Document of The World Bank

FOR OFFICIAL, USE ONLY

Public Disclosure Authorized Report No: 41251-BO

PROJECT APPRAISAL, DOCUMENT

ONA

PROPOSED CREDIT Public Disclosure Authorized IN THE AMOUNT OF SDR 12.8 MILLION (US$20 MILLION EQUIVALENT)

TO

THE REPUBLIC OF BOLIVIA

FOR A

LAKE TITICACA LOCAL, SUSTAINABLE DEVELOPMENT PROJECT Public Disclosure Authorized November 20,2007

Sustainable Development Department Country Management Unit for Bolivia, Ecuador, Peru and Venezuela 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 October 3 1,2007)

Currency Unit = BOB Boliviano BOB7.8 = US$1

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS ALT Binational Lake Titicaca Authority BSTC Basic Services Technical Committee CAS Country Assistance Strategy CBT Community-based Tourism CMU Country Management Unit cso Civil Society Organization DPL Development Policy Lending EIA Environmental Impact Assessment EMA Empresa Municipal de Aseo - Municipal Trash Collection Agency EMF Environmental Management Framework ENAPA Entidad de Agua Potable y Alcantarillado Sanitario - Drinking Water and Sanitary Sewer Agency EPSA Entidad Prestadora de Sewicios de Agua Potable y Alcantarillado Sanitario - Drinking Water and Sanitary Sewer Service Provision Agency FMR Financial Management Report FPS Fondo Nacional de Inversidn Productiva y Social - National Productive and Social Investment Fund GEF Global Environmental Fund GIS Geographic Information System IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICSDLT Inter-institutional Committee for the Sustainable Development of Lake Titicaca IDA International Development Association IFC International Finance Corporation IJC International Joint Commission IPP Indigenous Peoples Plan IRR Internal Rate of Return LCR Latin America and the Caribbean Region MDG MillenniumDevelopment Goals M&E Monitoring and Evaluation MPME Ministry of Production and Micro Enterprise NCB National Competitive Bidding NDP National Development Plan NGO Non Governmental Organization NGS National Geographic Society NPV Net Present Value NTP National Tourism Plan OM Operational Manual OTB Organizaciones Territoriales de Base - Grassroots Organizations FOR OFFICIAL USE ONLY O&M Operation and Maintenance PAS Producer Associations PCN Project Concept Note PCU Project Coordination Unit PDCR Proyecto de Desarrollo de Comunidades Rurales - Rural Development Project PLP Prefecture of La Paz POA Plan Operativo Anual- Annual Operating Plan PPF Project Preparation Facility PPL Popular Participation Law - Ley de Participacidn Popular PRIP Participatory Rural Investment Project PRS Project Regional Council PSC Public Service Committee QBS Quality Based Selection RAP Resettlement Action Plan RPF Resettlement Policy Framework SA Social Assessment SBD Standard Bidding Document scs Social Communication Strategy SIGMA Government’s integrated financial management system sss Single Source Selection TDPS Titicaca-Desaguadero-Poop6-Salar de Coipasa Hydrologic Basin T&T Travel and Tourism TTCI Travel and Tourism Competitiveness Index VDC Vice Ministry for the Development of Cultures VIPFE Vice Ministry of Public Investment and External Financing VMT Vice Ministry of Tourism VSB Vice Ministry of Basic Services WEF World Economic Forum WTO World Tourism Organization

Vice President: Pamela Cox Country Director: C. Felipe Jaramillo Country Manager David Tuchschneider Sector Director: Laura Tuck Task Team Leader: Daniel Hoornweg

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.

BOLIVIA Lake Titicaca Local Sustainable Development Project

CONTENTS

Page

I. STRATEGIC CONTEXT AND RATIONALE ...... 1 A . Country and sector issues ...... 1 B. Rationale for Bank involvement ...... 6 C . Higher level objectives to which the Project contributes ...... 7 I1. PROJECT DESCRIPTION ...... 7 A . Lending instrument ...... 7 B. Project development objective and key indicators ...... 8 C . Project components ...... 9 D. Lessons learned and reflected in the Project design...... 13 E. Alternatives considered and reasons for rejection...... 14 I11. IMPLEMENTATION ...... 15 A . Institutional and implementation arrangements ...... -15 B. Monitoring and Evaluation., ...... 16 C . Sustainability ...... 17 D. Critical risks and possible controversial aspects ...... 17 E. Credit conditions and covenants ...... 19 IV. APPRAISAL SUMMARY ...... 20 A . Economic and financial analyses ...... 20 B. Technical ...... 21 C . Fiduciary ...... 21 D. Social ...... 22 E. Physical Cultural Resources ...... 23 F. Environmental Category: B ...... 23 G. Safeguard policies ...... 24 H. Policy Exceptions and Readiness ...... 24 Annex 1: Country and Sector or Program Background ...... 25 Annex 2: Major Related projects Financed by the Bank and/or other Agencies ...... 34 Annex 3: Results Framework and Monitoring ...... 42 Annex 4: Project Costs ...... 48 Annex 5: Detailed Project Description...... 51 Annex 6: Implementation Arrangements ...... 56 Annex 7: Financial Management and Disbursement Arrangements ...... 61 Annex 8: Procurement Arrangements ...... 75 Annex 9: Economic and Financial Analysis ...... 84 Annex 10: Social Safeguards ...... 89 Annex 11: Environment Safeguards ...... 114 Annex 12: Geo-tourism Needs Assessment by National Geographic Society ...... 121 Annex 13: Community Demand Driven Initiatives ...... 133 Annex 14: State of the Lake-Executive Summary ...... 136 Annex 15: Cultural Heritage Investments in Lake Titicaca ...... 153 Annex 16: FPS Action Plan...... 157 Annex 17: Project Preparation and Supervision ...... 167 Annex 18: Documents in the Project File ...... 169 Annex 19: Statement of Loans and Credits ...... 170 Annex 20: Country at a Glance ...... 172 Annex 21: Maps - IBRD 35227, 35676, 35807 and 35808 ...... 175 BOLIVIA

LAKE TITICACA LOCAL SUSTAINABLE DEVELOPMENT PROJECT PROJECT APPRAISAL DOCUMENT

LATIN AMERICA AND CARIBBEAN

LCSUW

Date: November 20,2007 Team Leader: Daniel Hoornweg Country Director: C. Felipe Jaramillo Sectors: Other industry (25%), Sanitation (20%), Sector Director: Laura Tuck Other social services (25%), Water supply (1 5%), Solid Waste Management (1 5%) Themes: Other urban development (P); Pollution management and environmental health (P); Rural non-farm income generation (S) Project ID: P101426 Environmental screening category: B Lending Instrument: Specific Investment Credit

[ ]Loan [XI Credit [ ]Grant [ 3 Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing SDR 12.8 million (US$20 million equivalent)

International Development Association (IDA) 16.50 3.50 20.00 Total: 19.5 1 3.50 23.01

Borrower: Republic of Bolivia

Responsible Agency: Vice Ministry of Tourism Av. Mariscal Santa Cruz, Edificio CBmara de Comercio, Piso 11, La Paz, Bolivia

Estimated disbursements (Bank FY/US%m) FY 2008 2009 2010 2011 2012 2013 0 0 0 Annual 4.90 6.23 3.92 2.84 2.10 0.00 0.00 0.00 0.00 Cumulative 4.90 11.13 15.06 17.90 20.00 0.00 0.00 0.00 0.00

