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FOR OFFICIAL USE ONLY Report No: PAD3369 Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF US$70 MILLION Public Disclosure Authorized TO THE REPUBLIC OF HONDURAS FOR A WATER SECURITY IN THE DRY CORRIDOR OF HONDURAS PROJECT May 21, 2020 Public Disclosure Authorized Water Global Practice Latin America and the Caribbean Region Public Disclosure Authorized 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 World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective March 20, 2020) Currency Unit = Honduran Lempira (HNL) HNL 24.8 = US$1.00 HNL1.00 = US$0.04 FISCAL YEAR January 1 - December 31 Regional Vice President: J. Humberto Lopez (Acting) Country Director: Yaye Seynabou Sakho Regional Director: Anna Wellenstein Practice Manager: Rita E. Cestti Task Team Leaders: Marco Antonio Aguero and David Casanova ABBREVIATIONS AND ACRONYMS ADA National Water Authority (Autoridad del Agua) CABEI Central American Bank for Economic Integration CBA Cost Benefit Analysis CE Citizen Engagement CENAOS National Center for Atmospheric, Oceanographic, and Seismic Studies (Centro Nacional de Estudios Atmosféricos, Oceanográficos y Sísmicos) CER Contingency Emergency Response CIAT International Center for Tropical Agriculture (Centro Internacional para Agricultura Tropical) COMRURAL II Integrating Innovation for Rural Competitiveness in Honduras Project - P168385 COPECO Ministry of Disaster Risk Management and National Contingencies (Secretaría de Gestión del Riesgo y Contingencias Nacionales) COSUDE Swiss Agency for Development and Cooperation (Agencia Suiza para el Desarrollo y la Cooperación) COVID-19 Coronavirus Disease 2019 CWTP Central Water Treatment Plant DGRH General Directorate of Water Resources (Dirección General de Recursos Hídricos) EAP Emergency Action Plan EFA Economic and Financial Analysis EIRR Economic Internal Rate of Return ENEE National Electric Energy Company (Empresa Nacional de Energía Eléctrica) EPP Emergency Preparedness Plan E&S Environmental and Social ESF Environmental and Social Framework ESHS Environmental, Social, Health and Safety ESIA Environmental and Social Impact Assessment ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan FAO Food and Agriculture Organization (of the United Nations) FIRR Financial Internal Rate of Return FM Financial Management FMA Financial Management Assessment FSL Full Supply Level GBV Gender Based Violence GDP Gross Domestic Product GHG Green House Gases GIIP Good International Industry Practice. GoH Government of Honduras GRM Grievance Redress Mechanism GRS Grievance Redress Service GWh Gigawatt hours ICF National Institute of Forest Conservation and Development, Protected Areas and Wildlife (Instituto de Conservación Forestal) IDA International Development Association IFR Interim Financial Report IRR Internal Rate of Return INSEP Ministry of Infrastructure and Public Services (Secretaría de Infraestructura y Servicios Públicos) INVEST-H Honduran Strategic Investment Office (Inversiones Estratégicas de Honduras) IPF Investment Project Financing IPPF Indigenous Peoples Planning Framework IT Information Technology IWRM Integrated Water Resources Management JCV José Cecilio del Valle Dam LAC Latin America and the Caribbean MIAMBIENTE Ministry of Natural Resources and Environment (Secretaría de Recursos Naturales y Medio Ambiente) M&E Monitoring and Evaluation MFD Maximizing Finance for Development NPV Net Present Value MIS Management Information System OAS Organization of American States O&M Operations and Maintenance PDO Project Development Objective PMU Project Management Unit POM Project Operational Manual PPCR Pilot Program for Climate Resilience PPSD Project Procurement Strategy for Development RAP Resettlement Action Plan RPF Resettlement Policy Framework SAG Ministry of Agriculture and Livestock (Secretaría de Agricultura y Ganadería) SEFIN Ministry of Finance (Secretaría de Finanzas) SEP Stakeholder Engagement Plan SIAS Integrated System for Water Security (Sistema Integrado de Agua Segura) SIASAR Water Supply and Sanitation Rural Information System (Sistema de Información de Agua Potable y Saneamiento Rural) SMAGE Operations and Management System (Sistema de Manejo y Gestión de Equipos) SPC Shadow Price of Carbon STEP Systematic Tracking and Exchanges in Procurement TA Technical Assistance tco2 - eq Carbon dioxide equivalent measured metric tons TOR Terms of Reference USAID United States Agency for International Development WASH Water, Sanitation and Hygiene WB World Bank WOP Without Project WP With Project WRI Water Resources Information WRIS Water Resources Information System WRM Water Resources Management WSS Water Supply and Sanitation WUAs Water User Associations The World Bank Water Security in the Dry Corridor of Honduras (P169901) TABLE OF CONTENTS DATASHEET ........................................................................................................................... 1 I. STRATEGIC CONTEXT ...................................................................................................... 8 A. Country Context ............................................................................................................................ 8 B. Sectoral and Institutional Context ................................................................................................ 9 II. PROJECT DESCRIPTION .................................................................................................. 13 A. Project Development Objective .................................................................................................. 13 B. Project Components ................................................................................................................... 13 C. Project Beneficiaries ................................................................................................................... 17 D. Results Chain ............................................................................................................................... 18 E. Rationale for Bank Involvement and Role of Partners ................................................................ 19 F. Lessons Learned and Reflected in the Project Design ................................................................ 20 III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 20 A. Institutional and Implementation Arrangements ....................................................................... 20 B. Results Monitoring and Evaluation Arrangements ..................................................................... 21 C. Sustainability ............................................................................................................................... 22 IV. PROJECT APPRAISAL SUMMARY ................................................................................... 22 A. Technical, Economic and Financial Analysis (if applicable) ......................................................... 22 B. Implementing Agency Assessment ............................................................................................. 24 C. Fiduciary ...................................................................................................................................... 24 D. Legal Operational Policies ........................................................................................................... 26 E. Environmental and Social ........................................................................................................... 26 V. GRIEVANCE REDRESS SERVICES ..................................................................................... 31 VI. KEY RISKS ..................................................................................................................... 31 VII. RESULTS FRAMEWORK AND MONITORING ................................................................... 34 Annex 1: Implementation Arrangements and Support Plan ........................................... 47 Annex 2: Theory of Change ........................................................................................... 55 Annex 3: Detailed Project Description ........................................................................... 59 Annex 4: Economic and Financial Analysis ..................................................................... 77 Annex 5: Map of Project Area ....................................................................................... 88 The World Bank Water Security in the Dry Corridor of Honduras (P169901) DATASHEET BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name Honduras Water Security in the Dry Corridor of Honduras Project ID Financing Instrument Environmental and Social Risk Classification Investment Project P169901 High Financing Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Performance-Based Conditions (PBCs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster [ ] Alternate Procurement Arrangements (APA) Expected Approval Date Expected