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Document of The World Bank Public Disclosure Authorized Report No. 16090-PA Public Disclosure Authorized STAFF APPRAISAL REPORT PANAMA RURAL POVERTY AND NATIJRAL RESOlIRCES PROJECT Public Disclosure Authorized April 14, 1997 Public Disclosure Authorized Central America Department Latin America and the Caribbean Regional Office Currency Equivalents Currency Unit: = Balboa US$1 = I Balboa Weights and Measures I quintal (qq) = 100 pounds = 46 Kg. Fiscal Year January I - Decembcr 31 ABBREVIATIONS, ACRONYMS AND GLOSSARY ABC Atlantic Biological Corridor CAP Community Action Plan CAS Country Assistance Strategy Comarca Indigenous administrative district (Corregimiento Smallest administrative division in Panama CTC (COrregimiento Technical Committcc FES Social EmergencyFund (Fondo dc Emcrgencia Social) FUSARD Fund for Sustainable Agricultural and Rural Development GEF Global Environmental Facility GOP Government of Panama IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IDA International DevelopmentAssociation IDB Inter-American DevelopmentBank IDIAP Agricultural Rcsearch Institutc (Inst. dc Investigaci6n Agropecuaria) IFAD International Fund for Agricultural Dcvelopment IICA Inter-American Institute for Cooperation on Agriculture INRENARE Institute for Renewable Natural Resources (Instituto dc Recursos Naturales Renovables) 10 Implementing Organization IPDP Indigenous Peoples Development Plan LIB Limited International Bidding MBC Mesoamerican Biological Corridor MIDA Ministry of Agricultural Development(Ministerio de Desarrollo Agropecuario) MIPPE Ministry of Planning and Economic Policv (Ministerio de Planificacion y Politica Econ6micz NAPAS National Protected Area System NCB National Competitive Bidding NGO Non Governmental Organization PA Protected Area PCU Project Coordinating Unit PPF Project Preparation Facility PTC Provincial Technical Committee RUTA Regional Unit for Technical Assistance in Agriculture in Central Amcrica SA Special Account SDC Sustainable Rural Development Committee SOE Statement of Expenses UNDP United Nations Development Programme Vice President: Shahid Javed Burki Director: Donna Dowsett-Coirolo Sector Leadership Group Manager: Michael Baxter Sector Leader/Task Manager: Mark Cackler i PANAMA RURAL POVERTY AND NATURAL RESOURCES PROJECT Table of Contents Page Number Loan and Project Summary .................................................... ..................................... iii I. BACKGROUND................................................................... 1 A. COUNTRY OVERVIEW .......................................................................................... 1 B. GOVERNMENT POLICY IN AGRICULTURE AND NATURAL RESOURCES .................................................... 1 C. RURAL POVERTY AND NATuRAL RESOURCES.2 ........................................... e..2 D. INSTITUTIONALFRAMEWORK .........................................6 E. Gov'T STRATEGY FOR RURAL POVERTY ALLEVIATION AND NATURAL RESOURCE MANAGEMENT ..........8 F. BANKINVOLVEMENT IN THE SECTOR....................................................................................... .8 G. ACTIONS BY OTHER DONORS IN THE SECTOR ........................... ,9 9...................... H. LESSONSLEARNED ................................................. 9 II. THE PROJECT .................................... 11 A. ORIGIN ................................................. 11 B. PROJECTOBJECTIVES AND SUMMARY DESCRIPTION .................................................. 11 C. RATIONALEFOR BANK AND GEF INVOLVEMENT. ................................................. 13 D. PROGRAMOBJECTIVE CATEGORIES .................................. 14 E. DETAILEDPROJECT DESCRIPTION .................................. 15 F. PROJECTBENEFICIARIES AND PARTICIPATION .......................................................... 18 G. GENDERA SPECTS.......................................................... 18 H. INDIGENOUSPEOPLES ASPECTS. .......................................................... 19 I. COSTSAND FINANCING .......................................................... 19 111 PROJECT IMPLEMENTATIONAND MANAGEMENT........................................... 22 A. IMPLEMENTATIONARRANGEMENTS .................................. .. 22 B. PROCUREMENT.................................. 26 C. DISBURSEMENTS.................................. 30 D. ACCOUNTSAND AUDITS .................................. 31 E. STATUSOF PROJECTREADINESS .................................. 32 F. SUPERVISION,MONITORING AND EVALUATION ............................................. 32 IV. EXPECTED BENEFITS AND RISKS................................. 35 A. SOCIALIMPACT ............................................. 