Expected effectiveness date: 1 March, 2008 Expected closing date: 30 June, 2013

Does the Project depart from the CAS in content or other significant respects?Ref: [ ]Yes [XINO PAD A. 3 Does the Project require any exceptions from Bank policies? No Ref: PAD D. 7 Have these been approved by Bank management? NA Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the Project include any critical risks rated “substantial” or “high”? [XIYes [ ]No Ref: PAD C.5 Does the Project meet the Regional criteria for readiness for implementation? Ref: nAnn 7 [XIYes [ ]No

~~~ ~ Project development objective Ref PAD B.2 Technical Annex 3

The Project’s development objective is to contribute to local sustainable development in the Bolivian part of the Lake Titicaca watershed. This will include: (i)facilitating local activities that support tourism development and cultural protection in the communities surrounding the Lake, and (ii)improving basic water and sanitation services.

The Project will specifically support improvements in local tourism services and cultural heritage protection as indicated by a minimum 10% improvement over the 2007 baseline geotourism survey (See Annex 3). The Project will also support the sustainable provision of basic services (water supply, wastewater collection and treatment, solid waste management) to 150,000 people (with improvements for 100,000 and new services for 50,000 beneficiaries).

Project Description Ref: PAD B.3.a, TechnicalAnnex 4

The Project has three main components: (1) Support to Tourism Development and Cultural Protection; (2) Basic Services; and (3) Institutional Strengthening and Project Management.

Which safeguard policies are triggered, if any? Ref: PAD D. 6, Technical Annex 10

Environmental assessment, Indigenous Peoples (OP/BP 4. lo), Involuntary Resettlement (OP/BP 4-12), Natural Habitats (OP/BP 4.01), Cultural Resources (OP/BP 4.1 l),and Projects in International Water (OP/BP 7.50).

Significant, non-standard conditions, if any: Ref: PAD C. 7 There are no significant non-standard conditions.

Board presentation: None

Credit Effectiveness: (i)The Subsidiary Agreement has been executed on behalf of the Recipient and FPS; (ii)The Operational Manual has been adopted in a manner satisfactory to the Association.

Covenants applicable to Project implementation: Not later than one year after the Effective Date, the Recipient and the Association shall carry out a comprehensive review of the Project focused on Project performance. After said review is completed, the Recipient shall take, if necessary, any actions recommended to remedy any problems identified during the review. I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. Bolivia’s options for economic development are largely defined by its geography, nowhere is this more apparent than Lake Titicaca’. The area’s striking geography has produced the world’s highest navigable lake, with unique landforms, flora, and fauna. Lake Titicaca is an important ecosystem and a world-class attraction2. In 2005, tourism was the fourth most important component of Bolivia’s GDP, with a share of 4.6%, generated by national and international tourists3.

2. The basin is one of the most important archeological resources in South America. Inca cosmology believes that the Lake is the origin of human life; various cultures have continuously lived near the Lake for over 8,000 years. The area provides evidence of one the longest constant relations between humans and nature in the Americas. Ancient traditions are still largely preserved and the rural population surrounding the Lake is almost all indigenous, about 93% are self-identified as Aymara. Of these about 57% speak Aymara language, 36% Aymara and Spanish, and only 7% solely speak Spanish.

3. The Lake’s unique natural history and preserved cultural integrity is one of its great assets, which if properly preserved can generate long-term social capital and benefits. The communities surrounding the Lake are among the poorest in the region. Poverty levels have stubbornly remained at 1976 levels - therefore a long-term sustained improvement, based on relevant local economic development, broad based local support, and locally applicable interventions is most likely to succeed. However, pollution is starting to threaten the health of the Lake and the sustainability of the communities that depend on the Lake for their livelihoods. The total population of the 17 municipalities that make up the Lake Titicaca Mancomunidad is approximately 324,400, of which 93% have unmet basic needs. Almost all of the altiplano’s rural population lives in poverty. Morbidity and infant mortality rates are among the worst in the Americas4.

4. Although there are various opinions on what pollutants and land-use changes most threaten Lake Titicaca, many of these opinions have little technical support, and some are politically driven. Despite numerous studies on the Lake there is no accepted or consistent baseline data, nor community consensus on priorities for local economic development or ecosystem protection. International donor assistance in the Lake-area is often fragmented and complicated by joint Peru-Bolivia jurisdiction.

Lake Titicaca is part of the hydrologic basin that includes the Desaguadero River, Lake Poop6, and Salar de Coipasa (often referred to as TDPS), located on the Bolivian-Peruvian high plateau (altiplano). This Project area is limited to the 15 Bolivian municipalities along the lakeshore plus Laja and Viacha due to their potential impact on the Lake. Parts of Lake Titicaca are designated as a UNESCO World Heritage site, or national reserves under IUCN Category VI, and the entire Lake is a designated Ramsar site of vulnerable ecosystems and ancient cultures. The entire TDPS basin contains six Ramsar sites of global importance. Lake Titicaca has over 25 endemic species. Almost half of the international tourists come from Latin-America (49%), followed by European countries (32%) and American (1 1%). In the first semester of 2006, tourism increased by 21% compared to the same period in 2005. Departamento de Paz Prefecture has an infant mortality rate of 115/1000 compared to Haiti’s 94/1000. Morbidity rates are: 49% due to environment related infections; 25% are water borne ailments; 24% due to influenza and common cold.

-1- 5. Many issues need to be addressed to foster sustainable development of the Lake Titicaca region. For example:

(a) Community support. Historically, communities around the Lake often feel excluded from national economic growth and the political decision making process, and there is increasing impatience with the levels ofinequality5. This discontent can be exacerbated when, according to the Government’s National Tourism Plan, community-based tourism, with a 71% market share receives only 5% ofthe overall tourism revenues. Private operators obtain about 80% oftourist revenues.

(b) Stakeholder participation. The Government’s newly-developed Tourism plan is predicated on broad stakeholder participation. Any new tourism effort needs to gamer greater public support and this support needs to be developed in a manner that reflects the unique local cultures and organizations.

(c) Weak institutional and planning cauacitv. In 1994 the central government delegated to the municipalities the responsibility of managing their own finances and providing specified public services (Ley de Participacih Popular6). This was not matched with a commensurate increase in overall municipal finances or staff capacities. Long-term strategic planning is particularly absent and un-checked and inappropriate growth is threatening the Lake and local communities.

(d) Lack of infrastructure. There is a considerable backlog in infrastructure and basic services such as water supply, sewage, and solid waste management are sporadic and unsustainable. Management of EPSAs (local utilities) is hampered by staff capacities and poor cost recovery.

(e) Verv low travel and tourism Competitiveness. Along with basic services, tourism infrastructure such as signage, and visitor interpretation facilities and restrooms in main tourist sites around Lake Titicaca (Copacabana, Isla del Sol y de la Luna, and the ruins of Tiwanaku), is lacking. The lack of facilities constrains tourism development, as seen through: (a) higher transaction costs for tourist operators; (b) disincentives for tourists to stay longer at their final destination as evidenced by the amount of time spent by tourists at the Lake Titicaca region compared to other regions in the country7; and, (c) lack of competitiveness compared to other international tourist destinations. According to the World Economic Forum’ Bolivia is ranked very low in global tourism competitiveness (See Table l),when compared to international destinations for the largely international market.

Bolivia is among the most unequal countries in the most unequal region ofthe word. This, combined with a low per capita GDP, contributes to the high poverty levels of the country. Popular Participation Law or Ley de Participacih Popular (1994) initiated a process of decentralization designed to transfer resources and responsibilities to local governments and strengthen the capacity and participation of municipalities and civil society organizations. The Central government allocates 20% of the national taxes to the municipalities. Lake Titicaca is one of the most visited regions in the country but the amount of time spent by tourists is less than more distant destinations like the Amazonic Triangle and the Cochabamba Tropic. * World Economic Forum, Travel and Competitiveness report 2007. The travel and tourism index measures the factors that make it attractive to develop the travel and tourism industry of individual countries and covers 124 countries. Bolivia ranks 109th.

-2- (f) Lack of economies of scale. Despite the fact that many tourists annually visit the Bolivian side of Lake Titicaca, the size of the economy of this part of the Lake is small and spread over a very large geographic area. Communities are relatively small and are dispersed throughout the region and the migration of people to La Paz is considerable. There are few economic activities to provide incentives for retaining or increasing populations.

Table 1. Travel and tourism comDetitiveness I

J6URCE World Lmncinlc Form

(8) Environmental sensitivity. Lake Titicaca is a unique lake in that it is almost a closed system with about 95% of its total influent water evaporating due to strong solar radiation and local breezes. About 80% of the Lake’s water originates in Peru, rivers and streams provide about 45% of the water input to the Lake, the rest is local precipitation. Residence time for the whole Lake is about 70 years. Average water depth is 100 meters with the deepest at 281 meters. The Lake is divided into two lacustrine basins; the “minor lake” (or Huiiiaymarca) and the “major lake” (or Chucuito) are connected at the Tiquina Straight which is 850 meters wide and about 20 meters deep. Lake levels fluctuate annually by about 1 meter and over the last 100 years have fluctuated from a low of 3806 meters as1 in 1943 to a high of 3812 meters as1 in 1982. As outlined in the State of the Lake report (Annex 14) the Lake’s watershed drains an area of 140,000 km2. The watershed is believed to be undergoing a long-term drying trend, most likely from hemispheric climate changes. Glaciers that feed the lake are melting rapidly - the potential overall impact of climate change on the Lake is not yet well understood.

(h) Threats to the Lake include: climate variability and possible change; inadequate water resources regulations; pollution such as organic loading from human waste, livestock, and industry; sediment loading; invasive species; habitat destruction; heavy metal contamination and industrial pollution from mining; nitrates from fertilizer run-off; land-use changes; and over-fishing. Pollutants enter the Lake from several sources, for example the city of El Alto (located 50 Km from the Lake with more than 500,000 inhabitants), which in addition to municipal waste water, discharges significant quantities of industrial wastes; Viacha, with 30,000 inhabitants domestic waste water effluent, contributes also to the pollution of the

-3- Pallina-Katari river basin. Two other important sources are the Peruvian cities of Pun0 (around 100,000 inhabitants) and Juliaca (around 200,000 inhabitants). Nutrient inputs from domestic wastewaters are causing eutrophication at some locations, jeopardizing the Lake ecosystem. As a consequence of poor waste water management, high bacteria levels at some locations pose a threat to public health. Mining activities may result in effluents containing mercury and other toxics, possibly threatening the fishing industry. Additionally, the introduction in the 1940s of non-native fish (trout) to the Lake for commercial fanning is depleting the native fish populations as trout have escaped and are significantly influencing native fish population.

(i)International waters. Lake Titicaca is shared between Peru and Bolivia. A bi-national lake- management agency (ALT) exists, but is not always well-regarded, especially in Bolivia. More than 80% of Lake Titicaca’s water originates in Peru, yet the most threatened smaller and shallower part of the Lake in the south is virtually fully enclosed by Bolivia.

Government’s stratem

6. Bolivia’s strategy for fostering sustainable development of the Lake Titicaca area includes the development of a strategic vision among communities and stakeholders, through which local economic activities as well as the provision of basic services will be promoted. The Vice Ministry of Tourism views tourism as the overarching and cross-cutting theme that can support development of the region in a holistic manner as stated in the National Tourism Plan (2006-2011). The plan provides a policy framework that prioritizes the development of sustainable tourism on the basis of community- based tourism, as well as indigenous tourism. According to this Plan, the principles by which sustainable tourism is to be encouraged are: stakeholder participation; equitable distribution of economic benefits; the preservation of natural and cultural resources; environmental protection; and improved services and tourist satisfaction.

7. Bolivia now receives 500,000 international and 930,000 national tourists per year, and the Lake region receives 205,000 and 165,000 of these respectively. As outlined in the Government’s Tourism Strategy, the World Tourism Organization believes that Bolivia has a potential to attract 3.5 million tourists a year. The Government wants to increase tourist arrival by 5% a year. Currently, the central government is working on strategies to mobilize and deploy resources that will increase Bolivia’s competitive advantage in terms of its natural and cultural resources. The goal of increased tourist arrivals often conflicts with broader issues such as slow and costly border crossings for tourists, flight disruptions, international visa requirements, and physiologic challenges from altitude.

8. A Bolivian inter-agency committee oversees investments in the Lake Titicaca watershed. The investment needs already identified by the Committee are considerable, with investments required in roads, ports, water and sanitation, housing. Therefore, this relatively modest Project would finance critical investments with wide-spread consensus and potential for replication. The Bolivian Government designated the Vice Ministry of Tourism to oversee this Project and proposed that the Project strive for ‘sustainable economic and social development’ of Lake Titicaca’s municipalities and enhances environmental protection of the Lake. Since some activities are relatively small-scale and urgently needed, the Project envisages an important role for the Prefecture and individual local municipalities.

-4- Proiect Stratew

9. Several stakeholders expressed concern that a $20 million Project intervention is far too limited to have appreciable long-term regional impacts. With little effort the pre-identification mission identified at least $60 million in much-needed investments - the needs around the Lake are considerable. The needs are especially high for infrastructure, including wastewater treatment, water supply, solid waste management, and improvements to roads and ports. Given that the needed investments greatly surpass this credit amount, complimentary interventions from other donors, and complimentary action from Peru is also critical to ensure long-term sustainability of the Lake with associated improvements in the quality of life for local populations. Greater investment and support from the private sector is important and the local and international business community is considered a key stakeholder in the region’s development opportunities. This Project will initiate a broader program of regional assistance structured within a Vice Ministry of Tourism led strategy that will include:

(a) Develop a shared and relevant vision of Lake Titicaca’s challenges and opportunities. The Project will support the Government’s comprehensive ‘Visioning Exercise’ that will develop a fuller understanding of the economic, social and environmental value of the Lake Titicaca basin resources and the threats it faces, define and prioritize management needs and actions, and develop a long-term strategy for the region. This program will build on past exercises and will provide stakeholders (domestic and international) an opportunity to discuss their long-term vision for the Lake. This program is likely to progress in phases, with Phase 1 being conducted during Project preparation (with a social, cultural and institutional risk assessment). A participatory planning process was initiated with communities in order to inventory tourist products, assess demand, design itineraries and identify projects. During Project implementation, Phase 2 would facilitate an iterative process to obtain a broader consensus on development in the Lake region (largely based on existing studies). The Social Assessment is complemented by a proposed comprehensive social communication campaign that will support the specific implementation of the Project and the broader program objectives. Where practical, this vision will be developed with input from Peru. For enhanced understanding and management of the basin’s water resources bi-national institutions and research will be supported and complimentary funding sources sought.

(b) Support a long-term enhancement of quality of life for people living in the Lake Titicaca Basin through priority infrastructure investments. Poverty levels have stubbornly remained at 1976 levels - therefore a sustained improvement based on relevant local economic development, broad based community support, and locally applicable interventions is most likely to succeed. The local community needs to be an explicit component of local sustainable development; mobilizing their strong support through the visioning exercise was a key focus of Project preparation. Among the expected benefits of the Project are: (a) improved environmental conditions contributing to improving public health and wellbeing; (b) enhanced opportunities for small and micro business; (c) ability to attract and retain tourists; and (d) improved access to significant cultural heritage through systematic maintenance, preservation, and promotion of cultural resources.

(c) Focus on the sustainable delivery of basic services. Small scale water supply, wastewater collection and treatment, and solid waste management, are critical services needed by local populations and are needed to enhance tourist satisfaction. Consistently surveys of tourists have indicated that the absence of these services is a major shortcoming and their absence will impact the Lake. The Project proposes a new methodology to monitor the sustainability of service provision (See Annex 3). In addition to funding, expanded service provision activities are also included to enhance the EPSAs (local utilities) and provide ongoing feedback on the quality of

-5- service provision. These efforts include, for example, cost recovery, staff training, appropriate design and integration across relevant NGOs, varied government departments and levels, and community or user groups.

At a broader level the Project begins to address environmental degradation in and around Lake Titicaca, including depletion of natural resources such as groundwater, forests, soil and fish- stock, loss of biodiversity, and adverse consequences of uncontrolled urbanization. Through Project activities and the communication strategy, environmental impacts such as the “carbon footprint” in selected towns, e.g. Copacabana, will be identified. The Project’s input in issues of environmental degradation is modest; however a critical first-step of evaluation and dissemination will be supported.

(d) Encourage the participation of the private sector and other donors. The Project will encourage and catalyze participation of other partners such as the IFC9, the private sector and other donors to maximize investments.

(e) Provide a baseline and credible information for monitoring the Lake. Currently there is no sound baseline on the state of Lake Titicaca’s water resources, or a clear system for water quality testing, monitoring trends, or standardized data collection. A key aspect of the Project is to support the development of a sound baseline system and monitoring program that will highlight the stresses on the Lake and long-term trends that may be threatening the Lake and, where practicable, protect against these stresses. The proposed Project will support Lake Titicaca’s first “State of the Luke Report”, which includes baseline information regarding the Lake’s environmental quality as well as quality of life indicators for the population inhabiting the basin. The State of the Lake Report will be updated annually by the Government of Bolivia for the duration of the Project, highlighting environmental and economic trends which can also serve as monitoring indicators for overall success of the Project. Upon completion of the proposed Project, the issuance of the State of the Luke Report should be maintained by the governments of Bolivia and Peru.

B. Rationale for Bank involvement

10. The Bank’s 2006 Interim Strategy Note for Bolivia supports the Government’s 2006-2010 National Development Plan (NDP). The main strategic areas of the NDP are: (i)Fostering jobs through inclusive growth; (ii)Providing better services to the poor and greater social inclusion through improved public service provision; and (iii)Enhancing good governance and transparency. These objectives are particularly relevant in the altiplano area as poverty rates have not appreciably improved since 1976.

11. The Bank is mobilizing parallel assistance such as trust fund supported studies, an International-Waters GEF Project, and scientific support from the European Space Agency. The Bank will evaluate and publicize relevant successes in Peru and Bolivia and the Bank will also facilitate a broader dialogue on the Lake between Peru and Bolivia. This includes mobilization of international experts.

12. Bolivia is an IDA borrower with limited borrowing capacity and limited access to international finance, therefore the Government expects that with the Bank’s relatively modest support through this Project, additional donor funds will be leveraged to compliment and expand the overall scope of work. The Bank can bring specific knowledge in social development, waste water management,

IFC is considering support in the Lake Titicaca area, in light of the experience of Orient Express in Peru. Based on demand, the IFC could support an eligible business plan for a company that wants to be established in the area.

-6- infrastructure provision, cultural heritage, sanitation, and housing. Therefore this relatively modest Project would finance critical investments with wide-spread consensus and environmental protection. Currently, the Bank is involved in other sustainable tourism projects in the Andean region and is now discussing with the Peruvian Government the possibility of including the Lake Titicaca area in a second tourism Project and the environmental DPL.

C. Higher level objectives to which the Project contributes

13. Poverty alleviation. The proposed Project contributes to poverty alleviation through the sustainable preservation and development of the natural, cultural, historical and social assets of the Lake Titicaca Basin consistent with local economic activities that support enhanced tourism development in the area. The Project will provide increased opportunities for economic and social development through tourism expansion and local business development.

14. Social Development. The Project supports a long-term enhancement in affected people’s quality of life by building upon existing social and cultural capital. As the target area of mainly Aymara people, Project activities need to be integrated with and reinforce the area’s ongoing social development predicated on the existing cultural traditions and organizational structures and customs. Moreover, the distinct Project components will be culturally appropriate in its design and implementation aspects. This strengthened social development will be highlighted through the participatory decision making process and institutional capacity building of local agencies and community groups.

15. Achievement of MDG coverage goals for water supply and sanitation. The Project will help achieve Millennium Development Goals (MDG) for access to water and sanitation in urban and rural areas. It will also contribute to gender inclusion by establishing participatory mechanisms for the Aymara women.

16. Environmental Improvement. Through investments in sanitation and wastewater treatment, the Project will directly improve the environment, including ambient water quality. Most important will be the provision of a credible baseline for monitoring trends in Lake water quality.

17. At the National Level, the Project supports the National Tourism Plan (2006-2011) that promotes. sustainable tourism development activities in communities and municipalities at the regional and national level while generating employment opportunities and supporting cultural processes.

18. Tourism development is particularly important in the Project area since it represents the area’s greatest economic potential (according to the National Geographic needs assessment study that reviewed the Bolivia and Peru sides of Lake Titicaca). Tourism can enhance social and cultural capital of the region by inclusion of the unique intangible cultural manifestations of the Aymara. However, as shown in Annex 1 and summarized in Table 1, Bolivia faces many constraints on tourism development, not all of which can be addressed by the proposed Project.

11. PROJECT DESCRIPTION

A. Lending instrument

19. The proposed Project is a Specific Investment Credit. Although the Project was originally conceived as a possible Adaptable Program Credit, it was agreed at the PCN review meeting that the Project should be a Specific Investment Credit with the potential for a repeater Project, to be determined

-7- by the Project’s success, and its ability to promote cross-national cooperation with Peru. The Project includes activities, such as the State of the Lake Report, to encourage this bi-national co-operation.

B. Project development objective and key indicators

20. The Project’s development objective is to contribute to local sustainable development in the Bolivian part of the Lake Titicaca watershed. This will include: (ii)facilitating local activities that support tourism development and cultural protection in the Aymara communities surrounding the Lake, and (ii)improving basic water and sanitation services.

21. The Project will specifically support improvements in local tourism services and cultural heritage protection as indicated by a minimum 10% improvement over the 2007 baseline geotourism survey (See Annex 3). The Project will also support the sustainable provision of basic services (water supply, wastewater collection and treatment, solid waste management) to 150,000 people (with improvements for 100,000 and new services for 50,000 beneficiaries).

22. Other broader objectives such as, contributing to the protection of the Lake’s long-term water quality and ecological integrity, greater social inclusion and participation according to the specific articulated needs by the range of communities, improved quality of life, increased tourist arrivals, agreement on a ‘shared vision’ for the Lake development, will be supported and monitored but can not be hlly attributed to the Project. The Project’s contribution to local sustainable development is modest but provides an important starting point. Follow-on and parallel activities will be identified during Project implementation, and integration with similar Peruvian efforts encouraged.

23. The objectives will be attained through:

(a) Shared vision of the Lake Titicaca basin followed by consultation among the local stakeholders during early preparation and throughout the Project to establish and to ensure that the Project design and implementation reflects the Aymara peoples priorities. Towards this goal, a team of Aymara professionals will form the local Project teams.

(b) Targeted municipal infrastructure investments such as small-scale water, waste water treatment, and solid waste.

(c) Targeted cultural heritage investments and municipal tourism activities that improve the usage of important pre-Hispanic sacred sites and monuments in priority circuits will also benefit tourism activities and enrich visitor experiences.

(d) The creation and annual updating of the Lake Titicaca State ofthe Luke Report, which will summarize water quality and natural habitat indicators in addition to quality of life indicators for the inhabitants of the Lake Titicaca Basin.

(e) Institutional strengthening for the Vice Ministry of Tourism and municipalities regarding tourism needs, the development of a national tourism strategy, community tourism, and urban planning for those municipalities in the Lake basin that represent rapid population growth and impacts for tourism and the health of the Lake.

(f) Enhanced dialogue within and among the scientific, policy and regulatory communities that oversee Lake management, and where possible targeted capacity building in key institutions.

-8- C. Project components

24. The Project has three main components: (1) Support to Tourism Development and Cultural protection; (2) Basic Services; and (3) Institutional Strengthening and Project Management. The following table presents the estimated Project costs including the Project Preparation Fund (US $950,000) that the Bolivian Government requested.

Table 2. Project estimated costs and financing

Component Indicative YOof Bank % Bank Costs Total Financing Financing (US !8 M) (US $ M)

1. Support to Tourism $8.91 38.7 $8.25 41 Development and Cultural Protection 2. Basic Services $11.09 48.2 $8.74 44 3. Institutional Strengthening $3.01 13.1 $3.01 15 and Project Management

Total Financing Required $23.01 I 100 I $20.00 I 100

Component 1: Support to Tourism Development and Cultural Protection

25. This component will support activities that promote quality of life, strengthen cultural identity, provide critical tourism infrastructure, and improve economic development for local communities within the Lake Titicaca Basin. Key investments include:

1.1) Tourism Development Support: The objective of this subcomponent is to enhance both current and potential tourism development in prioritized areas through relatively small-scale investments in: signage and accessibility infrastructure to facilitate both tourism reception and local ease of access; scenic byways and lookout facilities with public amenities; visitor interpretation centers; community-based initiatives such as, arts and crafts centers, organization and promotion ofindigenous cultural events (music and dance), village and home-stays, camping facilities, gastronomy, improvement of existing tourism services, and development of new tourism products based on current local initiatives and market demand studies. This subcomponent will assist both municipalities and communities around the Lake identified during Project preparation as having the need to improve their existing tourism development, as well as those that have the potential to embrace tourism as an agent of sustainable development. While this subcomponent is demand-based and all eligible populations could access Project resources, the Project will encourage a phased targeting of the Lake’s four prioritized geographical zones and their respective tourism circuits, which is consistent with the Government’s overall tourism development strategy for the Lake’s region. Both tourism demand and supply assessment studies for each of the four zones were carried out during preparation and priorities defined consensually for the region as part ofthe first phase ofthe Government’s comprehensive ‘Visioning Exercise’.

Eligible subprojects will sustain and enhance both current and potential cultural, social, economic and environmental assets to preserve the living character of the communities that surround the Lake. Financing will be provided through three categories of activities related to tourism: a)

-9- Municipal Investments; b) Community subprojects that include projects identified in the four tourism zones and their key circuits; and c) Tourism sector-wide investments. Municipal and community tourism infrastructure will be carried out through FPS, while the PCU will undertake activities that directly support communities. Community subprojects will be undertaken by the community with direct support of an intermediary NGO or firms that will be hired to work with the community to design and implement new projects. The community subcomponent is consistent with the community consultation conducted during Project preparation and will be refined as community groups are facilitated by the contracted intermediary. These community activities do not fall under local municipal jurisdiction. The Municipal tourism investments are consistent with existing local legislation and Municipal planning and priorities (See subcomponent 3.1). The sector-wide investments include a range ofrelevant interventions for the tourism sector like small-scale activities that will establish the groundwork to further improve infrastructure development and service provisions needed to enhance local livelihoods and bring the Lake to a regional and international level ofcommercial yet sustainable tourism expectations.

1.2) Cultural Heritage Program: This subcomponent addresses the necessity to protect the cultural integrity and heritage of pre-Hispanic sacred archaeological sites and monuments, and the unique natural landscape areas of Lake Titicaca. Also included is the restoration of pre- Hispanic agricultural landscapes and trails as well as artistic and historic assets in colonial churches. Most of the sites and cultural monuments listed and designated as ‘important national heritage patrimony’ by the Vice Ministry of Cultures are currently at risk of further deterioration, as a result of modest public sector involvement and lack of visitor use management plans-e.g. Isla del Sol, Isla de la Luna and Copacabana .

1.3) Support to productive activities for tourism: Similar to the Bank-Financed Rural Alliance Project, but focused only on activities related to tourism, this subcomponent will support small scale local economic development through grant financing of sub-proj ects. These could include handicrafts, textiles, and cultural events that are linked to tourism activities around the Lake. The relatively modest subcomponent would begin with strategic pilot activities and studies.

1.4) Administrative Cost for FPS: This subcomponent will finance the administrative cost to oversee the financial and procurement aspects of the tourist infrastructure in component 1. FPS will provide assistance to the municipalities and communities to implement the subprojects, participate in the follow up of the pre-investments, review the final designs, administer, execute and supervise the subprojects.

Component 2: Basic Services

26. This component will facilitate access to improved services and infrastructure in prioritized municipalities and communities within the Lake Basin through the Vice Ministry of Tourism and Basic Services. Proposed activities include:

2.1) Community Water and Sanitation: The Project will support small-scale water and sanitation infrastructure for the Lake’s rural communities. Communities will be selected using criteria that include an evaluation of the current situation and current threats to water sources from pollution, and potential benefits on critical tourist circuits. The intervention will be supported by specialized NGOs or fmshired by municipalities that will work with a cluster of communities. These will work closely with FPS and the municipalities to ensure that community concerns and demands are reflected in the design and construction and operation of facilities. The

- 10- Project will also finance post-construction follow-up including training and on-the-job support with tailored training for the Water User’s Associations.

2.2) Sewerage and Waste Water Treatment: The Project will support the development of sanitation facilities for communities and extension and rehabilitation of existing sewerage networks. Five municipalities (Copacabana, Tiquina, Achacachi, Tiwanaku and Viacha) are included in the Project. All of the cities, with the exception of Viacha, are significant tourist zones and serviced populations can increase dramatically during peak tourist periods. For example, additional peak populations in Copacabana and Tiwanaku can exceed 20,000 people during festival periods, and providing adequate water, wastewater, and sanitation services are essential to improving tourist potential and enhancing the quality of life for residents.

The wastewater subcomponent covers all five cities. The Project will finance the improvement of the collection network. Currently, only Achacachi has semi-functional facultative wastewater lagoons. The Project will finance low-cost and appropriate wastewater treatment systems. Potential treatment systems include larger and well-engineered lagoons, and use of post-treatment wetland polishing ponds to help remove nutrients.

In addition, the Project will finance technical assistance to ensure sustainable service provision. Only Viacha and Achacachi have water companies (EPSA); water services for the other municipalities are governed by a “Water Committee.” Under the existing and proposed new water law, all municipalities are required to formally establish water companies. A key goal under the Project is to put all water, wastewater, and solid waste services under a single company (EPSA or ENAPAS), and ensure that user fees cover at least O&M costs.

2.3) Solid Waste: The Project will finance solid waste investments in Tiwanaku, Copacabana, and Achacachi. Viacha will use other sources of financing for its solid waste Project. Proper solid waste management is also essential to reduce blockage of wastewater collection pipes which is now a major problem. A study is underway to consider the feasibility of multi-municipal landfills in Copacabana (Tito, Yupanqui, and Tiquina) and Tiwanaku (Guaqui and Taraco). The Project will finance improvements in collection, street cleaning, transportation, recycling, and final disposal in sanitary landfills. The landfills will be designed for low-cost operation, relying mainly on manual labor and minimizing the use of heavy equipment during operations. Each environmental assessment that will be undertaken before solid waste activities occur will determine if any waste pickers are present and could potentially be impacted and if so, programs to assist them will be developed and implemented as part of the activity.

2.4) Administrative Costfor FPS: This subcomponent will finance the administrative cost to oversee the financial and procurement aspects of the basic services in component 2. FPS will provide assistance to the municipalities and communities to implement the subprojects, participate in the follow-up of the pre-investment activities, review the final designs, administer, execute and supervise the subprojects.

Component 3: Institutional Strensdheninv and Proiect Management

27. This component will enhance the land-use planning and management capacity of municipalities within the Lake Titicaca Basin through the municipal strategic and land-use plans. The component will also enhance the development and annual updating of technical and social data - the Lake’s water quality and natural habitat, as well as quality of life indicators for the communities

- 11 - surrounding the Lake. This will be supported through the creation of an annual “State of the Lake” Report.

3.1) Capacity building for Vice Ministry of Tourism Municipalities and Communities, Institutional strengthening for Prefecture, J4f Culture, J4f Basic Services and J4f Basins and Hydrological Resources: This component will support the following activities:

3.1.1) Institutional strengthening for Vice Ministry of Tourism: This subcomponent will support the development of targeted tourism studies that support a long-term program for tourism development in the Lake Titicaca Basin. This subcomponent also includes consulting services for a marketing strategy to promote Bolivia’s international tourism potential, training in communications, assistance in reviewing the establishment of an internet booking system for community-based guest houses, and GIS technology for VMT.

3.1.2) Institutional strengtheningfor Municipalities and Communities: The Project will support municipal strengthening through the development of strategic and land-use plans for all of the municipalities in the region. These plans will establish strategic guidelines for medium and long-term sustainable development of the municipalities, in conjunction with the existing guidelines of the National Development Plan 2006-2010, the Tourism Sector Plan, and the Regional Strategic Vision. This subcomponent will also finance assistance for local communities in Project management. It will strengthen community organizations and producer organizations to participate in tourism development.

3.1.3) Institutional strengthening for Prefecture and Government Agencies: The Project will support institutional capacity building and management strengthening for several of the entities involved with the execution of the Project, including the Prefecture and Vice Ministries of Basic Services, Development of Cultures, and Basins and Hydrological Resources. International agencies such as the National Geographic Society, NGS”, and the International Joint Commission, IJC” could assist with this capacity building. An advisory group on Lake Management, with representatives from Bolivia and relevant international experts is planned.

3.2) Monitoring and Evaluation of the strategic vision, complementary studies and Project management: The Project will support the following activities:

3.2.1) State of the Lake Report: Through a World Bank Netherlands Water Partnership Program Trust Fund, the Bank supported the development of a framework for Lake Titicaca’s first State ofthe Lake Report. The Report summarized existing information on the Lake, including sources of contamination, habitat degradation and an additional water modeling exercise, also contracted through the trust fund, which shows impacts of current pollution trends. The Vice Ministry of Tourism’s preparation team developed the Social State of the Lake section within this report that highlights the social conditions and quality of life indicators for the municipalities of the region. The Project will continue to support this effort through the annual updating of both the technical and social data in the

loThe US-based NGS is active in the region and preliminary agreement has NGS preparing a Destination Mapping exercise, consistent with similar Machu Picchu activities. ’’ The Canada-US IJC manages the Great Lakes and can provide a useful model and training facilities for ALT.

- 12- report. The annual updating of this report will initially be executed by the Government of Bolivia.

3.2.2) Social Communication Strategy: This SCS, which complements the Project’s Social Assessment, will serve each component of the Project (cross-components). Special emphasis will be placed on communication activities with indigenous peoples to increase their potential for participation in the Project and to create a better context for communications which will increase the potential for the Project’s overall acceptance. The SCS will include activities implemented and described under the Project. The SCS will also address specific social, environmental and economic concerns as they may arise during Project implementation (including translations into Aymara language).

3.2.3) Project Management: This subcomponent is particularly important given that this is the first time the Ministry of Tourism executes a Bank financed Project. This subcomponent will enhance the management and execution of the Project, including standard operating costs, Project Coordination Unit fees (PCU) and third party auditing.

D. Lessons learned and reflected in the Project design

28. The design of the proposed Project reflects the lessons learned from Peru’s Vilcanota Valley Rehabilitation and Management Project in Peru and the Copan Tourism Project in Honduras. The funds provided by the Bank are used for strategic and catalytic investments to leverage investments by other donors and the private sector. As in Copan, the management of small-scale funding activities will be delegated to a credible intermediary. A review of Bank tourism projects in Latin America and lessons learned are included in a summary table in Annex 1. Lessons from other projects include:

29. Strengthening the FPS. The Bank financed Rural Development Project (PDCR) used the Government agency Fondo Nacional de Inversion Productiva y Social (FPS) for disbursing the funds to the participating municipalities. During the preparation of the proposed Project, a study was carried out by the Bank’s CMU to evaluate the capacity of FPS in implementing Bank projects. The findings and recommendations are incorporated in the Project design to strengthen FPS to undertake municipal investments in infrastructure and basic services (See Annex 7).

30. Strengthening the Municipalities. Experience from the Rural Development Project (PDCR) shows that municipal capacity for implementing Bank projects is still weak. The proposed Project includes a component for strengthening the Municipalities through technical assistance in land-use planning, procurement and financial issues.

31. Close multi-sector collaboration in strategic areas. Close coordination among different sectors is necessary between investments in tourism and cultural heritage activities and other specific sector investments in infrastructure such as sanitation and solid waste management. An Inter-institutional Committee for the Sustainable Development of Lake Titicaca (ICSDLT), consisting of the Vice Ministry of Tourism, Vice Ministry of Culture, Vice Ministry of Basic Services, Vice Ministry of Basins and Hydrological Resources, Vice Ministry of Territorial and Environmental Planning, the Prefecture and Municipalities, representatives of social and private sectors will be created for advising and monitoring Project activities. The Project will benefit from the dialogue between sectors by prioritizing interventions in strategic areas with a more visible and rapid impact. The Committee will be chaired by the Vice Ministry of Tourism.

- 13 - 32. Water should be managed at the lowest appropriate level: The Dublin principle established in 1992 suggests that those that are more closely affected or benefited by water provision services should effectively participate in its management. In this Project, the formation and strengthening of the Water User’s Association is consistent with Bolivian Law and complies with the good practices in other countries. For the Project towns there is wide-spread support for strengthening the existing EPSAs (and creating new ones).

33. Community Participation is needed for successful interventions: Experience from different projects around the world shows that neglecting community input on the design and construction of facilities results in a lack of ownership and poor management of the infrastructure. National rural water supply and sanitation programs in Paraguay, Peru and Ecuador involve a participatory approach were the communities are consulted prior to the intervention about their intention and commitment to participate, as well as their willingness to form the appropriate community institutions to sustain the water systems in the long run. Community participation, particularly women’s, is a key input to determine the location of facilities, as well as the level of service demanded. Community empowerment ultimately improves sustainability of the systems. The proposed Project intends to include the community’s input and include them as well in the Project monitoring.

34. Providing rural supply and sanitation requires a demand response approach. Best practices in Rural Water Supply and Sanitation show that it is best to provide only the level of service that communities demand, and can afford and sustain. The demand response approach would be applied in the Project through two criteria. Only communities that express a demand would be prioritized, and before commitments are made, localities would be informed as to what participating in the Project would entail. The consultant firms and Project staff will develop a menu of technical options and level of services to match community demands, local customs related to water and sanitation, as well as the cultural and ancestral belief system.

35. Operation and maintenance should drive the selection of the wastewater treatment technology: The majority of the wastewater treatment plants fail to provide services for their expected lifetime due to the inability of local operators to meet technical demands and consistently pay operational costs. In the Project, careful consideration will be paid to ensure that there is a match between the technology selected and the local operator ability to undertake the maintenance and operation of the treatment plants. Training of local staff on operation and maintenance of the treatment plants would be provided as part of the Project.

E. Alternatives considered and reasons for rejection

36. Lending; Instrument. The Project was originally conceived as an Adaptable Program Loan, but it was agreed at the PCN review meeting that the most appropriate instrument for the Project is a SIL. A SIL provides sufficient targeting for critical investments and can be expanded and continued as government priorities evolve. The Project supports the Vice Ministry of Tourism’s ‘visioning exercise’ which would likely form the basics of an APL program. The proposed Project includes several key ministries and governments and can be adjusted as experience is gained. A follow-on GEF Project is also possible.

37. Investment Mix and Institutional Arrangements. The Project considered a larger investment in water and sanitation but this option was not considered because the National Government wanted an integrated approach and decided to give equal priority to tourism initiatives as outlined in the National Development and Tourism Plan. Government rejected the idea of creating an extensive coordinating unit

- 14- in the Vice Ministry of Tourism and therefore implementation of many key components will be overseen by relevant agencies and municipalities.

111. IMPLEMENTATION

A. Institutional and implementation arrangements

38. The Project will be implemented by the Ministry of Production and Micro Enterprise (MPME), through its Vice Ministry of Tourism (VMT). VMT will operate the Project under the supervision of MPME, and the Inter-institutional Committee for the Sustainable Development of Lake Titicaca (ICSDLT) will provide advice to the Project and assist in coordination. The investments in infrastructure (water and sanitation, and those related to tourism activities undertaken by the Municipalities) will be administered by the Social and Productive Investment Fund (FPS) 12.

39. The Ministry of Production and Micro Enterprise (MPME): The MPME will be responsible for coordinating the execution of the Project with all members of the ICSDLT, delegating internally to the VMT operational responsibility for the execution of the sub-projects, approving the operational manual (OM) and any modifications, approving the Annual Operating Plan (POA) and ensuring the Project’s budget registration, processing together with VMT, amendments to the Credit Agreement, and reviewing annual evaluations and impact studies.

40. The Vice Ministry of Tourism (VMT): VMT through its Project Coordination Unit (“PCU”) will be in charge of Project coordination, the implementation of the institutional strengthening program, the development and execution of Bolivia’s tourism strategy for Lake Titicaca. It will also have the following responsibilities: the effective coordination with the ICSDLT, the MPME and its vice-ministries and other public entities with activities related to the Project (Vice Ministry for Development of Cultures, Vice Ministry of Territorial and Environmental Planning, Customs Services, Immigration Services), the coordination of infrastructure investment activities trough FPS, and coordination of the Project with the Municipalities in Lake Titicaca, the preparation of an annual update ofthe “the State of the Lake” and the procurement of VMT components. When necessary, inter-institutional technical committees (with FPS, the Vice Ministry of Basic Services Sanitation and/or the Vice Ministry of Cultures) will be established for the selection of projects, the revision of TOR’S, the revision of Project designs, the approval of projects and the periodic revision of execution arrangements. See Annex 6 for Implementation Flow for the VMT-PCU projects.

41. Productive and Social Investment Fund (Fondo Nacional de Inversion Productiva v Social) - FPS: FPS will be the agency in charge of implementing the Project investments in water, basic sanitation and solid waste management, as well as those investments in infrastructure for Municipal Tourism investment^'^. FPS will rely on the municipalities for the execution of the projects, i.e. the municipalities will carry out all procurement activities and will be in charge of signing the contracts for investments in infrastructure. FPS will focus on: (a) securing, along the Basic Services Technical Committee (BSTC), the technical quality of projects during the design, and ensuring the technical quality during execution; and (b) securing the compliance with safeguards and fiduciary requirements. FPS will provide technical and fiduciary assistance to Municipalities during the assessment, implementation and supervision of projects.

l2With the exception of very specific investments in Productive and Tourism Infrastructure which will be managed by the PCU. l3With the exception of the specific Project mentioned earlier.

- 15- 42. The Bank recently concluded an “Operational Review of FPS” and this review has led to the establishment of an Action Plan that, once implemented, will further enhance the capacity of FPS. FPS will operate under an Institutional Agreement signed with the Vice Ministry of Tourism. In order to secure the technical quality of infrastructure projects designs in basic sanitation; FPS, the Vice Ministry of Basic Services and the PCU will form a quality review committee (BSTC) to assess these subprojects. Once reviewed, PCU will send the subprojects to FPS for their implementation. VMT through the PCU will monitor FPS and will review periodic reports on the basis of agreed criterion. See Annex 6 for FPS implementation flow.

43. FPS will manage the Project funds and the counterpart funds for investments in infrastructure. Municipalities will transfer the required counterpart funds for these investments to an FPS account. FPS will use these funds to pay the firms (contractor and supervision) based on the terms defined in each specific contract.

44. The Prefecture of La Paz: The Prefecture of La Paz (PLP) has many capabilities in relation to the protection and sustainable development of Lake Titicaca. They also recently acquired a higher degree of political autonomy as prefects are now elected, rather than designated by the national government. The PLP has important resources derived from the national distribution of hydrocarbon royalties. The Vice Ministry of Tourism and the Prefecture of La Paz will sign an agreement that will establish the conditions for coordinated interventions in the Lake Titicaca area, particularly in relation to investments in infrastructure and overall regional planning.

45. Indigenous and Camuesino Communities and the Association of Producers: The main beneficiaries of the Project will be the communities and association producers in the Lake Titicaca region, thus the coordination with these groups is particularly important for the Project. Indigenous and Campesino communities have legal rights, as Territorial Base Organizations (“grassroots organizations” OTBs), over the identification and prioritization of municipal investments. Associations of producers also have rights to participate in the prioritization of these investments, although they are not as influential as OTBs. Among the key activities of these organizations within the Project are the following: cooperating with the local governments and the municipalities to define priorities, participating in activities related to capacity building, participating in the identification of possible investments and in the formulation of pre- investment studies, participating in the implementation of specific Project. (See Annex 6)

B. Monitoring and Evaluation

46. There are several mechanisms for monitoring and evaluation of the Project. The first is the establishment of the State of the Lake Report which will provide a baseline for monitoring Lake data, including sources of contamination, habitat degradation and an additional water modeling exercise. In addition, the Vice Ministry of Tourism has developed the Social State of the Lake section within this report, highlighting the social conditions and quality of life indicators for the municipalities of the region. The Project will continue to support this effort through the annual updating of both the technical and social data in the report as well as its publication. The annual updating of this report will initially be executed by the Government of Bolivia under oversight of VIPFE.

47. Municipal investments in tourism infrastructure and other basic services will be channeled through the FPS, which will have a monitoring and evaluation system in place during the implementation of the Project. Currently, an action plan for strengthening the FPS is being drafted and is expected that during the first year of the Project additional measures will take place for monitoring and evaluation of the Project. One of these measures is to have the community participate in the monitoring process by recording their observations in a “Libro de Actas”, and appointing ‘%scales de obras” which will be required to perform field visits to the sites at least three times during the life of a Project.

- 16- C. Sustainability

48. Proposed infrastructure and institutional interventions support the environmental sustainability of the Lake while serving as a prerequisite for long-term economic development from increased tourism activities around the Lake. Infrastructure works related to small-scale water and sanitation investments, as well as institutional capacity building supported through the Project, will lead to greater environmental sustainability of the Lake.

49. Social sustainability for residents around the Lake is supported through the Project’s focus on culturally appropriate interventions. The community was an integral part of Project design and will be the key actor during implementation.

D. Critical risks and possible controversial aspects

50. The Project team has identified several potential risks to the effectiveness and sustainability of the operation as well as feasible mitigation options. The risks fall into two broad categories: Country- wide and Project-specific. Country-wide risks are consistent with the Country Team’s overall assessment and include the macroeconomic framework, governance, and uncertainty of donor community support. This Project, as with other Bolivia investment projects rates the mitigated Country risk as ‘M’ - medium. Following is a Table with Project-specific risks.

Risk factors Description of risk Ratinga Mitigation measures Ratinga of risk of residual risk Sector Governance, Policies and Discrepancies H Oversight of water and M Institutions between the Vice sanitation investments Ministry of by FPS. Tourism and Basic Services for overseeing Project comnonents.

Operation-specific Risks Technicalldesign Limited technical M M capacity ofthe Vice comprehensive PPF- Ministry of Tourism to supported Project implement the Project ’ preparation and and ensure successful implementation process. coordination efforts Key investments, staged across sectors. for implementation. A comprehensive Project review at the one vear

- 17- anniversary date of effectiveness. Implementation capacity and Overlapping roles H Clear delineation at M sustainability between and among appraisal of roles and the National responsibilities for Government, the implementation. Inter- Prefecture of La Paz, government MOUs prior and municipalities. to Project effectiveness. Inclusion of a robust PCU in the Vice Ministry of Tourism during preparation with implementation oversight largely migrating to FPS and local governments. Financial Management Vice Ministry of S Much of the Financial S Tourism has limited Management works will Bank Project be overseen by FPS, experience and staff which has been capabilities. FPS strengthened under other undergoing an Bank projects and has a institutional comprehensive strengthening program. strengthening plan in place. Vice Ministry of Tourism has gained some experience through PPF management. Capacity building activities will be undertaken during Project implementation and a comprehensive one year Project review is required. Procurement Vice Ministry of H Most of the Procurement M Tourism has limited activities will be overseen Bank Project by FPS, which has been experience. strengthened under other Bank projects. Vice Ministry of Tourism has gained experience in PPF management. Capacity building activities are part of Project implementation. A one year Project review is required. Social and environmental Ethnic and social M Completion of a M safeguards tensions among the comprehensive social and communities in the cultural assessment region have existed for during preparation. over 500 years and Capacity building at

- 18- may threaten the community level to better success of the Project. manage conflicts to reduce the impact of unsolved conflicts on the Project. Community response Local communities M Inclusion of a Social M may lobby against Communication Program, Project objectives and including specific investments. advocacy activities, for the altiplano should help alleviate misunderstandings- and frictions. Shared Lake management Poor cooperation M Project supports ALT and M between Peru and a gioup of international Bolivia on shared Lake experts will be convened management. to provide advice High Expectations Unmet expectations. H Preparation activities M made clear the Project’s modest nature. Inclusion of a Communications stratem. Overall Risk (including Reputr IM

51. In order to mitigate some of the more severe risks such as fiduciary and procurement problems, a comprehensive one-year anniversary Project review will be undertaken, and specified in the Finance Agreement. At this time funds could be reallocated into faster disbursing and less problematic sectors.

E. Credit conditions and covenants

52. The conditions of effectiveness consist of the following:

i> The subsidiary Agreement has been executed on behalf of the Recipient and FPS.

ii) The Operational Manual has been adopted in a manner satisfactory to the Association.

53. Disbursement Conditions:

i> The Recipient shall maintain (or cause to be the only credit condition maintained) a financial management system in accordance with the provisions of Section 4.09 of the General Conditions.

ii) The Recipient shall prepare (or cause to be prepared) and furnish to the Association not later than 45 days after the end of each calendar quarter, interim unaudited financial reports for each Part of the Project covering the calendar quarter, in form and substance satisfactory to the Association.

- 19- iii) The Recipient shall, through VMT, and cause FPS to, have the Financial Statements for each part of the Project to be audited in accordance with the provisions of Section 4.09 (b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one fiscal year of the Recipient for the respective part of the Project, commencing with the earlier of: (a) the fiscal year in which the first withdrawal under the Project Preparation Advance was made; and (b) the fiscal year in which the first withdrawal under this agreement was made. The audited Financial Statements for each such period shall be furnished to the Association not later than six months after the end of such period.

54. Other covenants:

i) Not later than one year after the Effective Date, the Recipient and the Association shall carry out a comprehensive review of the Project focused on Project performance. After said review is completed, the Recipient shall take, if necessary, any actions recommended to remedy any problems identified during the review.

Iv. APPRAISAL SUMMARY

A. Economic and financial analyses

55. The economic analysis of Component 1 provides the results for the overall viability of the proposed Project. Additionally, as a positive externality of the proposed investments under component 2, additional economic benefits are expected from the on-site water and sanitation subcomponent, and those were separately quantified. For Component 1, the Project benefits were calculated based on projected increases in the volume of tourist visits based on historical trends, the average length of stay in the area and the average expenditure per tourist in the Region. In component 2, the proposed Project is based on a framework approach where specific sub-projects are not predefmed. Rather, they will be identified based on the demand from the municipalities and rural communities in the area and will be supported with technical assistance and capacity building activities to ensure successful implementation.

56. For component 1, the analysis estimates the economic benefit from increasing the average duration of stay as a result of enhancing the attractiveness of historical and cultural sites and increase of local tourism service providers, and additional jobs and production in the Project’s area of influence. In the Lake Titicaca area, foreign tourists spend only US$35 per day and National tourists US$10 per day on average. Although, not factored into the economic analysis, the Project’s focus on culturally appropriate and community supported tourism should help to encourage more of the economic benefits for the community and small-scale operators.

57. For analysis purposes, three potential scenarios were created: First a “without Project” scenario and two “with Project scenarios” for low and high expectations. Projections were made for a period of 15 years (2008-2022). “Without Project” scenario. The Projection is made considering no growth rate above the current trend. It is assumed that the average number of days and average expenditure remain constant throughout the Project life. This assumption results in a loss of 137.190 foreign and national tourists through 2022. Scenario 1: With Project scenario - low expectations. It was assumed that Project investments will have an increasing impact due to the Program’s implementation. The number of foreign tourists will increase by 0.05 days (1.2 hours) per year thereby increasing the average stay for foreign tourists to 3.36 days by 2022 and to 2.74 for national tourist and the tourists will increase by 5% annually given the new investments in the region. Scenario 2: With Project scenario - high expectations. The average time spent in the region was considered the same. But in this scenario,

- 20 - the number of national tourists will increase by 10 percent and of foreign tourist by 7 percent per year. For Scenario 1, the analysis yields a Net Present Value (at a 12% discount rate) of US$11.3 million and an Internal Rate of Return (IRR) of 23.1 1% and an IRR of 32.6% for the high expectation scenario.

58. For the analysis of Component 2, a detailed economic cost benefit analysis was conducted from a sample of 21 potential subprojects already identified by the Laja Municipality and the Prefectura. The main benefits of these projects are improved water services to 5,545 beneficiaries in 21 small communities in the municipality of Laja. Of the 21 pilot projects, 12 were found to be economically viable with a NPV average of US$44.85 and an average of IRR of 29 percent, as designed. From these results it can be seen that projects with a connection cost per person above of US240 should be restructured before construction or subjected to a detailed economic analysis (which would have resulted in the projects not being financed as designed) or redesigned lowering the level of service, thus ensuring the overall economic feasibility of financed subprojects under this component. The team engineer will provide guidance on the use of appropriate technologies that could considerably lower the costs, thus ensuring the economic feasibility of each individual subproject.

B. Technical

59. Technical considerations for Project implementation were reviewed for appropriateness of design, municipal capacity to operate facilities, capacity of the Vice Ministry of Basic Services. Another area of considerable technical importance is the ability of local universities and the ALT to collect, interpret and annually present Lake Titicaca water quality information.

60. Appropriateness of design - All wastewater treatment facilities will be designed by credible engineering professionals with international experience and where practical facilities will be designed to have minimal operating requirements for maintenance and ongoing inputs such as electricity and chemicals. Final effluent standards will be adjusted to reflect the sensitivity of Lake Titicaca waters.

61. For all solid waste management aspects, simple international best practices will be used and new disposal facilities will meet the World Bank (and other) standards for “sanitary landfills”. Transfer stations will be designed to minimize operation costs. Water supply components (mainly small scale rural applications) will be consistent with other Bank projects and meet the National standards, already reviewed by World Bank technical staff.

62. The Vice Ministry of Basic Services will review all designs, bid packages, and monitor construction of water, wastewater, and solid waste facilities. Technical support to local universities and ALT will be provided through the Project. These agencies will annually collect water and environment quality data from the Lake and surrounding areas.

C. Fiduciary

63. As part of the preparation process of the Lake Titicaca Local Sustainable Development Project, a preliminary financial management assessment was performed to determine the adequacy of the Vice Ministry of Tourism-PCU financial management arrangements to support Project implementation. The assessment was performed in accordance with OPBP 10.02 and the Manual “Financial Management Practices in World Bank Financed Investment Operations”. The objectives of the assessment were to determine the adequacy of the entity’s capacity to properly manage and account for all Project proceeds and to produce timely, accurate and reliable financial statements for general and Bank special purposes.

-21 - 64. It is important to mention that the financial management capacity assessment of FPS, the entity which will implement the Component 2 and Part of Component 1 of the Project, is based on the results of the Operational Review conducted with the support of the Bank at end of FY07. As a result of such review, a time-bound action plan including mitigating measures to address identified external and internal risks has been agreed upon with FPS to strengthen its operational performance, including the internal control environment (See Annex 16).

D. Social

65. The social analysis is closely related to the visioning exercise carried out during preparation of the Project and defines the long-term strategies among stakeholders for the development of the Lake Titicaca region. The visioning exercise started by reviewing the existing historical and cultural studies and current tourism activities and worked toward developing a consensus on the role of tourism and ways to increase the economic and social benefits accrued from tourism. The social analysis includes diversity and gender issues, analysis of stakeholders and social risks, as well as legal and institutional frameworks. In addition, special emphasis was placed on the socio-cultural characterization and community organization of residents living in the municipalities surrounding the Lake. Given the socio-cultural characteristics of the Aymara communities, the Project Coordination Unit’s (PCU) was responsible for undertaking the socio-cultural and institutional analysis to assess the sustainability of the Project and determine measures to mitigate the risks identified in the social analysis.

66. Primary information was gathered with help of young Aymara professionals living in the region and who are currently working as local liaison persons. The facilitators assisted in interviews with community leaders, municipal authorities such as mayors, council members, technical experts and representatives of producer associations and social organizations in the Lake region. In addition to the consultation process, the Aymara professionals facilitated a cultural exchange process as women and elderly people were able to express their opinions and views of the Project in their native language. This process has provided greater insight of the Project for the preparation team.

67. The direct Project beneficiaries are the Municipal Governments, the Aymara indigenous and peasant communities, organizations of small producers, artisans and service workers (transportation and hotel sector, guides, small traders). About 90% of Mayors, Council Members, and hctionaries of the Municipal administrations are Aymaras, as a result of a new Law of Community Associations and Indigenous Peoples which allows indigenous people to participate in the elections without the auspices of political parties. The Aymara communities maintain their own organizational structures and social control which is applied in orienting preparation and execution of projects in their domain. The Assembly is the supreme decision-making instance in the communities. It has a normative role in the realization of productive and social activities. Therefore, all of the Project activities will be coordinated with the communities. In the different municipalities, the artisans are organized. One of the principal characteristics of these organizations is that most are managed by Aymara women of varying ages. The Project will stimulate local knowledge in the production of an authentic indigenous art, towards this objective the program will seek to emulate good practices found in Bolivia. Other direct beneficiaries are the organizations in the road transportation sector. All of the transportation organizations found in the municipalities of the Lake are owned and operated by Aymaras. It is noted that Aymaras are the most entrepreneurial of the indigenous groups in Bolivia. The transport sector will be provided with capacity building in order to improve the quality of services offered for local residents and tourists. The indirect beneficiaries are the Vice Ministry of Tourism, Vice Ministry of Cultures, Vice Ministry of Basic Services, the Prefecture, the Lake Muncomunidud (association of municipalities), private tourist operators, consulting firms, local leaders, professionals, social and productive organizations, universities and NGOs.

- 22 - 68. Since about 93 percent of the population in the Project area claim to be Aymara, the Project triggers the OPBP 4.10 but does not require a stand-alone Indigenous Peoples Plan (IPP) as the Project document itself is considered an IPP. On the basis of the social assessment and in consultation with the Aymara communities, the principles and elements of an Indigenous Peoples Plan (IPP) have been incorporated into the Project design. These principles set out the measures through which the borrower will ensure that: (i)indigenous people affected by the Project receive culturally appropriate social and economic benefits; (ii)if potential adverse impacts on indigenous peoples are identified, FPS will provide assistance to the municipalities and community infrastructure to implement the projects; (iii)adverse impacts are avoided, minimized, mitigated, or compensated by following up on the pre-investment and approval of the final designs, administration, execution and supervision of the Project, , and (iv) the Project’s overall design is structured to take into account and maximize the benefits that accrue to the local population.

69. Finally, the extensive consultations and visioning exercise involved about 3,737 individuals who represented Aymara communities, local governments, the Mancomunidad del Lago, municipal associations, NGOs, farmers, women, and private sector representatives. Most of the sessions were conducted in Aymara language.

E. Physical Cultural Resources

70. In addition to its unique natural scenic beauty, the Lake Titicaca region is endowed with significant and diverse cultural patrimony-comprised of tangible assets (i.e. pre- Hispanic archeological sites, trails, astronomic monuments, Spanish colonial architecture, cultural landscapes and sacred sites) and intangible resources which include the living cultures with a range of religious and civic celebrations, festivals, production of art, music, crafts driven by the local communities.

71. However, a number of sites and cultural monuments listed as ‘important national heritage’ by the Vice Ministry of Cultures are found at risk. This is due to several factors including: irregular growth of towns with little land-use planning; and absence of preservation management guidelines for parks, sacred sites and monuments.

72. This Project component triggers Physical Cultural Resources (OP4.11) safeguard policy. A list of priority projects prepared by the Ministry of Cultures was organized into four types of interventions: (i)Sacred Islands of the Lake Titicaca, (ii)Cultural landscapes (pre-Hispanic), (iii)Pre- Hispanic archeological trails, and (iv) Spanish colonial churches. The Project may also consider supporting a Centro de Investigaciones del Lago Sagrado, which is planned to be established in Copacabana with the objective of establishing a presence of a team of trained specialists and experts to work with municipal authorities and staff, and local communities to directly oversee activities related to preservation management, conservation, and promotion of living culture and arts.

F. Environmental Category: B

73. Environment benefits and risks. The Project is designed to improve the environmental conditions in Lake Titicaca and the surrounding region. The investments envisioned for regional master planning, monitoring and civil works will contribute to the management and reduction in pollution levels in the Lake. They will also improve overall public awareness regarding environmental conditions in the region and community priorities for future management will be established. The Project will improve scientific understanding through the “State of the Lake” report and will strengthen institutions whose mandate, among other things, is to improve management of regional environmental problems.

-23 - 74. Civil works will be financed under the Project but these works are expected to be of a small to medium scale. Typical civil works investments could include small-scale water infrastructure, expansion of sewerage networks and waste-water treatment facilities, solid waste management and other sanitation or visitor infrastructure supporting tourism. The physical footprints of these works are expected to be small and the operational phase impacts are expected to be low to moderate. For these reasons the Project has been categorized as a category B for environmental risk purposes.

75. Environmental management framework. Because the specific infrastructure investments will not be identified prior to appraisal, the Project implementation team will be guided by an environmental framework (EMF). The EMF describes the procedures for Project screening and identifies the thresholds for triggering various types of environmental impacts assessments. Where required, impact assessments will be consistent with national regulations as well as with World Bank policy. The environmental screening and review of sub-project proposals under each component will be carried out by relevant government entities such as Servicios Bhsicos, and municipalities as well as FPS oversight. The Project Coordination unit will also be staffed with qualified environmental specialists who will have resources to carry out review of site proposals and field visits where necessary.

76. Proiects on International Waterways. The Project triggers the International Waterway Safeguard (OP 7.50) since Lake Titicaca is shared between Peru and Bolivia. The Government of Peru was officially notified about the proposed Project. During Project preparation the bi-national agency ALT was consulted. In Project documentation related to the Lake, Peruvian information will be included where available. The Project intends to strengthen cooperation between Peru and Bolivia on joint management of the Lake.

G. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [X 1 [I Pest Management (OP 4.09) [I 1x1 Physical Cultural Resources (OP/BP 4.1 1) [XI [I Involuntary Resettlement (OPBP 4.12) [XI [I Indigenous Peoples (OP/BP 4.10) [XI [I Forests (OP/BP 4.36) [I [XI Safety of Dams (OP/BP 4.37) [I [XI projects in Disputed Areas (OP/BP 7-60)' [I [XI projects on International Waterways (OP/BP 7.50) [XI [I

H. Policy Exceptions and Readiness

77. The Project complies with all applicable Bank policies and does not require any exceptions. Fiduciary arrangements are in place and disclosure requirements have been met. Baseline surveys for tourism activities are complete.

* By supporting the proposed Project, the Bank does not intend to prejudice thefinal determination of the parties' claims on the disputed areas.

- 24 - Annex 1: Country and Sector or Program Background BOLIVIA: Lake Titicaca Local Sustainable Development Project

1. Lake Titicaca is part of the TDPS hydrologic basin that includes the Desaguadero River, Lake Poopo, and Coipasa Salt Lake which comprise an extension of 140,000 km2. This system, which lies on the altiplano, spreads over parts of Peru, Bolivia and Chile. With an altitude of 3800 m and a drainage area of approximately 58,000 km2, Lake Titicaca, plays a very important role in the large bi-national watershed. Due to its altitude and size, Lake Titicaca is often referred to as the highest navigable Lake in the world. Around the Lake is a large population of approximately 324,000 people dedicated to agriculture, livestock, tourism, trading, fishing, and mining that relies on the natural resources of the Lake and its surrounding area.

2. The Lake Titicaca region is characterized by rich historical and cultural resources such as Tiwanah’s archeological ruins and ceremonial monuments in Copacabana, Inca archeological ruins on Isla del Sol y la Luna, and intangible assets such as music, festivals, language, customs, and traditions of the Aymara and Quechua people. From the 17 municipalities that are part of the Lake Titicaca Mancomunidad, approximately 93 % of the population has unmet basic needs. On average, 36% of the population lives in moderate poverty, 53% lives in conditions of indigence and 3.71% lives in conditions of marginality.

3. Despites the Lake’s unique natural history and preserved cultural integrity, pollution threatens the health of the Lake and the sustainability of the communities that depend on the Lake for their livelihoods and economic activities. Discharge from urban areas and mining activities are believed to be the two main causes of contamination to the Lake. Sewage discharge from urban centers in the basin has resulted in organic contamination of the Lake. The tropical situation of Lake Titicaca, the high levels of solar radiation and the high rate of evaporation make the system very vulnerable, particularly to pollution problems. In contrast, the size of the water body helps to maintain pollution at acceptable levels, although there are some eutrophication problems close to the costal villages. In addition, there are also problems related to heavy metal contamination, resulting from mining activities in the zone.

4. To address this concern, the Government of Bolivia has requested assistance from the Bank to support a strategy that will improve the quality of life of the basin’s residents through protection of the Lake’s long-term water quality and ecological vitality as well as through local economic and social development opportunities for the communities surrounding the Lake.

Government’s Strategy

5. The current government administration is playing an active role in the promotion of Bolivia as an international destination. Bolivia now receives 500,000 international and 930,000 national tourists, and the region receives 205,000 and 165,000 of these respectively. According to the World Tourism Organization Bolivia has a potential of attracting 3.5 million tourists a year and the Government expects to increase the number of tourists by 5% a year.

6. The National Tourism Plan (2006-201 l),provides a policy framework that prioritizes the development of sustainable tourism on the basis of community-based as well as indigenous tourism. With more than 10 years of experience in promoting community-based-tourism, the Bolivian government views the NTP as a strategy for fighting poverty in rural communities including the Lake Titicaca area.

- 25 - 7. The principles by which sustainable tourism is to be attained are: stakeholder participation; equitable distribution of economic benefits; the preservation of natural and cultural resources; quality improvement of the environment; and quality improvement of services. The National Tourism Plan includes three strategic objectives: (i)fostering indigenous and community-based tourism; (ii)improving capacities of different sectors for managing tourism activities; and (iii)marketing campaign to promote Bolivia as a national and international destiny. The proposed Project supports these objectives.

Bolivia's competitiveness in the travel and tourism sector

8. According to the World Economic Forum's Travel and Tourism Competitiveness Study, in 2007 Bolivia ranks 109* within 124 other countries, considering their travel and tourism competitiveness index (TTCI)14.

9. The TTCI aims to measure the factors and policies that make it attractive to develop the T&T sector in different countries. The TTCI is composed of three pillars: (i)regulatory framework, (ii) business environment and infrastructure, and (ii)human cultural, and natural resources. These pillars are composed of 13 different factors including: policy rules and regulations, environmental regulation, safety and security, health and hygiene, prioritization of travel and tourism, air transport infrastructure, ground transport infrastructure, tourism infrastructures, ICT infrastructure, price competitiveness in the T&T industry, human resources, national tourism perception and natural and cultural resources. Table 1 illustrates the ranking of Bolivia according to each pillar and factor.

Table 1. Bolivia Travel and Tourism Competitiveness Index

Travel & Tourism Competitiveness liidex Rank Score (out 0fia4) WSCRIS) 2007 Index ...... 109 3.5 T&T regulatory framework ...... Policy rules and repulations Environmental regulation ...... 114 3.0 Safety and securky ...... 103 3.6 Healkh and hygiene ...... "...... -. 98 3.7 Prioritization of T&T strategies ...... 108 2.9

Tourism infrastructure .....-...... -...... ICT infrastructure ...... Price competitiveness in T&T industry ...... T&T human, cultural. and natual resources...... Humen resources ...... 90 4.2 .."...... -.4T 4.7 Workforce wallness National tourism perceptio ...... 113 4.0

Natural and cultural resour ...... ~ ...... -...... 90 3.8 1 2 3 4 5 6 Source: 2007 World Economic Forum Travel and Tourism Competitiveness Study

l4The TTCI was produced by the World Economic Forum in close collaboration with Booz Allen Hamilton, the International Air Transport Association (IATTA), the UNWTO, and the WTTC.

- 26 - Legal and regulatory framework

10. The Law of Promotion and Development of the Tourism activities in Bolivia (Law No. 2074, 2000) established institutional parameters and sector policies as well as the definition of roles of different actors, supporting the development of private initiatives and creating fiscal incentives for tourism related activities. Additionally the Law of National Dialogue (Law No. 2235, 2000) conferred an important role to the sector recognizing its impact in the national, regional and local economies as a considerable employment generator.

11. Even though tourism policies considered inclusion, participation and integration of indigenous people in tourism activities among its fundamental principles, other sector policies have disregarded those principles established in the constitution until the recently elected president Evo Morales recognized the importance of reformulating the legal framework (in particular Law No. 2074) to fully include and recognize community-based organizations (indigenous and others) in the tourism sector. As a result of this, in November 2006, the National Committee for Social Organizations affiliated to Community-based Tourism was created

12. Moreover, in the National Development Plan there is a section dedicated to tourism which refers to tourism “as a productive, comprehensive, multi-sectoral and multidisciplinary activity, and its development should be oriented towards promoting and prioritizing the participation of indigenous people, peasant groups and rural communities, so that they become agents for preserving cultural diversity in harmony with the environment, promoters oflocal development and direct beneficiaries of the tourist activities in the long-term”.

13. As a strategy for fighting poverty, the National Tourism Plan (2006-2011) is based on the premise that tourism should be an inclusive, inter-sectorial and multidisciplinary activity in which the government (National Government, Prefecture and Municipalities) as well as local actors (community associations, federations and other civil society organizations) with the participation of the private sector have a responsibility in the development of sustainable tourism activities.

14. Access to local capital resources in Bolivia is difficult and expensive. Annual interest rates are high, making the investment climate rather difficult. To compound the situation, the regulatory framework in Bolivia governing the rules on foreign direct investment, property rights, and foreign ownership is ranked very low, on the competitiveness index prepared by the World Economic Forum. Future tourism development and destination competitiveness will depend on the availability of less expensive capital resources and greater reliance in community tourism.

Business environment and infrastructure

15. Bolivia, mainly through the private sector, has made significant headway in developing and transforming a cadre of skilled human resources into productive assets to play a key role in leading the industry to new levels of competitiveness. Learning from others outside of the country and applying this knowledge has allowed the local industry to grow mainly in the areas of hotel management, transportation of visitors, culinary arts, marketing, environmental management and even in service quality management. The government recognizes that it also has to play a role by establishing training organizations for the development of the necessary vocational skills in tourism. Academic institutions, such as the Catholic University and the Universidad Mayor de Sun Andres have established tourism careers and courses to respond to the industry’s education and research needs.

- 27 - 16. Even though the road leading from La Paz to Lake Titicaca is adequate and in fair condition, the remaining roads in the area are unpaved, which makes it difficult for the mobility of tourists and the accessibility to potential attractions. There is no signage from the city of La Paz for Lake Titicaca. Even after reaching the urban centre of El Alto, where the main road to Lake Titicaca begins, there are still no signs at all, and the small villages along the main road way are not identified at all.

17. However, the provision and coverage of potable water, the lack of sewage collection and treatment, and poor solid waste management are critical issues in and around the communities located along the northern and southern shoreline of the Lake. In fact, several of these communities, because of the lack of appropriate systems for sewage disposal, are a cause of the Lake’s contamination. Other public service systems such as health, fire and police protection are very frail. In the case of Copacabana, the police do not have communication equipment and means of mobilization.

Human and cultural resources

18. Lake Titicaca is a region characterized by rich historical and cultural resources such as Tiwanaku’s, archaeological site and ceremonial monuments, Copacabana’s radiant white-washed Moorish style Cathedral, the Inca archaeological ruins on Islas del Sol y la Luna, and intangible assets such as the music, festivals, language, customs, and traditions, life styles, values, and literature of the Aymara and Quechua people. It is a region with a sacred Lake filled with mystery and legend, whose overall value is appreciated by visitors, thus making it the popular destination that it is today.

19. Despite the fact that many tourists annually visit the Bolivian side of Lake Titicaca, the size of the economy of this part of the Lake is small. The main factors contributing to this situation are that communities are dispersed throughout the region and a significant amount of its people migrates to La Paz in search of better economic opportunities. Consequently, there are currently no conditions to generate greater economies of scale that would in turn create more local tourism demand. New investment is therefore needed to make the economy larger and improve its comparative advantage.

Environmental issues

20. Pollutants enter the Lake from several sources, the largest being the city of El Alto (approx 650,000 inhabitants), which in addition to municipal waste waters, discharges significant quantities of industrial wastes. Two other important sources are the Peruvian cities of Pun0 (around 100,000 inhabitants) and Juliaca (around 200,000 inhabitants). Nutrient inputs from domestic wastewaters are causing eutrophication at some locations, jeopardizing the Lake ecosystem. As a consequence of poor waste water management, high bacteria levels at some locations pose a threat to public health. Mining activities may result in effluents containing mercury and other toxics, threatening the fishing industry. Additionally, the introduction in the 1940s of non-native fish (trout) to the Lake for commercial farming is depleting the native fish populations as trout have escaped and are significantly influencing the Lakes fish population.

Water and Sanitation

21. Since 1990, Bolivia has significantly increased investments in water and sanitation, and coverage levels have expanded. Bolivia still, however, has one of the lowest water and sanitation coverage rates in Latin America. The coverage rates for urban and rural households are shown below. The quality of water service in many cities is low, with intermittent supply and non-potable water. Smaller

- 28 - cities, particularly around the Lake Titicaca region struggle to provide reliable water supply services, have incomplete drainage collection networks and lack wastewater treatment facilities. The National Geographic Geo-Tourism Study indicated that lack of adequate water and sanitation is a major impediment to tourism growth.

22. Water service delivery in Bolivia is the responsibility of the municipal government. Larger cities have established autonomous water and wastewater utility companies, referred to as “Entidades de Prestacidn de Sewicios de Agua Potable y Alcantarillado Sanitario (EPSAs). Smaller cities typically provide service through a “Water Committee.” The cities of Cochabamba and La PadE1 Alto experimented with private concession contracts that collapsed due to popular opposition in 2000 and 2006, respectively.

Urban Rural Total

23. The “Law for Water Supply and Sewerage Services,” which was promulgated in 1999 and amended in 2000 (Ley 2006), is the existing governing law for the sector. In 2006, the government created the “Ministry of Water” which combined the responsibility for river basin management, irrigation, and basic services (water and sanitation) under one ministry. The government is currently considering adopting a new law referred to as “Ley-Agua Para La Vida.” The proposed law defines water as a fundamental human right, requires the government to ensure universal access, and strengthens the role of the government as regulator. Similar to the existing water law, the new water law requires all cities to establish separate water and sanitation companies (referred to as ENAPAS-Entidad de Agua Potable y Alcantarillado Sanitario, in the proposed law).

24. Only two of the Project cities in the Lake Titicaca area, Achacachi and Viacha, have separate water companies (EPSAs), while the other cities have water committees. Water is generally supplied during the day, and distribution stopped at night to reduce pumping costs. Household water metering is common, but is still not universal with many households paying a flat monthly fee. A financial review of the two EPSAs indicated that Viacha relies extensively on municipal subsidies to cover operating costs, while the Achacachi water company can recover its costs through user fees. By the end of the Project all cities are expected to have established independent water and sanitation companies (including solid waste) that can recover operation and maintenance costs through user fees.

Basic Sanitation in Communities

25. Bolivia has an important experience in the provision of services in water and sanitation services in rural areas. The World Bank financed Project Yacupaj in the Department of Potosi settled the basis for a national Project, PROSABAR (also financed by the Bank) that scaled up the concepts of demand-based approach developed in Potosi. The participation of communities, selection of technologies and level of services using demand from the communities as well as the emphasis on the sustainability, in the overall intervention process are concepts that are incorporated in the national legislation. The Vice Ministry of Basic Services advises the implementation agencies -such as FPS- to incorporate those

-29- concepts in the implementation process. Currently, the law mandates the need to set apart 5% of Project costs for the Community Development Process. These monies are usually dedicated to the formation of the Water User’s Association or “Comitb de Agua y Saneamiento ”, that takes over the operation and management of the system once they are constructed and are fairly independent. However, the Comitis usually request support from municipalities when major system breaks occur.

26. Regarding sanitation, one of the main difficulties in achieving effective use of the on-site sanitation is the failure of projects to understand the religious and cultural representation of the “Pachamama” or mother earth, therefore depositing excreta in a sacred underworld has resulted in many sanitation facilities being built for storage purposes. Recently, the country has experimented with ecological sanitation, which entails the separation of urine and excreta and reuse of this for fertilization purposes.

Solid Waste

27. In 2005, the Bolivian government prepared the “National Strategy for Integrated Solid Waste Management.” The Strategy highlighted the poor state of solid waste management in Bolivian cities, and stressed the need for Bolivia to:

0 Control growth in solid waste production 0 Increase recycling and reuse 0 Improve solid waste service coverage 0 Promote environmentally sound waste disposal

28. Similar to water supply, solid waste management is the responsibility of the municipal government. Most cities provide collection services directly through a municipal government department, although at least four cities have established companies (Empresa Municipal de Aseo-EMA). In larger cities, the rate of solid waste collection is relatively high and the municipal governments have, or are planning to construct, sanitary landfills. In the intermediate cities, however, collection rates are generally below 50% and the waste is disposed in unsanitary dumps. Most Bolivian cities with a population over 50,000 apply solid waste user fees, but the fees typically fall short of covering full costs. Smaller cities typically do not charge for solid waste services.

29. Although there are a number of regulations pertaining to solid waste, the Strategy recommends formulating a comprehensive “Law for Solid Waste Management.” The Vice Ministry of Basic Services, under the Ministry of Water, currently is responsible for overall sector management. There is a clear need for the prefecture government to also support the municipalities in developing appropriate sanitary landfills approaches, and providing technical and financial assistance.

30. None of the Project cities around Lake Titicaca have well-developed solid waste management systems. Collection levels are below 50%, there are no user fees, and waste is disposed in an unsanitary manner. The lack of solid waste management often results in an unsightly, malodorous, and unhealthy environment which detracts from the tourism potential and quality of life in these cities. Under the Project, the cities will be required to provide water, wastewater, and solid waste services through one company (EPSA or ENAPAS), and initiate charges for solid waste services.

-30- Project intervention area

31. The Lake Titicaca area consists of 17 municipalities surrounding the Lake with a population of approximately 324,000 people living mostly in rural areas, the primary areas of intervention.

32. Preliminary estimates indicate that Project funds could cover around 30 communities of 200 families each, including construction (water meters), supervision, community development but not design of perforation of the wells.

Table 3. Population and poverty rates of the Municipalities of the Lake Titicaca Mancomunidad

Copacabana I 14,586 I 12,241 I 83.92 I 4,161 I 10,425 I 40 Desaguadero I 4,981 I 3,768 I 75.65 I 2,219 I 2,762 I 443 I 13 El Alto 649,958 424,504 65.31 647,350 2,608 99,6 8 Guaqui 7,552 6,480 85.81 0 7,552 04 18 Laja 16,311 15,896 97.46 0 16,311 030 65 Pucarani I 26,802 I 25,797 I 96.25 I 0 I 26,802 1 0,o I 80 Puerto Acosta I 28,288 I 27,105 I 95.82 I 0 I 27,296 I 030 I 138 Puerto Carabuco 17,517 16,498 94.18 0 16,264 090 75 Puerto Perez 7,830 7,554 96.48 0 7,830 0,o 29 San Pedro de Tiquina 6,093 5,252 86.20 0 6,093 0,o 17 Tiwanaku 17,231 16,347 94.87 0 17,231 0,o , 45 Tito Yupanqui I 2,213 I 2,166 I 97,88 I 01 2,213 I 090 I 7 Viacha I 66,142 I 54,220 I 81.98 I 29,108 I 37,034 I 44,O I 180 I Total I 967,654 1260,568 I 89.69 1690,378 I 277,276 I 71,3 I 1036 I The municipalities of Jeslis de Machaca y San And& de Machaca, which were part of Viacha, were created in 2004, as well as Taraco which was part of Tiwanaku. The data from these new municipalities has been included in the original municipalities. Source: INE. Censo 2001. (*) Poverty estimates are based on Necesidades Bitsicas Insatisfechas (NBI)

Emergency Communities in Laja

33. Currently, the Vice Ministry of Basic Services has prioritized about 80 communities in four municipalities (Laja, Puerto Perez, Pucarani, and Viacha) in the region for need of “emergency” services. The Project will finance those priority communities identified for the Municipalities ofLaja, Pucarani and Puerto PCrez (list below), which are classified as Emergency communities given their exposure to high- level of contamination of their water sources and are riparian to the river Seco-Pallina-Katari, one of the

- 31 - more polluted rivers in the region. Municipalities already have or have contracted the technical design for such communities and the Prefectura have typically financed the perforation of the wells. The Project will require communities to finance at least 30% of costs (See Economic Analysis, Annex 9) through their contribution of unqualified hand labor, local materials and other in-kind contributions.

34. The systems built on the Altiplano typically consist of a well 60-1OOm deep with an elevated tank, a small distribution system and a domiciliary water connection with a meter. Sanitation will be provided through on-site facilities, built with local materials. The community will be provided with a menu of options (at least three), including -but not limited to- a ventilated improved pit (subsidized except for pit excavation), an ecological latrine, and a pour-flush latrine.

Table 4. List of “Emergency” Communities Prioritized In the Project

Tambillo Yes PACAR4NI MUNICIPALITY Catavi Yes Catavi pueblo Yes Catavi Asunci6n Yes Lacaya (pueblo) Yes Lillimani Yes Mucura Yes Mucaiia Yes Quiripujo Yes Challaj ahuira Yes Chucara Yes Pamna Cohana Yes

- 32 - - 33 - Annex 2: Major Related projects Financed by the Bank and/or other Agencies BOLIVIA: Lake Titicaca Local Sustainable Development Project

IPDO . Project Name Amount Financier Ratings Sector Issues

Decentralized Infrastructure for SZOM IDA IP- s Local infmtructure subprojects and mumcipal.~ capacity Rural Transformation Project Do- S building Decentralization Second $25M IDA IP- s Strengthening capacity of government at the local level Programmatic Structural Do- S Adjustment Credit I1 Rural Alliances Project $28.4 M IBRD/IDA P-S Improving accessibility to markets for poor rural Do-S producers in selected sub-regions of the country Urban Infrastructure Project $30 M IDA IP- s Improving access to basic services for the urban poor in Do- S Bolivia’s major cities through targeted infrastructure investments and strengthened planning, expansion and sustainability of urban service delivey for municipalities. Bolivia Land for Agricultural $13.5M IDA Pipeline Decentralized beneficiary-driven land distribution Development Project mechanism that allows organized landless or poor farmers to acquire suitable agricultural land Productivity and Job Creation $15 M IBRDLDA Pipeline Facilitate access to fmancial services for micro, small Project and medium enterprises, and to improve the investment

IBRD/IDA

IADB The program is orgamzed under two Subprograms: Sustainable Tounsm Regulation & Marketing (Subp.1) and Investment in Demonstrative and Small projects. The first comprises three components. (i)a system for accreditation and certification (SAC) of local companies and personnel; (ii)regulation for sustainable tourism; and (iii)marketing. The second has two, (i) demonstrative projects --US$lOO thousand to US$lm; and (ii)small projects --US$25 to 100 thousand. Urban Transportation Planning in $900,000 IADB The objective of this technical cooperation was to strengthen the La Paz (2005) municipalities of La Paz and El Alto in the management of urban transportation through the development of a Bus Rapid Transit strategy. IADB (1) Rehabilitation of Urban Environment (a) strategic urban interventions in the Parque Urbano Central [Central Urban Park] (PUC); and @) upgrading public spaces in the city center; (2) Promotion of social and economic development through the financing of a social development fund, productive fund and the establishment of public- private enterprise; (3) Institutional strengthening Local Development and Fiscal $54.6M IADB Adjustment (2004)

Water and Sanitation Millennium $140,000 IADB Technical Cooperation Development Goals for Bolivia (2003) Basic Urban Sanitation Program, $70M IADB The PROSUB makes sub-loans to municipalities for water and sewage PROSUB. projects based on certain institutional, socio-economic and fmancial sustainability eligibility criteria. Water and Sanitation Program $92~ EU (1) $30M have been invested in WateriSewage Systems in the City of Santa Cruz, through the small cooperatives that operate in the outskirts of the city (not with SAGUAPAC); (2) $11M in the construction of WatedSewage in the city of Cobija - Pando and $51M have been allocated under a basket fund for FUNDASAB.

Sanitation Investment Program $5M CAF This program consisted of sanitation works in the North Zone of Santa (PROINSA) Cruz and was completed in December 2005.

Basic Water and Sanitation and $5M CAF This program consists of sanitation works in the East Zone of Santa CNZ Social Investment Support and is currently under implementation. Program (PASBAIS)

- 34 - Table 1. Projects financed by Donor Agencies in relevant areas for the Lake Titicaca Region

Project Agency Current situatiodObservations

PRODELI (Integrated UNICEF Based on demand, potable drinking water, ecological latrines Rural Development), and solar powered showers are being provided in the schools and community centers. Families and communities participate actively in the decision-making process related to the construction, operation and maintenance of these services and environmental education. PRODELI (Integrated UNICEF At the local level, community capacity building is being Rural Development), strengthened for generating more demand for social services, Municipal and community improving the quality of said services and exercising more strengthening control over government resources. Support for food security FA0 Under the training modality for food security, three fundamental and means for subsistence activities are being carried out: - Training and literacy mainly for women; - Creation and protection of physical and natural assets to allow the mitigation ofcatastrophic events and other crises; - Rapid and opportune assistance to victims of natural disasters and other emergencies.

Support for Human Capital FA0 Through three types of interventions, approximately 121.OOO Development beneficiaries are being supported annually: (i)Food assistance for children less than six years old; (ii) School nutrition program; and (iii)Support for children and adolescents living and working in the streets Support for SMEs and CAF The support and strengthening of SMEs is a fundamental microfinance challenge within CAF’s Action Plan for Bolivia. To meet the challenge, the CAF is providing financing to SMEs via direct short, medium and long-term lines of credit and through financial institutions (Commercial Banks and Development Institutions andor Banks, amongst others)

Tourism sector CAF This Project, under the auspices of the General Agreement improvement in the between CAF and the Spanish Government, contemplates the Andean Community evaluation of the tourism sector within each of the Andean Circuit Community countries and the definition of a series of practical actions to improve the region’s overall supply. Among other areas, this Project covers both transportation infrastructure and communication systems conditions; lodging and the provision of services; legal regulatory framework and procedures; quality systems and consumer protection; incentives for the industry; and formation and development of human resources.

Improvement of Alpaca CAF An agreement between CAF and COPROCA will provide the raw materials assistance to improve COPROCA’s raw material supplier system and processing plant.

International Plan Various Donors Health, education and basic sanitation and environmental Altiplano Program projects in the following municipalities: Pucarani, Guaqui, Desaguadero, Batallas, San Pedro de Tiquina, Achacachi, Huarina, and Ancoraimes.

- 35 - Project Agency Current situatiodObservations

Sustainable and Productive lICA 5000-6000 beneficiary families Rural Development in the Embassy of Japan Zomponents: Agricultural production and marketing of lima keaof Achacachi leans for export. ktificial insemination and animal health. 4gro-industry: Production of milk derivatives Education: Alternative training Health: Basic medicine campaigns Structural: Road infrastructure, improvement of irrigation infrastructure

BOO175 : Basic sanitation [ADB [mprove coverage and quality of drinlung water systems and for small municipalities sewerage systems in rural communities up to 10,000 inhabitants. Operational strengthening of both municipal governments and utilities for sustainability in the provision of services.

BO0174 : Sustainable IADB The program has two subprograms: Regulation and Sustainable Tourism Program Tourism Development (Subprogram 1) and Investment in Demonstration projects and Small projects (Subprogram 2). The first one has three components: (i)accreditation and certification (SAC) for sustainable tourism; (ii) regulation; and (iii) promotion. The second one has two components: (i) demonstration projects between US$ 100,000 and US$ lmillion; and (ii)small projects between US$25,000 and US$lOO,OOO.

BO-T1056 : Preparation of IADB Economic consultancies for: 1) the evaluation of the a Water Program for Small PROAGUAS Program (small municipalities); 2) socio- Communities economic justification for the new water rural program.

BO-T1025 : Support for IADB Includes the analysis of municipal institutional capacity in urban Productive Development and land-use planning in the principal cities ofthe country. and Poverty Reduction Strategies BO-M1018 : Capacity IADB Strengthen economically organized farmer organizations in strengthening for small business entrepreneurship, linkages and articulation with local producers entrepreneurs economic development stakeholders and financial entities.

BO-T1034 : Integrated IADB The Project will consider three components: The first one will Solid Waste Management complete the regulation of the law and its techcal annexes for Strategy the public consultation process; and the second will formulate an action plan to implement a strategy for solid waste management; and the third component will consolidate the strategy in three municipalities.

Decentralized IBRD Includes, amongst others, the following components: Infrastructure for Rural 1) National Strategies for Rural Electrification and Information Transformation and Communication Technologies will assist the Vice Ministry of Electricity and Alternative Energy and the Vice Ministry of Telecommunications in developing effective strategies to improve and accelerate electricity and ICT coverage expansion in rural areas; 2) Rural coverage expansion investmenl component includes financing for direct expansion of electricity and phone services into pre-identified rural areas.

-36- Project Agency Current situatiodObservations

4icro credit ipanish Cooperation Diversify financial services in rural and urban areas; facilitate Ipain-Bolivia the expansion of credit services; and support the formalization of non-banking financial entities. lupport Program for Rural 2OSUDE The program focuses on new opportunities that will generate 'roductivity APRU sustainable income in rural areas through the development of productive projects with viable business plans. The APRU also aims to strengthen and build capacity of producer organizations that can develop productive rural agro-industry projects; support productive investments that will generate employment and augment sustainable income for low-income rural inhabitants; and assistance for Project preparation. The program provides small producers with annual family income less than or equal to US$2.160, and that submit business plans via intermediary entities.

2ompetitiveness ZOSUDE Facilitate market access for rural products via business levelopment of small articulation and linkages with marketing fms Strengthening nicro and medium-size of the specialized supply chain provided by Servicios de nterprises FOMEM Desarrollo Empresarial (SDE), improving information and supporting the adaptation of SDE to the rural area Facilitate the interrelationship between the supply of non-financial services with complementary financial services For new clients expand the access to new SDE methodologies Support local economic development (Desarrollo Econ6mico Local -DEL) of municipal governments and facilitate the access of rural productive groups to SDE's supply chain via a competitive bond Facilitate the direct application of Buy Bolivia (Compro Boliviano) in government acquisitions through the Programa de Apoyo y Acompafiamiento a Ferias a la Inversa Support development strategies for the Vice Ministry of Micro and Small Producer, in coordination with other donor cooperation projects and facilitate open discussion on subjects related to the sustainable development ofboth micro and small business. kinking water supply and GTZ On the local level, the program supports the institutional ranitation in small and development of water utility companies in various regions. The nedium-sized cities aim is to improve the water supply of some 600,000 people. At the same time, the KfW development bank is making investment funds available for infrastructure improvements.

