Peru-CPF-112299-PE-04102017.Pdf
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Document of The World Bank Group FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 112299-PE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION AND MULTILATERAL INVESTMENT GUARANTEE AGENCY Public Disclosure Authorized COUNTRY PARTNERSHIP FRAMEWORK FOR THE REPUBLIC OF PERU FOR THE PERIOD FY17-FY21 April 4, 2017 Public Disclosure Authorized Bolivia, Chile, Ecuador, Peru and Venezuela Country Management Unit Latin America and the Caribbean Region The International Finance Corporation Latin America and the Caribbean Region The Multilateral Investment Guarantee Agency 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 Group authorization. ii The date of the last Country Partnership Strategy FY12-FY16 was February 1, 2012 (Report No. 66187-PE) CURRENCY EQUIVALENTS (Exchange rate effective as of March 19, 2017) US$1 = 3.26 Soles FISCAL YEAR January 1 – December 31 PRINCIPAL ABBREVIATIONS AND ACRONYMS ASA Advisory Services and Analytics BCRP Central Reserve Bank of Peru (Banco Central de Reserva del Perú) B4O Bottom 40 percent of the population CAF Latin American Development Bank (Banco de Desarrollo de América Latina) CAT DDO Catastrophe Deferred Drawdown Option CPF Country Partnership Framework DPF DDO Development Policy Financing with a Deferred Drawdown Option ENAHO Household Survey (Encuesta Nacional de Hogares) EPSs Water State Owned Enterprises (Empresas Prestadoras de Servicios de Saneamiento) FDI Foreign Domestic Investment FIP Forest Investment Program GDP Gross Domestic Product GEF Global Environment Facility GoP Government of Peru IEG Independent Evaluation Group IBRD International Bank for Reconstruction and Development IDB Inter-American Development Bank IFC International Finance Corporation INEI National Institute of Statistics and Informatics (Instituto Nacional de Estadística e Informática) MEF Ministry of Economy and Finance (Ministerio de Economía y Finanzas) MIGA Multilateral Investment Guarantee Agency MINEDU Ministry of Education (Ministerio de Educación) MSMEs Micro, Small and Medium Enterprises OECD Organization for Economic Co-operation and Development PPP Private Public Partnership PROINVERSION Private Investment Promotion Agency (Agencia de Promoción de Inversión Privada) RAS Reimbursable Advisory Services SIS Integrated Health Systems (Sistema Integrado de Salud) SCD Systematic Country Diagnostic SNIP National System of Public Investment (Sistema Nacional de Inversión Pública) SME Small and medium-sized enterprises ii SUNAT National Superintendence of Tax Administration (Superintendencia Nacional de Administración Tributaria) SWAP Sector Wide Approach Project PCM Presidency of the Ministers Cabinet (Presidente del Consejo de Ministros) T60 Top 60 percent of the population TA Technical Assistance US United States of America WBG World Bank Group WSS Water & Sanitation Services IBRD IFC MIGA Vice President: Jorge Familiar Dimitris Tsitsiragos Keiko Honda Director: Alberto Rodríguez Irene Arias Merli Baroudi Task Team Leader: Pedro Rodríguez Marc Tristant Gianfilippo Carboni Karina Olivas Luciana Harrington iii The Republic of Peru FY17-FY21 COUNTRY PARTNERSHIP FRAMEWORK TABLE OF CONTENTS I. Introduction ............................................................................................................................. 1 II. Country Context and Development Agenda .............................................................................. 3 A. Political Context ..................................................................................................................... 3 B. Recent Economic Developments and Outlook ....................................................................... 3 C. Poverty Profile........................................................................................................................ 5 D. Drivers of Poverty and Development Challenges .................................................................. 7 III. World Bank Group Partnership Strategy .................................................................................. 8 A. Government Program and Medium-Term Strategy ............................................................... 8 B. The WBG Country Partnership Framework......................................................................... 10 C. Objectives Supported by the World Bank Group Program .................................................. 12 Pillar I. Productivity for Growth ........................................................................................... 15 Pillar II. Services for Citizens across the Territory............................................................... 