35 B. ENVIRONMENTALAND ECONOM ANALYSISICAL .............................................. 36 C. SUSTAINABILITY.3...................... .8 3 D. SUMMARYOFPROJECT BENEFITS.. 39 E. PROJECTRISKS .. ......... 39 V. SUMMARY OF AGREEMENTS, LOAN CONDITIONS AND RECOMMENDATION ............ 41 This report is based on the findingsof an appraisalmission to Panamain October1996 consisting of: Mark Cackler, MaurizioGuadagni, Luis Constantino,Jorge Uquillas,Teresa Roncal (Bank), Kathy Mackinnon (GEF-Bank), Martin Raine, James Smyle(RUTA Agriculture), Nelson Espinoza (IICAIRUTA), Alicia Pitty, ManuelRodes, Jose Morcillo, AntonioArmas and AgapitoLedezma (Government Project Preparation Unit). Other Bank staff that have contributed to the preparationof the projectinclude MichaelBaxter, Arnoldo Contreras, Gabriel Keynen,Silvia Castro, Cora Shaw,Richard Ground,Jose AntonioGonzAlez, Doris Herrera-Pol, Sandra Vallimont and SocorroGane. The Peer Reviewerswere Tom Wiens (Bank),and JaniceAlcorn (WorldWildlife Fund). TABLESIN TEXT Table 1. Project Cost Summary ........................................................ 20 Table 2. Components by Financiers .21 Table 3. Procurement Arrangements .27 Table 4. Thresholds for Procurement Methods and Prior Review.29 Table 5. Analysis of Indicative Community Subprojects 37 FIGURESIN TEXT Figure 1. Poverty in Panama: Urban-Rural Disparities .3 Figure 2. Migration in Panama (1990-95) by Province .5 ANNEXES A - Sustainable Rural Development Component Figure 1: FUSARD Flow of Funds Appendix1: Fund for SustainableAgricultural and Rural Development(FUSARD) B - Biodiversity Conservation Component Table 1: NationalProtected Area System- By Category Table 2: NationalProtected Area System- Detail Table 3: Preliminary Proposal of Protected Areas For Strengthening Under Mesoamerican Corridor Sub-Component Appendix 1: Land Titling C - Project Organization, Administration and Coordination Figure 1: Functional Organogram of the Project Figure 2: Project Implementation Schedule D - Indigenous Peoples Development Plan E - Estimated Costs, Financing and Disbursements Table 1: Components Project Cost Summary Table 2: Expenditure Accounts Project Cost Summary Table 3: Project Component by Year -- Totals Including Contingencies Table 4: Expenditure Accounts by Year -- Totals Including Contingencies Table 5: Disbursement Accounts by Financiers Table 6: Allocation of Loan Proceeds Table 7: Estimated Disbursements F - Planning, Budgeting, Monitoring and Evaluation and Reporting Appendix 1: Financial Indicators Appendix 2: Status of Legal Covenants Appendix 3: Key Performance Indicators Appendix 4: Project Impact Indicators G - Economic Analysis of Community Subprojects and Protected Areas Table 1: Analysisof IndicativeCommunity Subproject Table 2: Financial Analysis for Four Protected Areas (Option A) Table 3: Financial Analysis for Four Protected Areas (Option B) Table 4: Protected Areas Table 5: Financial Analysis, Isla Bastimentos Marine Park H - Documents in the Project File MAPS: IBRD No. 28335 Transportation and Relief IBRD No. 28336 Forest Cover and Atlantic Biological Corridor IBRD No. 28337 Protected Areas IBRD No. 28338 Rural Development Component IBRD No. 28339 Darien Province IBRD No. 28505 Poverty in Panama iii PANAMA RURAL POVERTY AND NATURAL RESOURCES PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Panama Implementing Agencies: Ministry of Agricultural Development (MIDA) and the Institute for Renewable Natural Resources (INRENARE) Poverty Category: Program of Targeted Interventions Amount: US$22.5 million Lending Terms: Single currency-loan, denominated in U.S. Dollars, based on Libor rates. Commitment Fee: 0.75% on undisbursed loan balances, beginning 60 days after signing, less any waiver Financing Plan: See para. 2.19 Net Present Value: See paras. 4.6 - 4.10 Associated GEF Project ID: 45937 Project Identification No.: PA-PA-7847 Maps: IBRD No. 28335: Transportation and Relief IBRD No. 28336: Forest Cover and Atlantic Biological Corridor IBRD No. 28337: Protected Areas IBRD No. 28338: Rural Poverty Component IBRD No. 28339: Darien Province IBRD No. 28508: Poverty in Panama Vice President: ShahidJaved Burki Director: Donna Dowsett-Coirolo SectorLeadership Group Manager: MichaelBaxter Sector Leader/TaskManager: Mark Cackler PANAMA RURAL POVERTY AND NATURAL RESOURCES PROJECT STAFF APPRAISAL REPORT I. BACKGROUND A. Country Overview 1.1 Country and Sector Background. With a 1996 per capita income of US$2,880 and low inflation, the Panamanian economy appears to be among the most prosperous in the region. Progress on the economic reform agenda has been good in recent years, supported in part by the Economic Recovery Loan (Ln. 3438-PA), which disbursed its third and final tranche in April 1997. 1.2 As a result of the progress made, prospects for