- 37 - Table 2. Instruments for Tourism Development in LAC projects

Development Project Tourism Link Instrument for Tourism Obi ective ?olicy D Argentina: SEA (Califate) ?olicies are developed D Nat’l tourism strategy incorporates Development to .o assure that tourism environmental and heritage Mainstream D Colombia DPL I1- naintains cultural and protection & pro-poor stance Environmental D Ecuador CEA- :nvironmental D Reform of tourism institutional, Sustainability & D Honduras SEA with ieritage and legal, & regulatory frameworks for Social tourism - :ontributes to effectiveness improved livelihoods. Development D Mexico DPL I1 D Protection measures for D Peru CEA with tourism environment and heritage strengthened Incentives for SME development esp. value chain “back-ward linkages Gov’t agency regulates new tourism developments Brazil: Building M&E PDO -tourism leads Legal Frameworks Develop Capacity ofMin.Tur to economic Basic site infrastructure Sustainable Grenada: Tourism TA development Site Management, guides Tourism (PSD) Signing, education Industry Honduras: Copan Valley S&MEcredits (revenues) Honduras: Sustainable New site development Coastal Tourism Argentina: Indigenous Tourism encouraged Public private foundation Environmental CDD to provide revenues CDD Grants programs Protection Brazil: Protected Areas and incentives for Training in management & support to Brazil: Parana Biodiversity sustaining protected Training in marketing Indigenous Central America: Barrier areas Fiscal incentives for environment Peoples Reef Mexico: Protected Area System (SNAP) Nicaragua and Honduras: Corazon OECS: Protected Areas and Livelihoods Peru: Participatory Indigenous PIMA) 0 Brazil: Ceara Regional Tourism encouraged Tourism SME credits Local Development to create jobs, New Site development Development Bolivia - Participatory revenues CDD grants Rural Investment Tourism a motive for Signage and education Costa Rica: Puerto Lim6n community building Public spaces Jamaica: Inner Cities Basic and civic development Services Peru: Sacred Valley (Machu Piccu) Improved Bolivia Rural Transport Tourism is facilitated Government finances infrastructure Service DomRep: Water and as a result of the for use by hotel and tourism Delivery & Sanitation improved or new industry Performance St Lucia: Water Supply services St Lucia: Disaster Management

- 38 - Table 3-Summary review of Result Framework for Tourism projects in LAC

I Project Locale Scope Outcome Results Monitoring Critical Type [ndicators [ndicators irrangements Assumptions Biodiversity Clentral nstitutional Harmonization vleasurable gegional Externalities do and 4merica md of relevant mprovement nonitoring and not undermine Biosphere 3) irganizational policies If EIS reports Project Reserve Paranh, :apacity Ecoregional nanagement rargeted mtcomes Brazil 3iodiversity approach xtivities in aesearch and Climate change :onservation incorporated eeference to Project reports does not into Jaseline Surveys of undermine conservation Seneration of ionors, natural planning at all new policies multilateral resilience of

I levels in critical ?rejects and ecosystems or Improvement ueas scientific work impact local in resource Numbers of communities conservation families (forests, coral benefiting reefs) ffom new Adoption of programs and alternative policies production I systems Wastewater Dominican Address water Improved Increased Yearly report Government and Water Republic and sanitation reliability and water with has regulatory Management St. Lucia needs in regularity of production quantitative capacity and (1) tourism areas service in Increased and qualitative can enter into Provide drought area sales to feedback to agreements sufficient and Improved commercial ensure regular with private reliable water management users and correct operators supply of PCU Improved disbursement performance and effective of utility oversight of company projects Bolivia Income general Rate of growth Hectares of Monitoring Macroeconomic for small rural in volume of agricultural and evaluation stability and producers non-industrial lands under reviews growth agricultural cultivation Quarterly and Commitment to products with irrigation annual targets at Improved progress municipal coverage of reports levels infrastructure Project Relative services in supervision political, social rural areas reports and and economic Increased mid-term stability employment review in rural areas Project- Increased financed production for household market surveys Improved provision of health care services in rural areas.

- 39 - Project Locale Scope htcome Xesults Monitoring Critical rype ndicators [ndicators brangements Assumptions Cegional Clentral kvironmental hccessful ncrease in 2onsultation Relative social 3evelopment 4merica md socio- :onsultation iatisfaction imong local md economic :I) :conomic imong local imong local stakeholders 3tability Peru (1) ustainability itakeholders md foreign 3IA reports Harmonization Honduras If heritage o establish a .ourists Monitoring of 3fintra- (1) issets ihared vision hcrease in .ourism regional 'or the region :apacity for iequency and interests mproved iolid waste satisfaction Mobilization of :apacity of nanagement, Survey of local key nunicipalities, sanitation xonomic stakeholders :ommunities services and ictivities in md fmsin water supply relation to ourism [ncrease in 3aseline rupport local iervices zmployment Relevant [ncrease in infrastructure municipal investments capacity for md provision strategic 3furban planning and services revenue Zapacity suilding in services and management and providing tourism infrastructure Community MCxico [mprove Reduction in Delivery of Data collection Conditions Forestry livelihood for labor independent, Baseline and affecting forest dwellers migration performance- follow-up migration are [ncreased based surveys in beyond scope availability of certification multiple ofProject employment Payments communities Technology in made for available to communities environmental assure and ejidos services sustainable Number of forest community management enterprises Adequate surviving financial three or more support to carry years after out Project launch activities Number of forest area hectares under improved management

- 40 - Project Locale Scope Outcome Results Monitoring Critical rype Indicators Indicators Arrangements Assumptions ?rotected Bolivia Create national Increased Sufficient Protected area Environmental keas system of effectiveness financing to scorecards issues are management of biodiversity continuously applying priority for for protected protection sustain SNAP WWF :0Untry areas within management methodology government protected All major Data analysis Donors engage areas ecosystems Beneficiary in long-term Increased are assessment financing social support represented arrangements for protected with sizeable Financing areas areas available for Enhanced Local alternative rural local communities development participation within and projects in PAS in revenue- around the Pas External generating are actively pressures on PA activities involved in resources do conservation not increase efforts significantly

Human Honduras Improve Attraction of Significant Project Sustainable Capital (2) environmental visitors increase in completion development Development stewardship Use of number of report prioritized by and cultural database in visitors Training GOH knowledge local schools Significant workshop Social, Development increase in reports economic and of installations number of User surveys political and exhibits schoolchildren of the stability using database environmental resources and cultural Number of resources external and database and internal exhibitions installations and exhibits

Disaster St. Lucia Reduce Readiness and Number of Quarterly Natural Management (2) vulnerability of capacity of the infrastructure progress disasters do not infrastructure country's projects reports on exceed to natural institutions to completed physical planning and disasters prepare for Percentage of progress of response Strengthen and respond to hurricane- works capacity institutional disaster resistant Management Government response emergencies schools and assessment in priority given to capacity Percentage of health centers terms of disaster population Increase in persons trained management protected by staff training key mitigation for emergency works to planning infrastructure, Increase in flood control institutional capacity for disaster planning

-41 - Annex 3: Results Framework and Monitoring BOLIVIA: Lake Titicaca Local Sustainable Development Project

1. There are several mechanisms to monitor and evaluate the Project’s effectiveness. The State of the Lake Report which will set the baseline for monitoring existing technical data, including sources of contamination, habitat degradation and water modeling exercises. The Vice Ministry of Tourism has developed the Social State of the Lake section within this report, highlighting the social conditions and quality of life indicators for the municipalities of the region. The Project will continue to support this effort through the annual updating of both the water quality and social data in the report as well as its publication. The annual updating of this report will initially be executed by the Government of Bolivia under oversight of VIPFE.

2. Municipal investments in tourism infrastructure and other basic services will be channeled through the FPS, which will include a monitoring and evaluation system during the implementation. The local community will participate in the monitoring process by recording their observations in a “Libro de Actus”, and appointing “jscales de obras” who will be required to perform field visits to the sites at least three times during the life of the Project.

3. The Project-level monitoring and evaluation (M&E) framework will track implementation progress, measure intermediate outcomes, and evaluate Project impacts. The framework outlines key performance indicators, data collection methods, a timetable for collection, and responsible agencies. This framework will be used to supervise and monitor the implementation of the Project. The Unidad de Coordinacidn del Proyecto (Project Coordination Unit, PCU) has monitoring and evaluation facilities and will assume a coordinating role. The PCU will be responsible for the overall management and implementation of the Project M&E Framework. This will include maintaining the databases, managing the flow of information, and producing periodic monitoring reports.

Arranpements for Results Monitoring

Outcome Indicators:

A. Geo-Tourism Score: The Vice Ministry of Tourism, through the PCU, will be responsible for undertaking the Geo-tourism surveys. The Bank will complete a similar survey at the midterm review and as part of the Project’s Implementation Completion Report. The Geo-tourism survey will be further verified through a “Demand Survey” similar to that conducted during Project preparation.

B. Urban Environmental Sustainability Index: The PCU will monitor levels of environmental services and sustainability in the Project cities.

C. Quality of State of the Lake Report: The World Bank supervision mission, in collaboration with ALT, and international experts, will review and comment on the Reports.

Intermediate Indicators:

Component I:The municipal governments will monitor and report to the PCU on amount of tourism development and cultural heritage and production projects.

- 42 - Component 2: FPS will monitor and report to the PCU on the amount and progress of urban and rural basic service projects.

Component 3; PCU will monitor and report on the number of tourism and land-use studies undertaken.

Results Framework

Use of Outcome Information

Contribute to local sustainable A. Geo-Tourism survey ratings for A. Modify tourism investments as development by facilitating key areas. necessary. tourism and cultural protection, and improving B. Urban Environmental B. Direct investments, assistance basic water and sanitation Sustainability Index for key and policy dialogue related in key services. The Project will also communities. cities. contribute to protecting Lake Titicaca’s environment. C. Quality of the State of the Lake C. Help prioritize studies, Reports investment, and policy dialogue on Lake Titicaca. Results Indicators for Each Use of Results Monitoring ComDonent Component 1: 1.1 Number of tourism Track and adjust progress of Local tourism development improvement projects. municipal and community driven and cultural heritage protection activities. 1.2 Number of cultural heritage sites protected.

1.3 Number of small business supported.

Component 2: 2.1 Number of rural residents Track and adjust progress of Basic Services provided with improved water and water, wastewater, and solid sanitation services. waste investments.

2.2 Number of communities provided with adequate wastewater services.

2.3 Number of communities with adequate solid waste services.

~~ ~ Component 3: 3.1 Number of tourism studies. Track and adjust number and Institutional Strengthening quality ofimportant institutional 3.2 Number of municipal land-use studies. management plans.

- 43 - Target Values for Outcome Indicators:

A. Geo-Tourism Score: This score is based upon a methodology developed by the National Geographic which considers a number of different factors in determining the attractiveness of a tourist destination. The methodology is presented in Appendix 1 to this Annex. The score is based on a percentage; with 100% the highest score. During Project preparation the Bank supported the first baseline survey. The NGS will train local staff to carry out the survey and expand the locations surveyed.

(1) Titicachi-Sicuani-Yampupata route (2) Copacabana-Kasani-Tiquina route (Route 8) (3) Tiquina-Kompi-Chua-Huatajata-Achacachi-Huarina route (4) Taraco-Coacollo-Chiripa circuit

B. Urban Environmental Sustainability Index: This index is based upon the coverage and quality of water supply, wastewater, and solid waste services, as well as the financial sustainability of the company providing the services. The methodology is presented in Appendix 2 to this Annex. The index ranges from 1-4, with 1 being the highest score.

I Indexscore I Copacabana I Achacachi I Tiquina I Tiwanaku 1 Viacha 2007 4 3 4 4 4 2010 3 2 3 3 3 2013 2 2 2 2 2

C. Quality of State of the Lake Report: The annual State of the Lake Report will be evaluated based upon its scope, quality of the data, depth of the analysis, and policy impact.

2007 Poor: Limited scope, partial data, little analysis, and limited policy impact 2010 Moderate: Covers most environmental and social issues, comprehensive data and systematic analysis; some policy content. 2013 €&&I: Covers all key environmental and social issues, in-depth scientific and policy analysis; serves as the key management document for guiding the management of Lake Titicaca in Bolivia.

- 44 - Target Values for Intermediate Outcomes

Component Indicator 2010 2013 1.1 : Number of tourism improvement 50 100 projects. Component 1: Local tourist and 1.2: Number of cultural heritage sites 20 productive development protected.

1.3 Number of small business 50 100 supported.

Component 2: 2.1 Number of rural towns provided 10 20 Basic Services with improved water and sanitation services. 2.2 Number of urban communities 2009: 5 cities 201 1: 5 cities provided with adequate wastewater complete complete services. collection treatment plants systems 2.3 Number of cities with adequate 2009: 3 cities 2011: 3 cities solid waste services. complete landfills with adequate solid waste collection Component 3: 3.1 Number of tourism studies. 2 4 Institutional Strengthening 3.2 Number of municipal land-use 6 12 management plans.

-45 - Annex 3: Appendix 1-National Geographic Geotourism Study

BOLIVIA: Lake Titicaca Local Sustainable Development Project

National Geographic has developed a Score Ratings System as part ofthe Geotourism Study which lists percentage rankings for some sites according to a series of general and site-specific factors. 100% is the highest ranking possible, indicating that the destination is doing well. These rankings constitute the baseline for the tourism assessment, and more sites will be analyzed and the rankings will be updated annually by the National Geographic as part of the Project. At the end of the Project it is expected that these percentages will have increased by 10% minimum.

Bolivia Site Score Ratings according to National GeograDhic's Geoturism Studv

A. Natural Attractions 75% 85% 75% 75% 73% 80% 70% 63% 80% (Biodiversity)

C. Event Attractions 60% 52% 52% 52% 47% 47% 52% 47% 52%

E. Interpretation 56% 44% 36% 36% 44% 52% 44% 56% 36%

11. GEOTOURISM SITE SPECIFIC FACTORS

B. Cultural 1 Social 57% 43% 47% 60% 63% 63% 33% 67% 37% Conditions

"Titicachi-Sicuani-Yampupata route ** Copacabana-Kasani-Tiquina route (Route 8) *** Tiquina-Kompi-Chua-Huatajata-Achacachi-Huarina route **** Taraco-Coacollo-Chiripa circuit

- 46 - Annex 3: Appendix 2-Urban Environmental Sustainability Index

BOLIVIA: Lake Titicaca Local Sustainable Development Project

1. The Index score is based on an aggregate of indicators for water supply, wastewater, solid waste service, and financial sustainability of the company. The parameters for each indicator are:

1. Financial Indicator High Covers all O&M costs through user fees Medium Covers at least 75% of O&M costs through user fess Low All Others Note: Each city will have a company providing water, wastewater, and solid waste services 2. Water Supply Indicator High More than 16 hours service and 75% coverage Medium More than 8 hours service and 50% coverage Low All Others 3. Wastewater Indicator High Functional WWTP with 75% sewerage coverage Medium Functional WWTP with 50% sewerage coverage Low All Others Note: Functional WWTP consistently meets design effluent standards 4. Solid Waste Indicator High 75% collection coverage and disposal in sanitary landfill Medium 50% collection coverage and disposal in sanitary landfill

2. The overall index score depends on the specific indicators as follows:

Level 1-Highest All indicators are high Level 2 Financial indicator is medium, and all other indicators are high or medium Level 3 Financial indicator is medium, and one other indicator is low Level 4-Lowest All Others

3. The 2007 baseline values for the 5 Project cities are calculated as follows:

- 47 - Annex 4: Project Costs BOLIVIA: Lake Titicaca Sustainable Development Project

Table 1. Allocation of Project funds by component (SDR)

Component Subcomponent costs 1. Support for Tourism Development and Cultural Protection 5,276,800

1.1) Tourism Development Support 4,275,200 1.2) Cultural Heritage Program 320,000 1.3) Support to productivity activities 4 8 9,600 1.4) Administrative cost for FPS 192,000 2. Basic Services 5,596,800 2.1) Basic Community Services 2,69 1,200 2.2) Sewerage and Waste Water Treatment 2,252,8 00 2.3) Solid Waste 363,520 2.4) Administrative cost for FPS 289,280 3) InstitutionalStrengthening and Project Management 1,926,400 3.1) Capacity building for Vice Ministry of 518,400 Tourism Municipalities and Communities, Institutional strengthening for Prefecture, VM Cultures, VM Basic Services and VM Basins and Hydrological Resources.

3.2, Monitoring and Evaluation of the strategic 1,408,000 vision, complementary studies and Project management (PCU) and PPF Advance.

TOTAL 12,800,000

-48- Table 1.1 Allocation of Project funds by component in US$ Dollars

Costs with Component Subcomponent costs counterpart

1. Support for Tourism Development and Cultural $8,245,000 1 $8,907,222 Protection 1.1) Tourism Development $6,680,000 $7,342,222 support 1.2) Cultural Heritage Program $500,000 $500,000 1.3) Support to productivity $765,000 $765,000 activities 1.4) Administrative cost for FPS $300,000 $300,000 2. Basic Services $8,745,000 $11,095,866 2.1) Basic Community Services $4,205,000 $4,947,059 2.2) Sewerage and Waste Water $3,520,000 $5,028,571 Treatment I 2.3) Solid Waste $568,000 $668,235 2.4) Administrative cost for FPS $452,000 $452,000 3) Institutional Strengthening and Project $3,010,000 $3,010,000 Management 3.1) Capacity building for Vice Ministry ofTourism Municipalities and Communities, Institutional strengthening for $810,000 Prefecture, VM Culture, VM Basic $810,000 Services and VM Basins and I Hydrological Resources. 3.2) Monitoring and Evaluation of the strategic vision, complementary studies and Project $2,200,000 $2,200,000 management (PCU) and PPF Advance. TOTAL $20,000,000 I $23,013,088

- 49 - Table 1.2. Allocation of projects funds by component and years in US$ Dollars

COMPONENTSBubcom

(*) July 2008 - June 2009

-50- Annex 5: Detailed Project Description BOLIVIA: Lake Titicaca Local Sustainable Development Project

Component 1: Support to Tourism Development and Cultural Protection This component will support activities that promote quality of life, strengthen cultural identity, provide critical tourism infrastructure, and improve economic development for local communities within the Lake Titicaca Basin. Key investments include:

1.1) Tourism Development Support: The objective of this subcomponent is to enhance both current and potential tourism development in prioritized areas through relatively small-scale investments in: signage and accessibility of infrastructure to facilitate both tourism reception and local ease of access; scenic byways and lookout facilities with public amenities; visitor interpretation centers; community- based initiatives including: arts and crafts centers, organization and promotion of indigenous cultural events (music and dance), village and home-stays, camping facilities, gastronomy, improvement of existing tourism services, and development of new tourism products based on current local initiatives and market demand studies. This subcomponent will assist both municipalities and communities around the Lake identified during Project preparation as having the need to improve their existing tourism development, as well as those that have the potential to embrace tourism as an agent of sustainable development. While this subcomponent is demand-based and all eligible populations could access Project resources, the Project will encourage a phased geographic targeting of the Lake’s four prioritized tourism zones and their respective circuits, which is consistent with the Government’s overall tourism development strategy for the Lake’s region. Tourism studies for each of the four zones were carried out during preparation and priorities defined consensually for the region as part of the first phase of the Government’s comprehensive ‘Visioning Exercise’.

Eligible subprojects will sustain and enhance both current and potential cultural, social, economic and environmental assets to preserve the living character of the communities that surround the Lake. Financing will be provided through two categories of activities related to tourism: a) Municipal Investments; and b) Community subprojects that include projects identified in the four tourism zones and their key circuits. Community subprojects will be undertaken by the community with the support of an intermediary (NGO) or firms that will be hired to work with the community to design and implement new projects. The community component is consistent with the community consultation conducted during Project preparation and will be refined as community groups are facilitated by the contracted intermediary. These community activities do not fall under local municipal jurisdiction. The Municipal tourism investment component is consistent with existing local legislation and Municipal planning and priorities.

1.2) Cultural Heritage Program: This subcomponent aims to protect the integrity of sacred sites, heritage monuments and the unique natural areas of Lake Titicaca. Most of the sites and cultural monuments designated and listed as ‘important national heritage’ by the Vice Ministry of Cultures are now at risk -e.g. Isla del Sol, Isla de la Luna and Copacabana. This is due to several factors including: irregular growth of towns, with little land-use planning; absence of preservation management guidelines for parks, sacred sites and monuments; and continuous consumption of fire wood that depletes most of the natural tree species that once surrounded the Lake. In addition to preservation of cultural heritage monuments in Isla del Sol and Isla de la Luna, this component includes restoration of pre-Hispanic agricultural landscapes, restoration of pre-Hispanic trails and restoration of artistic and historic assets in colonial churches.

- 51 - 1.3) Support to productive activities: Similar to the Bank Financed Rural Alliance Project, but focused only on activities related to tourism, this component will support small scale local economic development through grant financing of sub-proj ects. These could include handicrafts, textiles, cultural events that are linked to tourism activities around the Lake. This relatively modest subcomponent would begin with strategic pilot activities and studies.

1.4) Administrative Cost for FPS: This subcomponent will finance the administrative cost to oversee the financial and procurement aspects of the tourist infrastructure in component 1. FPS will provide assistance to the municipalities and communities to implement the subprojects, participate in the follow- up on pre-investment activities, review final designs, administrate, execute and supervise the subprojects.

Component 2: Basic Services

This component will facilitate access to improved services and infrastructure in prioritized municipalities and communities within the Lake Basin through the Vice Ministry of Tourism and Basic Services. Proposed activities include:

2.1) Community Water and Sanitation: The Project will support small-scale water and sanitation infrastructure for the Lake’s rural communities. Communities will be selected using criteria that include an evaluation of the current situation and current threats to water sources from pollution, demand from communities, readiness, and commitment by municipalities to co-finance, geographical clustering, and potential benefits on critical tourist circuits. The intervention will be supported by specialized NGOs or firms hired by municipalities that will work with a cluster of communities. These will work closely with FPS and the municipalities to ensure that community concerns and demands are reflected in the design and construction of facilities. The Project will also finance a post-construction follow-up including training and on-the-job support with tailored training for the Water User’s Associations (WUA).

The community development program will include a) for the Water User’s Association: training on, basic accounting, minutes taking, tariff levels, billing and collection and technical basic-skills capacity, water system monitoring and control, pump operation and replacement, among others; b) for communities as a whole: sanitary education program, latrine maintenance, payment for services, Water User’s Association bylaws, rights and responsibilities, proper maintenance of facilities, etc; c) for municipalities: collection of information, indicators, periodic inventory of the status of the system and support systems for WUAs. The Project cycle will consist on a pre-investment phase where community mobilization and formation of WUAs would occur, an investment phase where the actual construction of facilities would be done and a post-investment phase, less intense, but in which there would be an opportunity to check on the use of the sanitation facilities and the water system.

Different NGOs, with the support of the bilateral cooperation, are currently working in El Alto and the Altiplano. The Project would build on their experience and on-going relation with municipalities and will likely establish a competitive process between them for the execution of the subcomponent. Once the PCU had prioritized the Tourist Circuits, the Project will finance the construction of water and sanitation facilities for tourists, ensuring that the fees for usage would allow proper operation and maintenance. A participatory community process will be undertaken to allocate the operation of the facilities, which would follow under the supervision of the local WAS.

2.2) Sewerage and Waste Water Treatment: The Project will support the development of sanitation facilities for communities and extension and rehabilitation of existing sewerage networks. Five municipalities (Copacabana, Tiquina, Achacachi, Tiwanaku and Viacha) are included in the Project, (See Table 1). All of the cities, with the exception of Viacha, are significant tourist zones and serviced

- 52 - populations can increase dramatically during peak tourist periods. For example, additional peak populations in Copacabana and Tiwanaku can exceed 20,000 people during festival periods, and providing adequate water, wastewater, and sanitation services are essential to improving tourist potential and enhancing the quality of life for the residents.

The wastewater subcomponent covers all five cities (See Table 1). The Project will finance the improvement of the collection network to ensure 100% coverage. Currently, only Achacachi has semi- functional facultative wastewater lagoons. The Project will finance low-cost and appropriate wastewater treatment systems. Potential treatment systems include larger and well-engineered lagoons, and use of post-treatment wetland polishing ponds to help remove nutrients.

Table 1. Water Supply and Sewerage Coverage

Municipio Urban Population Water Supply Coverage Sewerage Coverage Copacabana 4,200 80% da Achacachi 8,500 80% 65 % Tiquina 1,900 60% 0% Tiwanaku 1.500 40% 25% Viacha 30,000 90% 83% Total 46.100

2.3) Solid Waste: The Project will finance solid waste investments in Tiwanaku, Copacabana, and Achacachi. Viacha will use other sources of financing for its solid waste Project. Proper solid waste management is also essential to reduce blockage of wastewater collection pipes which is now a major problem. A study is underway to consider the feasibility of multi-municipal landfills in Copacabana (Tito, Yupanqui, and Tiquina) and Tiwanaku (Guaqui and Taraco). The Project will finance improvements in collection, street cleaning, transportation, recycling, and final disposal in sanitary landfills. The landfills will be designed for low-cost operation, relying mainly on manual labor and minimizing the use of heavy equipment during operations. Each environmental assessment that will be undertaken before solid waste activities occur will determine if any waste pickers are present and could potentially be impacted and if so, programs to assist them will be developed and implemented as part of the activity.

2.4) Administrative Cost for FPS: This subcomponent will finance the administrative cost to oversee the financial and procurement aspects of the basic services in component 2. FPS will provide assistance to the municipalities and communities to implement the subprojects, participate in the follow- up on pre-investments, review final designs, administrate, execute and supervise the subprojects.

Component 3: Institutional StrenPthening and Proiect Management This component will enhance the land-use planning and management capacity of municipalities within the Lake Titicaca Basin through the municipal strategic and land-use plans. The component will also enhance the development and annual updating of technical and social data - the Lake’s water quality and natural habitat, as well as quality of life indicators for the communities surrounding the Lake. This will be supported through the creation of an annual “State of the Lake” Report.

3.1) Capacity building for Vice Ministry of Tourism Municipalities and Communities, Institutional strengthening for Prefecture, I/M Culture, VMBasic Services and I/M Basins and Hydrological Resources: This component will support the following activities:

- 53 - 3.1.1) Institutional strengthening for Vice Ministry of Tourism: This subcomponent will support the development of targeted tourism studies that support a long-term program for tourism development in the Lake Titicaca Basin. This subcomponent also includes consulting services for a marketing strategy to promote Bolivia’s international tourism potential, training in communications, assistance in reviewing the establishment of an internet booking system for community-based guest houses, and GIS technology for VMT.

3.1.2) Institutional strengthening for Municipalities and Communities: The Project will support municipal strengthening through the development of strategic and land-use plans for all of the municipalities in the region. These plans will establish strategic guidelines for medium and long-term sustainable development of the municipalities, in conjunction with the existing guidelines of the National Development Plan 2006-2010, the Tourism Sector Plan, and the Regional Strategic Vision. This subcomponent will also finance assistance for local communities in Project management. It will strengthen community organizations and producer organizations to participate in tourism development.

3.1.3) Institutional strengthening for Prefecture and Government Agencies: The Project will support institutional capacity building and management strengthening for several of the entities involved with the execution of the Project, including the Prefecture and Vice Ministries of Basic Services, Culture and Hydrological Basin. International agencies such as the National Geographic Society, NGS”, and the International Joint Commission, IJC16 could assist with this capacity building. An advisory group on Lake Management, with representatives from Bolivia and relevant international experts is planned.

3.2) Monitoring and Evaluation of the strategic vision, complementary studies and Project management: The Project will support the following activities:

3.2.1) State of the Lake Report: Through a World Bank Netherlands Water Partnership Program Trust Fund, the Bank supported the development of a framework for Lake Titicaca’s first State ofthe Lake Report. The Report summarized all existing Lake Data, including sources of contamination, habitat degradation and an additional water modeling exercise, also contracted through the trust fund, which shows impacts of current pollution trends. The Vice Ministry of Tourism’s preparation team developed the Social State of the Lake section within this report that highlights the social conditions and quality of life indicators for the municipalities of the region. The Project will continue to support this effort through the annual updating of both the technical and social data in the report. The annual updating of this report will initially be executed by the Government of Bolivia.

3.2.2) Social Communication Strategy: This SCS, which complements the Project’s Social Assessment, will serve each component of the Project (cross-components). Special emphasis will be placed on communication activities with indigenous peoples to increase their potential for participation in the Project and to create a better context for communications which will increase the potential for the Project’s overall acceptance. The SCS will include activities implemented and described under the Project. The SCS will also address specific social, environmental and economic concerns as they may arise during Project implementation (including translations into Aymara language).

3.2.3) Project Management: This subcomponent is particularly important given that this is the first time the Vice Ministry of Tourism executes a Bank financed Project. This subcomponent will enhance the management and execution of the Project, including standard operating costs, Project Coordination Unit fees (PCU) and third party auditing.

’’The US-based NGS is active in the region and preliminary agreement has NGS preparing a Destination Mapping exercise, consistent with similar Machu Picchu activities. l6The Canada-US IJC manages the Great Lakes and can provide a useful model and training facilities for ALT.

- 54 - Special emphasis will be placed on communication activities with indigenous peoples to avoid misunderstandings and mistakenly created adverse environments that can undermine Project's overall acceptance. The SCS will include activities implemented and described under each component of the Project. The SCS will also address the specific social and economic concerns the population has through simple messages (including translations into Aymara language) while promoting: (i)reflection and change in people's behavior based on information; (ii)understanding; and (iii)persuasion, as the third stage in the changing behavior process.

- 55 - Annex 6: Implementation Arrangements BOLIVIA: Lake Titicaca Local Sustainable Development Project

1. The Project will be implemented by the Ministry of Production and Micro Enterprise (MPME), through its Vice Ministry of Tourism (VMT). VMT will operate the Project under the supervision of MPME and the Inter-institutional Committee for the Sustainable Development of Lake Titicaca (ICSDLT)”. The investments in infrastructure (water and sanitation, and those related to tourism activities undertaken by the Municipalities) will be administered by the Social and Productive Investment Fund (FPS) 18.

2. The Ministry of Production and Micro Entemrise (MPME): The MPME will be responsible for coordinating the execution of the Project with all members of the ICSDLT, delegating internally to the VMT operational responsibility for the execution of the sub-proj ects, approving the operational manual (OM) and any modifications, approving the Annual Operating Plan (POA) and ensuring the Project’s budget registration, processing together with VMT, amendments to the Credit Agreement, and reviewing annual evaluations and impact studies.

3. The Vice Ministrv of Tourism (VMT): VMT through its Project Coordination Unit (“PCU”) will be in charge of Project coordination, the implementation of the institutional strengthening program, the development and execution of Bolivia’s tourism strategy for Lake Titicaca. It will also have the following responsibilities: the effective coordination with the ICSDLT, the MPME and its Vice Ministries and other public entities with activities related to the Project (Vice Ministry for Development of Cultures, Vice Ministry of Territorial and Environmental Planning, Customs Services, Immigration Services), the coordination of infrastructure investment activities through FPS, and coordination of the Project with the Municipalities in Lake Titicaca, the preparation of an annual update of the study “the State of the Lake” and the procurement of VMT components. When necessary, inter-institutional technical committees (with FPS, the Vice Ministry of Basic Services andor the Vice Ministry of Cultures) will be established for the selection of projects, the revision of TOR’S, the revision of Project designs, the approval of projects and the periodic revision of execution arrangements. See Diagram No. 1 for Implementation Flow for the VMT-PCU projects.

4. Other responsibilities of the PCU during the implementation of the Project will be the following: (i)securing the efficient and coherent implementation of the Project, (ii)coordinating the Project activities with other public institutions and social actors involved or related to Lake Titicaca, (iii) formulating guidelines and operational regulations with the objective of improving the Project execution, (iv) carrying out the procurement for the VMT components, (v) being responsible for the Project accounting and financial management, (vi) preparing the Annual Operational Plan (POA) for the Project, this in conjunction with the VMT, (vii) ensuring that all procurement and financial audits are carried out on time, (viii) maintaining a proper Monitoring and Evaluation (M&E) system, (ix) implement a communications and information strategy for Lake Titicaca, (x) monitoring FPS implementation of infrastructure investments components, reviewing its advance reports periodically on the basis of agreed criterion, and approving payments of FPS’s operational costs; and (xii) establishing a mechanism to advise and monitor the municipalities, communities or associations during the implementation of their productive or tourism initiatives. See Diagram No.1 for Implementation Flow for the VMT-PCU projects and Community Driven Activities.

l7This Committee includes the Ministry of Water, the Ministry of Production and Micro-enterprise and the Ministry of Planning. l8With the exception of very specific investments in Productive and Tourism Infrastructure which will be managed by the PCU.

- 56 - 5. Productive and Social Investment Fund (Fond0 Nacional de Inversion Productiva v Social) - FPS: FPS will be the agency in charge of implementing the Project investments in water, basic sanitation and solid waste management, as well as those investments in infrastructure for Municipal Tourism investment^'^. FPS will rely on the municipalities for the execution ofthe projects, i.e. the municipalities will carry out all procurement activities and will be in charge of signing the contracts for investments in infrastructure. FPS’ role will focus on: (a) securing the technical quality of projects and (b) securing the compliance with safeguards and fiduciary requirements. FPS will provide technical and fiduciary assistance to Municipalities during the assessment, implementation and supervision ofprojects

6. The Bank has recently concluded an “Operational Review ofFPS” and this review has led to the establishment of an Action Plan that, once implemented, will further enhance the capacity of FPS. FPS will operate under an Institutional Agreement signed with the Vice Ministry ofTourism. In order to secure the technical quality of infrastructure projects designs in basic sanitation; FPS, the Vice Ministry ofBasic Services and the PCU will establish a quality review committee to assess these subprojects. Once approved, PCU will send the subprojects to MG for their implementation. VMT trough the PCU will monitor FPS and will disburse payments for eligible operational costs on the basis of agreed criterion. See Diagram No. 2 for FPS implementation flow.

7. FPS will manage the Project funds and the counterpart funds for investments in infrastructure. Municipalities will transfer the committed counterpart funds for these investments to FPS. FPS will use these funds to pay the fms(contractor and supervision) based on the terms defined in each specific contract. Payment to FPS from Project funds will be in accordance to National norms, which are up to 5% of contract value. The fee negotiated between VMT and FPS is 5% which will be reviewed at the one-year anniversary of the Project (which is being structured as an early mid-term review). The agreement on 5% rather than the 8% proposed for other Bank projects was apparently agreed-upon based on the relative greater degree of Project preparedness (most of the projects will have final design), the plan to have an FPS office in El Alto and thus less field travel costs, and that municipalities will prepare the environmental jchas.

Subproject Stages, Outputs and Payments to FPS

Stage output Payment Procurement Subproject contracts 2.25% of the total value of the subproject signed Subproject execution Physical advances and Per financial execution, up to 2.25% of the total payments value of the subproject Subproject closing Subproject completed and Up to 0.5% of the total value of the subproject administrative closing I

8. An important aspect ofFPS’s involvement is the detailed Action Plan that FPS is undergoing for strengthening Project management following a comprehensive review by the World Bank (See Annex 7). The majority of action plan activities are being funded under the PDRCIII Project and not within this Project.

l9With the exception of specific investments in Productive and Tourism Infrastructure which will be managed by the PCU.

- 57 - 9. Municiual Governments: The role of the Municipal Governments (MG) is fundamental for the Project. According to the Law of Municipalities, the Law of Water and Sanitation Services, the Popular Participation Law and the Law of the National Dialogue, among others, the Municipalities are responsible for either providing or coordinating the provision of infrastructure and basic sanitation, and in general terms the different assets this Project is expedited to deliver. The Municipalities are responsible for budgeting the required resources for co-financing the different investment initiatives.

10. Under this Project, the property of all new infrastructure (on basic sanitation and for tourism and productive activities) will be transferred to the Municipalities, thus MG’s will be responsible for the maintenance of these new assets and the sustainable operation of new or improved services. In this sense, building capacity within the Municipalities is an important element of the Project.

11. Municipal Governments will be responsible for: (i)coordinating all municipal planning activities with the PCU, (ii)carrying on the procurement of works, goods and services for the investments in infrastructure, with FPS support, and (iii)signing and managing these contracts, and operating and maintaining the new assets. Municipalities’ capacities will be reinforced through an overall Municipality Strengthening Program led by the Vice Ministry of Tourism through the PCU.

12. The Prefecture of La Paz: The Prefecture of La Paz (PLP) has many responsibilities in relation to the preservation and sustainable development of Lake Titicaca. The PLP has important resources derived from the national distribution of hydrocarbon royalties. The Vice Ministry of Tourism and the Prefecture of La Paz will sign an agreement that will establish the conditions for coordinated interventions in the Lake Titicaca area, particularly in relation to investments in infrastructure and overall regional planning.

13. Indigenous and Carnpesino Communities and Producers Associations: The main beneficiaries of the Project will be the communities and producers associations in the Lake Titicaca region, thus the coordination with these groups is particularly important for the Project. Indigenous and Campesino communities have legal rights, as Territorial Base Organizations (“grassroots organizations” OTBs), over the identification and prioritization of municipal investments. Associations of producers also have rights to participate in the prioritization of these investments, although they are not as influential as OTBs. Among the key activities of these organizations within the Project are the following: cooperating with the local governments and the municipalities to define priorities, participating in activities related to capacity building, participating in the identification of possible investments and in the formulation of pre- investment studies, participating in the implementation of specific projects.

- 58 - Diagram No.1 : Implementation Chart VMT- PCU

UCP COMUNIDAD OM I 1 II

- 59 - -60- Annex 7: Financial Management and Disbursement Arrangements BOLIVIA: Lake Titicaca Local Sustainable Development Project

EXECUTIVE SUMMARY

1. As part of the preparation process of the Lake Titicaca Sustainable Development Project, a financial management assessment was performed to determine the adequacy of the Vice Ministry of Tourism-PCU financial management arrangements to support Project implementation. The assessment was performed in accordance with OP/BP 10.02 and the Manual “Financial Management Practices in World Bank Financed Investment Operations”. The objective of the assessment was to determine the adequacy of the entity’s capacity to properly manage and account for all Project proceeds and to produce timely, accurate and reliable financial statements for general and Bank special purposes.

2. In addition, a financial management capacity assessment was conducted for the Fund for Social and Productive Investment (FPS), the entity which implement the municipal infrastructure investment of the Project. This assessment is based on the results of the FPS Operational Review which was conducted with the support of the Bank at the end of FY07. As a result of the review, a time-bound action plan including mitigating measures to address identified external and internal risks was agreed upon with FPS to strengthen its operational performance, including the internal control environment. The action plan is presented in Annex 16.

OVERALL CONCLUSION

3. Bolivia’s country Public Financial Management (PFM) risk rating is substantial. The advances reached towards improving the PFM, have been offset by several weaknesses found in the uneven application of the legal framework, particularly with regard to financial reporting and internal control environment. The situation at sub-national level is not really different.

4. Project design and implementation arrangements require that robust financial management systems are in place, so as to ensure that associated risks are adequately being addressed and that the implementing entities will be able to provide the Bank, the Borrower and other interested parties with accurate and timely information regarding Project resources, expenditures and activities. At the time of the assessment, minimum FM arrangements have been defined in the Vice Ministry of Tourism-PCU ; however, key actions still need to be completed, including,: i)completing the installation of an integrated financial information system, that could complement the Government’s FM system (SIGMA), and which will allow the use of a customized classification ofProject expenditures and the subsequent preparation of Project’s financial reports and withdrawal applications of credit proceeds; and ii)revising and refining the processes and procedures including specific internal controls and their inclusion in the Operational Manual. Given the complex institutional framework in which the Project has to operate and the weak capacity of the PCU, to properly address operational issues -not only fiduciary- the adequacy of those arrangements -mainly in terms of workflows- will have to be carefully reviewed within the first year of operation of the Project. A key issue for the proper operation of those arrangements will be the issuance of the corresponding Ministerial Resolution from the Ministry of Production and Micro-Enterprise, delegating Project implementation to the Vice Ministry of Tourism through the PCU, under terms and conditions acceptable to the World Bank for the operation ofthe proposed arrangements.

5. Regarding FPS, interim progress of the implementation of key actions from the Action Plan agreed with the Bank from the Operational Review exercise, will be followed up towards negotiation, Project effectiveness and ultimately during Project implementation. Those actions are mainly related to

- 61 - the adjustments of subproject cycle; operational policies, including internal controls and management information system. Completion of these actions is underway and it is being followed through the Second Participatory Rural Investment Project.

6. The Project inherent and control risk are rated as substantial. Consequently, the Project’s overall FM risk rating is substantial. Downgrading this rating will highly depend on the successful implementation of the FPS’ and VMT-PCU’s action plans. However, the risk profile on the Project can be adversely affected if the implementing entities are not able to maintain the proposed arrangements, including qualified staff, throughout the Project’s life.

7. On the basis of the review performed and progress achieved so far by both entities, the financial management team concludes that the proposed arrangements -as designed- can be considered acceptable to the Bank, subject to their effective and successful implementation.

SUMMARY OF FINANCIAL MANAGEMENT ASSESSMENT

8. The following sections summarize the results of the assessment conducted for the proposed financial management arrangements to be followed by the Vice-Ministry of Tourism, through the PCU; and the agreements reached for the implementation of WB financed projects under FPS, following the recommendations of the Operational Review ofFPS2’.

Risk Assessment and Mitigation

9. The risk assessment presented below, constitutes a summary of the issues considered for the Project as a whole, as of the date of the capacity assessment, and on the basis of the Bank’s knowledge of both proposed implementing entities, Vice Ministry of Tourism and FPS.

Risk Risk Risk Mitigating Measure Incorporated Condition of Negotiations, Residual into Project Design Board or Effectiveness

INHERENT RISK Country level - Country’s PFM risk S Implementation arrangements have been Draft Ministerial Resolution rating (including sub- discussed and evaluated. As a result, and delegating Project national level) is in compliance with current institutional Implementation to the VMT substantiaL2’ framework, the largest component will be through the PCU, discussed implemented through FPS, which is going by negotiations and signed through an integrated institutional before effectiveness. strengthening plan. Regarding the VMT, it has been agreed the establishment of a PCU, with streamlined processes and urocedures. The drastic salary M PCU will be staffed with professionals to reduction done in the be selected following Bank procedures; Key FM staff selected before whole public sector, therefore TORSof key staff will be Project implementation limits the capacity to approved by the Bank. begins attract and maintain qualified staff.

~

2o Operational Review of FPS, June 29,2007 (Draft Report) 21 2004 Bolivia Country Financial Accountability Assessment

- 62 - Risk I Risk I Risk Mitigating-- Measure Incorporated I Condition of Negotiations, Residual into Project Design Board or Effectiveness Rating @/N) Although the salary levels will be similar to the ones applied for the rest of the public sector, having an external source of financing can ensure staff stability. Regarding FPS, key FM experienced staff -at Central Office-have been maintained during the last years. The strengthening action plan includes specific training on Bank processes and procedures. Entity level The Vice-Ministry of Project design includes the establishment Draft Ministerial Resolution, Tourism has limited S of a PCU within the VMT. Project delegating Project capacity and no implementation would therefore be implementation to the Vice experience in external- formally delegated to the VMT and the Ministry of Tourism through financed projects. PCU through a Ministerial Resolution. the PCU under terms and Additionally, the entity conditions acceptable to the has complex and Adequacy of the arrangements agreed Bank agreed with the Bank bureaucratic processes will be carefully reviewed within the first discussed by negotiations and procedures that year of the Project implementation. and signed before would considerably effectiveness. delay Project implementation. FPS: Several An Operational Review ofFPS was Compliance with key actions weaknesses in the S carried out by external consultants, is being followed through the internal control financed and directly contracted by the Second Participatory Rural environment and other Bank. As result of such review, an Investment Project. deficiencies on FPS integral strengthening action plan has performance were been agreed with FPS. Consistently with identified as part of the other WB financed projects, key issues supervision and other and mitigating measures have been specialized reviews incorporated into Project design, conducted within the including a streamlined sub-project cycle, last years. better defmed roles and responsibilities of different actors (e.g. municipal governments), establishment of a monitoring & control unit, and a strengthened information system, with emphasis on control environment.

Institutional strengthening actions are being implemented through a Project Preparation Advance approved under the Second Participatory Rural Investment Project.

- 63 - 1 Risk 1 Risk I Risk Mitigating Measure Incorporated I Condition of Negotiations, Residual into Project Design Board or Effectiveness Rating (Y/N) Project level Project design is S Roles and responsibilities ofdifferent Draft inter-institutional and complex; it requires stakeholders have been defined, and on financing agreements coordination and such basis specific workflows for the providing for an adequate interaction with several implementation of different components definition of roles and actors, at national, have been agreed. However, adequacy of responsibilities of different regional and municipal those procedures will be carefully actors (Le., FPS, Basic level. evaluated within the first year of the Services, municipalities, Project design Project implementation, to timely identify communities, etc) reviewed proposes several types any need for adjustments. and agreed with the Bank by of activities at the negotiations and finalized in decentralized level. It the Operational Manual.. therefore requires that robust financial Operational Manual management approved by the Bank. arrangements are in place, including an Effectiveness (Y) adequate internal control system, that at the same time guarantee smooth and expeditious processes and procedures

CONTROL RISK Budget: FPS’ current M FPS has prepared specific procedures for Compliance with the budgetary procedures the preparation of operational and required actions is being establish that budget financial programming. Those followed through the Second modifications be procedures will be assisted with a Participatory Rural approved by DUF. customized programming module to be Investment Project (PDCR Experience has included in SAP (FPS’ information 11) demonstrated that such system), that will allow Regional Offices process may to prepare detailed program and budget considerably delay the allocation at sub-project level. This implementation of sub- enhanced programming process, if projects, when a properly implemented, should diminish budget modification is considerably the number ofbudget required. modifications required for the Project.

Budget (other than FPS Both entities have worked on specific Operational Manual budget modifications) S streamlined budgeting, and accounting, reflecting the processes and Accounting processes and procedures in the procedures agreed. Internal Control framework of existing local requirements Effectiveness (Y) and strengthening them as needed, Compliance with actions including the design and implementation required under FPS is being of punctual internal control mechanisms. followed through the Second Participatory Rural Investment Project.

- 64 - Risk Risk Mitigating Measure Incorporated Condition of Negotiations, Residual into Project Design Board or Effectiveness Rating (Ym S Those processes will be also supported by Complete the installation of budget modifications) a strengthened information system within the integrated financial Accounting FPS (SAP) and a ring-fenced system that information system. Internal Control complements SIGMA under the VMT- Disbursement Condition (Y) PCU.

On the basis of former experience, a Monitoring & Control Unit will be established within FPS, which among other tasks will perform specific control activities over the Regional Offices -and as required- at the central office, to ensure compliance with agreed procedures. Funds Flow M In the framework of the procedures set by SIGMA and the Single Treasury Account, I- funds flow arrangements have been defined for different components. Those procedures avoid unnecessary layers. As the specific regulations for the operation ofthe Single Treasury Account in US dollars are issued, the flow of funds would need to be adjusted accordingly. M Format and content of Interim Financial Reports are issued Reports and Financial Statements have automatically from been agreed with the Bank. More corresponding system. important, both entities are making the necessary arrangements to ensure that those reports are directly issued from SAP in the case ofFPS and from the Project financial information system to be used by VMT-PCU to complement SIGMA. Those arrangements will be critical to ensure comprehensiveness and reliability of the financial information. M On the basis of former experience, audit Audit TORSfor VMT and scope will require interim visits aimed at FPS reviewed and agreed evaluating internal control at FPS' with the Bank. Regional Offices, and on-site visits to sub-projects to ensure, among other An acceptable audit firm correspondence between physical and selected six month after financial progress. effectiveness. Overall FM Risk S

Weaknesses and Action Plan

10. All actions related to FPS are being addressed through the Second Participatory Rural Investment Project, in the framework of the strengthening action plan agreed with FPS. Therefore, this section will only focused on those critical actions agreed with VMT- PCU, to be completed towards, Negotiations, Board approval, and effectiveness.

- 65 - Action Estimated Date Complete the installation and adaptation of the integrated Disbursement Condition information system, making sure interim financial reports and financial statements provide the information agreed with the Bank. Operational Manual By Effectiveness DraR inter-institutionaUfinancing agreements to be entered into Reviewed by the Bank by between PCUEPS and participating municipalities, communities, negotiations and finalized etc, providing for adequate FM arrangements and clear roles and in the Operational Manual. responsibilities.

FINANCIAL MANAGEMENT IMPLEMENTATION ARRANGEMENTS

11. Following the implementation arrangements defined in section 1II.A of this PAD, it has been agreed that the financial management tasks would be undertaken by a) a Project Coordination Unit (PCU) to be established under the Vice Ministry of Tourism (VMT), for Components 1 (subcomponents 1.2, 1.3. 1.4) Support to Tourism Development and Cultural Protection and, 3. Institutional Strengthening and Project Management; and b) FPS for Component 1.1 and Component 2. Basic Services. Under such arrangements, the following sections describe the proposed financial management arrangements for each entity, identifying, as appropriate, the required additional actions to complete the design of fully acceptable financial management arrangements.

VICE-MINISTRY OF TOURISM: PROJECT COORDINATION UNIT

12. The PCU within the VMT will include a financial management team to be staffed with a Financial Management Specialist that would report directly to the Project Coordinator, and who would be supported by a Disbursement Analyst and an Accounting-Administrative Assistant. The main functions and responsibilities of these positions have been agreed with the Bank; and the specific terms of reference, including required qualifications will also be reviewed and approved by the Bank. The selection and contracting ofthese positions will follow Bank procedures.

13. In compliance with local requirements, some specific administrative and financial tasks - budget preparation and budget modifications- need to be coordinated with the General Administrative Unit of the Ministry of Production and Micro-Enterprise (MPM). As appropriate, those requirements will be reflected in the Project’s Operational Manual.

Programming and Budget

14. The preparation of the annual program and budget will follow local regulations established by the Ministry of Finance”, and specific regulations and instructions that may be issued by the Ministry of Production and Micro-Enterprise, through its General Administrative Unit. However, those general procedures will be complemented by additional guidelines to be included in the Operational Manual, to clearly identify the budgetary items under which Project specific activities need to be recorded, in accordance with their nature. Additionally, those guidelines will need to consider the regulations of public

22 Law No. 2042, Supreme Decree No. 27849 dated November 12,2004 - Regulations for Budgetary Modification.

- 66 - investment (SISIN), as applicable. In defining those procedures, the following issues will need to be considered in order to allow for an adequate budget control: 1) timely preparation of programming, budget and procurement plan, establishing a clear relation among them; 2) proper recording of the approved budget in the financial management system, not only following Government required classification (partidas por objeto del gasto), but also a classification by Project component and cost category (as needed); and 3) timely recording of commitments, payments and accruals as needed, to allow an adequate budget monitoring and also provide accurate information on Project commitments for programming purposes.

Accounting - Information System

15. The Vice Ministry of Tourism, and therefore the PCU has to comply with the Governmental Accounting Standards. Therefore, the Project would use the Chart of Accounts established by the Accountant’s General Office, followed by SIGMA (Government’s integrated financial management system). This Chart of Accounts will need to be complemented with a more functional classification including Project components/subcomponents and cost categories as needed. Project transactions and preparation of financial statements will follow the cash basis of accounting.

16. The Project will benefit from the use of SIGMA, and the Single Treasury Account (CUT) to process payments. However, in order to ensure adequate monitoring of Project activities, SIGMA will be complemented by an integrated ring-fenced system (budget, accounting and procurement) that is currently used by other WB and IDB financed projects. That system allows the use of a more customized classification of Project expenditures and the subsequent preparation of Project financial reports and withdrawal applications of credit proceeds. Arrangements are being made to adapt the system to Project specific needs, including its accounting manual, chart of accounts and format and content of financial reports.

Counterpart funding

17. Project Operational Manual will also include the specific procedures and accounting policies and procedures for the collection, recording, control, and reporting of the counterpart contributions provided by municipal governments/communities, and any other source. The valuation criteria for the recording of in-kind contributions will also be included in the Manual.

Internal control and internal audit

18. Specific processes and procedures for administrative and financial tasks have been designed, including the definition of roles and responsibilities of different levels -not only within the PCU-, segregation of duties and relevant internal controls. These procedures included in the Operational Manual, also reflect the internal control mechanisms in terms of authorization and approval, and specific documentation required in each step. However, it is important to mention that the successful operation of those procedures will highly depend from having a formal delegation from the MPM to the Vice Ministry of Tourism and the PCU, for Project implementation. The effective operation of those procedures will be evaluated through out the first year of Project implementation.

- 67 - Financial reporting

19. The Interim Financial Reports (IFRs) will specify sources and applications of Project resources and a statement of investment by Project component, reporting the current quarter and the accumulated operations against on-going plans. The reports will include credit proceeds, and local funds provided by participating municipalities, communities, and any other co-financing source -as appropriate- so as to provide information on the Project as a whole. Taking into account the considerations made in the accounting section, the IFRs and annual financial statements will be prepared directly from the integrated information system. The IFRs would be prepared on a quarterly basis and submitted to the Bank within 45 days of quarter end. The reports will be prepared in local currency and US dollars.

20. Specific content and format of the reports has already been agreed. However, adequate arrangements need to be made to ensure the issuance of the reports automatically from the information system, to be installed by December, 2007.

Auditing

Audit Report Due Date 1) Project specific financial statements June 30 2) Special opinions SOE June 30

FUND FOR SOCIAL AND PRODUCTIVE INVESTMENT (FOND0 NACIONAL DE INVERSION PRODUCTIVA Y SOCIAL- FPS)

22. Likewise the rest of the projects for which FPS undertakes the municipal infrastructure component, FPS subproject cycle will rely on municipalities for execution of subprojects. Under such arrangements, FPS’s role will focus on ensuring technical quality of subprojects and compliance with fiduciary requirements. These tasks will be performed through FPS’s existing institutional and financial management arrangements, both at central and regional level, strengthening them as needed.

23. Within FPS structure, the Finance Management Unit will assume overall responsibility for financial management tasks, through specialized staff, both at central and regional offices. Although FPS has gained sufficient experience in external financed projects, under different sources of financing -wB, IDB, and others- additional guidance will be required especially at Regional Offices, given staff rotation, and more important the changes that are taking place in terms of policies and procedures. FPS’ strengthening action plan provides for staff training and other capacity building efforts.

- 68 - 24. As a result of the Operational Review conducted with support of the Bank, a time-bound action plan has been agreed to strengthen FPS operational performance, including the internal control environment and mitigating measures to address identified external and internal risks. Key financial managements arrangements are detailed below, indicating, as appropriate, the specific arrangements agreed with the Bank.

Programming and Budget

25. The preparation of the annual program and budget will follow local regulations established by the Ministry of Finance23, and specific regulations and instructions issued by VIPFE for public investment, and Ministry of Finance and Directorio Unico de Fondos (DUF), as applicable. In addition to the requirements and tools available in SIGMA and SISIN for the recording and control of municipal subprojects; a customized programming module is being developed as part of FPS information system (SAP). This tool will assist FPS in preparing a detailed program and budget allocation at the subproject level, which will also be used for monitoring purposes. On the basis of its former experience, FPS will have to issue specific procedures and guidance for Regional Offices to ensure an efficient and smooth administration of sub-Proj ect budget and an adequate control and monitoring of budget execution. While defining those procedures, the following issues will need to be considered in order to allow an adequate budget control: 1) timely preparation of programming, budget and procurement plan, establishing a clear relation among them; 2) proper recording of the approved budget in the financial management system, not only following Government required classification (partidas por objeto del gasto), but also a classification by Project component and cost category (as needed); and 3) timely recording of commitments, payments and accruals to allow an adequate budget monitoring and also provide accurate information on Project commitments for programming purposes.

26. A key issue to be defined by FPS is the specific procedures and requirement related to budget modifications at the subproject level, and the interaction with VIPFE, the DUF. Once this is finalized, the Bank would evaluate the proposed arrangements within the framework of Bank-financed projects.

Counterpart funding

27. In relation to counterpart funding provided by the municipal governments, FPS has in place a long-standing arrangement which is acceptable to the Bank.

Accounting

28. In compliance with Government Accounting Standards, FPS uses the Chart of Accounts established by the Accountant’s General Office, followed by SIGMA (Government’s integrated financial management system). Being a decentralized entity, FPS is able to issue consolidated general purpose financial statements (balance sheet, and statement of income and expenditures). However, and although SIGMA allows registration at sub-project level, such chart of accounts will need to be complemented with a more functional classification including Project componentshbcomponents and cost categories, as needed. Given the nature of the entity and its information needs, FPS has developed an information system (SAP for its name in Spanish) that allows the recording of every single subproject through out its subproject cycle. The interface developed between SAP and SIGMA allows that each advance certificate (planilla) approved in SAP, automatically generates a record in SIGMA. Following the procedures

23 Law No. 2042, Supreme Decree No. 27849 dated November 12,2004 - Regulations for Budgetary Modification. established in SIGMA, upon completing the required approval and authorization process, payments are executed through the Single Treasury Account (CUT) in local currency. Project transactions are therefore recorded in both systems, SIGMA following the accounting and budgeting classification used by the Government and in SAP, following a more functional classification of Project activities by componentshbcomponents.

29. On the basis of the recommendations emerging from the Operational Review, FPS is currently working in strengthening its information system (SAP), to ensure that it meets the requirements in terms of internal controls, programming, and financial reporting.

Internal control and internal audit

30. Following the recommendations of the Operational Review, FPS is in the process of reviewing and adjusting, as appropriate, its operational processes and procedures, including fiduciary arrangements -both financial management and procurement- with the main purpose of strengthening the internal control environment and, at the same time, ensuring an efficient and smooth implementation of subprojects. As part of such process, sub-project cycle has been streamlined, and roles and responsibilities of different parties involved in the implementation of subprojects -municipalities, sectors, Prefectures -through out subproject cycle have been clarified and better defined towards avoiding duplication, and enhance accountability.

31. Key internal control mechanisms and additional mitigating measures to address identified risks have also been discussed and agreed as part of FPS’ institutional strengthening action plan (resulting from the Operational Review). Interim progress of the implementation of key actions will be followed-up towards appraisal, negotiation, and ultimately during Project implementation.

32. In accordance with local regulations, the Project is also subject to FPS’ Internal Audit Unit, as per the annual audit program defined by this unit approved by the Comptroller’s General Office.

Financial Reporting

33. Taking into account the considerations made in the accounting section, it has been agreed that SAP will also be adjusted to allow the direct issuance of specific interim financial reports and financial statements. Those interim financial reports should specify sources and applications of Project resources and a statement of investment by Project component, reporting the current quarter and the accumulated operations against ongoing plans. The reports will include credit proceeds, and counterpart contributions -municipal and prefecture’s- and other sources as required. Although core content of financial reports has been agreed, specific content and format still need to be defined, reviewed and finally developed in the information system. The final format and content of Interim Financial Reports have been agreed with the Bank. Those reports would be prepared on a quarterly basis and submitted to the Bank within 45 days of quarter end.

Auditing and External Oversight

34. Annual audit reports on specific Project financial statements -including all sources of financing- and corresponding management letter should be submitted to the Bank, within six months of the end of the Borrower’s fiscal year (December 3 1). The audit will be conducted by an independent audit

- 70 - firm acceptable to the Bank and under terms of reference approved by the Bank. Project audit cost will be financed out of credit proceeds and selection would follow standard Bank procedures. It has been agreed that scope of the audit would include interim visits to review the operation of specific internal control arrangements, as appropriate, especially at the regional level, including on-site visits to sub-projects on a sample basis.

I Audit Report I Due Date 1) Continuing entity financial statements I June30

21/.I* Proiect snecific financial statements I June30 I 31 Snecial oninions I SOE I June30 I I Compliance with Operational Manual I June30 I

35. In addition to external audit arrangements, FPS will also implement additional mechanism to promote local communities participation in the monitoring of the implementation of sub-projects. To this end, a community book will be kept on-site for communities to record their observations that will be later answered and addressed, as appropriate by FPS Regional Office staff.

36. FPS has agreed to publish on its web-site all contract awards, including the name of the Project, name of the company and amount. This is being followed through the Second Participatory Rural Investment Project.

FUNDS FLOW AND DISBURSEMENT ARRANGEMENTS

37. Considering the results of the assessments, the following disbursement methods may be used to withdraw funds from the credit: (a) advance, (b) reimbursement, and (c) direct payment.

38. Under the advance method and to facilitate Project implementation, each implementing entity - FPS and VMT’s PCU will have access to a Designated Account (DA) in US dollars which will be opened and maintained in the Central Bank of Bolivia in the name of the Project, for each implementing entity. These accounts would be managed by the PCU under the Vice Ministry of Tourism and, by FPS, respectively. Therefore, they will have direct access to funds advanced by the Bank to these DAs. Funds deposited into the DAs as advances, would follow Bank’s disbursement policies and procedures, as described in the Disbursement Letter and Disbursement Guidelines.

39. Currently the Designated Accounts in the Central Bank of Bolivia are segregated for each operation (i.e credit or Trust Fund) financed with multilateral or donor funds. However, the Bolivian Government has issued a Supreme Decreez4that establishes the operation of a Single Treasury Account in US dollars (CUT-ME) in the Central Bank of Bolivia. With the establishment of the CUT-ME, the proposal is that credit proceeds are directly deposited in this account, and similar to the CUT in Bolivianos, the CUT-ME would allow the opening of individual Libretas under the name of the Project from which they will have direct access to funds advanced by the Bank to be used for Project eligible expenditures.

40. Under the arrangement described above for the CUT-ME, it is expected that implementing entities will be able to process payments in US dollars from the Libreta in the CUT-ME when required;

24 Supreme Decree No 29236.dated August 22,2007.

- 71 - however, to process payments in local currency, funds would still need to be transferred from the CUT- ME to the corresponding Libreta in Bolivianos, following the procedure described above.

41. As of the time of this assessment, specific regulations for the operation of the CUT-ME are still being worked out by the Vice Ministry of Treasury and have not been issued yet by the Ministry of Finance. Therefore, any changes to current arrangements regarding the Designated Account for each implementing entity will be reflected through an amendment to the Disbursement Letter as appropriate in the near future.

42. Taking into consideration that both implementing entities use SIGMA and the Single Treasury Account (CUT) in local currency, in compliance with local regulations, a specific Libreta within the CUT in local currency would be exclusively opened for credit funds and it would be used to process payments in local currency, following the established mechanism, which has proved to function efficiently for other projects.

Disbursements from the WB and supporting documentation for withdrawal applications

Vice Ministry of Tourism -PCU

43 * The ceiling for advances to be made into the DA would be USD 500,000. The reporting period to document eligible expenditures paid out of the DA is expected to be on a monthly basis.

44. Supporting documentation for documenting Project expenditures under advances and reimbursement methods would be records evidencing eligible expenditures (e.g. copies of receipts, invoices) for payments for consultant services against contracts valued at USDl00,OOO or more for firms, and USD25,OOO or more for individuals; for payments for goods against contracts valued at USD200,OOO. For all other expenditures below these thresholds, supporting documentation for documenting Project expenditures will be Statements of Expenditures (SOEs).

45. All consolidated SOEs documentation will be maintained for post-review and audit purposes for up to one year after the final withdrawal from the credit account.

46. Direct Payments supporting documentation will consist of records (e.g.: copies of receipts, supplier/ contractors invoices). The minimum value for applications for direct payments and reimbursements will be USDlOO.000.

FPS

47. The ceiling for advances to be made into the DA would be USD1,500,000. The reporting period to document eligible expenditures paid out of the DA is expected to be on a quarterly basis.

48. Supporting documentation for documenting Project expenditures under advances and reimbursement methods would be records evidencing eligible expenditures (Le.. copies of receipts, invoices) for payments for consultant services against contracts valued at USD100,OOO or more for firms, and USD25,OOO or more for individuals; for payments for civil works against contracts valued at USD3,000,000; and for payments for goods against contracts valued at USD200,OOO. For all other expenditures below these thresholds, supporting documentation for documenting Project expenditures will be Statements of Expenditures (SOEs). Customized SOEs would be used for reporting FPS administrative costs.

- 72 - 49. All consolidated SOEs documentation will be maintained for post-review and audit purposes for up to one year after the final withdrawal from the credit account.

50. Direct Payments supporting documentation will consist of records (Le. copies of receipts, supplier/ contractors invoices). The minimum value for applications for direct payments and reimbursements will be USDlO0,OOO.

Disbursement of FPS’ administrative costs

51. Following the recommendations of the Operational Review, FPS’s administrative costs will be disbursed following an output-based disbursement mechanism, which consists of disbursing on the basis of out-puts up to an agreed-upon percentage on the total cost of the sub-Project. In the past, a similar mechanism was followed, except that disbursements were based only on payments. However, this mechanism was distorted creating a negative incentive would affect the quality of the sub-projects.

52. As described in section “Subproject Stages, Outputs and Payments to FPS” in Annex 6 of the PAD, the percentage agreed for this Project is 5% This 5% will be disbursed as follows: i)2.25% when the sub-project contract has been signed; ii) 2.25% during sub-project execution and on the basis of financial execution; and iii)0.5% when the sub-project has been completed and administratively closed.

53. To this end, FPS will prepare customized SOE report detailing: i)the list of sub-projects with contracts signed; ii)the amounts disbursed for each subproject under execution for a defined period of time; and iii)the list of sub-projects completed with administrative closing.

Table of Credit Proceeds

Percentage of Expenditures Amount of the Credit Allocated to be Financed Categorv (expressed in SDR) (inclusive of Taxes)

(1) (a) Works, goods, Training, 3,450,000 100% consultants services under Part 1 (a) ofthe Project; and

(b) Works, goods, Training, consultants services and VMT Operating Costs under Parts 1 1,650,000 100% (b), (c) and (d) of the Project

(2) Works, goods, consultants services and Training under Part 5,300,000 100% 2 of the Project, including audits

(3) Goods, consultants services, Training and VMT Operating 1,300,000 100% Costs under Part 3 of the Project, including audits

- 73 - Percentage of Expenditures Amount of the Credit Allocated to be Financed Catevorv (expressed in SDR) (inclusive of Taxes)

(4) FPS Operating Costs 500,000 5% ofthe total cost ofthe works under the Project paid in tranches as set forth in the Operational Manual

~~ ~ (5) Refund ofProject 600,000 Amount payable pursuant to Preparation Advance Section 2.07 ofthe General Conditions TOTAL AMOUNT 12,800,000

I

SUPERVISION PLAN

54. On the basis of the results of the assessments, identified risks and recommendations of the Operational Review of FPS, Project supervision will include desk reviews of IFRs and annual audited financial statements; and on-site visits to be performed on a semi-annual basis during the first two years of the Project for FPS. The FM supervision will also include visits to FPS Regional Offices. From the third year, supervision would be performed on an annual basis, unless otherwise required.

55. Given the identified weaknesses, and risks posed by the complex institutional framework in which the VMT-PCU will operate, two comprehensive FM reviews will be conducted within the first year of the Project to review the proper operation of the arrangements, mainly in terms of efficiency and timeliness of processes and procedures. These reviews would also be used as an opportunity to provide technical assistance to PCU’s staff. On the basis of such reviews, the FM team would determine the frequency and intensity of future supervision.

- 74 - Annex 8: Procurement Arrangements BOLIVIA: Lake Titicaca Local Sustainable Development Project

A. General

1. Procurement for the proposed Project would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, both updated in October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity.

2. Procurement of Works: Works procured under the Component 1 will support activities that promote quality of life improvements and economic development for the local communities living within the Lake Titicaca Basin. The works under this component will be executed by the municipalities and communities around the Lake, and they are mainly related to the construction of Information Centers for Tourists; signposting at tourist sites; public rest areas and bathrooms, interpretation centers, bike paths, small docks, preservation of cultural heritage monuments, restoration of pre-Hispanic agricultural landscapes, restoration of trails and restoration of artistic and historic assets. Component 2 will facilitate access to improved services and infrastructure in prioritized municipalities and communities within the Lake Basin through subprojects. The works under subprojects will include: (i)development of small- scale water and sanitation infrastructure for the Lake’s rural communities; (ii)development of sanitation facilities and/or rehabilitation of sewerage networks, and (iii)design and construction of the most appropriate technology for treating the wastewater.

3. All procurement of works, except those related to: (i)Community subprojects, that will be undertaken by the community with the support of an intermediary (NGO) or fm, and (ii)Basic Community Services, Sewerage and Waste Water Treatment and Solid Waste Program that will be executed by the municipalities under the responsibility of the Social and Productive Investment Fund “Fondo Nacional de Inversidn Productiva y Social - FPS”, which will be executed by the Project Coordination Unit (PCU) in coordination with the respective Municipalities, will be done using the Bank’s Standard Bidding Documents (SBD) for all International Competitive Bidding (ICB) procurement. For National Competitive Bidding (NCB) or Price Comparison (PC) methods, documents agreed with or satisfactory to the Bank will be used. Some of the small works may be carried out by the communities themselves in order for them to get involved as much as possible in their subprojects, in accordance with provisions of paragraph 3-17 of the Procurement Guidelines “Community Participation in Procurement (CPP)”, outlined and elaborated in the Project Operational manual (POM) and in the Procurement Plan (PP). The requirements, documents, as well as their procurement procedures and thresholds will be outlined in the Operation Manual and included in the Procurement Plan.

4. Procurement of Goods: Goods procured under this Project would include equipment for improving public infrastructure for local communities within the Lake Titicaca Basin, such as equipment for the Information Centers and Tourists; public rest areas and bathrooms, local museums, interpretation centers, docks and tourists resting areas; and community shelters in selected towns. Procurement of

-75- goods will be done using the Bank’s Standard Bidding Documents (SBD) for all ICB procurement. For NCB or Shopping (S) methods, documents agreed with or satisfactory to the Bank will be used.

5. Procurement of non-consulting services: The Project will include, within Component 3, activities to provide training and education to the different beneficiaries, and support institutional capacity building and management strengthening for several of the agencies involved in the execution of the Project. These activities will include the logistics for the workshops and training courses. No other non- consulting services are to be procured under the Project. All non-consulting services would be procured in accordance with the Bank’s Procurement Guidelines, as appropriate. This procurement would also be carried out using Bank’s SBDs or National SBDs agreed with or satisfactory to the Bank.

6. All procurement notices shall be advertised on the Project website and in at least one local newspaper of national circulation. ICB notices and contract award information shall be advertised in the UN Development Business online (UNDB online) and in the Development Gateways’ dg Market, in accordance with provisions of paragraph 2.60 of the Procurement Guidelines.

7. Selection of Consultants: Consulting services through firms will be contracted under this Project in the following areas of expertise: (i)Municipal Strengthening through the use of strategic plans; (ii)Institutional Strengthening, Capacity Building and Technical Assistance for the Prefecture and Government Agencies involved in the execution of the Project; (iii)State ofthe Lake Report (Social and Technical evaluation); (iv) development and annual updating of technical and social data of the Lake’s water quality and natural habitat, key studies with strong oversight and management by local municipalities; (v) studies such as the Lake Titicaca basin environmental management study; (vi) an industrial wastewater control study; (vii) Social Communication Strategy, and (viii) training.

8. Short lists of consultants for services estimated to cost less than $100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. The procurement of consulting firms will be carried out using Bank’s standard Request for Proposal (RFP). The Project may require the participation of nongovernmental organizations (NGOs) for the delivery of services for selected Project components to achieve certain specific objectives. In any case, a competitive process should be carried out and the short list should be comprised of consultants of the same category, similar capacity, by either consulting firms or NGOs.

9. Selection of Individual Consultant Services: Individual consultants will be contracted for the Project Management (Project Coordination Unit (PCU)), capacity building and technical assistance in specific areas.

10. A Project website and a national newspaper shall be used to advertise expressions of interest as the basis for developing short lists of consulting firms and individual consultants, and to publish information on awarded contracts in accordance with provisions of paragraph 2.28 of the Consultants’ Guidelines and as mandated by local legislation. Contracts expected to cost more than $100,000 shall be advertised in the UNDB online and in dgMarket.

11. Operating Costs: Standard Operating costs will be financed by the Project including Project’s Coordinating Unit’s fees (PCU).

- 76 - 12. Sub projects: Component 1 will include demand-based subprojects for: (i)Municipal Investments and (b) Communities. Community subprojects will be undertaken by the community with the support ofan intermediary NGO / firm hired by municipalities to work with a cluster of communities and with FPS to ensure that community concerns are reflected in the design and construction of facilities. The preparation of subprojects will follow procedures consistent with Bank Guidelines and included in the POM. All proposed subprojects would be submitted by municipalities and communities to the Vice Ministry of Tourism (VMT) who will be responsible of submitting them to the approval of the Inter- Institutional Committee for the Sustainable Development of Lake Titicaca (ICSDLT). Once approved the subprojects, VMT will transfer them to the eligible municipalities under Component 1, and to FPS under Component 2, for their execution.

13. The procurement of works, goods and services included in the subprojects would be implemented mainly by: (i)municipalities and or communities, and (ii)in certain occasions by FPS at the central or departmental level for specific purchases of specialized equipment, and grouping of contracts. These alternatives for procurement will depend on the capacity of the municipalities, and aim to increase participation and to obtain competitive prices. The procurement of works under the subprojects will be done using SBDs for NCB and PC agreed with or satisfactory to the Bank. No use of ICB for works is foreseen, with the sole exception of Viacha water treatment plant. The procurement of goods under the subprojects will be done using SBD agreed with or satisfactory to the Bank for NCB and RQ. The selection ofconsulting firms will be done using a standard RFP agreed with or satisfactory to the Bank.

B. Assessment of the agency’s capacity to implement procurement is still in process

14. The Project will be implemented by the Ministry of Production and Micro Enterprise (MPME) through the VMT who will operate under the supervision of the MPME and the ICSDLT, and the investments in infrastructure will be administered by the FPS. The Bank conducted an assessment of the procurement capacity of the VMT and FPS in October 2007, regarding the implementation of the procurement that will be done under the Lake Titicaca Local Sustainable Development Project, and prepared an action plan to enhance their procurement activities. The assessment also reviewed the organizational structure for implementing the Project and the interaction among the Project staff responsible for procurement activities with the technical staff within the VMT, municipalities, communities, and FPS, and their responsibilities.

15. Legal Aspects: The VMT, the eligible municipalities and communities and the FPS carry out their procurement processes according to the Public Sector Procurement Law “Normas Basicas del Sistema de Administracion de Bienes y Servicios - NB-SABS” and its “Reglamento - RE-SABS”, last updated by Supreme Decree No. 29190 on August 27,2007. ue to the differences between the NB-SABS and the Bank’s Procurement Guidelines all Project procurement should be made following Bank Guidelines and agreed procedures.

16. At the implementing agencies level the principal risks identified are: (i)in VMT lack of experience on Project execution financed by the Bank and as a result of that low staff capacity in Bank’s procurement procedures, poor procurement planning and internal control in regards of contract management, the fractioning of contracts due to budget constraints, an overall procurement environment which is relatively weak and vulnerable, and inefficient practices, fostered by the regulatory weakness, and (ii)FPS does not have a defined structure to manage and supervise procurement nor is there an analysis of the capacity of the various municipalities in this respect. However, there are procedures to carry out some procurement as requested by Municipalities.

- 77 - 17. Organization and staffing: The VMT will establish a Project Coordination Unit (PCU) within its structure which will be staffed by a Project Coordinator, with the assistance of a Legal Advisor of the VMT. Under the direct supervision of the Project Coordinator, there will be six specialists on the following areas: Financial Management, Procurement, Tourism, Basic Services, Social Productive Investments, and Land Planning. The Procurement unit will be staffed by two procurement specialists. The hiring of the PCU staff shall be completed by Project effectiveness. As per procurement staff, the VMT currently has a procurement staff with one year of experience, who is responsible for the procurement activities financed by the PPF of this Project. However, it is strongly recommended that a well qualified and experienced Procurement Specialist, under terms of reference approved by the Bank, should be hired. VMT is in process of contracting the design and implementation of an integrated Project management information system capable of supporting Project coordination, supervision, control and reporting tasks, including contract administration.

18. Productive and Social Investment Fund (FPS): FPS will be the agency in charge of the implementation of Project investments in water, basic sanitation and those investments in infrastructure that will facilitate the development of tourism and economic activities. FPS will rely on the municipalities for the execution of the sub projects including procurement. Its role will focus on securing the technical quality of projects and the compliance with safeguards and fiduciary requirements. The Bank has recently concluded an “Operational Review of FPS” and this review has led to the establishment of an Action Plan that once implemented will secure the capacity of FPS. The Bank is closely monitoring the implementation of such agreed Action Plan for its strengthening, and the specific plan for implementing Component 2 under this Project. FPS will operate under an Institutional Agreement signed with the VMT.

19. For managing Component 2, FPS is preparing: (i)the organizational structure to supervise and on certain occasions execute procurement, based on the capacity of the municipalities and communities involved; (ii)the analysis of the capacity of the municipalities, though the study has not yet been contracted, and (ii)the modernization of the SAP to include procurement plans and their implementation. Currently, FPS has only one procurement specialist with experience in Bank procurement procedures, who works at the central office and no one in the departmental offices. In previous projects procurement at the departmental level was carried out by technical staff or consultants hired according to the needs. The proposed procurement structure will be sent to the Bank shortly.

20. Based on the above, the overall Project risk for procurement is HIGH. Below is an Action Plan designed to mitigate the risks and to improve the VMT and FPS capacity for implementing procurement.

Action By when Bank to review Status and comment Signature Completed

properly staffed and the FPS structure and functions to supervise Municipalities procurement. VMT will evaluate municipalities to I VMT / I Effectiveness Before On-going establish a plan to monitor their work FPS Project’s start and to provide specific and punctual training to procurement staff in the municipalities.

- 78 - Action BY By when Bank to review Status whom and comment To define the procurement work flow VMT I October 15, Completed including approvers and timetable FPS 2007 within the PCU and the FPS procurement structure. To prepare TOR for the Procurement VMT October 15, Completed Specialist (with experience on Bank 2007 procurement procedures) To hire an experienced (senior-level) VMT December 15, Completed procurement specialist under TOR 2007 acceptable to thk Bank. To establish adequate office VMT I December 15, Completed infiastructure for the procurement unit FPS 2007 (VMT), including space for the procurement files.

To prepare the Procurement Chapter VMT I Negotiations Completed of the POM with detailed instructions FPS to all the agencies including municipalities, and communities on procurement procedures, documents, responsibilities, contract information, training, flow of information and a filing system. To prepare the Project Procurement VMT October 31, Completed Plan (for the first 12/18 first months 2007 of execution. To prepare standard bidding VMT Negotiations Completed documents for all procurement methods to be used in Project execution bv the PCU. Include in Annex 4 of the Loan Bank Negotiations Final Text Completed Agreement: (i)the Special Provisions agreed for Bolivia; (ii)a requirement for the use of standard bidding documents agreed in advance with the Bank, (iii)all Project procurement will be made following Bank Guidelines and agreed procedures Publication of the General VMT After Final text Pending Procurement Notice and the Negotiations Procurement Plan. Invitations for all contracts, VMT I During Invitations expressions of interest and contract FPS implementation should follow award will be advertised through a the Bank’s government and Project web page, Standard format and in a local newspaper. For consultant services above $100,000, the call for bids, the expressions of interest and contract award information should be also published in the UNDB and dg Market.

- 79 - Action BY By when Bank to review Status whom and comment To submit to the Bank Procurement VMT Four months NIA Audit Reports carried out by after independent auditors. completion of each calendar year. To design I include and integrated VMT I To be Disbursement procurement management system to: FPS discussed at the Condition (i)monitor the procurement plan and completion of its implementation; (ii)the workflow the of the processes; (iii)produce reports procurement (for ex-post reviews, audits, etc); (iv) capacity review unit prices, and (v) create a evaluation data base of contractors and its performance. Information about the use of this system should be included in the POM.

Special Provisions

A. In addition to and without limitation on any other provision set forth in this Schedule or the Procurement Guidelines, the following rules shall govern all procurement of goods and works under NCB: 1. A merit point system shall not be used in the pre-qualification ofbids. 2. Contracts for goods, services - other than consulting services - and works shall not be awarded to the “most convenient” bid but to the one that has been determined to be substantially responsive and has been determined to be the lowest evaluated bid, provided further that such bidder is determined to be qualified to perform the contract satisfactorily. 3. The Borrower shall open all bids at the stipulated time and place in accordance with a procedure satisfactory to the Bank 4. The Borrower shall use a single envelope procedure. 5. Whenever there is a discrepancy between the amounts in figures and in words of a bid, the amounts in words shall govern. 6. There will be no prescribed minimum number of bids submitted for a contract to be subsequently awarded. 7. Except as the Bank shall otherwise agree, the bidding process shall not be declared automatically void if the cost ofall bids received are above the cost estimate. 8. Any standards and technical specifications (quoted in the bidding documents) that are at least substantially equivalent to the national standards and technical specifications shall be acceptable. 9. Foreign bidders shall be allowed to participate. 10. Foreign bidders shall not be required to legalize any documentation related to their bids with Bolivian authorities as a prerequisite for bidding. 11, Foreign bidders shall not, as a condition for submitting bids, be required to enter into a joint venture agreement with local bidders. 12. No margin ofpreference shall be granted for any particular category ofbidders. 13. In the event that a bidder whose bid was evaluated as the bid with the lowest evaluated price withdraws its bid, the contract may be awarded to the second lowest responsive evaluated bid. 14. No other procurement rules or regulations of the Borrower’s agencies or of any state-owned entity shall apply without the prior review and consent of the Association.

- 80 - 15. Government-owned enterprises may participle in bids only if they follow paragraph 1.8 (c) of the Guidelines.

B. In addition to and without limitation on any other provisions set forth in this Schedule or the Consultant Guidelines, the following rules shall govern all procurement of consultant services referred to in this Schedule: 1. As a condition for participating in the selection process, foreign consultants shall not be required to enter into a joint venture agreement with local consultants, unless the conditions stated in paragraph 1.13 of the Consultant Guidelines are met. 2. As a condition for participating in the selection process, foreign consultants shall not be required to legalize their proposals or any documentation related to such proposals with Bolivian authorities. 3. Foreign consultants shall not be required to be registered in the Borrower's National Registry of Consultants (Registro Nacional de Consultoria). 4. Consultants (firms and individuals) shall not be required to present Bid and Performance securities as a condition to present proposals and to sign a contract.

C. Procurement Plan

21* The VMT has developed a preliminary procurement plan for Project implementation which provides the basis for the procurement methods. This plan is currently under review (October 7, 2007). Once reviewed and approved, the Plan will be available in the Project's database and in the Bank's external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity.

D. Frequency of Procurement Supervision

22. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agencies has recommended semi-annually supervision missions to visit the field to carry out post review of procurement actions.

E. Details of the Procurement Arrangements Involving International Competition

Goods, Works, and Non Consulting Services

(a) List of contract packages to be procured following ICB and direct contracting:

11 2 3 4 8 9

Ref Contract Estimated Procurement Review Expected Comments , (Description) cost Method by Bank Bid-Opening No. (Prior I Post) Date Construction 2,850,000 ICB Prior review January 2009 and improvement of the sewage system and treatment waste water plant, in Viacha

- 81 - (b) ICB contracts for works estimated to cost above US$3.0 million and ICB contracts for goods estimated to cost above US$200,000 per contract and all direct contracting will be subject to prior review by the Bank.

Consulting Services

(a) List of consulting assignments with short-list of international firms.

1 2

Ref. No. Description of Estimated Selection Review Expected Comments Assignment cost Method by Bank Proposals US% (Prior I Submission Post) Date Monuments and 368,000 SBCC Prior August 15, In case ofjust Archeological 2008 one contract Preservation Works Supervision 121,125 SBCC Prior July 9,2008 (Achacachi) Works Supervision 1 15,425 Prior October 24, (Copacabana) Works Supervision 228,000 Prior August 3,208 (Viacha) Works Supervision 541,500 Prior October 29, (Viacha)

(b) Consultancy services estimated to cost above US$ 100,000 per contract and all single source selection of consultants (firms) will be subject to prior review by the Bank. Individual consultants services to cost US$25,000 or above per contract or single source, regardless of the amount, will be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 ofthe Consultant Guidelines.

THRESHOLDS FOR PROCUREMENT METHODS AND PRIOR REVIEW

Thresholds recommended for the use of the procurement methods specified in the Project procurement plan are identified in the table below, which also establishes thresholds for prior review. The agreed upon procurement plan will determine which contracts will be subject to prior Bank review, and following the same thresholds the contracts subject to prior VMT and FPS review.

- 82 - Contract Value Expenditure Procurement (Threshold) Bank Prior Review Category (us$ooo) Method 1. Works =>3,000 ICB All 3,000 > 250 NCB First two each Year PSW (Price =<250 First two each year ComDarison) Other as in Procurement Plan i.e. contratacih <30 directa a First two comunidades

Contract Value Expenditure Procurement (Threshold) Bank Prior Review Category Method (US$OOO) 2. Goods =>200 I ICB All 200 > 50 I NCB First two each year =<50 First two each year 3. Consultant Services =>loo All All TORs. Selection Process QCBS, CQ, LCS reviewed twice yearly 400 (as per (Ex Post). All Procurement Plan) contracts awarded under S S S . 4. Individual Consultants =>25 IC All All TORs. Selection Process reviewed -=25 IC twice yearly (Ex Post). All contracts I awarded under SSS.

Notes: ICB = International Competitive Bidding NCB= National Competitive Bidding QCBS= Quality-Cost Based Selection QBS=Quality Based Selection FBS=Fixed Budget Selection LCS=Least-Cost Selection CQS=Consultant Qualification Based Selection SSS= Sole Source

- 83 - Annex 9: Economic and Financial Analysis BOLIVIA: Lake Titicaca Local Sustainable Development Project

1. The Project’s development objective is to contribute to local sustainable development in the Bolivian part of the Lake Titicaca watershed. This will include: (ii)facilitating local activities that support tourism development and cultural protection in the communities surrounding the Lake, and (ii) improving basic water and sanitation services.

2. The Project will specifically support improvements in local tourism services and cultural heritage protection as indicated by a minimum 10% improvement over the 2007 baseline geo-tourism survey (See Annex 3). The Project will also support the sustainable provision of basic services (water supply, wastewater collection and treatment, solid waste management) to 150,000 people (with improvements for 100,000 and new services for 50,000 beneficiaries).

3. Other broader objectives such as, contributing to the protection of the Lake’s long-term water quality and ecological vitality, greater social inclusion and participation, improved quality of life, increased tourist arrivals, agreement on a ‘shared vision’ for the Lake, will be supported and monitored but cannot be fully attributed to the Project. The Project’s contribution to local sustainable development is modest but provides an important starting point. Follow-on and parallel activities will be identified during Project implementation, and integration with similar Peruvian efforts encouraged.

4. The Project includes investment under three components including (1) Support to tourism development and cultural protection; (2) Basic services; and (3) Institutional strengthening and Project Management. Component 1 provides the feasibility of the overall Project. However, in component 2, additional benefits are expected from the on-site sanitation subcomponent. These should bring additional heath benefits to the communities. Therefore, this annex presents the results of the economic and financial analyses that concentrated in the component 1 and part of component 2.

5. For component 1, the Project benefits were calculated based on projected increases in the volume of tourist visits based on historical trends, the average length of stay in the area and the average expenditure per tourist in the Region. In component 2, the proposed Project is based on a framework approach where specific sub-projects are not predefined. Rather, they will be identified base on the demand from the municipalities supported with technical assistance and capacity building activities to ensure its successful implementation.

6. Given this demand-driven approach, it was only possible to have a detail economic cost- benefit for a representative sample of well-identified and potentially eligible sub-projects. The sample consists of 21 small water and sanitation projects in The Laja Municipality. Those projects included could account for 12 percent of the total cost for component 2.

A. Cost-benefit analysis for component 1: Support to tourism development and cultural protection

7. The economic analysis involves an assessment of the cost and benefits of the Project investments as compared to a realistic “without-Project scenario”. The total investment cost under the three components was used for the analysis of this subcomponent as those necessary municipal investments pre-required to accomplish this objective. The Project investment cost is US20 million. Component 1 includes US$8.2 million worth of investments to strengthen the tourism sector through finance investment in management capacity and infrastructure to increase the economic value of historical sites in the Lake Titicaca region.

- 84 - 8. In order to estimate increases in tourism, the analysis differentiates between all visitors to Bolivia and those to the Lake Titicaca. In recent years, according to data from OMT and Vice Ministry of Tourism, between 15 percent and 20 percent of foreign tourists in Bolivia visit the Lake Titicaca. However, number the foreign visitors to Lake Titicaca that spend the night is low, reporting an average 2.66 days stay for foreign tourist and 2.04 for national tourist according to our analysis of INE 2003 data. Hotel industry infrastructure in the Lake Titicaca has 79 Hotels with 2982 beds. However, the average occupation rate for hotels in Lake Titicaca area is under 20 percent.

9. In this context, the Project intends to boost tourism development and to increase the income of Lake Titicaca Region residents, through an increase in the flow of visitors to the different archeological sites that make up the circuit, and an increase in the amount of time that tourists stay visiting the area, and increase in their daily expenditures on tourism products, helping to materialize the potential of the installed capacity of the tourist industry in the areas. Therefore, improvements in tourism services made under the Project may increase the total number of foreign and national tourists traveling to the Lake Titicaca Region.

10. The analysis estimates the economic benefit from increasing the average duration of stay as a result of enhancing the attractiveness of historical and cultural sites and increase of local tourism services providers, and additional jobs and production in the Project’s area influence. The INE has calculated that foreign tourists on average spend in Bolivia US$50.4 per day. According to interviews with experts on Bolivians’ tourism industry in the Lake Titicaca area, foreign tourists spend only US$35 per day and average daily expenditures are only US$10 per day for national tourists. This figure is held constant throughout the Project period.

11. For analysis purposes, three scenarios were built: First a “without Project” scenario and two with a medium and high expectations scenario. Projections were designed for a period of 15 years (2008- 2022). At the new sites to be developed, visits are expected to start to grow quickly only after the 5th year, when the Project’s investment is completed. The characteristics ofthe scenarios are as follows:

12. “Without Project” scenario. The Projection is made considering no growth rates. It is assumed that the average number of days and average expenditure remain constant throughout the Project life. This assumption result in a loss of 137.190 foreign and national tourists through 2022. This is a conservative assumption give that negative externalities about the contamination of the Lake.

13. Scenario 1: With Project scenario - medium expectations. It was assumed that Project investments will have an increasing impact due to the Program’s implementation. The number of foreign tourists will increase by 0.05 days (1.2 hours) per year thereby increasing the average stay for foreign tourists to 3.36 days by 2022 and to 2.74 for national tourist and the tourists will increase by 5% annually given the new investments in the region.

14. Scenario 2: With Project scenario - high expectations. The average time spent in the region was considered the same. But in this scenario, the number of national tourist will increase by 10 percent and of foreign tourist by 7 percent. The parameters for each variable are adjusted assuming a favorable performance.

15. The annual flow of net benefits is presented in the table below. For the scenario 1, the analysis yields a Net Present Value (at a 12% discount rate) of US$11.3 million and an Internal Rate of Return of 23.1 1%.

16. The key to the reasonableness of these Projections is to be found in the low starting point, which is due in part to the impact of the news that the lake is contaminated and other negative

- 85 - externalities. This explains why projected growth even “without the Project” is quite high in the scenario 2, due to an expected “bounce-back” when the investments and new activities start in the region. Specially, local tourist from the capital given that it does not have big green parks or recreation.

Table 1. Project Costs and Benefits Project Cost and Benefits (US$ million)

