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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 38508-CO PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$90.0 MILLION Public Disclosure Authorized TO THE DEPARTMENT OF LA GUAJIRA WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR A LA GUAJIRA WATER AND SANITATION INFRASTRUCTURE AND SERVICE MANAGEMENT PROJECT IN SUPPORT OF THE FIRST PHASE OF THE WATER AND SANITATION Public Disclosure Authorized INFRASTRUCTURE AND SERVICE MANAGEMENT PROGRAM February 12,2007 SUSTAINABLE DEVELOPMENTDEPARTMENT COLOMBIA AND MEXICOCOUNTRY MANAGEMENTUNIT LATINAMERICA AND THE CARIBBEAN REGION This document has a restricted distribution and may be used by recipients only in the Public Disclosure Authorized performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective February 1, 2007) Currency Unit = Colombian Peso (COS) C0$2264.5 = US$ 1 US$0.000442 = CO$ 1 FISCAL YEAR January 1 - December 3 1 ABBREVIATIONS AND ACRONYMS ANH National Hydrocarbons Agency (Agencia Nacional de Hidrocarburos) APL Adaptable Program Loan BOD Biochemical Oxygen Demand CAR Autonomous Regional Corporation (Corporacidn Autdnoma Regional) CAS Country Assistance Strategy CFAA Country Financial Accountability Assessment CONPES National Council for Economic and Social Policy (Consejo Nacional de Politica Econdmica y Social) CQ Consultants’ Qualifications CRA Water Regulatory Commission (Comisidn Reguladora de Agua) DNP National Planning Department (Departamento Nacional de Planeacidn) EIA Environmental Impact Assessment FM Financial Management FMR Financial Management Report IBRD International Bank for Reconstruction and Development ICANH Colombian Institute of Archaeology and History (Instituto Colombiano de Antropologia e Historia) ICB International Competitive Bidding INCODER Colombian Institute for Rural Development (Instituto Colombiano de Desarrollo Rural) IPP Indigenous Peoples Plan IPPF Indigenous Peoples Planning Framework IRR Internal Rate of Return LCR Latin America and the Caribbean Region LCS Least Cost Selection M&E Monitoring and Evaluation MAVDT Ministry of Environment, Housing, and Regional Development (Ministerio de Ambiente, Vivienda, y Desarrollo Territorial) MDG Millennium Development Goal NCB National Competitive Bidding NDP National Development Plan NGO Non-Government Organization NPV Net Present Value O&M Operation and Maintenance OP Operational Policy PIU Program Implementation Unit POI Works and Investment Plan (Plan de Obras e Inversidn) PSP Private Sector Participation PVC Polyvinyl Chloride FOR OFFICIAL USE ONLY QBS Quality Based Selection RPF Resettlement Policy Framework SA1 Secretary of Indigenous Affairs of La Guajira (Secretaria de Asuntos Indigenas) SBD Standard Bidding Document SENA National Learning Service (Servicio Nacional de Aprendizaje) SOE Statement of Expenditure SSPD Superintendency of Public Enterprises (Superintendencia de Sewicios Pziblicos Domiciliar ios) sss Single Source Selection TA Technical Assistance TAL Technical Assistance Loan Vice President: Pamela Cox Acting Country Director: Makhtar Diop Sector Director: Laura Tuck Sector Manager: John Henry Stein Task Team Leaders: David Sislen / Menahem Libhaber This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. COLOMBIA La Guajira Water and Sanitation Infrastructure and Service Management Project CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE.............................................................. 9 1. Country and sector issues .................................................................................................... 9 2 . Rationale for Bank involvement ........................................................................................ 14 3 . Higher level objectives to which the Project contributes .................................................. 15 4 . Poverty Impact................................................................................................................... 16 B. PROJECT DESCRIPTION............................................................................................ 16 1. Lending instrument ............................................................................................................ 16 2 . Program objective and Phases ........................................................................................... 17 3 . Project development objective and key indicators ............................................................ 17 4 . Project Components ........................................................................................................... 18 5 . Lessons learned and reflected in the Project design .......................................................... 21 6 . Alternatives considered and reasons for rejection ............................................................. 23 C . IMPLEMENTATION..................................................................................................... 24 1. Partnership arrangements .................................................................................................. 24 2 . Institutional and implementation arrangements ................................................................ 24 3 . Monitoring and evaluation of outcomes/results ................................................................ 30 4 . Sustainability ..................................................................................................................... 31 5 . Critical risks and possible controversial aspects ............................................................... 31 .. 6 . Loan conditions and covenants .......................................................................................... 41 D. APPRAISAL SUMMARY .............................................................................................. 42 1. Economic and financial analyses ....................................................................................... 42 2 . Technical ........................................................................................................................... 42 3 . Fiduciary ............................................................................................................................ 42 4 . Social ................................................................................................................................. 43 5 . Environment ...................................................................................................................... 44 6 . Safeguard policies .............................................................................................................. 45 7 . Policy Exceptions and Readiness ..................................................................................... -48 Annex 1: Country and Sector or Program Background.......................................................... 49 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ..................62 Annex 3: Results Framework and Monitoring......................................................................... 63 Annex 4: Detailed Project Description ...................................................................................... 68 Annex 5: Project Costs ................................................................................................................ 71 Annex 6: Implementation Arrangements.................................................................................. 74 Annex 7: Financial Management and Disbursement Arrangements ..................................... 84 Annex 8: Procurement ................................................................................................................ 89 Annex 9: Economic and Financial Analysis .............................................................................. 98 Annex 10: Summary Environmental Assessment ................................................................... 125 Annex 11: Project Transparency and Accountability Strategy and Risk Control Matrix .136 Annex 12: Project Preparation and Supervision .................................................................... 143 Annex 13: Documents in the Project File ................................................................................ 144 Annex 14: Summary of Performance of Existing Specialized Operators ............................ 145 Annex 15: Pilot Rural Component Description...................................................................... 152 Annex 16: Statement of Loans and Credits............................................................................. 163 Annex 17: Social Issues and Summary of Social Assessment ................................................ 164 Annex 18: Fiscal Analysis of the Department of La Guajira ................................................ 173 Annex 19: Potential Financial Structure to Manage the Commodity Price Risk for La Guajira. Colombia ..................................................................................................................... 185 Annex 20: Letter of Sector Development Policy ..................................................................... 187 Annex 21: Country at a Glance ...............................................................................................