated for this indicator.

During project preparation, the target number of parcels to be surveyed was overestimated. Project implementation experience shows that the original target exceeds the existing country capacity.

Regularized parcels will not be measured under this indicator as these are already being measured by the first indicator discussed above, given that according to the Property Law, a regularized parcel must be registered under the folio real.

Original Outmt Indicator: 12 protected areas (an approx. area of 230.000 ha) are demarcated and incorporated in SINAP.

Adiustment: This target is reduced to 8 protected areas (resulting in an approx. area of 220,000 ha, given that some protected areas have been enlarged over recent years). The new target is estimated on the basis of the complex logistics and process, as well as the human resources required to establish the protected areas’ perimeters and set the demarcation landmarks in the field. The most critical area, Pic0 Bonito, was kept under the revised list, which also includes:

Management Extension Category Department Municipality Protected Area Has. \ ~ LaCeiba, El Porvenir, La Masica, Pic0 Bonito Parque Nacional Atlantida, Yoro San Francisco y Olanchito 107.090,OO Blanca Jeannette Kawas Fernhdez Parque Nacional Atlantida, Cortes Tela, Puerto CortCs 78.145 Punta Izopo Parque Nacional Atliintida Arizona, Tela, Esparta 18.820,OO Capiro y Calentura Parque Nacional Col6n Trujillo, Sta. Fe 4.858,31 Jardin Botiinico y Centro de Lancetilla Investigacih Atliintida Tela, 1681 Barras de Cuero y Refugio de Vida El Porvenir, San Francisco, La Salado Silvestre Atlhntida Masica y Esparta 12800 Fortaleza de San Fernando de Monument0 Omoa Cultural CortCs Omoa 41 Laguna de keade Usos Ticamaya M~ltiples CortCs I Choloma 442,66 223.877,97 11

Oripinal Output Indicator: 40 municipalities are demarcated and 2,800 km of inter- municipal boundaries defined.

Adiustment: This target is reduced to 25 municipalities demarcated and 1,352 km ofinter- municipal boundaries defined.

With respect to municipal boundaries, the term "demarcated" refers more accurately to delimiting. The new target is based on a better understanding of the process and logistics required to determine these perimeters and boundaries.

Municipios de 1. Comayagua 2. 3. ElRosario 4. Esquias 5. 6. LaLibertad 7. Lamani 8. La Trinidad 9. Lejamani 10. Meambar 11. 12. Ojo de Agua 13. San Jeronimo 14. San Jose de Comayagua 15. San Jose del Potrero 16. San Luis 17. San Sebastian 18. 19. 20. Las Lajas 2 1. Taulabe

Municipios de Francisco Morazhn 1. San Buenaventura 2. SantaAna 3. Santa Lucia 4. Valle de Angeles

Original Output Indicator: (a) Lands of 16 ethnic communities in the Project area are demarcated and surveyed by tenure category; (b) Lands of 12 ethnic communities in the Project area are titled and registered in SINAP:

Adiustment: This target is adjusted to (a) lands of 12 ethnic communities in the Project area to be demarcated and surveyed by tenure category; and (b) lands of 8 ethnic 12

communities in the Project area are titled or have a certificate of occupation, and are registered in SINAP.

With regard to communal boundaries, the term "demarcated" refers to delimiting. The new target is based on a better understanding of the social and political challenges faced by the regularization process, which includes highly participatory consultations in a conflictive environment, support to Mesas Regionales, management of community expectations, and the promotion of conflict resolution mechanisms.

The revised list of communities includes:

COMUNIDADES GARIFWAS Departamento de Col6n: 1. Cristales y Rio Negro, 2. Sangre laya, 3. Limb, 4. SantaFe, 5. Guadalupe, 6. San Antonio Departamento de Atlhntida: 7. Rio Tinto (en el Departamento de Atlhntida).

COWNIDADES MISKITAS: Departamento de Gracias a Dios 1. Yajurabila, 2. Krata, 3. Puswia, 4. Kaski, 5. Caukira 13

Annex 2 Project Results - Outcome and Output Indicators

?roject Development PDO Indicators Project Reports :FromPDO to 3bjective Program Purpose)