~~~~ SummaryofCortandBeneflts 2008 2008 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018 2020 2021 2022 Benefits Scenarlo 1 0.00 0.59 1.21 1.88 2.59 3.34 4.14 5.00 5.90 6.87 7.89 -8.98 10.14 11.37- 12.68 Beneflla Scenarlo 2 0.00 0.80 1.67 2.62 3.66 4.80 6.05 7.41 8.89 10.52 12.29 14.23 16.35 18.67 21.20 Investment cost -3.00 -4.00 -4.00 -5.00 -4.00 TotalNetBenentsScennriol 4.00 -3.41 -2.79 -3.12 -1.41 3.34 4.14 5.00 5.90 6.87 7.89 8.98 10.14 11.37 12.68 Total Net Banenla Scenario 1 -3.00 -3.20 2.33 -2.38 -0.34 4.80 6.05 7.41 8.89 10.52 12.29 14.23 16.35 18.67 21.20 P IRR Scenarlo 1 23.1% IRR Scenario 2 32.6%

17. The Project’s timing is good, since the Government has prioritized tourism as one ofthe key sectors for the country’s economic development. There is much expectation and interest from the private and public sector in providing complementary tourism products (i.e. Visitor centers, tour operators, tourist guides, souvenirs and quality local products). This is a classic situation where public-private cooperation can help unleash the economic potential of an industry in which Bolivia is known to have high competitive potential in the international market. Conditions are ripe for investments to improve the quality of the principal tourist attractions that will provide the main underlying motive for future visitor flows, and for working to help the industry develop its products to promote these attractions and then meet the increased flow ofdemand.

B. Cost-Benefits for Component 2: Municipal Services

18. The Component 2 is based on a framework approach where specific sub-projects are not predefined. However, the team has identified appropriate methodologies for conducting the economic analysis of the eligible investments during Project implementation. In order to test the methodology and have an idea of the possible economic returns that could be achieved through the implementation of this proposed Project, a small sample ofpossible interventions was analyzed.

19. A detailed economic cost benefit analysis was conducted of a sample of potential 21 subprojects already identified by the Laja Municipality and the Prefectura which could be the initial stage of this Subcomponent of basic Community Services. The major benefits of these projects are improved water services to approximately 5.545 beneficiaries in 21 small communities in the municipality of Laja. These include direct user benefits: resource services (time savings and savings that result from the elimination of individual water treatment (e.g. the cost for boiling water), and benefits from increased water consumption estimated by the willingness to pay for increased consumption, for user who without the Project would use less effective and more costly alternatives (such as river, bottled water, etc.). The Project is demand driven and offers a new WSS infrastructure to communities that express a willingness to participate. Technical solutions will be designed if those beneficiaries can meet the variable cost associated with the level ofthe service they select. Direct beneficiaries will also be required to contribute in cash and labor to cover 20% of the investment cost.