23 Pillar III. Natural Resource and Climate Change Risk Management. .................................. 27 D. Implementing the Proposed FY17-FY21 Country Partnership Framework ........................ 31 IV. Managing Risks to the CPF Program ..................................................................................... 32 iv Boxes Box 1:WBG Engagement on Community Development around Mining in Apurimac ................ 22 Figures Figure 1: Extreme and Moderate Poverty Rates ............................................................................. 6 Figure 2: Moderate Poverty Rates per Region 2015 ....................................................................... 6 Figure 3: Government’s Strategic Priorities in the National Plan 2016-21 .................................... 9 Figure 4: CPF Selectivity Analysis ............................................................................................... 10 Figure 5: CPF’s Pillars and Objectives ......................................................................................... 13 Tables Table 1: Key Economic Indicators, 2012-18 .................................................................................. 4 Table 2: Peru’s SCD - Priority Areas and Key Bottlenecks ......................................................... 11 Table 3: CPF Areas and Donor Coordination ............................................................................... 32 Table 4: Risks to the CPF Program............................................................................................... 34 Annexes Annex 1: CPF Results Matrix ....................................................................................................... 35 Annex 2: Peru - Key Economic and Social Indicators, 2012-2019 .............................................. 45 Annex 3: Alignment of the CPF with the SCD and Government’s program ............................... 47 Annex 4: Peru FY17-FY21 Country Partnership Framework Consultations ............................... 48 Annex 5: Selected Indicators of Bank Portfolio Performance and Management ......................... 52 Annex 6: Operations Portfolio (IBRD/IDA and Grants) .............................................................. 53 Annex 7: IFC Committed and Disbursed Outstanding Investment Portfolio ............................... 55 Annex 8: Completion and Learning Report .................................................................................. 56 v FY17-FY21 COUNTRY PARTNERSHIP FRAMEWORK FOR THE REPUBLIC OF PERU I. Introduction 1. Peru’s sound macroeconomic and structural policies, supported by favorable external conditions have rendered significant growth. Peru’s economy advanced at close to 6 percent per year during the last decade and at 4.7 percent per year on average over the last two decades. Countercyclical fiscal and monetary policies during the commodity boom, underpinned by reforms, led to an increase in domestic savings, which complemented with Foreign Direct Investments (FDI) to the tune of 5 percent of Gross Domestic product (GDP) on average over the last ten years, transformed the landscape in mining, agribusinesses and commerce. Income per capita at market exchange rates tripled over the past fifteen years, reaching US$6,206 in 2016. 2. Between 2004 and 2015, nine out of thirty million Peruvians escaped poverty. Moderate poverty fell by more than half from 58 to 22 percent of the population, while extreme poverty shrank from 16 to 4 percent. At the same time, the income of the poorest bottom 40 percent of households (B40) grew by 6.8 percent on average, well above the 2.5 percent improvement experienced by the top 60 percent (T60). The middle class expanded by 18 percentage points, outnumbering the poor in 2013. Higher labor incomes explain the lion’s share of the poverty and inequality reductions, but non-labor incomes (cash payments from safety nets established over the past ten years) helped to alleviate extreme rural poverty. 3. However, the negative terms of trade shock, most notably in 2014, dislodged Peru from its fast-growth path by depressing exports, private investments and domestic consumption alike. The shock also revealed important structural weaknesses in Peru’s economy– its low levels of productivity, its sharp geographical disparities in access and quality of basic public services, and its high vulnerability to climate change risks. The fall in commodity prices has narrowed the window of opportunity for people to escape poverty and exposed the emerging middle class to the risk of falling back into poverty. A prevalent exclusion and inequality across the income and ethnic ladders exacerbate these vulnerabilities.