4x1 integrated and System maintains a 96% SINAP subsystem Successful integration of iecentralized land :ate oftitled lands [SURE, SINIT) reports .he various registries, idministration system . accurately registered in novable assets, :composed ofpublic and SINAP independent :ommercial, and xivate entities) evaluations of SINAP intellectual property xoviding users in thee At least 70% ofSINAP eights registries xoject areas with users (and % ofwomen) Registry annual report rate its services as accurate information on and financial statements Key features ofnew xban and rural land “satisfactory” (third legal and institutional ?arcels and effective level on a four-level Stakeholder, customer, framework: land administration scale) and beneficiary surveys services (transactions, B Transfer of mortgages, cadastral and The average time to Project’s MIS reports registries from registry certifications, register a land etc.) in a timely, cost- Judicial to transaction is 7 days Independent impact effective manner Executive evaluation report Consolidation of Average administrative folio cost ofregistering a real IDA supervision reports Consolidation of land transaction is 2.07 all registries US$ equiv. Mid-term Review Strengthening of (MW decentralized land 100% ofthe Registry’s administration to operating costs covered Implementation municipal levels by registration fees Completion Report

At least 60% of the (IW conflicts on national lands (protected areas and forests) in the project area are resolved 14

Output from each Output Indicators Project Reports (From Outputs to Corn onent Ob,iective)

1. Policy Framework 60 access / connection Laws, regulatory Comprehensive and Institutional points to SINAP decrees, and policy institutional and Strengthening established in public and statements officially regulatory reform is private entities published and approved to consolidate The National Property disseminated by the real estate property Administration System 600 people certified to Government institutional and (SINAP) is created, operate SNAP regulatory regime including a National subsystems Quarterly project Land Information implementation reports Judicial reform System (SINIT), its prepared by PCU facilitates the Registry ofNorms independence of, and (RENOT), and the access by, the poor to Unified Registries the courts System (SURE), and operates at selected public & private entities

2. Area-based 30% of land parcels in Project-generated field Government entities Systematic Land the project area are reports, maps, enforce existing Regularization, Titling registered in SINAP assessments, etc. measures (such as the and Registration under a parcel-based 1992 Agricultural system (folio real) SINIT reports, SURE Modernization Law) and .Land parcels (private reports for each type of all future land tenure and public, rural and 40% of land land regularized, titled laws and policies, as they affect achievement urban) are incorporated transactions in the and incorporated in in SINAP under folio SINAP: of the project objective project area are real in the project area: registered in SINAP National public lands Government adopts a under folio real * * Comayagua (3rd step (forests, protected areas) comprehensive forestry ofpilot; rural & urban) * Municipal lands policy that clarifies and Percentage ofparcels * Cortes (all 3 steps in * Private urban lands enforces rights over rural and urban areas) incorporated in SINAP * Private rural lands forest lands and that * Francisco Morazan with a woman as (including lands strengthens the principal owner (1 st step, all urban belonging to ethnic regulatory functions of areas; 2nd and 31d steps, groups, individually or COHDEFOR 521,500 land parcels in only) collectively) the project area * Atliintida (1st step, Appropriate legal and surveyed' selected rural areas; 2"d Project's MIS reports institutional frameworks and 3rd steps, selected are in place for 12,000 parcels surveyed protected, forest and Performance / field protected areas in national forest areas ethnic rural areas) evaluation reports ofall (including adequate * Colon (1" step, contractors funding ofa Fondo de 8 protected areas (an selected rural; 2"d and Areas Protegidas) approx. area of220,000 3rd steps, selected ethnic ha) are demarcated and rural areas) Appropriate incorporated in SINAP * Gracias a Dios (1 st mechanisms are in place step, selected rural; 2"d to resolve land issues of and 31d steps, selected indigenous and Afro- 15

Output from each Output Indicators Project Reports (From Outputs to Component Objective) :thnic rural areas) 25 municipalities Honduran peoples * Choluteca delimited and 1,352 kms (modernization of ofinter-municipal All other land-related registry) boundaries defined initiatives in the country, urban and rural, Lands of 12 ethnic use compatible cadastre communities in the and registration project area delimited methodologies and surveyed by tenure category (and 8 Municipalities have communities titled and access to increased registered in SINAP) (closer to the 5% of national revenues Number of mandated by law), more Regularization Tables regular, and more established predictable resources from the national government to effectively carry out their land administration functions

3. Project Management, Annual Operating Plan Quarterly project Monitoring & and training plans performance reports Evaluation approved in November from MIS, prepared by for following year PCU Phase Iof the Program is well managed and Procurement Plan Annual Audits properly coordinated approved in September with other related for following year IDA supervision reports initiatives, and the management systems Phase IEvaluation Mid-term Review required for Phase I1 are completed in three (MTR) fully operational months before closing date Implementation Completion Report PIP for Phase I1 agreed three months before (ICR) closing date ofPhase I