20. Additional benefits are expected from on-site sanitation and solid waste investments, although these were not quantified. A least cost analysis of alternatives and cost-effectiveness criteria will be used for investment decisions. Consultants will be hired for the development of the municipal water

- 86 - and sanitation efficiency improvement plans and for the development of master plans. These consultants will be responsible for conducting financial and economic feasibility studies, and to ensure that all proposed interventions will be economically feasible. The Operational Manual will contain the methodology and detailed information on the development of the economic analysis for the investments to be financed by the Project. The economic analysis principles to be applied are discussed below.

Methodology

21. A cost-benefit analysis will be used to assess the economic feasibility of the sub-projects to be financed. This methodology was tested in the analysis of a sample of the 21 proposed projects. To determine the net incremental financial costs and benefits, “with” and “without” Project scenarios will be constructed.

Assumptions

22 * Investment Costs. The “with” Project scenario includes all associated investment costs including labor and the necessary equipment, including those not directly financed by the Project, but are necessary for the expected benefits to materialize. (e.g. replacement of the electro-mechanic equipment every 5 years).

23. Operation and Maintenance (OM) Costs. The O&M costs for both the “with” and “without” Project scenarios include the cost o f labor, chemicals, electricity, and all administrative recurrent costs. It is expected that the incremental O&M costs resulting from the Project will be considerably lower, resulting in resources savings for the utility/municipality and the economy of Bolivia.

24. Economic Costs. For the economic cost-benefit analysis, shadow prices will be used. During Project preparation the team estimated the conversion factors for the main inputs of the typical sub- projects to be used for the actual analysis of eligible business and investment plans: unskilled labor, skilled labor, national and imported goods, and the standard conversion factor. Details ofthe calculations can be found in the Project files.

25. Incremental Benefits. Incremental benefits identified includes (i)Cost savings to the economy due to the reduction of expenses associated with waterborne diseases; and (ii)Cost savings to the economy associated to time saved associated with fetching water.

26. Discount rate. The cash flows will be discounted using a discount rate of 12 percent for the financial analysis, which is estimated to be a proxy of Bolivia’s opportunity cost ofcapital. The costs and benefits will be projected for 20 years

27. The sub-proj ects under these components will generate additional economic benefits, including intangible and more difficult-to-measure environmental benefits and increased customer satisfaction. Improved reliability and leakage management will reduce the level of illegal tampering and so reduce the cost of distribution maintenance. The Project will also have an impact on increasing the flexibility in the operational handling of the systems and improved pressure management. This will reduce the level of current pipe-burst-out and therefore leakages-while increasing the economic life of pipelines and therefore reducing the cost of distribution maintenance. These additional benefits have not been considered in the analysis, so the results will be a conservative estimate of the economic impacts of the financed investments.

- 87 - Results

28. Of the 21 pilot projects, 11 were found to be economically viable with an NPV average of US$44.852 and an average of IRR of 29 percent. A sensibility analysis for all assumptions was conducted to all feasible projects. The results showed that the findings from the economic analysis are robust. These results were taken into consideration for the operation manual to make sure population Projections are conservative. The main results of economic analysis of the sample are presented in Table 2. From these results it is evident that projects above US$240 of the cost of the connection per person should be restructured before construction or subjected a detailed economic analysis (which will result in the projects not been financed as designed) or receive a technical analysis in order to be financed.

Table 2. Results of the Economic Cost-Benefit Analysis of the ex-ante sampk Communlty(s) Number of NPV us. IRR Investment Connection Connection families cost per famlly per person

/Economic unfeasible projects

Puchucollo bajo 15 ($16,400) 1% 36,003 2,433 486.53 Wichi Wichi 12 ($9,124) 3% 24,254 2,055 41 1.08 Quentavi 18 ($13,531) 4% 37,109 2,017 403.36 Machacamarca Baja 28 ($12,684) 6% 48,162 1,696 339.17 Antajahua 27 ($9,078) 7% 41,961 1,577 315.50 Machacamarca Alta 30 ($6,676) 9% 43,834 1,442 288.38 Collpajahua 19 ($2,666) 10% 25,903 1,349 269.82 Sullcata Baja 58 ($2,832) 11% 60,614 1,049 209.74 Avicaya 29 ($881) 11% 35,662 1,230 245.94 Puchuni 26 ($505) 12% 31,884 1,217 243.39 Sub-total NPV ($74,376) $385,386 Average 26 (7,438) 7% 38,539 1,468 293.52

Economic feasible projects

Puchucollo Bajo Sur 22 $342 12% 26,135 1,177 235.45 Sullcata Aka 66 $15,659 17% 61.787 933 186.67 Caicoma 44 $13,578 19% 37.483 856 171.16 Ninachiri 45 $14,460 19% 38,164 841 168.12 Kallutaca 51 $16,482 20% 42,381 834 166.85 Ancokala 82 $29,432 21% 65,319 797 159.31 Pallina Laja 97 $37,285 22% 74,044 767 153.30 Puchucollo Alto 38 $15,566 23% 28,287 740 148.10 Quellani 72 $37,630 28% 43,898 61 1 122.28 22 141 $92,214 37% 66,293 469 93.77 Tambillo 186 $139,090 49% 67,318 362 72.38 Masaya 143 $126.485 83% 30,310 21 1 42.27 Sub-total NPV $538,223 $581,419 Average 82 44,852 29% 48,452 589 117.72

29. During implementation, the economic viability of the subprojects will be determined applying this method, with the objective of reducing time and preparation cost, and having an explicit methodology for increased transparency. When subprojects are not feasible, projects should be redesigned lowering the costs.

- 88 - Annex 10: Social Safeguards BOLIVIA: Lake Titicaca Local Sustainable Development Project

SOCIO-CULTURAL ANALYSIS AND ORGANIZATIONAL ASSESSMENT

A. Overall Objectives and Project Structure

1. The Project’s development objective is to contribute to local sustainable development in the Bolivian part of the Lake Titicaca watershed. This will include: (ii)facilitating local activities that support tourism development and cultural protection in the communities surrounding the Lake, and (ii) improving basic water and sanitation services.

2. The Project will specifically support improvements in local tourism services and cultural heritage protection as indicated by a minimum 10% improvement over the 2007 baseline geo-tourism survey (See Annex 3). The Project will also support the sustainable provision of basic services (water supply, wastewater collection and treatment, solid waste management) to 150,000 people (with improvements for 100,000 and new services for 50,000 beneficiaries).

3. Other broader objectives such as, contributing to the protection of the Lake’s long-term water quality and ecological vitality, greater social inclusion and participation, improved quality of life, increased tourist arrivals, agreement on a ‘shared vision’ for the Lake, will be supported and monitored but cannot be fully attributed to the Project. The Project’s contribution to local sustainable development is modest but provides an important starting point. Follow-on and parallel activities will be identified during Project implementation, and integration with similar Peruvian efforts encouraged.

4. The Project components are: i)Support to Tourism Development and Cultural Protection; (ii) Basic Services; and (iii)Institutional Strengthening and Project Management.

B. Social objectives

5. The total population in the Project area is 324,402 inhabitants living in 1,028 communities and distributed over 95,000 households as per forecasts of the National Statistics Bureau (INE) for 2005. Ninety-four percent (94%) has unsatisfied basic needs and the HDI of the municipalities in the region is 0.54.

6. According to the 2001 census data, 93.15% of the population was identified as Aymara. The Project triggers the OP/BP 4.10 but does not require a stand-alone Indigenous Peoples Plan (IPP) because the Project document itself is considered an IPP. On the basis of the social assessment and in consultation with the affected indigenous communities, the principles and elements of an Indigenous Peoples Plan (PP) have been incorporated into the Project design.

7. During Project preparation, the Bolivian government undertook a comprehensive socio- cultural and organizational assessment as part of the development of a long-term strategic vision for improvements to the Lake Titicaca watershed (Bolivian side). This consultation process included numerous stakeholders including all ofthe 15 municipalities surrounding the Lake.

8. From a social and cultural perspective, the Project will have the following objectives:

- 89 - 0 Increase opportunities in an inclusive manner: promote the equitable distribution of benefits; open up employment and income-generating opportunities; support and foment production by giving priority to small-scale agricultural and livestock, artisanal and service producers; improve the access to basic sanitation services, latrines and other services for poor rural inhabitants of the region and establish mechanisms to ensure participation of the groups that are normally excluded from development, i.e. women and youth.

0 Promote empowerment: promote the active participation of local stakeholders in the entire process, from development of the vision as a region until the identification, formulation and execution of the projects and investment opportunities. This way, the poor will have a better chance of their demands and needs being satisfied and of forming new and better social and productive organizations to improve their income and their standard of living.

0 Encourage transparency: promote transparent resource management by strengthening social organizations of the communities and municipalities.

0 Strengthen the cultural identity: recognize and place value upon the knowledge, habits and traditions of the Aymarh culture; promote actions aimed at improving gender equity and improve opportunities for Aymarh women; support generational equity, respecting the knowledge of the elderly and promoting participation of the young; strengthen traditional and native organizations for adequate implementation of the projects and for ensuring that all institutions involved, especially the municipalities, meet their commitments.

0 Promote intercultural processes: facilitate the establishment of networks for an exchange among the different social and cultural groups and establish exchange bridges between the different indigenous identities, visitors and tourists.

9. The process agreed upon for developing the Project has several innovating characteristics related to the following elements: i) a proposal was made to include the social assessment in the participatory process for developing a long-term vision and the definition of long-term development strategies in conjunction with the different social and private stakeholders in the Lake Titicaca Region; ii) in view of the socio-cultural characteristics and the conflictive nature of some communities, it was suggested that the responsibility for the assessment process be assigned to the Project preparation team aimed at examining sustainability of the Project and establishing measures to improve this aspect; iii) besides the points of entry of the social assessment (social diversity and gender, institutions and rules, a social stakeholder analysis, participation and social risk), the emphasis was on the socio-economic characterization of the zone, the analysis of the principal socio-cultural characteristics of the central beneficiaries and the organizational structure.

10. All these analyses were based on secondary and primary sources of information. The primary information was collected in coordination with young Aymarh professionals living in the region who are currently working as local liaison persons or local facilitators. In this capacity, they helped identify key informants; they interviewed the key informants, municipal stakeholders, mayors, councilors and technicians, representatives of social organizations and ofthe different sectors present in the Lake region. In addition to the ongoing public consultation processes, the Aymarh professionals have facilitated an intercultural learning process and a process to enhance participation of the women and elderly who could share their opinions and perceptions in their mother tongue, strengthening the Project preparation team.

- 90 - C. Socio-demographic characteristics of the four Lake zones

11. The percentage of women in the region is higher due to the migration of men to the cities. The municipalities with the high levels of poverty are: Puerto Acosta, Puerto Carabuco, Achacachi, Ancoriames, San Pedro de Tiquina, Tito Yupanqui, Pucarani, Puerto PCrez, Batallas, Laja. Guaqui y Tiwanaku, with 90% of the population having unmet Basic needs. The municipality of Tito Yupanqui is one of the poorest in Bolivia. The levels of illiteracy and primary education vary across municipalities. This Data can be found in the annex to the social analysis prepared by the PCU with the collaboration of an Aymara team.

12. For practical reasons, the Lake region was divided into four zones; north, south, east, and west. The PCU team prepared a comprehensive and systematic socio-demographic information base for each municipality, with the study of population in terms of density, gender, human development index, poverty measured on the basis of unsatisfied basic needs (access to basic services, levels of education and health). See the completed Social Evaluation in www.lagoTiticaca.

13. Northern Zone. This is the area along the eastern bank of the Upper Lake, from Achacachi to Puerto Acosta. This area encompasses the municipalities of Achacachi, Ancoraimes, Carabuco and Puerto Acosta, which are part of the provinces of Omasuyos and Camacho.

14. Southern Zone. This area covers the southern bank of the Lower Lake between Desaguadero and the Peninsula of Taraco, covering the municipalities of Desaguadero, Guaqui, Tiwanaku and Taraco in the province of Ingavi.

15. Eastern Zone. This zone covers the area from Pucarani to the Strait of Tiquina and includes the municipalities of Pucarani, Puerto PCrez, Batallas, Huarina and Achacachi, as well as the islands of the Minor Lake. This zone is part of the provinces of Los Andes and Omasuyos.

16. Western Zone. This zone covers the peninsula of Manco Kdpac, between the Strait of Tiquina and up to Copacabana, including the Islands of the Sun and of the Moon. This zone encompasses the municipalities of Copacabana, Tito Yupanqui and San Pedro de Tiquina, all of which are part of the province of Manco Ktipac.

D. Social-cultural and historic characteristics

17. The Andean Pre-Columbian societies lived in extensive territories, and were organized in traditional uyllus, markas and suyus. Located in Tiwanaku culture, the area known as Qulla was formed, covering the western of Bolivia, the north of Argentina, the north of Chile and the south of Peru. The Pre- Columbian societies possessed an intense community life, and their cosmology was based on duality of space and time. In terms of their territory, they occupied different ecological strata such as the puna, the highlands, the valleys, the subtropical Yungas and the lowlands.

18. The Project area is part of the ancient pre-Hispanic territories occupied by several prominent culture-like Tiwanaku-which flourished in the region during the last 8,000 years. Their most recent descendant-the Aymard people-and their communal cultures and organizational aspects are alive and thriving.

19. In the Project intervention area there are different communities that are organized according to their origin in: i)native community, ii)former hacienda communities, and iii)peasant communities.

-91 - 20. The native community as a whole consists of persons or households that descend from the population that lived in the areas before the conquest. These communities have a common history, language, beliefs, organizational forms and other cultural characteristics, which are the basis for identifying their members and for maintaining links with the space they occupy traditionally under their socio-cultural-territorial logic

21. The former hacienda communities, which are defined as the communities that settled on former hacienda lands as a result of the Land Reform process in 1953. The former hacienda communities can display the characteristics of a peasant community, i.e. the basic social unit in the rural area composed of nuclear or dispersed peasant households that share a territory and that have different cultural roots, and do not share the same socio-cultural identity.

22 * In recent years, actions have been undertaken to reconstitute the organizations with native authorities in the ayllus, markas and suyus, within the framework of LOConvention 169 and the INRA Land Reform Law 17 15, aimed at controlling and managing their territorial space.

23. An important characteristic of the Aymard communities is the management system based on rotation or taking turns, which is known as thakhi (jisk’a, taypi and jach’a thakhi). This means that people take turns in occupying public office and assuming community responsibilities. People must necessarily participate in this system throughout their life, assuming responsibilities in household and community activities. This system influences the demands generated by the communities towards the municipality.

24. People living in the communities of the Lake Titicaca region distribute their time between their communities and the cities where they sell their products and work in non-agricultural activities. The families that actually live in the cities of El Alto and La Paz and other regions of the country play a very important role in this work-life pattern. These city dwellers’ links with the community are no longer related to land ownership but to their family.

Rituality and religiosity

25. Today, many Andean Aymard rituals are still practiced, such as the ch’allas (blessings) and wuajtas for the pachamama (earth goddess).The people who still know how to perform these rituals and who live in the communities are the amautas or the elderly.

26. With regard to production, the region still uses some ancestral production modalities and other practices are being recovered, such as the sukakollos, an agricultural system based on flooding in flat areas and terracing on the slopes. Both systems are used for producing the more than 200 potato varieties. Besides, the communities produce beans, maize, quinoa (very little), fodder, and they also prepare chuiio and tunta (freeze-dried potatoes). Many agricultural production organizations have been identified, especially of potato, quinoa and bean producers.

Indigenous People, language-based belonging and identity

27. In the Lake Titicaca region 56.44% of the population speaks Aymard, 35.77% speak both Aymard and Spanish and only 6.97% Spanish and speak no native language. More than 80% of the population in the Project municipalities speaks Aymard as their principal language.

- 92 - 28. Because of the high percentage of Aymar6 speakers the preparation team considers it strategically important to work with young Aymarh professionals from the communities as local liaisons or facilitators. Many people particularly women, speak only Aymar6. In order to ensure participation, it is very important that the language used in the presentations, interviews and workshops be understood by the most people possible.

29. As the consultative process is closely linked to the visioning exercise, the first phase of the consultative process is based on regional and sectoral workshops. Visioningbonsultative events have taken place with fishermen, dairy producers, artisans and tourist operators. For building the strategic vision and territorial plans, the 15 municipalities around the Lake were consulted, as well as El Alto, Viacha and Laja.

Table 1. Percentage of population speaking Aymara, Quechua and Spanish

Name Quechua In% Aymari In Native In% Only In % Total No. of % language Spanish individuals and Spanish Puerto Acosta 319 0,87 23802 64,85 11701 31,88 879 2,40 36701 Puerto. Carabuco 192 0,89 13400 62,31 7068 32,87 845 3,93 2 1505 Viacha 1232 1,76 29590 42,38 24722 35,41 14275 20,45 69819 Guaqui 128 1,08 6184 52,35 4477 37,90 1023 8,66 11812 Desaguadero 74 0,96 3831 49,68 2902 37,63 905 11,73 7712 Copacabana 185 0,81 11825 52,04 8858 38,98 1857 8,17 22725 San Pedro de Tiquina 114 1,21 4884 51,74 3518 37,27 924 9,79 9440 Tito Yupanqui 32 0,92 1952 56,32 1284 37,OS 198 5,71 3466 Achacachi 593 0,55 62240 57,82 39513 36,71 5298 4,92 107644 Ancorainies 73 0,34 14260 66,83 6702 31,41 304 1.42 21339 Tiahuanacu 76 0,44 10154 59,27 6261 36,55 640 3.74 17131 Taraco 53 0,57 5428 57,97 3612 38,58 270 2,88 9363 Pucarani 179 0,49 22193 60,38 13300 36,19 1083 2,95 36755 Laja 137 0,56 14921 61,07 8730 35,73 644 2,64 24432 Batallas 181 0,57 18360 57,59 11816 37,06 1525 4.78 31882 Puerio Ptrez 60 0,51 7261 61,89 4174 35,58 237 2,02 11732 TOTALES 3628 0,82 250285 56,44 158638 35,77 30907 6,97 443458

Source: Own elaboration based on data of the ME Census 2001

- 93 - Table 2. Percentage of population belonging to an ethnical identity

Name Quechua In% Avmarh In Other Yo individuals Guaqui b8 1,33 46U6 Y 1,3'1 6 u,12 36 1 7,16 5041 Desaguadero 41 1,26 3025 93,08 3 0,09 181 537 3250 San Pedro de Tiquina 46 1,lO 3834 91,81 9 0,22 287 6.87 4176 Achacachi 173 0,38 42955 95,l I 33 0,07 200 1 4,43 45 162 Ancoraimes 14 0,15 8757 94,05 2 0,02 538 5,78 931 1 Puerto Acosta 66 0,40 15794 96,84 IO 0,06 439 2,69 16309 Puerto Carabuco 69 0,7 1 9023 93,3 1 14 0,14 5 64 5,83 9670 Tiahuanacu 31 0,44 6716 96,23 3 0,04 229 3,28 6979 Taraco 8 0,20 3854 96,47 2 0,05 131 3,28 3995 Pucarani 50 0,34 13550 92,52 18 0,12 1027 7,Ol 14645 Laja 32 0,32 9386 94,50 9 0,09 505 5,08 9932 Batallas 53 0,41 12194 95,27 17 0,13 536 4,19 12800 Copacabana 82 0,91 8683 96,07 5 0,06 268 2,97 9038 Puerto Pdrez) 4 0,os 4779 94,4 1 6 0,12 273 5,39 5062 Viacha 867 2,94 2494 1 84,64 52 0,lS 3607 12,24 29467 Tito Yupanqui 6 0,38 1530 98,08 0 0,oo 24 134 1560 TOTALES 1610 0,86 173627 93,15 189 0,lO 10971 5,89 186397 source: &&I elaboration based on data of the INE Census 2001

30. According to the census data, 93.15% of the population claims to be Aymara; in most communities the Aymara culture is strong, with the daily practice of costumes, traditions, organizational forms, music, dances and rituals.

E. Progress on indigenous and native peoples in Bolivian legislation

31. Law 1257 of June 1991 ratifies the LOConvention 169 on Indigenous and Tribal Peoples in independent countries. The International Labor Organization recognized the discrimination of indigenous and native peoples and through the Convention, is working to empower them to assume control of their own institutions, their lifestyle and their economic development.

32. Article 1 of the Bolivian Constitution reformed in 1994 sets forth the multiethnic and multi- cultural nature of the Bolivian State. Article 174 confirms the recognition, protection and respect for the social, economic and cultural rights, the TCOs (native territories), ensuring the use of their natural resources, identity, values, languages, uses and institutions. At the same time, the Common Law and the law applied by natural authorities of the native indigenous communities regarding the administration of justice is acknowledged, as well as the right to apply the communities' own norms as alternative conflict- solving mechanisms, provided these are not contrary to the Constitution and laws. The People's Participation Law (04/94) recognized the OTBs, and native and indigenous communities. Resources are distributed equally to rural and urban inhabitants. The Law on Citizen Groups and Indigenous Peoples can benefit indigenous communities in that indigenous leaders are not obliged to form part of Political Parties to be elected.

33. For developing its approach and objectives, the Project is set within the framework of different legal norms such as the Municipalities Law, the Administrative Decentralization Law and the People's Participation Law, as well as other norms that protect the rights of indigenous peoples. In the

- 94 - tourist sector, the principal norm is the Law for the Promotion and Development of Tourist Activities in Bolivia.

34. The Project policies are set within the framework of the National Development Plan (PND, in Spanish), which considers tourism an essential economic activity, an instrument in the fight against poverty and a means to generate productive employment in communities.

35. Regarding municipalities, the Municipalities Law sets forth the participatory planning norms for promoting sustainable human development in the urban and rural areas of the municipalities, thus promoting economic growth in coordination with the Departmental Prefecture, identifying the municipalities’ potential and then involving economic, local and external agents. The equity-based participation of indigenous peoples, native communities and women is incorporated in the drafting of policies, plans, programs and projects. The People’s Participation Law encourages municipalities to promote rural development through the use of applied technologies, micro irrigation and local roads; the provision and construction of new facilities for education, culture, health, sports, local roads and basic sanitation; and a contribution to maintenance of the secondary and local roads passing through the municipality.

36. The responsibilities of the departmental governments or Prefectures are detailed in the Administrative Decentralization Law: in coordination with the Municipal Government of the Department and within the framework of the General Economic and Social Development Plan of the Republic, they must draft and execute the departmental social and economic development plans in accordance with norms of the National Planning System. They must also draft and execute public investment projects and programs within the framework of the departmental development plan and in accordance with norms of the National Public Investment System in the following areas: the construction and maintenance of roads, secondary roads and roads shared with the Municipal Governments; rural electrification, infrastructure for irrigation and support for production, technical - scientific research and extension, environmental conservation and preservation, the promotion of tourism and the development of social assistance and municipal strengthening programs. Finally, Supreme Decree No. 25286 sets forth the attributions and functions of the departmental Municipal and Communal Strengthening services that must support the Municipal Governments in their territorial jurisdiction to identify joint investment and service provision programs and projects, as well as support for the creation of municipal associations for executing joint investment programs and projects with a view to economic and social development.

37. In the field of development of the tourist sector, the principal norm is the Law for the Promotion and Development of Tourist Activities in Bolivia (Law No. 2074, 2000) which sets forth institutional and policy parameters for the sector, as well as the roles of different stakeholders. This norm gives a central role to the private sector for exploiting products for a niche market segment interested in Bolivia. It defines a series of fiscal incentives which had an irrelevant impact in revitalization of the offered services.

38. The National Dialogue Law (Law No. 2235, 2000) conferred an important role to the tourist sector as an employment and foreign currency generating sector for invigorating the national economy. Despite the interest and dynamism the small and medium-sized companies display, the State has not developed the needed capacities and mechanisms for an adequate and timely response to the existing needs and opportunities, and rather limited its intervention to a “normative” role. Nonetheless, in recent years, the combined efforts of different actors and the growing visibility of the country and its tourist attractions have led to the development of many community-based businesses.

39. The activities undertaken by the majority sectors of society - particularly peasants and Indians - are focused in the “Productive Bolivia” approach of the National Development Plan (PND), which

- 95 - considers tourism is an instrument for economic and social development, with a protagonist role for the indigenous communities. Likewise, tourism is projected as a productive, integrated, multidisciplinary and multi-sectoral activity that helps to soften the existing economic and social asymmetry between the regions, as well as within the communities.

40. The Vice Ministry of Tourism is responsible for executing these new policies through the National Tourism Plan 2006-2011, which proposes to build tourism from an inclusive, inter-sectoral and multidisciplinary approach in all areas where the principal public actors (National Government, Prefectures and Municipalities), local actors (Communal Associations, federations, grassroots organizations) and the private sector (through its representative associations) are given rights and responsibilities aimed at the development of sustainable tourism. Besides, these actors become the axis for tourist dynamics. Within this framework, the plan focuses on the development of three fundamental pillars for the sustainable development of tourism: i)Indigenous and Communal Tourism; ii)Sustainable Territorial Management of the tourist destinations and products; and iii) Promotion and marketing of national tourism in the domestic and international markets.

41. In Bolivia, the Vice Ministry for Development of Cultures (VMDC) is subordinated to the Ministry of Education and Cultures. Its main functions include the formulation and execution of cultural policies aimed to foster a range of cultural manifestations, namely the production and dissemination of artistic and cultural expressions, protection of national cultural assets, including the religious and historic artifacts and archival documents. VMDC promotes conservation and/or preservation of monuments and goods of historic and cultural importance. It has a mandate to promote cultural policies in articulation with tourism sector, by providing assistance in the cultural and artistic activities such as capacity building and promotion, while conservation of sites and monuments in coordination with prefecturas and municipalities.

42. It is to be noted that the VMDC through its Directorate General of Cultural Patrimony and the National Archeological Unit, are invested to protect and safeguard sacred sites and heritage monuments and artifacts listed in the national registrar. Given that cultural heritage assets considered as socially valuable public goods, are becoming an attraction in tourism activities can contribute to local economic development.

F. Stakeholder Analysis

43. Primary information was gathered with help from young Aymarh professionals living in the region and who are currently working as local liaison persons and/or facilitators. It was found that most social stakeholders in the region are organized, each one with a different role in the Project. Likewise, some sources of conflict were identified between the municipalities, between the communities, between productive organizations and communities, between productive organizations, between civic organizations and communities etc.

Direct and indirect beneficiaries:

44. The direct Project beneficiaries are the Municipal Governments, the indigenous and peasant communities, organizations of small producers, artisans and service workers (transportation and hotel sector, guides, small traders).

- 96 - 45. The indirect beneficiaries are the Vice Ministry of Tourism, Vice Ministry of Cultures, Vice Ministry of Basic Services, the Prefecture, the Lake Mancomunidad (association of municipalities), private tourism operators, consulting fmsand local leaders and professionals of social and productive organizations, peasant universities and NGOs.

46. This section describes the culturally appropriate benefits accrued by each of the stakeholders. Appendix 1 gives an overview of the principal identified stakeholders.

47. Municipal Governments.- About 90% of Mayors, Council Members, and functionaries of the Municipal administrations are Aymaras. This is a result of a new Law of Community Associations and Indigenous Peoples, which allows indigenous people to participate in the elections without the auspices of political parties. These municipalities play a central role in local development as they intervene in the communities with the provision of public goods and collective goods in support of tourism and production, and particularly also in communal basic sanitation and environmental projects. Despite this increase in revenues, the municipalities’ resources are still insufficient to adequately respond to the population’s demand for a better standard of living, especially the rural population.

48. As part of Component 3.2 Institutional Strenghtening for municipalities, management and technical capacities of the administrations will be strengthened through the establishment of tourism units which will play a major role in re-valuation and conservation of the unique cultural patrimony of the Lake region. The capacity building will be contracted by the municipalities to indigenous NGOs specialized in indigenous culture and heritage.

49. Indigenous and Peasant Communities.- The Aymara communities maintain their own organizational structures and social control which is applied in orienting preparation and execution of projects in their domain. The Assembly is the supreme decision-making instance in the communities. It has a normative role in the realization of productive and social activities. Therefore, all of the Project activities will be coordinated with the communities.

50. All of the programs and projects were identified through a participatory process or “visioning exercise”. The Project will be executed in coordination with the communities, by observing and valuing their traditions, costumes, and way of thinking. To strengthen the Aymara language, the Project team will continue to work with the local Aymara staff.

51. Implementation of the basic sanitation, including building of sewerage treatment plants, supply of potable water, and solid waste management components will impact the quality of life of communities. In addition, the Project will promote the participation of women in the development of tourism component.

52. Productive amiculture and livestock organizations.- “The organizations of small producers are the result of the need for producing, transforming and especially commercializing goods in an organized manner so as to become part of the national and international marketplace” (Cbrdova, 2000). The People’s Participation Law recognized social organizations as Territorial Grassroots Organizations. The best-organized activities are dairy production, agriculture, handicrafts and fishery in Lake Titicaca region. These productive units typically have an Aymara identity and the Project will strengthen this aspect by linking local economic production chain with tourism activities.

53. Artisanal organizations.- In the different municipalities, the artisans are organized. One of the principal characteristics of these organizations is that most are managed by Aymara women and the women members are of different ages. The Project will stimulate local knowledge in the production of an authentic indigenous art, towards this objective the program will seek to emulate good practices found in

- 97 - Bolivia, such as ASUR and ARTECAMPO. Aymara women will provide assistance in the training aspects of the textile production, thus they will directly benefit from the Project.

54. Organizations in the road transportation sector.- All of the transportation organizations found in the municipalities of the Lake are owned and operated by Aymaras. It is noted that Aymaras are the most entrepreneurial of the indigenous groups in Bolivia. The transport sector will be provided with capacity building in order to improve the quality of services offered for local residents and tourists.

55. Organizations in the Lake transportation sector.- Likewise, these organizations are also owned and operated by Aymaras. These organizations are very much interested in the Project because the Project will expand the itineraries to new tourist destinations. They work in shifts according to the demand and upkeep their Aymara organizational structure.

56. Organizations of traders and vendors.- These organizations exist in all Lake municipalities, especially in the cities headquartering the Municipal Governments. These are mostly headed by Aymara women. They have considerable influence in the cities of Copacabana and Desaguadero and they could be important allies for Project execution.

57. Organizations of hotelkeepers and lodging services.- These organizations exist in all municipalities of the area. Only in Copacabana and the islands there are more than 100 businesses, 10% of which provide all services. The quality of these services will improve with the Project inputs.

58. Restaurants and gastronomy.- These activities can be found in tourist places such as Copacabana, the islands and Tiwanaku. They offer services with different quality levels. There are no restaurants offering traditional local food with Andean products, the Project will introduce and promote consumption of nutritional products and also improve the quality of the services.

59. Association of Tourist Guides.- All the local tourist guides are Aymara, and they are organized in Tiwanaku and Copacabana. Most tourist guides studied in the Rural Academic Unit of Tiwanaku, which is part of the private Catholic University of Bolivia. With the expansion of tourist activities at the Lake region their work opportunities will expand as well.

Indirect Project beneficiaries:

60. The Vice Ministry of Tourism.- Is in charge of the Project implementation agency. The Project Preparation Unit (VPP) is part of this Vice Ministry. With this Project the Vice Ministry will be strengthened in its capacities to formulate and execute national policies.

61. The National Tourist Police. The national police is a very weak institution and at the rural level, this weakness is even more evident. The tourist police is practically non-existent. Tourist security needs to be strengthened.

62. Tourist operators. There are many private tourist companies operating at the national and sub- national levels. In general, the operators have worked with little coordination with local organizations. More often than not, the local organizations are hired as cheap labor. With the adoption of land-use plans, regulations and norms the above mentioned activities will be improved. Organized tourism accounts for hardly 20% of all tourist activities.

-98- 63. The Prefecture participates through its Directorate of Tourism and the Directorate of Culture coordinates their work with the PCU, and participates in selection of consulting firms; thus improves its expertise in the tourism sector.

64. The Vice Ministrv of Culture will participate through its Directorate of Cultural Heritage and the National Archeology Unit orients and provides technical supervision in a range of activities, i.e. review of the TOR, selection of consulting firms and other activities related to the protection and promotion of cultural resources. Moreover, it will be strengthened through the development of the Cultural component of the Project.

65. Foundations and NGOs work mostly in social aspects, and less in the field of production and rural credit. Some of these non-governmental organizations coordinate their activities with the Municipal Governments. The following organizations were identified: Plan International, CIPCA, PROSUKO, ANED, PRODEM, INTERVIDA, besides individual consultants.

G. Consultation process

66. The consultative process has been developed in close coordination with the ongoing process for developing the strategic vision. In a first phase (period of 10 to 29 May 2007), 25 workshops took place with approximately 85 1 participants (mayors, councilors, municipal technicians, secretaries general of unions, native authorities, communal inhabitants, the federation of fishermen, producers, artisans. These workshops focused on an analysis of the following topics: i)an analysis of the national context and situation; ii) a reflection on the importance of participation, the division of roles and stakeholder ownership in all Project phases; iii)an assessment of local natural and cultural resources; iv) the covered area of the Project;; v) intervention areas include: tourism, basic sanitation and environment, physical planning and productive development (Annex 2 contains a summary of the first phase).

67. The second phase of community consultations was developed from June to July of 2007, several workshops were conducted and the community organizations were informed of the preliminary results ofthe aforementioned consultations.

68. A third phase of community consultations was developed by four consulting firms hired by the PPU with the objective to identify and estimate the value of the proposed cultural and tourist investments in the four zones of the Lake region. The consultant firms were assisted by the Aymara facilitators in conducting field work. These firms have visited more than 300 communities, and held meetings with more than 500 indigenous authorities, and participation of more than two thousand local residents. The reports contain more than 400 sites of cultural heritage and natural sites, and identified nearly 600 potential projects in the domain of tourism and productive activities, and undertook action to validate these proposals with the local residents. (See Appendix 3).

69. The principal contributions of local stakeholders to the Project design are:

0 Project information was presented in Aymard language 0 Tourism is considered as the principal source of employment 0 Communal tourism experiences will inform the proposed Project activities. 0 Ancestral ways of living to be recovered, as well as native artistic expressions of dances and music. 0 Local products and produce need to be linked to the tourism industry

- 99 - 0 Tourist attractions include a range of different natural settings, cultural monuments and heritage sites, cave paintings, which need to be inventoried and integrated in tourism circuits. 0 People concur on the importance of solid waste management. 0 The sewer systems (Ancoraimes) are not functioning well or inadequate to serve the growing population, therefore they need to be improved Water and sanitation services are the priority demand articulated by the communities. 0 The organizational and technical experiences of the productive units (i.e. fishermen, dairy producers, textile artisans) are to be recovered and strengthened.

70. Consultations conducted with key stakeholders, at the local level, and public authorities, revealed a pressing need to initiate a process of revaluing (Puesta en Valor) the important cultural patrimony assets comprised by monuments, sacred sites, museums and other expressions of culture found in the Lake Titicaca area. In many localities the encroachment of new construction represents a real threat to the integrity of the pre-Hispanic monuments and archaeological sites. In other areas the lack of management and operational structures in place allows for vandalism, and the risks of irreversible degradation of monuments. The Project will address the above issues by updating lists of national protected sites and monuments. The most threatened sites will be surveyed and strategies for their preservation proposed are: (a) assisting national and local authorities to develop conservation management operational manuals; (b) build local partnerships and capacity to protect and preserve important cultural assets; and (c) promoting the concept of Geotourism as a way to enhance visitors appreciation of the unique cultural and natural endowments of Lake Titicaca.

RESETTLEMENT FRAMEWORK

71. This section summarizes the Resettlement Policy Framework (RFP) applicable to Lake Titicaca Local Sustainable Development Project.

72. The RFP describes: (i)the Lake Titicaca Local Sustainable Development Project and its components; (ii)the problems that would be caused by the resettlement of homes and an estimate of the affected population, (iii)the objectives and principles of any resettlement that could be triggered by the Project; (iv) the legal framework of the resettlement process; (v) the compatibility of domestic norms with the World Bank’s operational policy OP 4.12; (vi) the preparation process of the abbreviated resettlement plan; (vii) the implementation process, and, finally, (viii) some comments concerning the institutional capacity of Municipal Governments in the Project’s implementation area.

73. Notwithstanding the fact that the number of expected resettlements resulting from the Project’s implementation would be minimal or null, most likely not exceeding two hundred people, an Abbreviated Resettlement Plan (ARP) will be prepared, to apply in the unlikely eventuality under the terms defined in OP 4.12. The guidelines for the ARP were designed with consideration given to the sub- projects foreseen during the Project’s design phase. The Municipal Governments where the Project will be implemented failed to develop guidelines for the eventual application of an ARP; so strengthening their institutional capacity may be necessary.

- 100- PROBLEMS CAUSED BY RESETTLEMENT

Causes of Resettlement

74. In order to attain the objectives of each subproject, when construction of works is required, resettlement of persons could potentially occur. To this effect, the World Bank’s policy dictates that to the extent possible involuntary resettlements must be avoided or reduced to a minimum, and for that purpose all viable Project design options must be studied.

Estimation of population to be resettled

75. Preliminary inspections of the area of the projects to be implemented have not identified any possible resettlements. Resettlements are not part of the projects’ objectives and, if the case arises, in adherence to OP 4.12, the participating municipal governments should try to avoid any possible resettlement. The potential circumstances could comprise moving certain service activities (Le. itinerant vendors, peddlers, etc.) and adjusting certain interventions for the preservation of the area’s historic heritage and municipal territorial organization. In such cases, the municipalities shall oversee the provision of the necessary resources to pay the costs arising from said restoration, relocation or resettlement processes. In the cases of community projects, the Project’s intervention condition shall be the agreement between the interested parties to use their lands andor facilities for the undertakings to be financed.

76. It is not likely that any relocation or resettlement could occur for the Basic Services component. Water tapping and supply projects for communities are normally based on the exploitation of resources located in the lands owned by the beneficiary communities themselves, and the installation of facilities for home distribution is defined by community inhabitants based on their internal reciprocity mechanisms. The installation of latrines or ecological bathrooms for family use is implemented on private lands, while public bathrooms or services that could be used for tourist activities will be located in public or community land, with the beneficiaries’ prior consent.

77. The design phase for the subcomponents of the sewage networks and water treatment plants and the integral solid waste management includes concurrent community development work through which the best locations for each subcomponent will be identified, with the help of the local community. In the event that community property or private land is affected, the municipalities will oversee the corresponding purchase or compensation, according to prior agreement with the affected communities or families.

Resettlement Objectives

78. The general objective of a resettlement is to mitigate and compensate the affected population for the impacts caused by an inevitable relocation, with the intention to restitute or improve the socioeconomic conditions of the relocated population.

79. The specific objectives are to (i)characterize and evaluate the socioeconomic conditions of the relocated persons through a census-based diagnosis; (ii)evaluate the impacts caused by such relocation in order to determine an alternative solution and compensation level; (iii)support relocated persons and follow them through the process from a social standpoint in order to allow them to obtain similar or better living conditions.

- 101 - Principles of Resettlement

80. The principles of resettlement are: (i)Exceptionality, (ii)Planning, (iii)Information and Participation, (iv) Restitution of Socioeconomic Conditions, (v), Concordance (vi) Equality and (vii) Celerity.

LEGAL FRAMEWORK

81. The following legal framework focuses on the norms that guarantee a just indemnification of resettled persons, as well as the norms that determine the causes for resettlement in urban development processes.

Domestic Norms

82. The applicable domestic norms are contained in the following instruments: 1. State’s Political Constitution, 2. Administrative Proceedings Law, 3. Municipalities Law No 2028, 4. Civil Code, 5. Expropriation for Public Use Law, 6. Law Decree 14375, 7. Law on the Regularization of Urban Ownership Rights No. 23 72, 8. Regulations for Environmental Prevention and Control, 9. National Agrarian Reform Service Law No1715, Community-Based Reconduction of the Agrarian Reform Law No 3545, Regulations to Law 3545, S.D. NO29215, 10. Law No 668, 11. General Water Regulations, 12. Norm on Contracting Processesfor Goods, Works, General and Consultancy Services (S.D. 27328 dated January 31, 2004) and 13. General Law on Concessions of Public Transportation Works NO1874.

International Norms

83. The following international norms are applicable in case ofresettlements: 1. 1972 Agreement of San Josd de Costa Rica, 2. United Nations Universal Declaration of Human Rights - W,3. ILO ’s 169 Convention on the Rights of Indigenous Peoples in Independent Countries, and 4. United Nations Declaration on the Rights of Indigenous Peoples.

Jurisprudence

84. The jurisprudence concerning this matter is contained in several cases and can be summarized as follows: a) expropriation will only be carried out prior solemn declaration of public need and usefulness , determined by a competent authority; b) the procedure shall submit to previously established legal dispositions; and e) the assignment of ownership rights, as well as the public occupation of the expropriated asset will only materialize prior payment of thejust indemnification ”.

COMPATIBILITY WITH OPERATIONAL POLICY OP 4.12

85. Applying the norm on Contracting Processes for Goods, Works, General and Consultancy Services (Supreme Decree 27328 dated January 31” 2004) whose Article 10 (External Financing Agreements) establishes that “whenever public contracts are entered within the framework of external financing agreements, endorsed by a Law of the Republic, these shall be regulated by the norms and procedures established in this Supreme Decree, except for what is expressly foreseen in said agreements” it is necessary to secure the commitment of public and private institutions involved in any

- 102 - resettlement that is necessarily applicable to the World Bank’s Operational Policy 4.12, and that concerning indemnification, the determination of the value of the affected assets or goods must include a consideration of the replacement value of said goods, complementarily to the assessment established by Law.

PREPARATION OF ABBREVIATED RESETTLEMENT PLAN

86. An abbreviated Resettlement Plan (RP) has been prepared taking into consideration the following phases:

TABLE 1: Process Phases

PHASES STAGES MOMENTS RESULTS

Preparation And Diagnosis Pre-Initiation Census, Socioeconomic Study Planning Formulation Initiation Preparation OfArp, Private Agreements Execution Integral Gratuitous Or Forced Transfer Execution Intervention Deeds Due To Expropriation Move Relocation Delivery Minutes OfCompensated Good And Affected Good Follow-Up And Monitoring During And After Results Report Evaluation Execution

I I I I I

The PCU shall appoint or engage a specialized professional in charge of designing the Abbreviated Resettlement Plan for the municipalities that require it.

The Municipal Governments, through their pertinent units, shall determine which plots will be affected and shall issue a technical report and the cadastral assessment as well as a physical- legal diagnosis of the affected plots.

The specialized professional shall coordinate activities with the PCU and the Municipal Governments concerned and shall process the information that was prepared, make a socioeconomic diagnosis, identifying the relocations and other impacts and she shall also propose measures to address them. S/he shall develop the Abbreviated Resettlement Plan for later execution under the responsibility of the corresponding Municipal Governments, which may engage specialized companies to be compensated with the resources from the Project’s Institutional Strengthening component.

87. Implementation of the ARP must foresee an Information and Community Participation component, as well as the presentation of alternatives for the eventual affectation modalities, and it must also foresee the subscription of agreements with the affected parties prior to initiating technical- administrative expropriation processes or the limitation of ownership rights. The Bank must grant its Non-Objection.

- 103 - FINANCING THE RESETTLEMENT PLAN

88. The cost of the Resettlement Plan shall be part of the projects’ total cost. The funding of replacement goods and other payments corresponding to compensations shall stem from counterpart funds corresponding to the Municipal Governments.

COMMENTS ABOUT THE MUNICIPAL GOVERNMENTS’ INSTITUTIONAL CAPACITY

89. The institutional capacity of the region’s Municipal Governments to cany out resettlement processes, in spite of the significant disorder that characterizes them, is limited by a number of factors, including among others: (i)the life of the majority thereof does not exceed the 13 year span of the Popular Participation Law, (ii)their income is reduced and most of it is absorbed by concerted works - year after year- with the communities and urban corporate sectors, without the possibility of structuring investment programs for public and collective goods with a more strategic vision and fewer emergency undertakings; (iii)staff turnover is high; (iv) their management experience is very weak in terms of the Project’s components, even in the case of Copacabana and Tiwanaku; and (v) their experiences in terms of resettlement, if any, is related mostly to minor interventions such as the relocation of itinerant businesses in public streets and facilities

- 104- Annex 10 Appendix 1 Identification of Stakeholders Social and Productive Organizations

BOLIVIA: Lake Titicaca Local Sustainable Development Project

Area Potentialities Problems or limitations Transportation Land They are organized in unions, There is no provincial bus station or terminal for transportation which makes it possible to the Lake area. They are not authorized to enter convene them and start a the city during the nighttime and they leave dialogue tourists in different places in the city ofEl Alto. Lacustrian They are organized in unions Disloyal competition from large companies transportation and at the community level. push prices down, below the cost of fuel, which hinders small companies from making any immovements. Trade Trade guilds This sector agglutinates more They not have adequate areas to carry their than 45 trade guilds which trading activities. carry out their business activities throughout the Lake Insecurity exposes them to theft with great area. frequency. In Copacabana and Desaguadero these groups have the strongest social force. Services Hotels, lodges There are hotels that meet the The main problem of most lodging facilities and needs of organized tourism in hotels is basic sanitation. They lack sufficient Copacabana, Puerto PCrez, drinking water, there is no sewage and their Huatajata, the islands and solid wastes are not properly managed. other locations. In Copacabana they are affiliated to the Hotel Chamber. Restaurants, There are no gastronomical or The insufficient basic sanitation does not allow gastronomy restaurant organizations. This them to provide quality services. Large is a disorganized sector. There restaurants failed to establish contact with local is a great variety of food suppliers. There is no traditional food on the specialties at a wide price menu. range.

There are examples of community-based initiatives in this area at Sun Island. They constitute a good example of community management. Professionals There are organizations of There is a poor relationship among these specialized in tourist guides and organizations and other associations. tourism - professionals specialized in tourist guides tourism at the main sites such as Copacabana and Tiwanaku. Security National Police The national police force is very weak and Tourist Police failed to consider the importance of tourism. There is practically no tourist police force. Working conditions are absolutely precarious, and these are coupled to institutional weakness, in terms of staff and material resources. It is rare to frnd police officers in rural areas.

- 105 - Area Potentialities Problems or limitations :ourism rhere are numerous operators n general, operators have been working without iperators it the national and my coordination with local organizations. lepartmental level. There is jometimes they hire them as cheap labor. inly one local operator in 'eople in the communities resent the fact that Clopacabana. hey operate without any coordination. igricultural ;mall milk Some organizations were The producer organizations of milk and diary md livestock roducers strengthened, such as iroducts do not meet with the suppliers of )reeding FEDELPAZ, which operates ;astronomical and restaurant services in ictivities, in the provinces of Ingavi, ;eneral, which does not allow them to enter this ishing and Omasuyos and Los Andes narket that is covered by companies from El iandicrafts located around the Lake. Their 4lto. There is improved livestock and very main market is PIL Andina. good quality forage throughout the entire area. There are parallel milk producers and dairy manufacturers organizations in each municipality. They market their products in La Paz and El Alto. The main dairy industry is located in the city of El Alto. Most ofthese organizations have a legal personality. Small There are producer rheir greatest problem is their weakness as a igricultural organizations of potato, bean, productive organization, given that they lack an iroducers forage and quinoa growers as instance that is exclusively dedicated to seek well as other agricultural markets for their products. They could improve products in almost all the their conditions with adequate strengthening and municipalities that surround training. The issue of land ownership in the area the Lake. limits the production and investment capacity in their plots, which are becoming increasingly They are organized as OECA, smaller with the passage of time. associations, cooperatives and coracas. Fishermen There is a fishermen's Given the absence of a clear-cut organization organization in the five they are unable to strengthen it in terms of its provinces combined with productivity, It is a union type organization that other sectors such as does have a production or marketing secretariat, businessmen, forage which are the most important for productive producers, artisans and tourist- organizations. On the other hand, being oriented undertakings everything and nothing at the same time constitutes a risk factor for the Project as ofthe formulation thereof. 4rtisans The largest number of Handicrafts traders are also organized as organized artisans is in artisans. Tiwanaku, where we identified five organizations ir In general a great weakness is observed in the the following fields: weaving, handicrafts sector. It requires strengthening to pottery, stone and wood address its main problem: i.e. the market. carvings and others. In Copacabana the smuggling of Peruvian Some organizations have a handicrafts at very low prices does not allow legal personality them to compete with quality domestic products.

- 106- Area Potentialities Problems or limitations locial and Xvic 3rganized in urban areas. The Has problems in its relating with the Municipal :omunity :ommittee strongest one is in Government but is not considered as a risk to Irganizations Zopacabana, which together the Project and the compliance of its objectives. with the Catholic church’s xganization Pastoral Social is xomoting, the xofessionalization of jifferent tourist-related areas inder an agreement with the UCB. Jeighborhood Neighborhood Councils are They are involved in a power struggle with Zouncils urban grassroots territorial community-based organizations. In some xganizations (OTB). They are municipalities such as Desaguadero they exert found in all intermediate the greatest influence on the municipality. A sities. They are the spokesmen large part of the inhabitants belong to trade with municipalities and other unions and guilds. organizations. ?enera1 Community-based General secretaries comply with their duties as jecretaries organizations affiliated to an obligation to keep land ownership rights and unions and guilds have general their mandate generally lasts only one year, secretaries as their highest which does not allow them to lend continuity to executive authority. their tasks, programs and projects. ndigenous In the area surrounding the The jilakatas and mallkus exert their posts iuthorities Lake, the Ingavi Province is according to their turn with regards to the only one that has maintaining the land ownership rights to their indigenous authorities in the properties; their mandate lasts for one year. communities. As of year 2000, They have problems with the neighborhood the indigenous nature of the boards to achieve an answer to their demands. ‘ayllu ’ and the community is being acknowledged. :omunity It is the uppermost decision- In some communities demands become 4ssembly making instance in the distorted because the community assembly communities. What the requires that projects benefit everybody within Assembly decides must be the community, which leads to the construction enforced. Ithas a normative of sports facilities, multi-purpose courts, role. refhrbishing ofcemeteries, church arrangements, etc, failing to take into consideration basic sanitation, which requires community management, or other more important public works. lesidents Community inhabitants that Residents return to their communities during reside in the cities of La Paz patron saint holidays, and leave their lands and El Alto as well as in other under the care of a family member as well as cities, and who have not lost compliance with the duties derived from their their links with their native positions in order to maintain land ownership. communities are called residents.

Residents are organized in Resident Centers in the City of La Paz, as well as in El Alto.

- 107 - Area Potentialities Problems or limitations khoolBoards community Directorate and up of School Boards, there are fewer problems they monitor the teachers’ among teachers, students and parents. This issue performance. In the requires a more in-depth analysis. communities two people alternate their functions assuming the roles of gatekeeper and superintendent. They alternate every week and do not receive any remuneration. They also coordinate with the school Principal civic acts on Mondays as well as other

Water and electricity committees control the service, collect payments as well as other

PUBLIC AND PRIVATE INSTITUTIONS

~~ Area Potential Problems or limitations Academic Universidad There are UACs in the Project’s four Their resources are limited and Cat6lica areas of incidence:iTiwanaku, Batallas, they do not have any relations with Boliviana, Rural Escoma and Pucarani. the Municipal Governments. Academic Units In Copacabana they are training tourism (UACs)) experts. Many local professionals attended these units and currently reside in their communities.

UMSA It offers several careers in Copacabana and Pucarani Naval Force Its headquarters It is building a multipurpose watercraft Its economic limitations do not are located in in Guaqui . allow it to comply with many of its Tiquina, Chua objectives to support tourism. and Guaaui. ALT As a binational It has a plan to mitigate pollution. It does not have much credibility authority of Peru within the communities that and Bolivia, it is surround the Lake. in charge of preserving the Lake’s health, and monitor the conditions of the water, air, fauna and flora. It must promote decontamination processes, etc. I

- 108 - Area Potential Problems or limitations vlunicipal vlunicipal rhese correspond to the northern area. The need for institutional jovernment jovernments of Municipal Governments have shown strengthening at the different 'uerto Acosta, interest and are willing to favor tourism. Municipal Governments was hcoraimes, identified. lchacachi and In Puerto Acosta community luarina . dwellers believe that GMPA does not consult anything with them and fails to convene them. The municipality of Ancoraimes lacks the conditions to become a tourist attraction. In Achacachi, there is a movement to become independent and form a new municipality due to the abandonment of the communities on the part of the Municipal Government, which focuses all its activities in the city ofAchacachi. This happened in Huarina, which was recognized as the fourth section of the Omasuyos Province. aunicipal They correspond to the Project's In Desaguadero the Municipal 3overnments of southern area of coverage. They are Governments is willing to support Iesaguadero, interested in becoming touristic the town in the first place and 3uaqui, municipalities thereafter the communities, which riwanaku, have been postponed. In Guaqui, raraco and there is good coordination and a lot Viacha is expected from the museum, but the beneficiaries oftourist activities have not been identified yet. In Tiwanaku, it is possible to improve coordination. Preparations are being made to receive the Aymara New Year, where all social and productive stakeholders participate. Taraco is potentially a touristic area, but an exclusive plan should be prepared to take advantage of its scenic beauty without causing any damages thereto. The direct beneficiaries have not been identified. There are many residents.

Municipal In Copacabana the Municipal Relationships with civil society Sovernments of Government considers that tourism organizations are not good. Clopacabana, Tito constitutes a priority. The islands are the Yupanqui and greatest tourist attraction riquina Area Potential Problems or limitations rito Yupanqui has one of the tourist The Municipal Government has :ircuits with the highest attraction due lot yet stated its willingness to :o its natural beauty. ?articipate in the Project.

Tiquina concentrates the passage to the riquina does not exploit its irea of Copacabana as well as the 3dvantages with respect to other islands of Lago Mayor. tourist areas. The Municipal Sovernment does not coordinate with neighboring municipalities.

dunicipal Puerto PCrez has tourist attractions in its There are very few inhabitants in jovernments of islands and has a paved road into the the town. There is a larger number ’uerto PCrez, town. Its Municipal Government is 3fresidents. ’ucarani, unable to plan because it divides its 3atallas and resources based on the number of ,aja. inhabitants in the communities and the town.

Pucarani, has many activities that attract large crowds. The Municipal Government has good relationships with its neighbors and communities

The Municipal Government of Batallas The main problem of the carried out studies to develop tourism. Municipal Government is Koana Bay. The Municipal Government ofLaja is being pressured by the communities to address the water Droblem. Zommon- ,ake Titicaca’s It comprises 17 municipalities from the Its current president is the Major ol vealth Zommonwealth area that surrounds the Lake. Tiwanaku Mancomunidad iel Lago The MMLT is composed by the riticaca) Municipal Governments and is not known in the communities. VGOs, :ntemational Ithas been working for many years in In some communities there is a ’oundations ?lan different communities surrounding the weak coordination that does not Lake. It works with the aim of allow adequate management to improving the children’s condition and take advantage of the projects that supports planning, sanitation and water are implemented. supply projects. 3PCA It works in the Ingavi province. It It has limited resources that allow provides support through studies, it to cover small sectors that do not research and technical assistance for have great impact. producer organizations and Municipal Governments. hter Vida Its interventions are of a social nature, It does not work with small emphasizing children’s needs. producers and local micro- entrepreneurs for the distribution ofbackpacks and uniforms for children.

- 110- Area Potential Problems or limitations Proimpa It works to improve the production of potatoes, lima beans and onions. Nuevo Norte, They work in Pucarani and Batallas in Pachamaman the areas of irrigation and production Urupa management with small organized producers. Fundaci6n Tierra It has trained legal facilitators in Financial limitations do not allow different communities and it to address the process under municipalities. Territorial management better conditions. will be promoted in some communities such as Viacha, Jes6s de Machaca and San AndrCs de Machaca. CEPROMU It works to strengthen women’s organizations, especially artisans. It works in Tiwanaku. Mass com- San Gabriel Radio is the most popular mass- munication Radio communication media. Large media FIDES Radio municipalities have radio broadcasting Copacabana stations to reach their local population. Radio and others They will become important media to disseminate the activities of the Vice Ministry and UPP, especially to convene workshops and meetings.

- 111 - Annex 10. Appendix 2 Summary of Events during the Preparation Process of the Project- First Phase

BOLIVIA: Lake Titicaca Local Sustainable Development Project

Date Municipality Venue Participants 10 - 05 - Carabuco Sal6n de la Alcaldia 53 10 - 05 - Ancoraimes Of. Junta de Vecinos 16 11 - 05 - Achacachi Conceio Municipal 59 I 12-05- 1 Huarina I Subalcaldia I 76 I \ 12 -05 - I Tiauina I Centro del CIDAl3 I 17 I

I 22-05- I IslaOuewava I Espacio abierto I 26 I I 22-05- I PuertoPCrez I Museo de Sitio I 6 I I 22-05- I PuertoPCrez I Predio del Sindicato I 4 I 23 - 05 - Tiwanaku Museo de Sitio 72 23 - 05 - Tiwanaku Museo de Sitio 15 23 - 05 - Desaguadero Alcaldia 70 23-05- Guaqui Alcaldia 19 24 - 05 - Tiwanaku Museo de Sitio 72 25-05- Taraco Alcaldia 2 29-05- Viacha Comunidades 50 I 29-05- I Laja Alcaldia 42 TOTAL 896 I Summary of Events during the Preparation Process of the Project- Second Phase

Date Municipality Community/Sector Participants 08-06-07 Huarina Cuyahuani 40 08-06-07 Huarina Copankara 77 14-06-07 Copacabana Actores locales de turismo 36 20-06-07 La Paz Operadores de Turismo 24 2106-07 I Taraco Pescadores 40 TOTAL 217

- 112- Third Phase: Participation of the community in meetings with the consultancies undertaken to identify tourism projects

Date Municipality Zone Participants 20.08 - 30.09.07 Puerto P6rez Este 170 Pucarani 95 Batallas 215 Laja 25 Huahna 400 25.08 - 30.09.07 Achacachi Norte 370 hcoraimes 56 Carabuco 213 Puerto Acosta 49 3 1.08 - 30.09.07 Copacabana Oeste 450 Tiquina 22 1 Tito Yupanqui 360 TOTAL 2.624

- 113 - Annex 11: Environment Safeguards BOLIVIA: Lake Titicaca Local Sustainable Development Project

A. Project Description

1. The Project’s development objective is to contribute to local sustainable development in the Bolivian part of the Lake Titicaca watershed. This will include: (ii)facilitating local activities that support tourism development and cultural protection in the communities surrounding the Lake, and (ii) improving basic water and sanitation services.

2. Other sub-projects will support institutional strengthening through investments and technical support for master planning, regional development priority setting exercise, improved monitoring and reporting of environmental conditions in the Lake and the surrounding area.

3. The Project proposes to finance three types of investments: small-scale civil works aimed at the remediation and protection of the water quality of Lake Titicaca; community investments to promote development of the tourism sector; and capacity building to improve and strengthen strategic planning for the Lake Titicaca region. Eligible investments and sub-projects will include: small scale infrastructure such as latrines, in-house sanitation, expansion of waste-water treatment and sewerage networks, solid waste management programs, municipal strategic planning, and regional environmental studies. This will be done through a financing mechanism for funding for Water Supply and Waste Water Management through FPS.

B. Project environmental setting and baseline conditions.

4. While the proposed Project aims at improving the environmental conditions of Lake Titicaca it is very important to bear in mind that it will be set within a sensitive environmental and social context. The hydrology of the lake and the overall basin is complex and the area comprises a diversity of cultures. The lake plays an important role in the large bi-national watershed between Bolivia and Peru. The lake itself is almost a closed hydrologic system and is a key element of the regional hydrology comprising the Titicaca basin, the Desaguadero River, Lake Poopo, and Coipasa Salt Lake, collectively referred to as the TPDS.. (For a more complete treatment of the physical setting of the lake refer to Villegas and Roberts A Hydrodynamic Model for Lake Titikaka 2007)

5. In fact, the region’s great tourism potential is grounded firmly in its unique physical setting, environmental beauty and cultural diversity. As documented in the Geo-tourism Needs Assessment (National Geographic 2007)’ the Bolivia side of the lake is endowed with great geographic diversity which includes numerous peninsulas and islands and many outstanding scenic landscapes. Easy access to major tourist destinations in the region will almost certainly assure that the area will see a growth in tourism and an expansion in the numbers of annual visitors to the region.

6. It is generally understood and accepted that pollution is already a significant problem in the lake. People living in the Project area recognize these problems and these issues have been raised consistently in public consultations. At present, pollutants enter the lake fiom multiple sources. The Bolivian city of El Alto is a significant source of industrial and domestic pollution as the Peruvian towns of Pun0 and Juliaca. Other important sources of pollution are the discharges of untreated municipal waste from Copacabana (Bolivia) and the presence of formal and informal mining operations leading to heavy metal runoff into the lake (National Geographic 2007).

- 114- 7. Waste water treatment facilities and trash dumps in places such as Copacabana, Achacachi, Tiwanaku, Tiquina and Viacha have exceeded their capacity and are contributing to significant local environmental degradation and are in need of replacement or remediation measures. In Copacabana, for example, wastewater is being disposed right on to the beach areas in very close proximity to restaurant, playgrounds, and areas where water-based tourist activities such as boating, wading, and kayaking are taking place. Nutrient levels are already causing eutrophication in many sites and though data is lacking, at some locations bacteria levels will almost certainly be at levels which are threatening public health.

8. Other long-term problems include the introduction of non-native fish species (trout) into the lake for commercial fishery. Growth in aquaculture may also pose important problems in the short and medium terms. Agriculture in the Project area is not intensive but some of the agricultural practices such as grazing and production are already contributing to problems of non-point source run-off especially in some of the smaller stream which drain into the lake.

9. It is important to note that a major constraint in overall lake management at the regional level is the lack of reliable data. Some water quality studies, temperature stratification and basic climate parameters are available but few data exist on the hydrodynamics, currents or circulations patterns for the lake. There is no mechanism in place for systematic data collection, archiving, or instrument maintenance (Villegas and Roberts 2007).

C. Environment benefits and risks of the Project.

10. Overall, the Project aims at improving the environmental conditions in Lake Titicaca and the surrounding region. The investments envisioned are expected to both improve and remediate existing wastewater collection and treatment, water supply and solid waste facilities which are poorly designed, beyond their normal life expectancy or physical capacity as well as to finance new investments in these areas. The current situation in all sites proposed for Project financing is that they are contributing to environmental degradation through inadequate wastewater treatment and open dumps which presenting unsafe conditions for those living in and around the sites. The Project will improve the current situation with respect to pollution management and the residents in the area will benefit from lower risks of health and improved safety.

11. This Project presents two types of environmental risks. First are the risks associated with the site, selection, construction and operation of solid waste and waste water management facilities. Past practice in the Project area shows the need for more careful planning, site selection and choice of technology. However, if the sites for facilities are carefully selected, if contractors follow construction guidelines established for the Project and if the facilities are operated as designed, these risks should be low.

12. The second set of risks is associated with increased numbers of tourists and visitors who will be encouraged to come to the Project area. If visitors are poorly managed, their access to sensitive sites not controlled, or if their numbers grow beyond the carrying capacity of the tourism industry then this could pose long-term sustainability problems. For example, there are already three major cultural events in Copacabana which can attract tens of thousands of visitors which greatly increases the pressures on the ability to manage waste associated with these visitors. It has been estimated that the population of Copacabana can grown by ten times during these festivals.

13. Growth in tourism will not only puts pressure on existing facilities but will lead to the growth in demand for new facilities and new tourism experiences. Already, there is pressure to develop or find new beaches for tourists to explore and experience. Many visitors to these areas will want to experience areas which have not been developed or are free from large numbers of visitors. This will almost certainly lead to pressure to develop new beaches or to develop facilities on the many islands in the Project area.

- 115 - 14. The Project investments envisioned for regional master planning, monitoring and civil works will contribute to the management and reduction in pollution levels in the lake. They will also improve overall public awareness regarding environmental conditions in the region and community priorities for future management will be established. The Project will improve the scientific understanding through the State of the Lake reporting and will strengthen institutions whose mandate, among other things, will be to improve management of regional environmental problems.

15. Civil works will be financed under the Project but these works are expected to be of a small to medium scale. Typical civil works investments could include small-scale water infrastructure, expansion of sewerage networks and waste-water treatment facilities, construction of small landfills, improved solid waste collection and management and other sanitation or visitor infrastructure supporting tourism. The physical footprints of these works are expected to be small and the operational phase impacts are expected to be of low to moderate. None of the risks are regional in nature, are highly localized and have known mitigation and management measures to address any impacts. For these reasons the Project has been categorized as a Category B for environmental risk purposes.

D. Environmental assessment process.

16. A strategic level Environmental Analysis (EA) of the Project has been camed out by an independent consultant. This report summarizes the institutional, regulatory and legal framework governing environmental management in Bolivia; the environmental context of the Project, available baseline information of the Lake and the Project’s area of influence such as priority environmental hotspots and sensitive sites as well environmental threats and risks in the Project area. The report provides detailed information on the geography of the region, the natural resources, existing agricultural practices and other economic activities and their relationship to the natural resources of the area.

17. The EA develops a typology of likely investments types and describes the most likely risks associated with civil works during both the construction and operational phases of the individual sub- projects. In addition, the EA provides a description of recommended mitigation measures appropriate to each type of environmental impact. The environmental analysis provides a detailed list of environmental management measures that each contractor is expected to adhere to with respect to disposal of construction debris, soil management and disposal, storage of fuels and other hazardous materials, contracting local labor, and guidelines for community involvement among other important concerns. According to the analysis presented in the EA the overall environmental risks associated with the Project are expected to be low to medium and are mostly associated with the construction and operations of civil works.

18. Several supporting studies have been completed which complement the Environmental Analysis. These include: Geotourism Needs Assessment - Lake Titikaka (National Geographic July 2007); A Hydrodynamic Model for Lake Titikaka (P. Roberts Consulting Engineer August 2007); Manual de Gestion Ambiental (FPS 2002). These documents are all publicly available within Bolivia as well as through the Bank’s InfoShop.

E. Environmental Management Framework (EMF).

19. Because the specific infrastructure investments will not be fully identified prior to appraisal the Project implementation team will be guided by an environmental framework (EMF). The EMF will describe the procedures for Project screening and will identify any applicable thresholds for triggering various levels of environmental impacts assessments. A proposed outline for the EMF is included in this annex. The EMF will be included as part of the Project’s Operational Manual. Where required Project

- 116- specific impact assessments will be consistent with national regulations as well as with World Bank safeguard policies.

20. The environmental screening and review of sub-project proposals under each component will be carried out by staff of the PCU of VMT as well as by the Environment Unit of the FPS (See below). These units will be staffed with appropriately qualified environmental specialists who will have adequate resources to carry out review of site proposals and field visits where necessary.

21. At a minimum, each civil works sub-project financed by the Project will require the contractor to comply with a site specific Contractor’s Environment Management Plan (CEMP). The CEMP should provide a detailed description of the contractors’ environmental responsibilities and obligations. Not all sites will require actions in every aspect of environment management but in general will cover actions required for management of air quality, water quality, noise control, construction waste management, soil conservation and sediment control, control of workers and work site and handling and management of hazardous materials. The operation of individual facilities such as landfills and wastewater management will be guided by a simple Environmental Management Plan (EMP) which addresses specific requirements to be followed during the operational phase of each Project.

22. The EA describes, in considerable detail, the most likely impacts and defines specific operational mitigation measures for each type of impact (See page 85 in the EA for detailed descriptions). Many of the measures are expected to be included in the CEMP and the EMP for each facility. The detailed tables from the EA will be included in the Operational Manual.

F. Implementation arrangements.

23. The Project’s environmental safeguards will be implemented through the PCU of the VMT as well as through the FPS. As the implementing agency of the Community Fund the VMT through its PCU will be responsible for enswing compliance with the environmental screening procedures established for the fund.

24. For larger sub-projects, the FPS will establish a competent environmental unit to implement their FPS environmental screening, review and assessment procedures. At present FPS has developed detailed operational guidelines for environmental review but they have yet to mobilize the requisite numbers of staff to implement this program. FPS has been agreed that staff will be mobilized prior to Project effectiveness and they have informed the Bank that the recruitment process is well underway. Specific roles and responsibilities will be defined through Terms of Reference developed for each of the technical positions in the respective management units.

G. Consultations and information disclosure.

25. While the environmental risks of the proposed works should be considered low to moderate for works envisioned under the Project, it is important to recognize that these works will be situated in very sensitive environmental and social contexts. Thus, individual sub-projects could be locally controversial if poor decisions on site-selection are made, if basic environmental measures are ignored during the construction and operations phases of the Project, or if local communities and affected people are not properly informed and consulted. For this reasons the Project will place great emphasis on the role of public consultations and disclosure of information

26. The Environmental Analysis and the proposed EMF have been subject to a thorough review and consultation process. The PCU has sponsored a technical workshop to discuss both the analysis of likely impacts from proposed works as well as the EMF which will guide Project operations. The

- 117 - Environmental Analysis has been disclosed in accordance with Bank policy at and in the Bank’s Infoshop. Opportunities to comment on the overall approach have been provided to concerned stakeholders at meetings held during the consultation process.

H. Monitoring and Supervision Arrangements.

27. Monitoring of the environmental procedures and overall quality control for the Project will be carried out at various levels. Responsibility for overall compliance with environmental measures will rest with the PCU of the VMT. Specific supervision responsibilities will rest with the environment unit of the FPS and with the supervising engineer of various sub-projects. The World Bank team will carry out periodic supervision of the Project which will also include appropriate environmental staff to review the effectiveness of environmental screening mechanisms and to visit field sites.

I. Compliance with World Bank Environmental Safeguard Policies

28. OP 4.01 Environmental Assessment. The proposed approach of the Project is fully consistent with the EA policy. The environmental risk category of B is appropriate for the nature and scale of the proposed Project works. The client has provided a strategic analytical report covering the Project area of influences, the legal framework, risks and benefits of the Project. To guide operations the PCU will develop an EMF which will spell out the procedures, technical standards and institutional requirement to be used under the Project. AN EMF is consistent with the Project’s programmatic approach and is standard practice for a Project of this type.

29. OP 4.04 Natural Habitats, The Project is not expected to degrade any critical natural habitats though it is recognized that the Project is located in the context of a sensitive and beautiful landscape. Thus, there may be situations where site selection for infrastructure could impact local habitat values. Screening criteria and management mitigation measures will be included in the Environmental Management Framework to ensure that habitat impacts are identified and taken into account and avoided, minimized or offset.

30. OP 4.36 Forests. The Project will have no affect on forests in the Project area. Screening criteria will be included in the Project assessment process to evaluate potentially affected habitats but it is not expected that forests will be affected in any way. There is no action expected under this policy.

31. OP 4.09 Pest Management. The Project will not finance the procurement of pesticides nor will it lead to the increased use of pesticides. There are no additional actions required under this policy.

- 118- Summary ofSafeguard Issues

Safeguard Risks and Benefits Mitigation measures and disclosure of documents triggered Environmental The Project is designed to improve the environmental conditions in Lake Environmental assessment process. (EA) A strategic level Assessment Titicaca and the surrounding region. The investments envisioned for environmental analysis was carried out for the Project which (OPIBP 4.01) regional master planning, monitoring and civil works will contribute to summarizes the environmental context, available baseline the overall management and reduction in pollution levels in the lake. information, and current threats and risks. The EA addresses the They will also improve overall public awareness regarding typical risks associated with civil works during the construction and environmental conditions in the region and community priorities for operational phases of the Project. The analysis summarizes a range future management will be established. The Project will improve the of possible mitigation measures appropriate to each type of impact. scientific understanding through the State of the Lake reporting and will In addition, the EA provides a detailed list of environmental strengthen institutions whose mandate, among other things, will be to management measures that each contractor is expected to adhere to improve management of regional environmental problems. with respect to such things as; disposal of debris, soil disposal, storage of fuels and other hazardous materials, contracting local Civil works will be financed under the Project but these works are labor, and guidelines for community involvement. expected to be of a small to medium scale. Typical civil works investments could include small-scale water infrastructure, expansion of Environmental management framework. (EMF) Because the sewerage networks and waste-water treatment facilities, solid waste specific infrastructure investments will not be identified prior to management and other sanitation or visitor infrastructure supporting appraisal the Project implementation team will be guided by an tourism. The physical footprints of these works are expected to be small environmentalhmework (EMF). The EMF describes the and the operational phase impacts are expected to be moderate. The procedures for Project screening and identifies the thresholds for Project will finance sewage treatment facilities, thus contributing to triggering various types of environmental impact assessments. decrease overall discharges of sewage into the Lake. Where required, impact assessments will be consistent with national regulations as well as with World Bank policy. The environmental screening and review of sub-project proposals under each For these reasons the Project has been categorized as a category B for component will be carried out by respective agencies. The unit will environmental risk purposes. be staffed with qualified environmental specialists who will have resources to carry out review of site proposals and field visits where necessary.

The EA and the EMF have been finalized and disclosed at www,laeoTiticaca.eoodeuaees.com and sent to the Infoshop Natural Habitats Natural habitats specifically listed as key wildlife areas (e.g. noted The Project is not expected to degrade any critical natural habitats (OPIBP 4.04) Ramsar sites for critical bird habitat) are identified and Project activities though it is recognized that the Project is located in the context of a and communications are intended to contribute to their protection. sensitive and beautiful landscape. Thus, there may be situations where site selection for infrastructure could impact local habitat values. Screening criteria and management mitigation measures will be included in the Environmental Management Framework to ensure that habitat impacts are identified and taken into account and avoided, minimized or offset.

Physical Cultural Consultations conducted with key stakeholders, at the local level, and The Project will address the above issues in the following ways: (a) Resources public authorities, revealed a pressing need to initiate a process of updating lists of national protected sites and monuments. The most (OPIBP 4.1 1) revaluing (Puesfu en Valor) the important cultural patrimony assets threatened sites will be surveyed and strategies for their preservation comprised by monuments, sacred sites, museums and other expressions proposed; (b) assisting national and local authorities to develop of culture found in the Lake Titicaca area. In many localities the conservation management frameworks; (c) build local capacity to encroachment of new construction represents a real threat to the integrity protect and preserve cultural assets; and (d) promoting the concept of the pre-Hispanic monuments and archaeological sites. In other areas of Geofourism as a way to enhance visitor appreciation of the the lack of management and operational structures in place establish the unique cultural and natural endowments of Lake Titicaca. risks of degradation.

Indigenous According to the 2001 census data, 93% of the population was identified The social consultation process has been developed in close Peoples (OPIBP as Aymara. The Project triggers the OPIBP 4.10 but does not require a coordination with the ongoing strategic vision process. In a first 4.10) stand-alone Indigenous Peoples Plan (IPP) because the Project document phase (IO to 29 May 2007), 25 workshops took place with itself is considered an IPP. On the basis of the social assessment and in approximately 896 participants (mayors, councilors, municipal consultation with the affected indigenous communities, the principles technicians, union representation, native authorities, communal and elements of an Indigenous Peoples Plan (IPP) have been inhabitants, the federation of fishermen, producers, artisans). These incorporated into the Project design. workshops focused on the following topics: i) an analysis of the national context and situation; ii) a reflection on the importance of During Project preparation, the Bolivian government conducted a participation, the division of roles and stakeholder ownership in all comprehensive socio-cultural and organizational assessment as part 01 Project phases; iii) an assessment of local natural and cultural the development of a long-term strategic vision. This consultation resources; iv) review of intervention opportunities: tourism, basic process engaged different stakeholders of all 15 municipalities sanitation and environment, territorial planning and productive surrounding the Lake. The main areas covered by the social assessmen1 development. include: (i) social objectives; (ii) legal framework, (iii) stakeholder groups; (iv) consultations; (v) key inputs to the Project; (vi) social In June and July of 2007, a second round of workshops took place, characteristics of the Project areas (indigenous groups, gender, potential the information and results of which have not yet been systematized. risks, and impacts); and, (vii) monitoring and evaluation arrangements. In these workshops, the communities and consulted organizations Given the socio-cultural characteristics of the region, the historic levels were informed of the frst round of the consultations. of tension in the region, and the level of mistrust among residents caused by perceived lack of commitment and accountability of the central A third round of consultations was done by the four consultancies government, prefecture and municipalities, a socio-cultural and organizational assessment was undertaken.

Primary and secondary information sources were used in the social and cultural assessment, The collection of primary data was carried out by a team of young professional Aymaras that collaborated as local facilitators or focal points. They team undertook interviews with community leaders, municipal authorities such as mayors, council members, technical experts and representatives of producer associations and social organizations in the Lake region. In addition to the

- 119- consultation process, the Aymara staff facilitated a cultural exchange process as women and elderly people expressed their opinions and views of the Project in their native language. This process provided greater insight to the preparation team regarding social and cultural issues.

Involuntary Resettlement of population is likely to happen due to civil works. The resettlement component is integral to the overall objective of Resettlement Resettlement activities will be pkinned and carried out in accordance improving the living conditions in low-income neighborhoods. A (OPIBP 4.12) with the Bank’s OP 4.12 (Involuntary Resettlement). Resettlement Policy Framework (RPF) has been prepared for the Lake Titicaca Sustainable Development Project based on the RPF A Resettlement Policy Framework (RPF) has been prepared by the which was prepared for the Bolivian Urban InfrastructureProject. Project’s Coordinating Unit located at the Vice Ministry of Tourism. Future and potential resettlement planning and implementation will continue to be implemented by the PCU in coordination with Municipal governments for the Tourism Component, and with the Vice Ministry of Basic Services for the Basic Services Component.

It is assumed that the activities under the Tourism and Basic Services components may not have an impact on people and property in terms of acquisition of land, houses andor access to property. However, in cases where there might be some impact, the preparation and implementation of potential resettlement plans will be carried before any civil works. projects on A bi-national Lake-management agency (ALT) exists, but is not always As part of the International Waterways program a letter from the International well-regarded, especially in Bolivia. More than 80% of Lake Titicaca’s Country Director was sent to the Peruvian Embassy outlining the Waterways water originates in Peru, yet the most threatened smaller and shallower proposed Project’s components and objectives. Lake Titicaca is (OPIBP 7.50) part of the Lake in the south is virtually fully enclosed by Bolivia. shared between Peru and Bolivia.

- 120- Annex 12: Geo-tourism Needs Assessment by National Geographic Society BOLIVIA: Lake Titicaca Local Sustainable Development Project

1. The Geotourism Needs Assessment was conducted by National Geographic and consisted of on- site workshops with local communities, government officials, NGOs, and tourism businesses; one-on-one interviews with key stakeholders, and visitor surveys. The information collected during this process, plus the team’s professional assessment of the region is compiled in this executive summary. This annex provides a specific analysis of specific destinations around the Lake, site assessments for each of these destinations, and a visitor analysis.

2. The analysis found that there were a number of needs that were consistently identified by local stakeholders as being important to their communities. These needs included:

Interpretive, service, and business training for guides, and local tourism business operators Improved interpretation, such as signage, maps, guidebooks, etc. Better linkages between tourism businesses and sites in the region, including linkages between Bolivia and Peru Improved communications between national and regional government agencies and stakeholders More equitable relationships between national or international tour operators and local suppliers The development ofnew tourism products and access to capital financing Increased visitor length of stay Sewage treatment and water pollution controls Region specific marketing and outreach

Lake Titicaca Comparative advantage

3. Lake Titicaca is one of the highest navigable Lakes on the planet. Situated at an altitude of 3,600 to 4,500 meters in the highest plateau of the Cordillera Real de 10s Andes, the Lake offers a unique yet diverse combination of natural physiographic features, comfortable climate together with an array of ecological, cultural and historical resources that provides a baseline for the great majority ofvisitors. On the Bolivian side ofthe Lake, it is endowed with peninsulas and islands with low and elevated ridges that provide breath-taking scenic landscapes ofthe Cordillera. Its ease of accessibility, and its proximity to the South American and North American markets, gives the Lake a comparative advantage.

4. Tourists to the region tended to fit the ‘geotourist’ profile; with an interest in an authentic tourism experience that includes culture, history, archeology, and nature. They were interested in local products, such as textiles, local food, and dance; they would be interested in eco-lodges or home-stays with local families, were well educated, and were fairly well off financially. Based on the analysis conducted a Geotourism MapGuide as well as some other targeted National Geographic assistance would help to address many of the needs raised by the communities of the region and help them enhance their tourism products in a long-lasting, balanced way.

5. The following description includes a list ofdestinations around the Lake that could be developed through the Project, as well as the opportunities and capacities needed. Through a process of local consultation the Coordinating Unit will prioritize investments in these areas.

- 121 - Destination 1: Copacabana

6. This workshop was attended by 28 local representatives of (i)the tourism private sector (tour operators, the hotel chamber, hoteliers, associations and unions of both terrestrial and maritime transportation service providers); (ii)the municipal government council; (iii)civic committees; (iv) neighborhood associations; (v) environmental and educational NGOs; (vi) naval authorities; (vii) police; and (viii) radio and media. The SWOT analysis focused on the following areas: terrestrial and fluvial transportation services provided to the Islas del Sol y Luna from Copacabana, accommodation and food and beverage, security, the environment, tour operators, human resources, and the tourism product currently offered in Copacabana and surrounding communities, including those found in the aforementioned islands.

KEY ATTRACTIONS 0 Development of nature and 0 Scenic landscapes of the Lake and the cultural heritage trails Cordillera Real 0 Local guides association e Copacabana’s Moorish style Cathedral and e Community-based management Museum of archaeological sites and e Archaeological sites in and around business Copacabana e Spiritual tourism - Pachamama 0 Archaeological sites in Mas del Sol and offerings (Earth offerings) Luna 0 Overnight stays with local 0 Flora and fauna along the Lake’s shoreline families in Islas del Sol and e Religious festivities, local folklore and Luna, including traditional festivals celebrated throughout the year cuisine and cultural evenings e Music and unique instruments (Charango, e Participatory tourism (education, Kena, Panpipes, etc.) farming, and volunteer) Hand-made crafts and textiles Horseback riding businesses Fish Hatcheries e Mountain bike businesses Ago nurseries (carpas solares) e Hand-gliding businesses Surrounding villages and communities like 0 Agrotourism Sampaya 0 Waste management businesses e Solar energy businesses CAPACITIES NEEDED 0 Highlight textiles of the region 0 Promote organic local foods e Strengthen collaboration and communication Star gazing observatories between government, service providers (tour 0 Increase collaboration between operators) and local NGOs public and private sectors and 0 Establishment of local government policy organized civil society framework and regulation for long-term planning e Community-base tourism planning - Copacabana and surrounding communities are in dire need of long-term planning 0 Business planning and access to credit e Training in numerous areas (boat safety, security, hotel management and hospitality, food hygiene, guiding, interpretation, language skills, etc.) e Demonstrate and establish linkages between

- 122 - tourism, the environment, and community development 0 Community-based management oflocal attractions and sites 0 Resolve water supply reliability and administration, raw sewerage treatment and solid waste management 0 Facilitate safety oftravelers between Peru and Bolivia 0 Promote regional identity

7. Copacabana is the main gateway and tourist destination in Bolivia’s Lake Titicaca. It provides direct access to the natural and cultural attractions on the Islands ofthe Sun and the Moon and continues to be one of Bolivia’s principal religious pilgrimage destinations. There are estimates that range from 85,000 to over 100,000 visitors that come through Copacabana year round.

8. There are a plethora ofissues on the supply side that need to be addressed in the next two to three years for the local tourism industry to grow on a sustainable basis and to improve the ecological health along the town and peninsula’s Lake shoreline. The most urgent issues are related to: (i)its drinking water supply and coverage;25 (ii)the town’s sewerage system in terms of coverage access and lack of adequate treatment26; and (iii)the final disposition ofsolid waste management.27

9. This situation is further aggravated with the constant stream of tourists and pilgrims that come through Copacabana on a yearly basis. There are three major events in Copacabana that seriously compromise its carrying capacity as a tourist destination: February 2nd, Fiesta de la Virgen de Candelaria honoring the town’s patron saint; Easter week; and the Bolivian Independence day, celebrated during the first week ofAugust.

10. There are no reliable figures. However, current estimates are that each of these events alone brings in an influx of over 10,000 people. For the event in August, it has been estimated that over 30,000 to 40,000 Peruvians alone come to Copacabana. This influx together with another 10,000 to 15,000 Bolivians causes overcrowding, serious traffic congestion, enormous and unmanageable liquid and solid waste, depletion ofthe water supply capacity, increase in raw sewerage and havoc in the accommodation and food and beverage sectors that are not equipped adequately enough to manage the overflow of visitors, thus contributing to the already environmental fragility ofthe town and the Lake.

11. There are numerous other issues that surfaced during the workshop that can be summarized into one general theme: the lack of a framework to establish sustainable tourism standards and the need to regulate services in transportation, including safety measures; establish and enforce construction and

25 Only 74,4%, of the local population (5,725) is connected). There are 1,670 families that do not have access to drinking water and water is rationed daily during a two-hour period affecting all businesses catering to tourism. There are no water meters and billing and collection is inefficient by the Neighborhood Committees (PDM Copacabana). 26 Only 1,491 families have access (67% coverage), which is considered extremely low and represents a critical issue: the raw sewage is currently being disposed untreated into the Lake, in the vicinity of the town’s main beach area and on the north bayside of Cerro Calvario. Copacabana is the only urban area in the peninsula that has a sewerage system. The remaining communities use latrines for the final disposition of human waste (PDM Copacabana). 27 There are no waste management or landfill areas. The municipality provides collection at determined points and waste is burnt as the current method of final disposition.

- 123 - building codes and standards; provide reliable security for both local residents and tourists; make technical assistance available on a grant basis to local businesses to improve their business and customer service (small hotels and hostels, restaurants, local guides and recreational providers); establish agro linkages with the surrounding communities for the provision of local foods; and establish a closer working collaboration with La Paz tour operators that sell Bolivia’s Lake Titicaca.

12. Despite this state of affairs, there are ample opportunities to improve Copacabana’s overall situation and enhance its current tourism product, as demonstrated by an increasing commitment and involvement of the private sector represented by the four main tour operators from La Paz, who have invested heavily in transportation and accommodation in Copacabana and the islands. One of these initiatives is their support for a recent proposal to develop and implement an urban plan and the recuperation of the architectural cultural patrimony of Copacabana and its surrounding communities.

13. Another initiative is involving the Fundaci6n para la Gesti6n del Destino Turistico (OGD) a non- profit organization, whose mission is to develop and promote sustainable tourism in the tourist destination region of La Paz - Beni. A new Board has been recently appointed comprising representatives from Bolivia’s tourism private sector, and public sector authorities from the Prefectures (Departments) and municipalities of La Paz and Beni, as well as social and communal enterprises of both Departments. The Foundation has 74 members representing a wide spectrum of stakeholders and is in the process of incorporating more members. PCU has signed an agreement of collaboration with OGD during the preparation of the Project.

14. They have developed a strategic plan, which includes action plans to: (1) attain financial sustainability; (2) marketing benefits for its members; (3) consolidate, develop and implement projects in La Paz and Beni; (4) marketing and promotion of the Foundation through its web site: www.visitbolivia.org, press releases, and promotional kits; (4) undertake studies to determine market segmentation, as well as safety and border facilitation; (5) establish strategic partnerships with institutions such as Conservation International and Fundaci6n Nuevo Norte, a member of a network that supports entrepreneurial initiatives; (6) technical assistance for municipalities in the Prefectures of La Paz and Beni, and in the areas of hotel management and customer service; and (7) raising awareness campaigns targeting elementary-age children through stickers and illustrated publications sponsored by the private sector, such as ENTEL, a Bolivian private telephone company.

15. The outcomes and benefits to be pursued by this Foundation consist of: (1) accomplishing an organized and planned sustainable tourism destination; (2) improving the living quality of its residents; (3) developing competitive tourism products; (4) positioning the destination in the international, regional and national markets; (5) increasing tourism flows to the destination; (6) sensitizing the local communities on tourism’s impacts; and (7) building their capacity to manage tourism.

16. The Foundation should be engaged as a strategic key partner in the development of a Geotourism strategy for Lake Titicaca, and any tourism efforts within the tourism component of the Lake Titicaca Sustainable Development Project. Its relationship with other OGDs in the region, especially with the OGD in Puno is critical.

17. Another initiative currently underway to promote, maintain, and enhance the local character of place is a plastic recycling Project supported by a USAID grant that will establish neighborhood micro- enterprises that will manage this type of waste with the support of a local NGO (Suma Jakaiiani Foundation). This is the beginning of a local solution to waste management for Copacabana, the islands and numerous communities in the peninsula.

- 124- Destination2: Islas del Sol & De la Luna

18. No workshops were conducted in these islands. Personal interviews with the owners of the Estancia (owned by Magri Turismo), Posada del Inca Eco-Lodge (owned by Crill6n Tours) and Posada Eco-Lodge Palla Khasa (owned by Valentin Mendoza) were conducted, as well as with Benedicto Choqueticon, President of the Isla del Sol Guides Association.

KEY ATTRACTIONS e Kayaking Iiiak Uyu ruins in Isla de la Luna e Canoeing Pilko Kaina ruins, Isla del Sol e Overnight stays on the islands, Chincana ruins, Isla del Sol including traditional cuisine and Escalera del Inca, Isla del Sol cultural evenings Yumani, Challa and Challapampa villages in e Fishing Isla del Sol e Bird watching Museo del Oro in Challapampa e Traditional dances and music Trekking trails across the Island events (San Antonio) Scenic landscapes of the Lake and the e Development of further nature Cordillera Real, as well as small bay inlets trails for trekking throughout the island e Community-based archaeological management plans with services for visitors CAPACITIES NEEDED e Spiritual tourism - Pachamama offerings (Earth offerings) Reliable drinking water supply e Establishment of scenic look-out Waste management or rest areas with services for Capacity building in tourism services and visitors improved communication channels between e Star gazing observatories private sector and local communities and e Waste management businesses between island communities e Increase collaboration between Construction and building codes public and private sectors and Financing for community-based businesses organized civil society Business and administrative skills for community-based lodging owners Training of local guides in interpretative and language skills (Spanish, English, French) Development of promotional material

19. At a distance of only 16 Km. from the town of Copacabana and accessible only by boat from the mainland, the islands are definitely the main attraction of Bolivia’s Lake Titicaca. Of the two islands, Isla del Sol is the most visited, given the fact that it is identified as the birthplace of several entities such as the Sun in the Aymara and Quechua cultures. There are no reliable figures, but approximately 80,000 visitors are estimated per year. The average period of stay at the Isla del Sol varies from a half-day excursion to one night, due mainly to the “organized” tour packages offered by Copacabana’s local operators and La Paz based tour operators. There are, however, longer stay packages. Local residents, especially the owners of the small hostels and 5 room lodges, would like to expand the length of time visitors spend on their islands. Their leverage with the tour operators is limited.

- 125 - 20. There are five main issues confronting the community of Yumani where the majority of the residents live and where the lodging supply of the island is concentrated: (i)supply of potable water for the entire community; (ii)lack of sewerage treatment and final disposal; (iii)solid waste management; (iv) unregulated community-based lodging construction and development; and (v) the village’s carrying capacity. There is conflict among the community leaders on how best to manage the supply, despite the fact that there is a system in place to make it function. Currently, the water is transported in plastic barrels by donkeys and sold to residents and businesses. The issue of waste management is also a source of conflict. Despite the fact that most of the trash is taken by boat to Copacabana, there are, however, significant quantities left behind untreated. Construction of small lodges is increasing without any regulation and standards. This is changing the island’s rural appeal and affecting the carrying capacity of the island, as the flow of tourist continues to grow without any management plan in place. There is an additional community issue with the members of the Challa community who are not receiving economic benefits from the influx of tourists that visit Yumani and Challapampa. Challa‘s accessibility is limited and not promoted. All community members engaged in the provision of services require business training in several areas, including hospitality, food hygiene, guiding and interpretation to assist them in providing better services to the tourists who visit their island.

21. There are great opportunities for the successful enhancement of the tourism product on the Islands. Both Crillbn and Magri Turismo have plans to implement their corporate social responsibility policies on the islands to ensure that their investments continue to be profitable. They recognize the need to be more proactive with the community leaders of the islands and the local authorities of Copacabana to contribute towards the improvement of the community’s living standards, which will even provide further return on their investment. It should be highlighted that Crillbn Tours invested in the building and layout of Yumani’s drinking water system, in providing garbage bags, cans and collection, computers for both Yumani and Challa‘s local school’s libraries and school exchange programs between La Paz and the communities on the island.

Destination 3 - Sampaya-Titicachi-Sicuani-Yampupata Circuit

22. These communities are located on the farthest northeastern section of the Copacabana peninsula. Sampaya lies on the northern side of the peninsula with direct boat access to the Isla de la Luna. The other communities are stretched along the south side and along the shoreline of the Lake. Yampupata, at the end of the peninsula is a launching point to access by boat the southern shore of Isla del Sol.

~ KEY ATTRACTIONS Kayaking Hinchaca fish hatchery Canoeing Gruta de Lourdes Overnight stays with local Tiwanakuta Inca Cemetery families Museo de Aves Acuaticas Tours of fishing hatchery Inca road Bird watching Flora and fauna along the shoreline Traditional dances and music Sampaya’s colonial church, cobble stone events paths and terraces and scenic landscapes of Development of further nature Isla de la Luna, the Lake and the Cordillera trails for trekking Copacabana-Yampupata trekking trail Community-based management Scenic landscapes of the Lake and small bay plan for the preservation and inlet in Titicachi conservation of Sampaya’s Spanish colonial heritage with services for visitors

- 126 - CAPACITIES NEEDED 0 Establishment of scenic look-out or rest areas with services for 0 Reliable drinking water supply visitors 0 Waste management 0 Capacity building in tourism services and improved communication channels between private sector tour operators and local communities 0 Construction and building codes 0 Development of promotional material 0 Training in management of flora and fauna

23. Based on the assessment, the villages of Titicachi and Sampaya have the greatest potential to be fully integrated into the current tourism product oferred by Copacabana and the islands. From a tourism management perspective, their natural physiography, and climate and especially Sampaya’s cultural, historical and scenic assets, if managed and marketed properly, should contribute to improving the area’s competitiveness. The challenge will be to evaluate further their existing infrastructure and the community‘s needs to make optimal economic use of existing investments to deter environmental degradation and determine whether existing visitor levels and market segments are the most appropriate for these communities. The community members need to participate in the planning and promotion of their community. It should be noted that there is a Project envisaged for Sampaya with Inter-American Development Bank financing that includes lodging, an interpretation center, development of educational trails, workshops for craftmaking, scenic look-out point, signage, capacity buiding, SME formation and marketing and promotion.

Destination 4 - Bolivia: Copacabana-Kasani-Tiquina (San Pedro & San Pablo) Circuit

24. The villages along this route that begins in Copacabana and heads in a southeastern direction, have the potential of being integrated and transformed into a tourism circuit. Developing a circuit could extend visitor stays. Opportunities exist to develop scenic look-outs and rest areas, mountain bike trails, and the promotion for visiting the village communities on their respective market days, as well as on the days they celebrate their local religious events and popular festivals throughout the year. In the case of the twin communities of San Pedro and San Pablo located in the Straits of Tiquina, the crossing point from the mainland to Copacabana’s peninsula, further assessment is needed to identify the type ofnew business opportunities that can be developed for the tourists who have to cross the straits in order to travel to Copacabana. For example, the existing yet limited sales of local art and crafts and textiles could be enhanced.

- 127 - KEY ATTRACTIONS 0 Banderani pictographs Kayaking 0 Town and market of Tito Yupanqui Canoeing 0 Town of Yunguyo and border crossing to Fishing Peru Traditional dances and folklore 0 Flora and sporadic aquatic bird fauna along events the shoreline Development of mountain bike 0 Scenic landscapes of the Lake and the trails Cordillera Real, as well as small bay inlets Establishment of scenic look-out or rest areas with services for CAPACITIES NEEDED visitors Waste management businesses 0 Reliable drinking water supply Increase collaboration between 0 Raw sewerage and solid waste treatment and public and private sectors and management organized civil society 0 Capacity building in tourism services and improved communication channels between private sector and local communities 0 Construction and building codes 0 Development of religious and popular festivities promotional material

25. It should be highlighted that the villages along this route are undergoing the same issues currently faced by the all the communities assessed, namely reliable drinking water supply, untreated raw sewerage and lack of solid waste management. The towns of San Pablo and San Pedro in the Tiquina Strait are, in fact, one of the major sources of Lake contamination because of the lack of raw sewerage and solid waste treatment systems and the lack of marine safety and environmental best management practices to control oil and gasoline spills of the vessels that provide transportation to cross the channel. These are critical issues that need to be addressed before further promotion of visitation is encouraged.

Destination 4: Tiquina-Straits-Compi-Chua-Huatajata-Achacachi-Huarina-PuertoPerez Circuit

26. This is another possible circuit that begins at the Tiquina Straits and heads southeast and then south toward La Paz. The town of Compi was visited for the purpose of experiencing their annual June 16' popular festival. Approximately 36 surrounding indigenous communities participate in this event. It is definitely a tourist draw that needs to be promoted.

27. The most prominent communities along this route are Chua and Huatajata and to a lesser extent Puerto Perez, due to the presence of La Paz tour operators. In Chua, Transturin has its catamaran-based operation that provides half-day, full day and overnight cruise tours to Isla del Sol, stopping at the Inti Wata Cultural complex in the island and in Copacabana. Their market is mid-to-high end, as reflected by their prices (US$50 half-day and US$lOO full day). They have four catamaran cruises, a private harbor, shipyard and docking facilities at Chua, a fleet of buses to provide transportation to La Paz and Puno, and are currently building a hotel on the shoreline to accommodate their clients.

28. In Huatajata, Crilldn Tours bases its hydrofoil services with its private harbor, shipyard and docking facilities. Currently, the company owns 7 hydrofoils and a fleet of 14 passenger vehicles to service its business in the Lake. In addition, it owns the 65-room Inca Utama and Spa Hotel in Huatajata,

- 128 - the Eco-Pueblo Cultural complex, comprising the Museo de Rakes Andinos, the Museo Paulino Esteban and the Alajpacha Aymara observatory, equipped by NASA for night-time star gazing. As indicated earlier, it owns the mid-to-high end 20-room Posada del Inca in Isla del Sol. Crill6n Tours moves approximately 10,000 tourists per year just to Lake Titicaca. Huatajata is also a launching point for tourists wanting to visit the islands of the Lago Menor (Suriqui, Khala Uta and Parati). In these communities there are no major attractions except the tourism superstructure built by Crill6n in Huatajata. This investment has created significant employment and other business opportunities in the community such as, restaurants, small hostels and support services for the hotel and the Eco-Pueblo Cultural complex.

29. In the case of Balsa Tours, they own the Complejo NaGtico Las Balsas in Puerto Perez, a 27-room resort and nautical complex that caters mainly to the corporate sector of La Paz by providing space and services for seminars, retreats and conferences. With their fleet of 13 vessels they also ferry visitors to the islands of Suriqui, Pariti and Kalahuta. According to the owners of Balsa Tours, the islands indicated are not frequently visited due to internal community problems and lack of promotion. In Parati, there is a community-based museum that is being supported with a grant from the Swiss Cooperation Foundation.

30. These operators are important players in these communities. Besides providing employment in the communities that they operate, they are increasingly recognizing the need to join forces to address the issues of economic, sociocultural and environmental sustainability that the destination is currently facing. More attention is being focused on the destination’s ecological fragility threatened by the Lake‘s contamination, improving a poorly educated population and untrained labor force, and to trying to understanding the political will and interest of the new government authorities in their support of tourism development.

Destination 5: Tiwanaku-Taraco-Coacollo-Chiripa Circuit

3 1. This circuit begins in the town of Tiwanaku which is located near the southern shore of Lake Titicaca, and 71 km. from La Paz on the road to Desaguadero (border crossing with Peru). The circuit then heads northwest to the town of Taraco and then borders along the peninsula that jets out into the southern extension of the Lake. Without a doubt the archaeological complex and ceremonial center of Tiwanaku is the major attraction in the area. Visiting the ruins can be arranged from La Paz with travel agencies that offer reasonably priced packages for full and half-day packages ranging from US$10 to US$20 dollars, including transportation to and from La Paz and a bilingual guide. Tiwanaku, unfortunately until now, has never had sufficient funds to rescue, preserve and elevate the archaeological and ceremonial complex to international visitation standards. Despite the ongoing archaeological investigations and rehabilitation works, the complex continues to be characterized by scattered heaps of basalt and sandstone slabs, poor signage and lack of interpretation at the most outstanding structures. To learn about its history and construction dynamics it is necessary to visit the Museums.

32. Overcrowding and management of visitors during the celebration of the Aymara New Year is extremely precarious. The carrying capacity of the complex during the arrival of the winter solstice and the town are far exceeded to the degree that the flow of people becomes dangerous in terms of safety.

33. With the exception of the town’s central plaza, colonial archways and 17th century renaissance church, there are not many more key attractions. Accommodations are limited due to the fact that the visit to Tiwanaku’s archeaological site is a half to full day excursion.

- 129 - KEY ATTRACTIONS

Tiwanaku’s archaeological complex Museo Litico Kayaking Museo Cer6mico Canoeing Tiwanaku‘s Spanish 17* century colonial Overnight stays with Aymara church families in communities, Aymara New Year Celebration (Southern including traditional cuisine and winter solstice - June 21st) cultural evenings Taraco-Coacollo-Chiripa Aymara Fishing communities Bird watching Taraco Archaeological Museum Traditional dances and music Flora and Fauna along the Lake’s shoreline events Chiripa ruins Development of further nature Scenic landscapes of the Lake and the trails for trekking Cordillera Real, as well as small bay inlets Community-based businesses for throughout the area visitors to Tiwanaku archaeological complex Establishment of scenic look-out CAPACITIES NEEDED or rest areas with services for visitors in Taraco-Coacollo- Reliable drinking water supply Chiripa circuit Raw sewerage and solid waste management Star gazing observatories Capacity building in tourism services and Waste management businesses improved communication channels between Increase collaboration between private sector and local communities and public and private sectors and between communities organized civil society Community-based tourism planning Construction and building codes Grant financing for community-based businesses Business and administrative skills for community-based lodging owners Training of local guides in interpretative and language skills (Spanish, English, French) Development of promotional material

34. To extend the stay of visitors that come to Tiwanaku, it would be necessary to develop the identified circuit of Tiwanaku-Taraco-Coacollo (Santa Rosa) and Chiripa. The most important assets to be developed into a tourism product are the cultural Aymara communities to be found in Taraco, Coacollo and Chiripa, followed by the flora and fauna found along the shoreline of the Lake’s southern shore, the scenic landscapes, and the Chiripa archaeological ruins. Community leaders indicated their desire to embrace tourism as long as they felt they were in control and empowered.

Workshop 14 - Bolivia: La Paz

35. The workshop carried out in La Paz was attended by 18 participants representing: (i)the tourism private sector (tour - Bolivia operators, the hotel chamber, hoteliers); (ii)national guides association; (iii)

- 130 - technical staff from both the Vice Ministry of Tourism and the Provincial Government working on tourism planning and development issues; (iii)destination organizations; and (iv) academia.

36. Following a brief introduction and explanation f the workshop, all participants presented themselves. ARer the Geotourism power point presentation the group was asked to initiate the analysis. The results of this analysis are presented in the following table. Part I1 of the workshop consisted of conducting a hierarchical ranking exercise of the motivational factors contained in the survey for the demand analysis, together with an identification of the activities that could be developed in relation to these factors.

KEY ATTRACTIONS Adventure tourism e The museums in Tiwanaku Bicycling and swimming e The Tiwanaku archaeological complex Development of small private Copacabana’s Cathedral and Museum enterprises e Isla del Sol and archaeological ruins Railway Museum (Port of Local gastronomy (especially the fish) Guaqui) e The Lake’s scenic landscape and overall Carabuco temple (in northern environment region of Lake) e Pariti’s community-based museum Community-based tourism Archaeological circuits (in the CAPACITIES NEEDED northern region of the Lake) Ethnotourism in the communities e Protect of community traditions surrounding Copacabana e Solid waste management e Training for hotel labor force 0 Promotion of the region e Water (boat) safety training e Better coordination and communication between stakeholders e Help to stop pollution of the Lake e Language training e Improve security e Support for SMEs & access to credit e Better understanding of the tourism market

Part I1

37. The participants ranked the following motivational factors contained in the visitor surveys. In addition, they identified the possible activities that could be developed in collaboration with each one. a) Quality of natural scenery and landscapes /environment and opportunity to stay in a pristine environment b) Observe wildlife c) Opportunity to visit an indigenous or traditional community d) Participate and/or observe major cultural or religious events e) Desire to learn about the local indigenous culture, their ways of life and heritage f) Opportunity to visit archaeological and/or historical sites g) Opportunities for adventurehport activities

- 131 - 38. The following activities and/or business opportunities were identified for the first ranked motivational factor: Quality of natural scenery and landscapes /environment and opportunity to stay in a pristine environment: Tourist circuits 0 Photography 0 Guided visits 0 Llama back riding 0 Scenic look-out areas 0 Trails with signage and interpretation 0 Trekking 0 Boatrides 0 Scuba diving

39. The following activities and/or business opportunities were identified for the second ranked motivational factor: Opportunity to visit archaeological and/or historical sites: 0 Circuits between the sites to integrate them 0 New art and crafts based on new archaeological findings

0 Local and traditional gastronomy 0 Sale of T-shirts and souvenirs 0 Replicas of archaeological ceramics 0 Themed restaurants 0 Archaeological eco-lodges

40. The following activities and/or business opportunities were identified for the third ranked motivational factor: Opportunity to observe wildlife: 0 Excursions with interpretation Photography 0 Trekking 0 Bicycling 0 Llama back riding

41. The following activities and/or business opportunities were identified for the tied third ranked motivational factor: Opportunity to visit an indigenous or traditional community 0 Learn about art and crafts 0 Local gastronomy 0 Publications 0 Photography 0 Village and home stay 0 Volunteer work

- 132- Annex 13: Community Demand Driven Initiatives BOLIVIA: Lake Titicaca Local Sustainable Development Project

1. The Project includes provisions to establish a CDD initiative. In the first year of implementation key studies will be conducted and the details ofa CDD initiative finalized.

2. The subcomponent will support small scale initiatives that contribute to local sustainable development with a particular focus on tourism. Grants will be awarded for sub-projects prepared and submitted by groups of eligible beneficiaries that improve community well being or generate income/employment opportunities.

3. The subcomponent reflects the sustainable tourism approach taken throughout the Project as attention will be paid to environmental, social and cultural heritage issues. Opportunities will be created for local communities to tap into the markets leveraged by tourism demand.

4. Participation of local communities, with a particular focus on the very poor, in tourism development will be encouraged as a way to: (i)increase income generating opportunities; (ii)embrace new fields and new technologies; (iii)conserve and protect the environment; and, (iv) protect and promote tangible and intangible cultural assets.

5. Involving beneficiaries in the design and implementation of subprojects will build local capacities, reinforce overall ownership of the Project, and enhance inclusion and cohesion within the targeted areas, while strengthening social capital.

6. The administration ofthe grants may be contracted to an eligible firm or NGO (Agency) who will be selected according to Bank procedures and according to the results of the design of a proper mechanism which will be carried out by the PCU during the first year of Project implementation. The Agency should have experience in the management of subprojects and experience in the targeted communities. The Agency would be responsible for assisting beneficiaries throughout the subproject cycle with the aim of gradually building community capacity. The Agency will report to the PCU. Disbursements to the Agency will be based on contractual specifications and milestones. The Project will consider the management of grants under the following categories:

a) employment/income generation subprojects directly or indirectly linked to tourism b) subprojects to enhance local tourism assets, notably intangible assets such as traditional knowledge or cultural and spiritual traditions. c) subprojects to improve community/tourists wellbeing d) subprojects to build capacity and provide new skills or assistance to start income generating activities e) subprojects to protect the environment or improve natural resources management

7. Examples of activities to be financed include, telecenters, bike paths, pedestrian access to sites, water retention subprojects, cultural events (carnival, exhibitions), handicraft markets, promotion of traditional healing practices, ‘made locally’ label creation, promotion of culinary traditions, support for dance/music groups, capacity building in environmental quality, organic horticulture, guide certification. Activities would be small scale, i.e. not under municipal jurisdiction.

8. Subprojects may consist of works, goods and services, technical assistance and training, or combinations of these. Eligible beneficiaries would be legal or customary community associations, or organized community groups. Eligible subprojects would be presented by potential beneficiaries, who will be

- 133 - identified through a participatory process at the community level. Total costs of any activity would not exceed $25000 USD. A minimum 10% community contribution is required for all subprojects.

9. The majority of subprojects will be very small, i.e. less than $3,000 USD and most co-financing will be in the form of labor and local materials, The greater the level of community contribution, the higher the Project will be ranked.

Eligibility and selection criteria:

10. Eligibility and selection criteria for the subprojects will be detailed in the Operational Manual. They will meet the following general principles:

11. Income generating/productive subprojects: the subcomponent seeks to support financially viable and sustainable activities for which a market demand exist. Specifically, to make sure those aspects have been given due consideration, eligibility for income generating subprojects will be contingent to an analysis by the agency of their economic return potential. Priority will be given to sub projects that can show linkages with private sector tourism operators. Such linkages will be facilitated by the Project through workshops or networking events. Additionally, a simple business plan, including the total subproject cost with provision for maintenance of the assets, and specific arrangements for monitoring & evaluation will be mandatory.

12. Positive discrimination. In the appraisal process and selection of subprojects for financing, strong elements ofpositive discrimination will be introduced to favor initiatives involving groups of women, youth or other vulnerable persons. Similarly, sub projects promoting intangible cultural assets or the traditional sustainable use of natural resources will be ranked higher. The respective weight given to each of those elements will be detailed in the operational manual.

13. Compliance: Despite the small scale of individual investments, all subprojects will comply with environmental and cultural heritage regulations and technical standards (including environmental screening).

14. All subprojects would meet the eligibility criteria and would go through a selection and technical analysis procedure as set forth in the Operational Manual and overseen by the retained Agency. A negative list of activities, such as support to military activities or organized religion, would also be provided.

15. Sub Project Cycle

0 A communication and information campaign in the Project area will provide detailed information about the pilot, methods for accessing benefits, rules of the game, and eligibility criteria. Each participating municipality may be provided with a list of potential investment opportunities for their information.

0 The local communities determine, trough a participatory process, their local investment priorities. Subproject proposals will be prepared by eligible beneficiaries with the help ofthe Agency who will ensure compliance with the eligibility criteria and with environmental/socialeritage requirements.

0 Subproject proposals will be submitted through the PCU to the respective municipal Project councils (MPC- created at municipal level with the help of the Agency), where they will be prioritized and approved according to selection criteria set forth in the Operational Manual.

- 134 - 0 After technical evaluation, and confirmation of due compliance with social and environmental guidelines established in the Project Operational Manual, Subproject agreements are signed between the Agency (and PCU) and beneficiary groups before releasing the funds. They will be countersigned by the respective community and municipal government. These agreements define the terms and conditions for the funding, execution, ownership, operation and maintenance of the approved subprojects. A model of agreement will be included in the Operational Manual.

0 Disbursement for subprojects will be carried out in tranches specified in the agreement on the basis of field supervision reports that would verify the execution of works, services and equipment purchases in accordance with approved budgets and implementation schedules.

0 According to their capacities, community groups themselves or representatives from the Agency, would contract eligible goods, works and technical assistance for subproject execution under PCU support. They will bear responsibility for operation maintenance and evaluation of subproject investments. The Operational Manual details procurement methodology.

- 135 - Annex 14: State of the Lake-Executive Summary BOLIVIA: Lake Titicaca Local Sustainable Development Project

1. An annual State of the Lake report28-intended to communicate simply and clearly to stakeholders-includes a major section containing final data output and analysis. Disseminating information, exchanging ideas, and sharing best practices which are part of the Project strategy.

2. The aim of this subcomponent is to elucidate the nature and dynamics of the lake ecosystem by providing detailed information on the characteristics of the waters of the lake. The Report will provide also details of limnological changes, model and predict their short and long-term consequences, and provide guidelines for ameliorating potentially disastrous changes. The Report will provide quantitative information on nutrient loading and recycling in the lake (particularly the internal loading of sediment phosphorus); sources and mechanics of eutrophication and pollution and their effect on lake productivity (with a particular focus on ways to stabilize or reduce eutrophic status); phytoplankton communities and their composition; algal blooms and their dynamics; lake zooplankton, microbes, benthic flora and fauna, primary production including estirnation of lake carrying capacity; stratification of the lake and the increasing problem of anoxia; trophic inter-relationships; and lake palaeolimnology.

3. The Report is designed to be a mixture of information-gathering, institution establishment, and actions to deal with the environmental problems of the lake and its surrounding municipalities, with an emphasis on fisheries management, water hyacinth control, improving water quality, and land use management (including wetlands). A central concern is to reduce the flow of nutrients and pollutants into the lake, and reverse some of the adverse environmental developments ofthe past.

4. This Report will attempt to lay the foundations in these areas, and provide a "central core" around which a larger program of investments will coalesce to clean up the lake, and establish sustainable development of the lake and its surrounding municipalities in the face of the growing population pressures likely to be experienced.

5. It will be difficult to isolate and measure the Project's impact on development in the lake. Although there are some specific characteristics of the lake which can be measured - water quality, fisheries yield, and ecological stability - the lack of reliable historic data will make it hard to calculate in an exact way the extent to this component itself is responsible for changes noted, since these have to be considered against some prediction of what would have happened without the Project.

6. Specific indicators of Project impact will include (a) reductions in the nutrient and fecal coliform counts from towns bordering the lake; (b) reductions in sediment and phosphorus loading in rivers flowing into the lake; (c) reductions by at least 50 percent over five years in significant industrial pollutants entering the lake and increasing the recovery of other species; (d) measurable reduction in the infestation of water hyacinth.

7. The Lake basin is used as a source of food, energy, drinking and imgation water, shelter, transport, and as a repository for human, agricultural and industrial waste. With the populations of the communities growing at rates, the multiple activities in the lake basin have increasingly come into conflict. This has contributed to rendering the lake environmentally unstable.

** This is a partially-translated version of the State of the Lake Report. The full version is in Spanish.

- 136- 8. The Lake ecosystem has undergone substantial, and to some observers alarming changes, which have accelerated over the last three decades. Massive blooms of algae have developed, and come increasingly to be dominated by the potentially toxic blue-green variety. Overfishing and oxygen depletion at lower depths of the lake threaten the artisanal fisheries and biodiversity.

General Characteristics of the Lake Titicaca

9. Lake Titicaca, with its elevation of approximately 3800 m and a drainage area of approximately 58,000 km2, is known as the highest of the world’s Great Lakes. It forms part of the political border of two countries, Peru and Bolivia (Figure 1). The lake lies between 15’13’10” to 16’35’37” South and 68’33’36” to 70”02‘13” West. The lake surface area is 8,372 lad; the maximum depth is about 285 m and the volume about 930 billion m3. It has a maximum length of 190 km, a maximum width of 80 km, and a shoreline length of 1125 km (Dejoux, and Iltis, 1992). Around the lake is a large population dedicated to agriculture, livestock, tourism, trading, fishing, and mining that relies on the natural resources of the lake and its surrounding area. Water quality problems in the lake may threaten and put at risk these important and ancient economic practices.

10. Pollutants enter the lake from several sources. The largest is the city of El Alto in Bolivia (more than 500,000 inhabitants), which, in addition to municipal wastewaters, discharges significant quantities of industrial wastes. Two other important sources are the Peruvian cities of Pun0 (around 100,000 inhabitants) and Juliaca (around 200,000 inhabitants). Nutrient inputs from domestic wastewaters are causing eutrophication at some locations, jeopardizing the lake ecosystem. As a consequence of poor wastewater management, bacteria levels may be high at some locations, posing a threat to public health. Mining activities may result in effluents containing mercury and other toxics, possibly threatening the fishing industry. These issues are of growing concern for the local population and for local and national authorities of both countries.

11. To address these concerns, Bolivia and Peru formed the Binational Autonomous Authority of Lake Titicaca (ALT) in 1993. ALT has autonomous decision-making authority for the watershed system and represents the Peruvian and Bolivian Ministries of Foreign Affairs. In addition, both countries developed special Project units: the Proyecto Especial del Lago Titicaca, PELT (Peru) and the Unidad Operativa Boliviana, UOB (Bolivia), that are both technically dependent on ALT.

12. ALT’s main responsibility was joint management of flood protection and irrigation activities in the hydrologic system comprising Lake Titicaca, the Desaguadero River, Lake Poop6 and the Coipasa Salt Lake (collectively referred to as the TDPS system). It has also recently received responsibility for environmental and water quality issues. Between 1991 and 1993, ALT developed a flood control Master Plan with the cooperation of the European Union that provides a basic reference and a twenty year framework for development of the TDPS system. The master plan attempts to consolidate information referring to the TDPS system that is scattered among various institutions in Bolivia and Peru.

13. ALT is the most knowledgeable and credible agency with regards to Lake Titicaca but it faces several challenges in its oversight of the lake and its related basins. First, there is no system in place for water quality testing, monitoring trends, or standardized data collection. Second, the Master Plan is now out of date and there is no mechanism in place for regular updating. Third, although the current master plan lists “promoting human development” and “increasing community participation in water management issues” as some of its main priorities, these have proved extremely challenging given the difficulty in overcoming the basic poverty of the local populations.

- 137- 14. The indigenous social, cultural, and mythical elements of the local population also raise challenges to the future infrastructure improvements proposed by both Bolivia and Peru for the surrounding communities. As other regions of Latin America have shown, failure to understand the social and cultural dimensions of the population and implementation of projects that do not properly engage, support and motivate these groups may cause them to be unsustainable.

15. The TDPS hydrological system, shown in Figure 1, consists of the Lake Titicaca basin, the Desaguadero River, Lake Poopb, and Coipasa Salt Lake, The Lake Titicaca basin is its main element. This system, which lies on the El Altiplano, has an area of 140,000 km’ and is located at elevations of 3600 to 4500 m above MSL. The Andes Range divides into two ranges in southern Peru, the Western Range and the Eastern Range, which delimit the western and eastern portions of the El Altiplano. El Altiplano spreads over parts of Peru, Bolivia, and Chile and comprises a series of plains, mountain areas, and a plateau called Puna.

- 138 - Figure 1. The TDPS System (UNESCO, 2004).

16. The climate within the TDPS system is that of a high mountain region with a tropical hydrological regime of great seasonal variability. Lake Titicaca exercises a moderating influence on temperatures and rainfall that enables development of many species of plants and animals and establishment of indigenous communities (Revollo, 2003).

- 139 - 17. Lake Titicaca is divided into two lacustrine high steep basins, the “Minor Lake” (or Huiiiaymarca) and the “Major Lake” (or Chucuito). These two basins are connected at the Tiquina strait which is 850 m wide and at least 21 m deep. More than 2/3 of the surface of the major lake has depths more than 150 m with the deepest point being 285 m. The minor lake is relatively shallow; most depths are between 5 and 10 m with the deepest point being 40 m. Water flows predominantly from the major to the minor lake (Ronteltap et al, 2005). The water in the major lake is quite clear with Secchi depths ranging from 4.5 to 10.5 m.

18. The major lake resembles a lowland tropical lake in almost all limnological aspects despite its cool temperatures. Temperature profiles show a thick epilimnion, with relatively small differences between epilimnetic (max 16°C) and hypolimnetic (11.1 “C) temperatures. Periods of almost complete overturns can occur in the dry season, which extends from July to September.

Socio Economic Aspects

19. The pre-Hispanic ethnic groups around the lake maintain ancestral cultural patterns that are unlike western cultures (Ronteltap et al, 2005). The indigenous people are extremely poor and only about 20% have access to water and sanitation. The annual economic growth rate in the area is low, particularly in the rural areas. Infant mortality is high and people tend to migrate from rural areas to the cities. Poverty is widespread in the entire TDPS system and it is affecting both rural and urban populations (ALT, 2003).

20. According to the most recent census the total population of the TDPS is 2,781,900 of whom 1,636,200 live in urban centers and 1,151,500 in rural areas. Ofthis total 1,079,800 live in the Peruvian sector and 1,158,900 in the Bolivian sector (Revollo, 2003). The principal urban centers in the Peruvian sector are Pun0 (96,800 inhabitants) and Juliaca (172,600 inhabitants), and in the Bolivian sector are El Alto (506,800 inhabitants) and Oruro (1 83,400 inhabitants). Most of the urban population growth is due to migration.

21. The main economic activity around the lake is fishing. Next are agriculture, exploitation of aquatic vegetation, animal raising, and mining (Senamhi, 2004). Fishing is important in Lakes Titicaca and Poop6. Fishing is practiced in the coastal area; the principal species are Karachi and Aspi among the native species, and Pejerrey and trout are among the introduced species.

22. Agriculture is practiced mainly in Bolivia. Technology levels are low, characterized by a deficient administration, heavy use of the land, especially in the area around the lake, and little utilization of machinery, fertilizers, pesticides, and improved seeds. This is related to low educational levels, lack of services and technical assistance, and inadequate production and commercialization (Revollo, 2003). Animal husbandry is more developed in the Peruvian sector; the principal species are cattle, sheep, alpaca llama pork and chickens. Aquatic vegetation is very important and is used as animal food and for manufacturing.

23. Mining activity in the Peruvian sector has a moderate level of technology and equipment with fairly significant production volumes. The principal products are tin, silver, copper, lead, zinc and gold. In the Bolivian sector of the TDPS mining has a significant impact on the national production; nevertheless it has also had important falls in its contribution to the gross domestic product. The principal mineral products are zinc, lead, tin, silver and gold.

- 140- 24. Although tourism and recreation in the region has a socio-cultural attraction and a folkloric frame, it is undeveloped. In the Peruvian sector the most important centers are the cities of Puno and Juliaca. In the Bolivian sector the important center is La Paz, from there the tourists go to the other lesser centers like Copacabana, Tiwanaku and Oruro.

Climatology and Hydrology

25. Due to its location, the lake has intertropical climatic conditions with a fairly constant number of hours of daylight through the year. Due to its altitude, however, it is influenced by mountain climatology that includes high solar intensity, low temperatures and low humidity (Dejoux and Iltis, 1992).

26. Annual precipitation varies between 700 and 1200 mm. The rainy season occurs between November and March and the dry season fiom April to October (Senamhi, 2004). The air temperature over the whole TDPS system varies with latitude, altitude, and proximity to the lake with minimums of - 10 to -7°C and maximums of 19 to 23°C. The lake has an average atmospheric pressure of 64.6 kPa. It receives strong solar radiation with an annual average of 533 calories/cm2/day that results in intense evaporation from the lake.

27. The average surface water temperature in the lake is 13°C. Monthly variations are small, ranging from about 12°C in July to 14°C in December (Senamhi, 2004). This surface temperature variation is small compared to African lakes at the same latitude, This can be explained partially by the altitude but also by the climate: the rainy season occurs in summer and the winter insulation compensates the decreasing air temperature.

28. The humidity of the TDPS system decreases from north to south. It is more humid around the lake, semi-arid near Lake Poop6, and arid near the Coipasa Salt Lake. The annual average relative humidity around the lake ranges from 50 to 65%. The annual variation follows the precipitation with a maximum in January or February and a minimum in July. Evapotranspiration also has significant spatial variability. At the northwest the annual average is 970 mm, near the center 1200 mm, and to the southeast 1400 mm.

29. The prevalent winds are moderate and often modified by local breezes. They are northeasterly during the rainy season and west to southeast the rest of the year. The average wind speed over the TDPS watershed has considerable spatial variability. At the southeast the annual average speed is 3.4 ds,near the east and center 2.5 ds,and it diminishes to 1.9 dsover the remaining area.

30. Lake Titicaca is an almost closed system. It is subject to strong evaporation (about 95% of the total water input evaporates) and its only outflow is the Desaguadero river which is responsible for the remaining 5% of the total water loss. The Desaguadero River, the most important water resource for the arid Bolivian Altiplano, flows toward the south across the Bolivian Altiplano for about 400 km until it reaches Lake Poopci. Lake Poop6 cannot always contain this water and it regularly floods with the excess flowing to the southwestern Salar de Coipasa. Climatological conditions sometimes make the river reverse its direction, but these reversals are rare and short (Dejoux and Iltis, 1992).

3 1. Rivers and streams provide about 45% of the water input to the lake. The main tributaries and their flows are shown in Table 1. The principal tributaries are in Peru, Ramis and Huancane to the north, Coata and Illapa to the west, and Ilave and Zapatilla to the southwest. In Bolivia the most important

- 141 - inflows are Huayco, Suchez, and Keka to the north and east, and Catari and Tiwanaku to the south. Discharges vary widely over the course ofthe year, from practically zero during the dry season up to 10 times the average discharge in the rainy season. Diffuse groundwater leakage into the lake from aquifers is believed to be negligible (Dejoux and Iltis, 1992).

32. Variations in lake water levels over almost 90 years are shown in Figure 2. The maximum variation is about 6 m. Yearly cycles are clearly evident, with maximum values occurring from March until May, and minimum from October to December.

I Table 1. Lake Titicaca Main Tributary Inflows (Source ALT). I River Watershed area Average discharge m/s I I kmz 1 Ramis I 14.70 I 76 I I Ilave I 7.71 39 ~~~ ~ Coata 4.51 42 Catari 2.02 10 Huancank 3.54 20 Suchez 2.83 11

2 a3 rn

a3 0 03 0

d 0 a3 m

0 0 03 m 1920 1940 1960 1980 2000

time

Figure 2. Water levels for Lake Titicaca from 1915 to 2004 (Source PELT)

- 142 - Hydrodynamics

33. Although some studies of water quality in the lake have been made, almost no data are available of its hydrodynamic characteristics. We could find no measurements of currents or discussions or analyses of hydrodynamics.

34. Indirect inferences about circulation were obtained through the isotopical and chemical measurements of Paredes and Gonfiantini (1999). They deduced that water flows predominantly from the major to the minor lake.

35. Estimates of the residence time for the whole lake can be made from the volume and inflow data. The total inflow from tributaries, according to Table 1 is about 198 m3/s and direct rainfall on the lake contributes about 240 m3/s for a total inflow to the lake of about 440 m3/s. The volume of the lake is 932x106 m3 yielding a residence time = 930x109/440 = 2.1~109sec =: 70 years. Several publications, e.g. Ronteltap et a1 (2005), give the residence time as being longer than 1000 years, but it is not clear where this much longer time estimate comes from and it appears to be in error. Ronteltap et a1 (2005) report that the minor lake has a “rather short residence time.”

36. Measurements of temperature stratifications are reported in Dejoux and Iltis (1992). The vertical temperature profiles are shown in Figure 3. Weak stratifications with temperature differences of less than 4°C are apparent in the summer months, December to June. In winter, from July to November, the lake is essentially homogeneous except for a thin surface layer with a temperature difference of less than 1°C. This weak but persistent stratification reduces vertical mixing. These temperature variations are typical for a lake with summer heating and winter cooling. The surface temperatures range from about 11 to 16°C. The epilimnion appears to have a relatively constant temperature of around 11°C. The homogeneous temperature profiles imply mixing to the lake bottom, i.e. periods of almost complete overturn during the dry season. Similar patterns are evident in longer records from 1973 to 1976 (Dejoux and Iltis, 1992) but Richerson et a1 (1977) state that the extent of deep mixing probably varies substantially from year to year. More recent measurements (Annex 1) are similar to the above patterns.

- 143 - TEMPERATURA CwADOs Caslvs

Figure 3. Temperature profiles in Lake Titicaca [Dejoux and Iltis, 1992)

1drtical mixing can be significantly enhanced by surface cooling, especially at night. This is illustrate( in the diurnal variations of temperature shown in Figure 4. The surface water heats during the day and the temperature increases. At nighttime the surface waters lose heat, cool, and sink as they are now denser than the water beneath them. This process, known as penetrative convection, can be a major mechanism for vertical mixing and the transport of dissolved oxygen downwards.

- 144- TEMPERATURA ('C)

Figure 4. Diurnal temperature variations in Lake Titicaca (Dejoux and Iltis, 1992). September 3, 1981 (top) and July 23, 1982 (bottom)

Water Quality Hidroquimica del Lago y sus tributarios

37. La salinidad de las aguas de ICafluentes del lago stb comprendida entr 5 7 10 mM/l, relativamente alta si se la coipara a otras aguas continentales (2 mM/i) (MEYBECK, I_791, lo que revela una fuerte erosi6n quimica. La mayoria de las aguas proviene de formaciones volcbnicas y sedimentarias; su salinidad varia entre 5 y 20 mM/1, con fuertes variaciones estacionales, pudiendo variar de uno a tres entre las aguas de crecida y las de estiaje. Sus contenidos en HC03, SO4 y C1, son aproximadamente iguales, por lo que no presentan un perfil dominante.

38. La salinidad promedio de las aguas del lago es de 898 mg/l , siendo 10s afluentes 10s unicos contribuyentes en sales disueltas. Las pkrdidas en sales se producen por tres medios: por el rio Desaguadero, por infltraci6n, y por sedimentaci6n. El pH medio varia entre 8,2-8,7, y la alcalinidad es de aproximadamente 0,l mE/1.

39. En kpoca de estiaje o de inicio de crecida, las aguas pueden tener un perfil cloruro-s6dico por un enriquecimiento de las aguas en C1- y en Na+ en 10s cursos inferiores de 10s rios. El rkgimen hidrol6gico del lago es tal, que las aguas fluviales deberian, en promedio, concentrarse en un factor de 4,7, lo que es cierto para Na+ y C1-, per0 no para 10s otros elementos disueltos, para 10s que el factor es mbs dkbil, debido a la sedimentaci6n quimica. Globalmente, las pkrdidas por sedimentacibn representan 28,5% de 10s aportes fluviales, 77,5% en el Lago Mayor y 22,5% en el Lago Menor. Las pkrdidas por infiltraci6n

- 145 - representan 40%, 68% en el Lago Mayor y 32% en el Lago Menor. El Desaguadero evacua solamente el 11,4% de 10s aportes fluviales.

40. La renovaci6n anual de las reservas en sales disueltas es dkbil en el Lago Mayor, para 10s elementos mayores varia entre 0,20 (Na y Cl) y 0,50% (HC03/C03 y Ca). Es mucho mbs importante en el Lago Menor, donde varia entre 1,6 a 1,7 (Na y C1) y 6,5 a 7,2% (HC03/C03 y Ca). Por lo tanto, el lago Titicaca es un medio muy estable y la irregularidad de 10s aportes en agua y en sales disueltas no modifica de manera notable la composicih quimica de sus aguas, por lo menos en el Lago Mayor.

Principales Contaminantes del Lago Titicaca

Clasijicacidn de 10s principales contaminantes 41. Los contaminantes relevantes identificados han sido clasificados en:

0 Criticos

0 Preocupantes

0 Emergentes

0 Otros de interb

42. La Tabla 5.1 resume las categorias para todos 10s principales contaminantes identificados en el Lago Titicaca e indica las razones para esa clasificacih.

TABLA 5.1.- PN ZIPALES CONTAMINANT ;IDENTIFICADOS EN EL LAG0 TITICACA

Contaminante .M Raz6n

c)B

.C d Se han detectado en las aguas concentraciones altas en varias zonas del Lago y en varios puntos de sus tributarios, manifesthdose incumplimientos del objetivo de calidad de sustancias peligrosas en ArsCnico tributarios de las unidades hidrogrificas del Ramis principalmente, y en menor medida del Coata, Illpa y Circunlacustre. Se han detectado en 10s sedimentos concentraciones altas en la

del Lago y muy altas en varios puntos de sus tributarios, existiendo incumplimientos en el objetivo de calidad de sustancias peligrosas Cadmio X en tributarios asociados a unidades hidrograficas del Coata, Catari, Illpa y Circunlacustre. Se han detectado en 10s sedimentos concentraciones moderadas en

Cianuros X

Cobre

- 146- TABLA 5.1.- PEUNCIPALES CONTAMINANTI IDENTIFICADOS EN EL LAGO TITICACA Categoria

Contaminante Razon

{arias zonas del Lago y altas y muy altas en varios puntos de sus ributarios Se han detectado en las aguas concentraciones moderadas y altas en mios puntos de 10s tributarios, existiendo incumplimientos del ibjetivo de calidad de sustancias peligrosas en las unidades X iidrograficas del Suches y Catari. 3e han detectado en 10s sedimentos concentraciones moderadas en mias zonas del Lago Se han detectado en las aguas concentraciones muy altas en varias zonas del Lago (prbximas a la costa) y en varios puntos de sus X tributarios Se han detectado en 10s sedimentos concentraciones moderadas en una zona del Lago y altas en varios puntos de sus tributarios Se han detectado en las aguas valores muy altos de DQO en varias X zonas del Lago (prbximas a la costa) y en varios puntos de sus tributarios Se manifiestan incumplimientos en 10s objetivos de calidad para X vida piscicola y para la produccibn de agua potable en tributarios de las unidades hidrograficas del Coata y Circunlacustre. Se han detectado en peces de varias zonas del Lago concentraciones bajas, per0 significativas Se han detectado en 10s sedimentos concentraciones muy altas en la mayor parte del Lago y en varios de sus tributarios Se han detectado en las aguas concentraciones altas y muy altas en varios puntos de sus tributarios, reveltindose incumplimiento del objetivo de calidad de sustancias peligrosas en las unidades X hidrograficas del Ramis, Coata y Circunlacustre. Se han detectado en 10s sedimentos concentraciones moderadas en varias zonas del Lago y altas en varios puntos de sus tributarios Se han detectado en las aguas valores altos de nitrbgeno en varias X zonas del Lago (prdximas a la costa) y muy altos en varios puntos de sus tributarios Se han detectado incumplimientos en 10s objetivos de calidad para vida piscicola y produccibn de agua potable en algunos puntos del X Lago, asi como en varios puntos de 10s tributarios, principalmente en las unidades hidrogriificas del Ramis, Katari, Coata y Circunlacustre. Se ha detectado incumplimiento en el objetivo de calidad para la X produccibn de agua potable en alguno de 10s tributarios de la unidad hidrogrhfica del Coata. Se han detectado en las aguas concentraciones moderadas en varias zonas del Lago y muy altas en algunos puntos de sus tributarios, asi como incumplimientos en el objetivo de calidad de sustancias X peligrosas en las unidades hidrogriificas del Suches, Coata y Circunlacustre. Se han detectado en 10s sedimentos concentraciones moderadas en una zona del Lago y en varios puntos de sus tributarios Se han detectado en las aguas concentraciones moderadas en varias zonas del Lago y altas en uno de sus tributarios X Se han detectado en 10s sedimentos concentraciones moderadas en una zona del Lago y muy altas en varios puntos de sus tributarios

- 147 - Contaminantes criticos

43. Los contaminantes criticos son aquellas sustancias que cumplen 10s siguientes requisitos: 0 Estar presentes en las aguas del Lago

0 Provocar un incumplimiento de 10s objetivos de calidad en la mayor parte del Lago o haberse detectado en las aguas o 10s sedimentos concentraciones muy altas en la mayor parte del Lago.

0 Plantear una amenaza para la salud humana y la vida acuitica (sustancias peligrosas).

0 Ser bioacumulables

44. Estas sustancias deberin ser objeto del Programa de actuacih, planteando acciones de prevencih, reducci6n y remediacih destinadas a reducir las cargas contaminantes aportadas y sus concentraciones en el medio ambiente. Los contaminantes criticos identificados en el Lago Titicaca son:

0 Mercurio.

0 Arstnico

Contaminantes preocupantes

45. Los contaminantes preocupantes son sustancias peligrosas que, no estando clasificadas como contaminantes criticos, estin asociadas con incumplimientos locales de 10s objetivos de calidad en algunos tramos de 10s tributarios o algunas zonas del Lago, o se han detectado concentraciones altas o muy altas en las aguas o 10s sedimentos de algunas zonas del Lago.

46. Las acciones a contemplar en el Programa de actuaci6n para estas sustancias incluirh la prevencih, reduccibn y obtenci6n de informaci6n adicional.

47. Los contaminantes preocupantes identificados en el Lago Titicaca y su cuenca son: Cadmio

0 Cianuros

0 Cromo

0 Plomo

Contaminantes emergentes

48. Los contaminantes emergentes incluyen aquellas sustancias peligrosas que, aunque actualmente no contribuyen a incumplimiento de objetivos de calidad en el Lago o 10s tributarios, se han detectado concentraciones altas o muy altas en las aguas o 10s sedimentos de alguno de 10s tributarios y tienen caracteristicas que indican un potencial de afectar a la integridad del Lago.

49. Estos contaminantes se contemplan como medida de precaucih, a fin de evitar que se conviertan en problemas en el Lago.

- 148 - 50. Los contaminantes emergentes identificados en el Lago Titicaca y su cuenca son:

0 Cobre

0 Zinc Otros contaminantes de inter&

5 1. Aparte de las sustancias peligrosas, otros contaminantes pueden causar el incumplimiento de 10s objetivos de calidad en el Lago y, por ello, se consideran de interb.

52. Los contaminantes emergentes identificados en el Lago Titicaca y su cuenca son: Amonio

0 F6sforo

0 Materia orgiinica

0 Nitr6geno

53. Deteriorating water quality will have a number of direct effects, the avoidance of which can be counted as potential benefits of the program. These include: - additional water treatment costs to deal with increasing levels of algae; - impacts on water available for cattle: algal blooms can render water unsuitable for cattle and in extreme cases are known to be fatal to animals; - loss of potential tourist revenue: polluted or foul-smelling water would prevent the expansion of the present (low) level of tourism to the lake; - health effects of increased malaria and bilharzia as a result of stagnant and polluted water.

Wetlands

54. Given the lack of data on the type and extent of wetlands it is not possible to estimate the value of preserving these systems, but a wide range of functions of wetlands have been identified,. these include: buffering of the impacts of increased loads of nutrients and sediments; breeding areas for fish and animals of value to the local population; protection of local water supply sources; provision of papyrus and other materials of commercial value. Preserving the wetlands is very important for sustaining biodiversity, as well as for helping to maintain the lake as a functioning and stable ecosystem. Further work is required to understand and quantify the benefits of preserving key components of the existing wetlands systems.

Biodiversity Estado bioldgico del Lago 55. Aparte de lo descrito sobre la biologia del Lago en 10s apartados 3.5 y 3.6, se incluyen a continuach 10s comentarios de NORTHCOTE (1991) sobre las variaciones detectadas en 10s distintos indicadores, como consecuencia de problemas de contaminaci6n. Los Crucero Cientificos del PELT han obtenido mucha informacibn miis reciente sobre este tema, per0 ahno se dispone de ella.

Algasfijas y planctbnicas

56. Las mbs fbertes biomasas e indices de crecimiento del perifiton heron encontrados a1 nivel de las estaciones litorales pr6ximas de la ciudad de Puno, por comparacibn con aquellas existentes en la bahia exterior (COFWEJO Y ARAMAYO, 1989). Asimismo la abundancia del fitoplancton de la bahia interior de Pun0 era por lo menos cuatro veces superior a la encontrada en la bahia exterior (CORNEJO et al,

- 149 - 1989) y aunque las Clorofitas representaban de 50 a 60 % de la abundancia total en las dos zonas, las algas azules eran el segundo grupo dominante en la bahia interior y las Diatomeas eran mas abundantes en la bahia exterior.

Macrofitas

57. La comunidad de las macrofitas de la bahia interior de Pun0 ha cambiado por causa de la fuerte eutrofizacibn (CORNEJO Y ARAMAYO, 1989), particularmente si se la compara a aquklla existente en la bahia exterior. Lemna spp forma herbarios flotantes muy densos en numerosos puntos de la orilla, en la bahia interior, per0 estan ausentes en la bahia exterior o en el lago principal. El porcentaje de cobertura de Chara spp. En la bahia interior es solamente la quinta parte de su porcentaje en el exterior de la bahia. Potamogeton strictus es la macrofita dominante en la bahia interior, con una cobertura de mas del 95% en esta zona, contra solamente 47% en el exterior. La superficie cubierta por las totoras (Schoenoplectus tatora) en la bahia interior alcanzaba 70% a mediados de 10s aiios 1930 per0 estaba reducida a solamente unos 15% a principios de 10s aiios 1980, presentando entonces solamente matas dispersas (COLLOT, 1980).

Zooplancton

58. La eutrofizaci6n de la bahia interior de Pun0 esta claramente indicada por su comunidad zooplanct6nica (MU&Z et al, 1989). Densidades medias significativamente superiores se encuentran aqui (de 30.000 a cerca de un mill6n de organismos por m3 de enero a junio de 1982), en comparacih con la situaci6n en la bahia exterior (4.000 a menos de 20.000 por m3 durante el mismo periodo), y tambikn en el lago principal.

59. Los Copkpodos Calanoidos (Boeckella spp) son siempre el elemento dominante del zooplancton en el lago Mayor y en la bahia exterior, lo que es raramente el cas0 en la bahia interior donde 10s Copepodos Cicl6pidos y 10s Rotiferos dominan. La relaci6n Calanoidos/Cicl6pidos + Cladbceros, utilizada, utilizada como indicador del estado trbfico de 10s lagos (valores generalmente bien encima de 2 en las aguas oligotrofas, per0 que pueden bajar a 0,2 en 10s sistemas muy eutrofizados; ver GANNON y STEMBERGER, 1978), se escalonaba entre 0.02 y 0.04 en la bahia interior. En el lago Mayor, un valor de 10.1 ha sido calculado a partir de 10s datos de RICHERSON et a1 (1 977).

Zoobentos

60. La fauna bkntica del lago Titicaca ha reaccionado igualmente a la fuerte eutrofizacibn local de la bahia interior de Pun0 y a 10s efectos de 10s efluentes mineros del lago principal. En el primer caso, varias evidencias demuestran que la eutrofizacih de la bahia interior de Puno se encuentra ya bastante avanzada y llega ya un fuerte nivel de stress ambiental (MOUES et al, 1989 b).

6 1. Primeramente, la abundancia de invertebrados bknticos, que han aumentado indudablemente durante las primeras etapas de la eutrofizacibn, es ahora mucho menor en la bahia interior que en las zonas litorales (2 a 6 m) de la bahia exterior. Hay kpocas en que no se encuentra ningh organism0 bkntico a 6 metros de profundidad en la bahia interior, mientras que las densidades sobrepasan frecuentemente 6.000 individuos por m2 a esta profundidad, en la bahia exterior. En segundo lugar, la abundancia del bentos se ha reducido grandemente en las zonas pr6ximas de las fuentes principales de eutrofizacibn, a lo largo de las orillas de la bahia interior, y menos en las otras zonas. No habia diferencias marcadas de las densidades a lo largo de las orillas de la bahia exterior. En tercer lugar, la riqueza taxon6mica era 4 veces mas reducida en la comunidad bkntica de la bahia interior que en la exterior, y varios taxones, comunes actualmente en la bahia exterior (Esfkridos, Gasterbpodos), eran anteriormente

- 150- tambitn presentes en la bahia interior como lo atestigua la presencia de conchas vacias. Finalmente 10s tres grupos taxon6micos que pueden persistir a ciertas tpocas del aiio, en las zonas mls profundas de la bahia interior son 10s oligoquetas, las sanguijuelas y 10s quironomidos, grupos que contienen formas conocidas como muy tolerantes a la poluci6n.

62. Volviendo a1 lago principal, parece haber alli solamente un lrea donde una fuerte polucibn se refleja claramente en la comunidad bentica. Se trata de una zona pr6xima de la desembocadura del rio Suchez, que ha recibido numerosos efluentes como resultado del funcionamiento de la mina Matilde. Un estudio realizado por DEJOUX en febrero de 1987 sugiere que una zona que se extiende a1 interior del lago sobre cerca de un kilometro y extensa de aproximadamente 500 metros presenta una fauna btntica fuertemente reducida en riqueza y abundancia.

Peces

63. La comunidad de peces de la bahia interior de Pun0 ha reaccionado a la eutrofizacibn de esta regi6n. Tres especies de Ciprinod6ntidos endtmicos (Orestias ispi, 0. luteus y 0. olivaceus) presentan tomas por unidad de esfuerzo de pesca fuertemente reducidas en la bahia interior, con relacibn a la exterior, mientras que lo contrario ocurre con 10s pejerreyes introducidos (Basilichtys bonariensis). Los cambios ocurridos en el rtgimen alimentario y en 10s indices de crecimiento permiten, sin embargo, pensar que el pejerrey recibe todavia algunos efectos bentficos de la eutrofizacibn de la bahia interior de Puno.

64. Mortalidades periodicas de peces han ocurrido en la bahia interior, particularmente cuando las condiciones de temperatura y oxigeno estaban fuertemente afectadas. Sin embargo, hay que seiialar que mortalidades de peces suceden de tiempo en tiempo, en otras partes del Lago. WURTSBAUGH y ALFARO (1988) seiialan tales hechos asociados a la accion de un protozoario parlsito Ichthyophtirius multifiliis.

65. One objective of the component is the preservation of the existing richness of the fish fauna because of its scientific interest and its role in providing a resilient ecosystem for the whole lake. The ecosystem support benefits are included in the valuation of stabilizing the fisheries, but the intrinsic and scientific value of the biodiversity that is believed to be threatened under current conditions are additional benefits for which no valuation is yet available.

66. Typical of the projects to be tackled as national concerns, within the framework of the Project, which would be expected to produce net benefits in their own right, and where the costs attributable to the Project may be exceeded by the benefits achieved through bringing the projects forward would be:

Expansion of artisanal fishing and processing; reduction in post-harvest fish losses; Implementation of water hyacinth control; Wetland conservation; Improved pasture management; Catchment soil conservation; Rural water and sanitation; Urban sewerage upgrading; Industrial pollution abatement.

- 151 - The Lake Titicaca Region Future

67. The Lake Titicaca Sustainable Project will therefore become the heart of the wider investments needed in the lake basin in forthcoming years in direct actions to clean up the lake and manage the ecosystem in a sustainable way. Substantial investments will be needed in direct actions to reduce nutrient inflows from human waste (in both urban and rural areas), to decrease soil erosion, to clean up industrial effluent, and reduce pollution from all sources. The Report will provide the information and build the capacity to coordinate the substantial sums likely to be available for financing these direct actions in the next five years.

68. The Project is a comprehensive program aimed at rehabilitation of the lake ecosystem for the benefit of the people who live in the surrounding municipalities, the national economies of which they are a part, and the global community. The program objectives are to: (a) maximize the sustainable benefits to surrounding communities from using resources within the basin to generate food, employment and (b) conserve biodiversity and genetic resources for the benefit of the surrounding communities and the global community. In order to address the tradeoffs among these objectives which cut across national boundaries, a further Project objective is to harmonize national management programs in order to achieve, to the maximum extent possible, the reversal of increasing environmental degradation.

- 152 - Annex 15: Cultural Heritage Investments in Lake Titicaca BOLIVIA: Lake Titicaca Local Sustainable Development Project

1. Lake Titicaca and its islands are one ofBolivia’s major tourist destinations-the region receives an estimated 184,000 tourists per year, of which an estimated 81,000 are international touristsz9. Lake Titicaca is the largest freshwater lake in the hemisphere and the world’s highest navigable water body. In addition to its unique natural eco-regions the Lake is endowed with significant and diverse cultural heritag-omprised of tangible assets, namely: pre-Hispanic archeological sites, monuments and trails, astronomy instruments, Spanish colonial architecture, cultural landscapes and sacred sites. The region is rich in living culture -including a range of religious and civic celebrations, festivals, production of art, music, crafts and textiles by local artists and communities.

2. The Governments of Bolivia and Peru, through their respective Ministries of Cultures, have initiated discussions to prepare technical reports depicting Lake Titicaca natural and cultural attributes that will be submitted to the World Heritage Commission (WHC) for analysis and, ultimately to obtain the nomination of Lake Titicaca as a World Heritage Site by UNESCO. Although a nomination as a World Heritage Site, does not guarantee allocation ofresources for adequate protection and conservation ofthe Lake’s unique heritage (i.e. natural, biological and cultural assets), it does bring to public attention the need for action to deter and mitigate deterioration of the Lake’s assets by virtue of public disclosure and pressure. The proposed Project invests in environmental sanitation, public tourism infrastructure and services, and the protection ofmonuments and cultural sites which will clearly enhance the chances of the bi-national candidacy for the Lake Titicaca to be recognized by the WHCKJNESCO. The unique remains ofthe sacred site of Tiwanaku is designated a World Heritage Site by

3. In Bolivia, the Vice Ministry for Development of Cultures (VMDC), under the Ministry of Education and Cultures, is the responsible agency for formulation and execution of cultural policies that foster cultural manifestations, and provide support for dissemination of artistic and cultural expressions, protection ofnational cultural assets, including the religious and historic artifacts and archival documents. VMDC assists in archeological conservation of monuments and artifacts of historic and cultural

29 Source: Estudio de la Temporada Alta de la Demanda Turistica a1 Lago Titikaka (Octubre 2007). The archeological site of Tiwanaku received 27,000 domestic visitors; 34,000 students; and 45,300 international visitors in 2007. 30 Scientific evidence indicates a continuous presence of human population in the lake’s area demonstrated through monumental archaeological remains of pre-Columbian civilization comprised of settlements, sacred sites and monuments. Both the tangible and intangible cultural elements indicate distinct patterns of land-use and its management, the evolution of human settlements predicated on agriculture and complex social organization, in which the spiritual and cultural manifestations shaped the design of human habitat. Archaeological documents indicate the constant relation between man and nature is a process that began evolving in the southern cordillera highlands some 10.000 years ago. Located on the south of the Titicaca basin Tiwanaku is perched at 12,600 feet above sea level, its first settlements dating to around 650 BC were established by Chiripas at the Titicaca basin. Centuries later a monumental civic center with spectacular temples decorated in stone carvings, clad in gold-leaf, featuring broad courtyards was erected by Pukara people. Covering an estimated area of 600 hectares it was considered to be the largest altiplano settlement of its time. The Lake region came under the dominance of the Inca Empire a century before the Spanish conquest of the Andean territory. An important sacred shrine is the massive mound covering the pyramid of Akapana (56 feet high by 200 feet in extension), in addition to the Kalasaya temple and its gateways where the indigenous populations have continued the ancient celebrations of the solar New Year, held at the first sunrise on the day of the winter solstice. Tiwanaku was inscribed into the World Heritage Sites list in 1998, and it attracts estimated 45,000 visitors per year. However, the shrine and museum of the Virgin of Copacabana, built by the Spanish Order of Franciscans in 1654, and the sacred sites and monuments at located at the Isla del Sol and Isla de Luna, are the most visited heritage sites, with an estimated 100 thousand visitors per year.

- 153 - importance. It provides support for cultural and artistic activities such as capacity building and promotion, while the conservation of sites and monuments is performed in coordination with prefecturas and municipalities. The Directorate General of Cultural Patrimony through its National Archeological Unit, is invested in protecting and safeguarding sacred sites and heritage monuments and artifacts, these activities are part of the tourism development, and can contribute to local economic growth. However, with the Decentralization Law, the responsibilities for managing the natural and cultural heritage sites and monuments were transferred to local authorities. By and large, the municipal authorities surrounding the Lake have yet to adequately fulfill the responsibility of protecting the integrity of the natural and cultural sites and monuments.

4. Most of the sacred sites and monuments designated and listed as ‘important national heritage’ by the Vice Ministry of Cultures are at risk. This is due to several factors including: irregular growth of towns, with little land-use planning; absence of preservation management guidelines sacred sites and monuments. In addition to preservation of cultural heritage monuments in Isla del Sol, and Isla de la Luna, this component includes restoration of pre-Hispanic agricultural landscapes, restoration of pre- Hispanic trails and restoration of artistic and historic sites. It is not rare to find a site rated ‘high’ for cultural heritage and the area’s natural attraction(s), yet rated ‘very low’ for conservation maintenance and overall condition. The pre-Hispanic monuments and archaeological sites located in the vicinity of Copacabana, at Isla de Luna and Isla de Sol, the village of Sampaya, and the museums at the Isle of Pariti, and the Tito Yupanqui house museum fall into this category. Typically, due to a lack of visitors’ information depicting these attractions (i.e. signage, maps, guides, and visitors’ center) and poor site management practices, few visitors are found at these cultural sites. Culture is defined in its broadest terms-as both the tangible and intangible aspects of the social-cultural diversity surrounding the Lake. The municipal investment components within the Project address the issues of sustainable preservation management, conservation, maintenance, and promotion of important cultural heritage assets for the benefit ofthe local communities and as attractions for visitors.

5. A recently completed assessment of the Lake region, conducted by the Center for Sustainable Destinations of the National Geographic Society (NGS), with a survey sample of more than 130 respondents, recognized the positive potentials for development of a GeoTourism investment strategy for the regi01-1.~’ In general, the NGS assessment indicated that while the natural attributes, such as bio- diversity, scenic and cultural landscapes offered at the Lake region, as measured in its 9 sub-zones, received very high ratings-between 63% to 80%, the cultural heritage attractions also received high ratings of 70% -- with the exception of Tiwanaku which scored an impressive 87%. The “Event Attractions” received an average score of 50% for the nine sitedroutes. Interpretation facilities of important heritage sites and monuments, including those at Copacabana and Tiwanaku, received modest scores ranging from 36% to 56%. The assessment of “On Site Services” also received low and modest scores, ranging from 30% to a high of 67% for Copacabana. Basic facilities such as public baths, solid waste collection, a signage system and public information services are not available in the visited areas.

6. More specifically, the survey of geographic sites depicted under the topic; “GeoTourism Site Specific Factors” indicate seriously inadequate environmental conditions with scores ranging from 20% to 32 % --with the exception of the village of Sampaya leading the list with a modest 40%. Similarly, the assessment of “Cultural/Social Conditions” received modest scores of 43% to 47%, with the exceptions of Copacabana-Kasani-Tiquina route and Tiquina-Kompi-Chua-Huatajata-Huarina route which received 63% and Tiwanaku with 67%.

31 GeoTourism (n): Tourism that sustains or enhances the geographical character of a place--its environment, culture, aesthetics, heritage, and the well-being of its residents.”

- 154- 7. The ratings allow one to identify the strong points, or tourism selling points, at specific surveyed sites through the analysis of “general site factors” section. Moreover, the scorecard allows the user to identify specific locations around the Lake that are threatened and the specific threats that may endanger a particular site. As explained above it is not rare to find a high score for a site due to its cultural heritage and natural site(s) attraction(s) but a very low score on the conditions of these attractions. Such is the case of the Inca monuments and archaeological sites located in the environs of Copacabana, and those at Isla de Luna and to some extent at the Isla del Sol, the village of Sampaya, and the museums at the Isle of Pariti, and the Tito Yupanqui house museum. Typically, due to a combined effect of lack of visitor information about these attractions (Le. signage, maps, guides, and visitors’ center) and poor site management practices few visitors, if any, are found at these cultural sites. The adoption of NGS “scorecard” at the outset of Project preparation is a proper objective way to establish a baseline of performance in critical related areas.

8. With the Law of Decentralization adopted in Bolivia, the responsibility for heritage site management, conservation and upkeep of these assets were transferred from the central government agencies to the local authorities. With the exception of the monumental ensemble of Tiwanaku and the Church of the Virgin of Candelaria in Copacabana, all other sites and monuments present problems with inadequate protection measures, deferred maintenance and preventive conservation works, hence these assets are exposed to further risk of physical deterioration, decay and even irreversible losses. Some of the main heritage attractions, such as the Calvario and Horca del Inca sites located within walking distance of the historic center of Copacabana, and the Museum Tito Yupanqui, are clearly facing such risks.

9. At the local level, important protected monuments and listed heritage sites are vulnerable to the encroachment of new construction, parking lots and to heavy traffic of buses and trucks and to the effects of air and noise pollution. Authorities of Copacabana and Tiwanaku agree on the need for improved land- use plans and ways to improve public sector capacity to enforce municipal regulations. In addition, special buffer zones (zonas de amortipamento) for monuments located in areas of urban expansion should be created. Moreover, studies on the carrying capacity for a number of selected heritage sites are also needed. Through the Municipal investment component the urban upgrading list includes re-routing of buses and trucks from the central area to a new bus terminal-to be built, creating pedestrian and bicycle paths, and increasing the planted area of public parks and linear parks along the lakeshore, and improved of solid waste collection and disposal and sanitation systems.

10. A survey of cultural heritage sites and monuments was conducted with the objective to define tourist circuits, to assess the demand for infrastructure and public services as well as to build the basis to prepare a document on Development of Tourist Destinations at the Lake Titicaca. The survey also looked into the alternative tourist routes (circuitos turisticos) so to enlarge and diversify the offering of tourist products. Priority was set on the selection for sub-projects to be developed in the first 18 months of Project implementation. The selection criteria used included: (a) towns and communities with higher indices of tourist demand; (b) locations with greater demand for urban services and infrastructure; (c) locations with significant tourist attraction but low local community active participation; (d) localities with important cultural attractions that can be transformed into destinations that would improve residents’ livelihoods.

11. The proposed Project addresses the issues of conservation and management of cultural heritage assets through environmental sanitation works, solid waste services, strengthening of local planning and management capacities, and supporting community initiatives. The scope of cultural and tourism interventions is based on already designated existing tourist circuits. More specifically the Project will assist through: (a) protecting cultural heritage sites and monuments and their value (posta en valor); (b)

- 155 - strengthening the Directorate of Patrimony, Vice-ministry of Cultures and local authorities’ capacity to manage and disseminate cultural information; (c) supporting capacity building for preservation management and site operations at the local level-through improved enforcement of land-use plans and regulations, and preparation of site management manuals; (d) supporting development of a functional signage system for heritage and natural sites at the regional level (Municipios y Prefectura); (e) promoting community awareness in good practices for protecting cultural patrimony and appreciation of heritage monuments and sites.

12. Several sites and cultural monuments listed as ‘important national heritage by the Vice Ministry of Cultures are at risk. This is due to several factors including irregular growth of towns, little land-use planning, and an absence of preservation management guidelines for sacred sites and monuments. In addition to conservation of cultural heritage monuments and sacred sites in Isla del Sol, and Isla de la Luna, the Project includes restoration of pre-Hispanic agricultural landscapes, restoration of pre-Hispanic trails and restoration of artistic and historic sites. Typically, there is a lack of visitor information at these attractions (i.e. signage, maps, guides, and visitors’ center) and overall poor site management practices.

13. The VMDC has elaborated a four year plan containing priority activities, these include listing archeological excavations and conservation of monuments and sites, protection and interpretation of physical cultural assets, and maintenance of the natural and cultural patrimony at the Lake region. A set of 16 priority projects was prepared by the Ministry of Cultures distributed in four types of interventions (i.e. Sacred Islands of the Lake Titicaca, Cultural (pre-Hispanic), Rural landscapes, Pre-Hispanic archeological trails, and Spanish colonial churches. The Vice Ministry of Cultures declared its intention to create a Centro de Investigaciones del Lago Sagrado, in Copacabana with the objective of establishing a presence of a team of trained specialists and experts to oversee directly, with municipal authorities and staff, and local community activities related to preservation management, conservation, and promotion of living culture and arts.

- 156- Annex 16: FPS Action Plan BOLIVIA: Lake Titicaca Local Sustainable Development Project

I.INSTITUTIONAL STRENGTHENING OF THE FPS

OBJECTIVES Period for NO Principal objectives Responsibility execution Priority Strengthening of the operational and Project cycle FPS 2007 1 control processes Technological and computer system FPS 2007 2008 1 modernization 3 Organizational strengthening of the FPS FP S 2007 2008 1

1. STRENGTHENING OF THE OPERATIONAL AND CONTROL PROCESSES - PROJECT CYCLE - CONTROL

Financing (in Intervention Logic Responsible Institutions Period Bs) Respon- PPF- Objectives Activities Results Institution Institution sible Start End FPS PDCR party - 1. Preparation Approval for of a proposal to implementation FPS 8/30/2007 912 1/2007 define the of the conceptual component - framework of the informatics GAS component - Computer System (SAP), for system manager design and operational FP 9/24/2007 1213 If2007 124,80C implementation S SHORT TERM of the [mprove the PLAN programming xogramming component in 3rocess in the the SAP Project Cycle 2. Develop a coordination procedure to facilitate timely GON GF Procedure - advance Operations approved by programming FPS 10/1/2007 11/30/2007 sectors and in the Contracts operational framework of Office procedures set by Planning and Treasury 1. Define Application of 3ptimization differentiated differentiated GON - if the Project Project cycles cycles for FPS 9/24/2007 11/16/2007 Operations Zycle by type, size, efficient and complexity processing 2. Define cycle FPS 9/24/2007 11/16/2007 plans

- 157- Financing (in Intervention Logic Responsible Institutions Period Bs) Respon- PPF- nstitution sible Start End Objectives Activities Results [nstitution PDCR party 3. Develop instruments for FPS 9/24/2007 I 111 612007 the cycles 1. As a result of the evaluation jreater of the Project :fficiency in the ideas, the FPS )reinvestment will prepare a rtage and faster FPS VIPFE 9/24/2007 L 1/16/2007 Project profile ind less form :xpensive (equivalent to :valuation an EI). 2. For projects with a favorable evaluation, the municipality will supplement the design with technical 3ptimization specifications If the or engineering ireinvestment drawings. rtage 3. This Have procedure will :ompatible GON - conform to the .egulations and FPS Legal 10/1/2007 1 111 612007 public irocedures for Services investment iptimization of regulations. ieriods. 4. Develop the jacilitate the evaluation echnical 10/1/2007 11/16/2007 instruments (E1 :valuation of and TESA), he projects taking into account the complexity of Qproval of the the projects, nstruments by guaranteeing he Vice- FPS VMD GON 10/1/2007 11/16/2007 the Uinistry of participation of Decentralization the municipal governments.

- 158 - Financing (in Intervention Logic Responsible Institutions Period Bs) Respon- PPF- sible Start End Objectives Activities Results Institution nstitution PDCR party 1. Propose an alternative transfer and fin anc in g contract, taking into account the Clarification of participation of the legal the FPS, obligations of municipal the participants FPS 10/1/2007 11/16/2007 governments, in the financing and city and the government consequences 01 (Tripartite), noncompliance. incorporating the new structure of co- financing Qproval and (currently illocation of under review). GON GF .esources, 2. Revise the Application of Legal :ormalizing financial sanctions to Services :he loan transfer contractors that contract to fail to comply include the with their monitoring role contractual of the FPS with obligations. FPS 10/1/2007 11/16/2007 control authority and fines for Approval of noncompliance model contract with the contract. Prevent interruptions in 3. Propose and projects caused include a new by current payment FPS 10/1/2007 10/3 1/2007 procedure of mechanism for annual counterparts. counterpart contributions. Clearly defined 1. Assign full procedures for responsibility delegation of 3ptimize for contracting contract :ontracting FPS GON 10/1/2007 10/3 112007 procedures to authority, procedures the municipal without direct governments. intervention by the FPS

- 159 - Financing (in Responsible Institutions Period Intervention Logic Bs) - . Respon- PPF- Objectives Activities Results [nstitution Institution sible Start End PDCR party 2. Define a procurement Improved management contracting system, procedures, assigned with efficient, personnel, FPS GAS 10/1/2007 1/16/2007 agile, and duties and transparent responsibilities, contracting training procedures processes and controls. 3. Periodically Have an update the instrument for FPS GON 10/1/2007 2/28/2008 reference price Project database evaluation. 4. Change the current no- objection internal Faster and regulations so simpler no- the FPS shall FPS BM GON 10/1/2007 1/16/2007 objection - only approve procedures. procedures that exceed an amount to be established. Noninterference in the 5. Prepare a contracting register of process, to contractors for implement FPS GON 10/1/2007 2/3 1/2007 purposes of better control risk and supervision, assessment, requiring legal and contractual compliance 6. Provide long lists of Timely companies and reduction ofrisk professionals exposure from FPS GON 10/1/2007 2/28/2008 for invitations bad contracts to bid for with companies Project and supervisors. supervision. 7. Include information on GON - Project cycle FP S GAS - 10/1/2007 l1/30/2008 operators on Systems the web site. 1. Define the [mprove the FPS role in the stage of The monitoring GON GF execution Project role of the FPS FPS Legal 10/1/2007 11/16/2007 phase as a txecution and is established. Services monitor of the payments. loan contract.

- 160- Financing (in Responsible Institutions Period Intervention Logic Bs)- . Respon- PPF- sible Start End FPS Objectives Activities Results Institution Ynstitution PDCR party - 2. Include the FPS monitoring role Contracts in the contracts inc 1u d e (works, goods Legal monitoring and and services), FPS Services 10/1/2007 12/3 1/2007 authority for requiring GON execution of guarantees to guarantees. the FPS and the authority to enforce fines. 3. Define responsibilities for supervisory More effective tasks in and controlled FP S GON 10/1/2007 12/3 1/2007 manuals and supervision. contract management. 4. Present a proposal for More efficient GON training and supervision of FPS VMD - 101112007 1213 112007 GAS accreditation of works. supervisors 5. Present a Fewer budget new procedure changes and for change orders, FPS GON 10/1/2007 10/3 1/2007 authorization of greater control change orders and institutional and extensions transparency 6. Include social control in this stage, Greater through a participation by record book beneficiaries maintained in FPS GON 10/1/2007 12/3 1/2007 and better accordance control of with a execution procedure to be established by the FPS

- 161 - Financing (in Intervention Logic Responsible Institutions Period Bs) Respon- PPF- sible Start End Objectives Activities Results [nstitution nstitution PDCR party 7. Require departmental offices’ compliance with regulations on necessary Compliance and documentation greater for payments, efficiency in with penalties departmental FPS 3ON - GF 1011512007 11/15/2007 for offices noncompliance, following the and application regulations. ofa verification procedure with sampling by the monitoring team. 8. Include in the SAP design a mechanism for scanning Computer and system with FPS GF - GAS 1/2/2008 11/28/2008 transmission of electronic file documents or electronic document file Present the End all projects proposal for on time with regulation on corresponding ending projects documentation End of by stages, with Centralization FP S 11/1/2007 1 1/30/2007 Project corresponding of all Project file of documents in supporting the central documentation office Closed and evaluated Prepare a projects general Streamlining procedure for and reduction of ex-post online or in- 3perations evaluation for Ex-post process control quality control FPS VMD 1011 512007 1213 112007 :valuation in favor of Zontracts and posterior 3ffice verification, control, including speeding up sectoral execution with indicators. greater transparency

- 162 - Financing (in Intervention Logic Responsible Institutions Period Respon- Bs) Objectives Activities Results [nstitution nstitution sible Start End party 1. Design a Strengthening general control of the capacity and monitoring for control, system to increased include risk institutional analysis in the transparency. Project Cycle 2. Identify indicators of capacity, Measure the efficiency, and efficiency of the GON 1011 5/2007 111 512008 aonitoring transparency in institution. ind control the FPS system municipalities. Fewer 3. Develop a discrepancies procedure for for irregular control and acts by the monitoring by public officials the Executive and companies Office involved 4. Develop a Computerized unit in the SAP and more GAS - 1/2/2008 11/28/2008 for follow-up efficient Systems and monitoring controls 1. Control and monitoring of contracts not Register of Effective subject to prior :ompanies, follow-up of review for FPS GON 1/2/2008 4/30/2008 iupervisors, companies and feedback on md contracts supervisors risk criteria 2. Identification of risk criteria.

- 163 - 2. TECHNOLOGICAL AND COMPUTER SYSTEM MODERNIZATION

~~ Inti yention lo IC ResDonsible institutions Period Financing- -I Bs) Responsible Objectives Activities Results nstitution nstitution Start End party 1. Prepare a proposal for Have a the technologically conceptual GAS - FPS v30/2007 911 012007 updated definition of Systems computer each unit of system with the computer capability for system efficient and 2. Develop a Have a new transparent proposal and computer monitoring, timeline for GAS system with FPS - 3/30/2007 912 1/2007 with a development Systems the required management of the capabilities control system system to replace including units 3. With the SAP for assistance of programming, a systems procurement, expert, execution, review the GAS FPS BM - >/17/2007 912 112007 fOllOW-up and technical Systems monitoring, viability of general reports the proposal or alternatives 1. Present a standard format for Standardized generation oi financial reports FPS GF 313 1I2007 9/28/2007 reports for (financial, cooperation procurement, follow-up etc.) Complete the 2. Consider reporting and adding a unit management or system information capability Replace units (SAP) for manual automatic financial generation 01 reports with FPS GF - GAS 1/2/2007 11/28/2008 financial computer- reports with generated clear ones indication of uses and sources

- 164 - 3. ORGANIZATIONAL STRENGTHENING

Int mention IC$C Respor ble Institutions Period Financing- (i Bs) Respon Institu Institu Objectives Activities Results sible Start End FPS Loan tion tion party Do a study to determine the percentage of “recovery of Iefine the A administrati nstitutional financially ve expenses ncome sound of the FPS” nechanism institution FPS GF 813 1/2001 ?/I1/2007 and break it with a with down by sustainability efficient each step approach. services with collection based on completed phases of the Project cycle 1. Formation of the Control and Monitoring 9/24/2007 4/30/2008 Unit under FPS GAS 1,113,091 1,360,44: the Executive Office of the FPS 2. Formation of the FPS GAS 9/24/2001 4/30/2008 Environment 218,213 340,111 a1 Unit 3. Formation of the FPS GAS 9/24/2001 4/30/2008 Procurement 428,112 523,24I Monitoring A complete [ncorporation Unit organization 3f new units 4. with in the Implementat required Organization ion of a capabilities monitoring FPS GON 711 12008 6/29/20 12 77 1,552 943,001 role for Project follow-up 5. Proposal for general functions and their assignment to minimal FPS GAS 9/3/2001 9/10/2007 staff

- 165 - Int mention 1( (iC Respo ble Ins utions Pe id Fina iespon Institu Institu Objectives Activities Results sible Start End FPS ?PF tion tion party Present a Complete Contracting timeline of the of activities for incorporatio specialized contracting n of or qualified specialized FPS BM GAS 2/24/2007 l/30/2008 personnel staff in personnel, required for contracting, and terms of the environment reference for programs their hiring Develop and present a program for training at Improve the the national Improved knowledge level for performance and skills of personnel in and I1/16/ FP S BM GAS 10/1/2007 the technical areas such at efficiency !007 staff of the contracting, by trained FPS and others, personnel. with assistance from the WB Conduct Contribution Define terms more audits and of reference of the feedback for for the 11/16/ internal and follow-up FPS 9/24/2007 audits, 2007 external and control including processes of of processes field visits the FPS and results Clarify for Develop a the plan for institution its reaffirming functions and the the institution’s importance image and of its prestige, and development continuous A information trustworthy on the and VMD services reaffirmed delivered institution. Recover a and results positive obtained, image. considering also needs for budgetary resources.

- 166 - Annex 17: Project Preparation and Supervision BOLIVIA: Lake Titicaca Local Sustainable Development Project

Planned Actual PCN review 01/18/2007 01/18/2007 Initial PID to PIC 01/18/2007 12/15/2006 Initial ISDS to PIC 01/18/2007 02/09/2007 Appraisal 10/29/2007 10/29/2007 Negotiations 11/09/2007 11/09/2007 BoarcVRVP approval 12/20/2007 Planned date of effectiveness 0310 112008 Planned date of mid-termreview 0511 2/2010 Planned closing date 06/30/2013

Key institutions responsible for preparation of the Project: Viceministerio de Turismo Av. Mariscal Santa Cruz, Edificio Cimara de Comercio, Piso 11, La Paz, Bolivia

Bank staff and consultants who worked on the Project included: Name Title Unit Roberto Chavez Lead Urban Specialist LCSUW Daniel Hoornweg Senior Municipal Engineer LCSUW David Tuchschneider Senior Rural Development Specialist LCSAR Menahem Libhaber Lead Sanitary Engineer LCSUW Miguel Vargas-Ramirez Water & Sanitation Specialist LCSUW Maria AngClica Sotomayor Senior Economist LCSUW Fabiola Altimari Counsel LEGLA S tefania Abakerli Social Development Specialist LCSSO Ruth Llanos Social Dev. and Civil Society Specialist LCSSO Alejandro Tapia Energy Specialist LCSEG Greg J. Browder Senior Water Resources Spec. EASUR Teddy Ernest0 Landaeta ConsultantProcurement Specialist LCCBO Ana F. Daza Language Program Assistant LCSUW M6nica Claros Team Assistant LCSHE Ephim Shluger Consultant/ Cultural Heritage Specialist LCSUW Natalie Palugyai Junior Professional Associate LCSUW Diana Ortiz Zuluaga Urban Specialist LCSUW Juan Carlos Junca Salas ConsultantEconomist LCSUW Glenn Morgan Lead Environmental Specialist LCSEN Claire Lammens ConsultantILED Specialist LCSSO Miriam CCspedes Procurement Assistant LCSPT Lourdes Linares Senior Financial Management Specialist OPCFM Karla Chaman Communications Officer EXTCD Xiomara A. Morel Senior Financial Management Specialist LCSFM Maria Lucy Giraldo Senior Procurement Specialist LCSPT Kristine Ivarsdotter Senior Social Development Specialist LCSSO Juan Luna-Kesler ConsultantITourism Expert LCSUW Jessica Wwwarg Junior Professional Associate LCSUW

- 167 - Bank funds expended to date on Project preparation: 1. Bank resources: $135,000 2. Trust funds: $80,000 3. Total: $215,000

Estimated Approval and Supervision costs: 1. Remaining costs to approval: $15,000 2. Estimated annual supervision cost: $85,000

- 168 - Annex 18: Documents in the Project File BOLIVIA: Lake Titicaca Local Sustainable Development Project

Documents Related to on Lake Titicaca- Background

1. Lessons for Managing Lake Basins for Sustainable Use; Report No. 32877, The World Bank, December 2005.

2. Lake Titicaca Basin, Bolivia and Peru; The Binational Autonomous Authority of Lake Titicaca (ALT); Published in the United Nation's 1'' World Water Development Report 2003.

3. Lake Titicaca Experience and Lessons Learned Brief; Mario Francis0 Revollo, SERECO, La Paz, Bolivia; Maximo Liberman Cmz, La Paz, Bolivia, and Albert0 Lescano Rivero, CEDAS, Puno, Peru.

Documents Related to Environmental AssessmenWater Resource ManaPementISafeguards Issues

4. Mancomunidad de Municipios del Lago Titikaka, Situaci6n Ambiental; Gerencia General Mancomunidad del Lago Titikaka, abril2006.

5. Assessing the Performance of International Water Management at Lake Titicaca; Jorg Rieckermann, Helge Daebel, Mariska Ronteltap, and Thomas Bernauer; Swiss Federal Institute of Aquatic Science and Technology (EAWAG) and Swiss Federal Institute of Technology (ETH), Center for Comparative and International Studies, Zurich, Switzerland, April 2006.

6. Water for People Water for Life, United Nations World Development Report, Executive Summary; UNESCO Publishing and Berghahn Books, 2006.

7. A Hydrodynamic Model for Lake Titikaka; Beatriz Villegas, Consulting Engineer, Medellin Colombia, and Phillip J. W. Roberts, Consulting Engineer, Atlanta, GA, USA; August 3, 2007.

8. Managing Lakes and their Basins for Sustainable Use. A Report for Lake Basin Managers and Stakeholders. International Lake Environment Committee Foundation, 2005.

Documents Related to Tourism and Cultural Heritape

9. Plan Sub-Sectorial de Desarrollo del Turismo Comunitario, Viceministerio de Turismo, Gobierno Nacional Bolivia.

10. Tourism Presentation by Departamento del Departamento de La Paz, Direcci6n de Desarrollo Productivo, Unidad de Turismo, 2007.

11. Geotourism Needs Assessment-Lake Titicaca: Assessing the Geotourism Needs, Threats and Opportunities of the bi-national Titicaca Regibn, National Geographic Society, Center for Sustainable Destinations, July 3 1, 2007.

12. Turismo Comunitario en Bolivia: Hacia la Construcci6n de un Turismo Sostenible de Base Comunitaria, Ministerio de Produccicin y Microempresa, Viceministerio de Turismo, 2007.

- 169- Annex 19: Statement of Loans and Credits BOLIVIA: Lake Titicaca Local Sustainable Development Project

Difference between expected and actual Original Amount in US$ Millions disbursements Project FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. ID Rev’d PO83979 2007 BO Urban 0.00 30.00 0.00 0.00 0.00 30.91 0.00 0.00 Infrastructure Project PO83051 2005 BO Rural Alliances 0.00 28.40 0.00 0.00 0.00 27.59 0.40 0.00 PO73367 2003 BO Decent Infras for 0.00 20.00 0.00 0.00 0.00 19.28 16.29 2.92 Rur Transformation PO68968 2002 BO Road Rehab. & 0.00 77.00 0.00 0.00 0.00 40.28 25.33 0.00 Maintenance Project PO74212 2001 BO-Health Sector 0.00 35.00 0.00 0.00 0.00 6.48 0.75 0.00 Reform APL I1 Total: 0.00 0.00 0.00 0.00 124.54 2.92 190.40 42.77

BOLMA: Lake Titicaca Local Sustainable Development Project

STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed IFC IFC FY Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. Approval 1995 BISA 0.00 0.54 0.00 0.00 0.00 0.54 0.00 0.00 1998 BISA 0.00 0.09 0.00 0.00 0.00 0.09 0.00 0.00 2003 Banco Los Andes 6.60 0.00 0.00 0.00 6.60 0.00 0.00 0.00 2003 Banco Sol 4.00 0.00 0.00 0.00 4.00 0.00 0.00 0.00 1999 CBTI 0.00 0.00 0.85 0.00 0.00 0.00 0.85 0.00 1994 COMSUR 0.00 0.00 1.30 0.00 0.00 0.00 1.30 0.00 1991 Central Aguirre 0.00 0.24 0.00 0.00 0.00 0.24 0.00 0.00 200 1 Central Aguirre 1.69 0.00 0.00 0.00 1.69 0.00 0.00 0.00 1999 Electropaz 18.04 0.00 0.00 0.00 18.04 0.00 0.00 0.00

- 170 - 2003 FIE 1.25 0.00 0.00 0.00 1.25 0.00 0.00 0.00 1993 GENEX 0.10 0.00 0.00 0.00 0.10 0.00 0.00 0.00 1999 Illimani 3.84 0.00 0.00 0.00 3.84 0.00 0.00 0.00 Minera 0.00 3.40 0.00 0.00 0.00 3.40 0.00 0.00 2001 PQB 10.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2003 PRODEM 2.45 0.00 0.00 0.00 2.45 0.00 0.00 0.00 2003 TDE S.A. 12.72 0.00 15.00 0.00 12.72 0.00 15.00 0.00 TRECO 0.00 1.16 0.00 0.00 0.00 1.16 0.00 0.00 200 1 Telecel Bolivia 3.33 0.00 5.00 1.43 3.33 0.00 5.00 1.43 2005 Transierra 45.35 0.00 0.00 86.05 45.35 0.00 0.00 86.05 Total portfolio: 5.43 5.43 109.87 22.15 87.48 99.37 22.15 87.48

Approvals Pending Commitment FY Company Loan Equity Quasi Partic. Approval

Total pending 0.00 0.00 0.00 0.00 commitment:

- 171 - Annex 20: Country at a Glance BOLIVIA: Lake Titicaca Local Sustainable Development Project

Latin Lower- POVERTY and SOCIAL Arnerlca mlddle- )evelopment diamond. Bollvla (L Carib. Income 2005 Popuiation.mid-year (miliions) 92 551 2,475 Life expectancy GNIpercapita(Atiasmethod, US$) 10 Q 4,008 1918 GNI(Atlasmethod, US$ biilions) 9.3 220 4,747 Average annual growth, IWS-05 T Population (Sy 2.0 14 10 Gross Laborforce(%) 3.0 22 14 primary Most recent estlmate (latest year available, IWS-05) Poverty (%of population below nationalpo vertyline) 63 Urban population (%oftotalpopulation) 64 77 50 Life expectancyat birth (pars) 65 72 70 I Infant mortaiiiy(per tOOOlive births) 54 27 33 Child malnutrition (%ofchildrenunder6) 0 7 a Access to improvedwatersource Access to an improvedwatersource (%ofpopulation) 85 91 02 Literacy(%ofpopulation age S+t 87 90 09 Gross primary enrolirnent (%of school-age population) m tB M -8 o livia Male M P1 115 .- Lower-middie-incomegroup Female m M m KEY ECONOMIC RATIOS and LONG-TERM TRENDS

I985 1995 2004 2005 Economic ratios. GDP (US$ billions) 3.1 6.7 8.7 9.3 Gross capital formation1GDP 8.5 152 12.4 Trade Worts of goods and services/GDP 8.0 22.6 30.9 Gross domestic savings/GDP 15.7 Q.6 15.1 Gross national savings/GDP 9.1 Q.6 15.8 T Current account balance1GDP -D.9 -5.0 3.3 2.0 Domestic Capital Interest payments/GDP , , 5.0 2.3 15 savings ,,d$ formation Total debt/GDP 153.9 70.5 70.0 Total debt servicelexports 49.4 29.3 18.6 PreSent value of debt1GDP 34.5 Present value of debtleqorts 00.9 Indebtedness 1985-95 1995-05 2004 2005 2005.09 (average annualgrowth) GDP 3.5 2.9 3.9 4.1 3.7 -Bolivia 12 GDP percapita 0.8 19 2.1 2.0 ~ Lower-middle-incomegroup Worts of goods and services 9.5 4.7 8.1

- 172- STRUCTURE of the ECONOMY 1985 1995 2004 2005 (%of GDP) Agriculture 20.6 6.9 15.7 Industry 34.8 33.1 30.9 Manufacturing 17.3 8.0 14.4 Services 44.6 50.0 53.4 Household final consumption ewenditure 73.8 75.8 68.6 General gov't final consumption eqenditure 0.6 0.6 15.3 Imports of goods and services 22.8 27.2 272

1985-95 1895-05 2004 2005 Growth of exports and Imports (Oh) (average annual gro wth) Agriculture 2.7 2.5 0.3 20 Industry 4.3 2.3 5.8 Manufacturing 3.7 2.6 5.1 Services 2.9 3.4 2.9 -20.10 Household final consumption expenditure 2.9 2.9 2.6 1+4G&S&75 General gov't final consumption ewenditure 12 2.9 -0.6 Gross capital formation 4.1 0.0 .0.1 -Exports -Inports Imports of goods and services 5.6 3.3 5.4

Note: 2005 data are preiiminaryestimates. This tablewas producedfrom theDevelopment Economics LDB database. 'Thediamonds showfourkeyindicators in thecountry(in bo1d)comparedwithits incomegroupaverage. Kdata are missing,thediamondwill be incomplete.

Bolivia

PRICES andGOVERNMENT FINANCE 1985 1995 2004 2005 Domestlc prlces (%change) Consumer prices 11749.6 0.2 4.4 5.4 Implicit GDP deflator ~,33a.7 114 7.4 4.6 2 Government Flnance (%of GDP, includes current grants) 'v0 Current revenue 25.7 26.8 27.9 00 01 02 03 04 05 Current budget balance 5.7 3.4 5.0 -GDPddlator -CPI Overall SUrDlUS/defiCit -18 -5.6 -4.4

TRADE 2004 2005 1985 1995 Export and Import levels (US$ mlll.) (US$ millions) Total exports (fob) 628 1075 2,146 2,527 Zinc 29 51 152 3,000 T Silver 0 71 91 Manufactures 300 380 Totalimports (cif) 691 1385 1844 2,84 Food 55 74 Fuel and energy 2 55 a2 Capital goods 254 535 487 88 00 01 02 03 04 05 Export price index (ZOOO=WO) I76 m PO 03 Import price index (ZOOO=WO) 63 00 04 D7 HExporta mlmports Terms of trade (2000-WO) 280 m n5 P4 I

- 173 - BALANCE of PAYMENTS 198 5 1995 2004 2005 Current account balance to GDP (YO) (US$ millions) Eqorts of goods and services 722 1239 2,546 2,941 ST Imports of goods and services 807 1576 2,320 2,693 Resource balance -86 -337 226 249 0 Net income -423 -221 -385 -394 Net current transfen 74 223 444 330 Current account balance -434 -335 285 185 5 Financing items (net) 463 459 -147 -X8 Changes in net reseives -29 -a3 -U8 -37 -10 I Memo: Reserves including gold (US$ millions) 400 1320 1745 1349 Conversion rate (DEC,local/US$) 0.8 4.8 7.9 8.1

EXTERNAL DEBT and RESOURCE FLOWS 1985 1995 2004 2005 Composition of 2004 debt (US$ mill.) (US$ millions) Total debt outstanding and disbursed 4.805 5,272 6,096 IBRD 207 95 0 0 IDA 94 770 1750 1673 Total debt seivice 366 372 50 IBRD 27 36 0 0 IDA 2 8 20 35 Composition of net resource flows Gfficial grants 71 328 768 Official creditors 1 28 1 3f3 Private creditors -36 41 3 Foreign direct investment (net inflows) 29 393 18 Portfolio equity(net inflows) 0 0 0 World Bank program Commitments 0 1% 55 A ~ IBRD E- Bilaterd Disbursements If3 P4 71 72: B - IDA D ~ Other mltiiata-d F - Private Principal repayments 73 29 8 22 C-IMF G. Short-ten Net flows -1 84 177 49 hterest payments 8 15 t? t3 Net transfers -77 69 m5 35

Note:This tablewas produced from the Development Economics LDB database. 8/t?/06

- 174- IBRD 35227 70° 69° LAKE TITICACA AND VICINITY BOLIVIA LAKE TITICACA LOCAL SUSTAINABLE DEVELOPMENT PROJECT LAKE TITICACA 0 10 20 30 Kilometers PROJECT MUNICIPALITIES 0 10 20 30 Miles CULTURAL HERITAGE SITES TO BE ° 15° 15 PROTECTED UNDER THE PROJECT ARCHAEOLOGICAL SITE WITH TOURIST POTENTIAL

Lake Arapa Huancane SELECTED CITIES MAIN RIVERS MAIN ROADS Rio Ramis Taraco SECONDARY ROADS ta nsa Chiñijo Co MUNICIPAL BOUNDARIES o Ri INTERNATIONAL BOUNDARY Juliaca Puerto BOLIVIA Acosta CITY OF COPACABANA

Rio Cabanillas

Lake Puerto Puno Carabuco CCaminoamino deldel CCalvario:alvario: Ndo. Jankho Titicaca Uma walkwaywalkway ttoo bbee iimprovedmproved (6429 m) underunder thethe ProjectProject Ndo. Illampu Ancoraimes (6331 m)

For detail, Cerro Calvario 16° See IBRD 35676 16° Achacachi

Ilave Tito Yupanqui Copacabana ForFor detail,detail, seesee San Pablo de Tiquina Juli mapmap atat rightright Batallas

Sorapa Puerto Perez Pucarani Aygachi Lake Titicaca Taraco Laja Tiwanaku Malecon:Malecon: wwaterfrontaterfront ppromenaderomenade Basilica de Copacabana Desaguadero andand ppiersiers ttoo bbee cconstructedonstructed Intikala PERU underunder thethe ProjectProject Rio Huenque Guaqui Viacha

Jesús de Machaca Mazocruz

Nazacara

17° 17°

R i o D es ag ua de r Horca del Inca o

The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 70° 69° 68°

DECEMBER 2007 IBRD 35676 Isla Pallalla 72° 70° 68° 66° Isla Khoa COPACABANA AND VICINITY BOLIVIA Isla Chujo Isla Lahuasani Bahía Sabacoca Challapampa Chinkana LAKE TITICACA LOCAL SUSTAINABLE Santuario Aumpa TOURIST CIRCUITS Isla Jochihuata Bahía Kona Ecia. Khasa Parque LAKE del Norte SELECTED CITIES TITICACA DEVELOPMENT PROJECT Cuzco ROADS Pucara LAKE TITICACA BASIN Keacuchokeapata Yumani INTERNATIONAL BOUNDARY Isla del Sol Saxsamani Central Ajllahuasi Central Yumani Isla de la Luna (Coati) Titinuani Bahía LAKE TITICACA BASIN SELECTED CITIES Kona Pilcocaina 18° Cmdad. Choquena Santiago de Huata LAKE TITICACA BASIN BOUNDARY NATIONAL CAPITAL Faro SUB-BASIN BOUNDARIES MAJOR ROADS Yampupata Sicuani Cmdad. Zampaya Reyes Cmdad. Momo INTERNATIONAL BOUNDARIES Canta Pata Pilapata Cmdad. Thajocachi Sicuani Qahuaya Cmdad. Titicachi Siripaya Cmdad. Belén TITICACA Apolo San Borja Isla Jiskha Huata BOLIVIA S Lake Putina u Kollasuyo c For Detail, BASIN Ayaviri h Hinchaca e See IBRD 35227 s Chachapoyas Chani R Huancané . For detail, PERU BOLIVIA see map, below. Hueko Cmdad. Chisi Puerto Cmdad. Chinchilaya Juliaca Jankho Acosta COPACABANA Amaya Cmdad. Huacuyo San Miguel Cmdad. Ajanani Juaquipa (Huathapampa) LL.. TiticacaTiticaca de Huachi Calamarca For detail, Huatafosro Titicaca Cmdad. Loma Labruyo Tito Yupanqui 16° Puno see map, right. Khalata Lopalaya LLave 16° Carmen Achacachi Cmdad. Loka Kaputina Khalata Juli Viluyo San Pablo Khasani San Martín Vítor San Pedro Arequipa LA PAZ Desaguadero Viacha PERU Luipaya DESAGUADERO Amacari BASIN Santiago de Ojje

Isla Limina I. Jhamiti

I. Jhamiti Chico 502.5 Isla Taquiri Taquiri Moquegua Corocoro Km Cochabamba adero Sicasica Desagu Isla Chipi Tarata R. Charaña Horca del Inca Intikala 14° Tacha Oruro 14° POOPÓ Basilica de BASIN a Copacabana c Arica Poopó Lau a ca R. c L.L. i PoopóPoopó t COIPASA i BASIN T Challapata CaminoCamino deldel Calvario:Calvario: PACIFIC Sucre walkwaywalkway toto bebe improvedimproved

underunder thethe ProjectProject

Cuya Salar de

OCEAN Coipasa

Salt Plain Potosí

e

Llica k

12° CHILE a

12° L Salar de Uyuni Malecon: waterfront promenade Iquique Salt Plain and piers to be constructed Cerro Calvario under the Project Humberstone Pulacayo This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and CULTURAL HERITAGE SITES TO BE any other information shown PROTECTED UNDER THE PROJECT on this map do not imply, on 0 40 80 Kilometers the part of The World Bank ARCHAEOLOGICAL SITE WITH Group, any judgment on the TOURIST POTENTIAL legal status of any territory, 0 20 40 60 80 Miles or any endorsement or ROADS acceptance of such Ollaque boundaries. 70° 68° 66° CITY OF COPACABANA DECEMBER 2007 BOLIVIA LAKE TITICACA LOCAL SUSTAINABLE DEVELOPMENT PROJECT

Source: Ministerio de Producción y Microempresa Viceministerio de Turismo.

BASIC SANITATION PROJECTS Sanitation (Second Year) Potable Water Wastewater Treatment Regional Landfill (Construction) Municipal Capital LAKE Roads TITICACA Contamination Level: Lake Severe Moderate Titicaca Low None

The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.

Lake Titicaca

Crafts and Textiles TOURISM PROJECTS Integrated Information Center (Construction)(Construction) Community Guest House

Docks (Construction) Docks (Rehabilitation) Small Roads Larger Roads

Municipal Capital

Lake

Titicaca DECEMBER 2007 IBRD 35807 BOLIVIA LAKE TITICACA LOCAL SUSTAINABLE DEVELOPMENT PROJECT

Source: Ministerio de Producción y Microempresa Viceministerio de Turismo.

LAKE TITICACA

Lake Titicaca DECEMBER 2007 IBRD 35808

The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.