PUBLIC SIMULTANEOUS DISCLOSURE DOCUMENT OF THE INTER-AMERICAN DEVELOPMENT BANK BELIZE CLIMATE VULNERABILITY REDUCTION PROGRAM (BL-L1028) LOAN PROPOSAL This document was prepared by the project team consisting of: Gines Suarez (RND/CES) Team Leader; Christopher Persaud (INE/TSP) Alternate Team Leader; Michele Lemay, Héctor Valdes Conroy, Roberto Guerrero, Khafi Weekes, Lisa Sofia Restrepo (CSD/RND); Sara Valero Freitag (CSD/CCS); John Primo, Brodrick Watson (FMP/CBL); Jane Chow, Elizabeth Ayala (CID/CBL); Ignacio Barragan (LEG/SGO); David Baringo and Luca Marini (VPS/ESG) In accordance with the Access to Information Policy, this document is being released to the public and distributed to the Bank’s Board of Executive Directors simultaneously. This document has not been approved by the Board. Should the Board approve the document with amendments, a revised version will be made available to the public, thus superseding and replacing the original version CONTENTS PROJECT SUMMARY ......................................................................................................... 1 I. DESCRIPTION AND RESULTS MONITORING ................................................................. 2 A. Background, Problem Addressed, Justification ............................................. 2 B. Objective, Components and Cost ............................................................... 13 C. Key Results Indicators ................................................................................ 15 II. FINANCING STRUCTURE AND MAIN RISKS ................................................................ 16 A. Financing Instruments................................................................................. 16 B. Environmental and Social Safeguard Risks ................................................ 16 C. Fiduciary Risk ............................................................................................. 17 D. Other Key Issues and Risks ........................................................................ 17 III. IMPLEMENTATION AND MANAGEMENT PLAN ............................................................ 18 A. Summary of Implementation Arrangements ................................................ 18 B. Summary of Arrangements for Monitoring Results ...................................... 19 C. Significant Design Activities Post Approval ................................................. 20 D. Other .......................................................................................................... 20 - ii - ANNEXES Annex I Development Effectiveness Matrix (DEM) – Summary Annex II Results Framework Annex III Fiduciary Arrangements ELECTRONIC LINKS REQUIRED (REL) 1. Pluriannual Execution Plan (PEP) and Annual Operational Plan (POA) 2. Monitoring and Evaluation Arrangements 3. Environmental and Social Management Report (ESMR) 4. Procurement Plan OPTIONAL (OEL) 1. Updating and Detailed Designs of Flood Control Works in Belize City 2. Feasibility and Designs of Small Scale, Nature Based Coastal Protection Works in Caye Caulker and Goff Caye, Belize 3. Economic Analysis 4. Index of Governance and Public Policy in DRM -. National Report for Belize 5. Hazard and Risk Reduction Works Modeling Including Climate Change Scenarios 6. Technical References 7. Synergies with other Programs 8. GCF Chronogram 9. Safeguard Policy Filter (SPF) and Safeguard Screening Form (SSF) 10. Program Operations Manual - iii - ABBREVIATIONS BCC Belize City Council BSAP Belize Biodiversity Strategy and Action Plan CBA Central Building Authority CC Climate Change CCA Climate Change Adaptation CRF IDB Corporate Result Framework 2016-2019 CCVC Caye Caulker Village Council CZM Coastal Zone Management CZMAI Coastal Zone Management Authority and Institute DRM Disaster Risk Management ECLAC Economic Commission for Latin America and the Caribbean ECP Environmental Compliance Plan ESCI Emerging and Sustainable Cities Initiative ESMR Environmental and Social Management Report FMIP Flood Mitigation Infrastructure Program for Belize City ESS Environmental and Social Strategy GDP Gross Domestic Product GoB Government of Belize GSDS Growth and Sustainable Development Strategy 2016-2019 IDB Inter-American Development Bank iGOPP Index of Governance and Public Policy in Disaster Risk Management IMF International Monetary Fund IRR Internal Rate of Return LRP Livelihood Restoration Plan MDAs Ministries Departments and Agencies MEDPITC Ministry of Economic Development and Petroleum, Investment, Trade and Commerce MOU Memoranda of Understanding MTCA Ministry of Tourism and Civil Aviation NCRP National Climate Resilience Plan NDC National Determined Contributions NEMO National Emergency Management Organization NICZMP National Integrated Coastal Zone Management Plan NPV Net Present Value NSTMP National Sustainable Tourism Master Plan PM Program Manager PMU Program Management Unit POD Proposal for Operation Development POM Program Operations Manual PSC Project Steering Committee RMI Risk Management Index SLR Sea Level Rise - iv - ABBREVIATIONS SPF Safeguard Policy Filter SSF Safeguard Screening Form TC Technical Cooperation UNFCCC United Nations Framework Convention on Climate Change WTTC World Travel and Tourism Council WB World Bank PROJECT SUMMARY BELIZE CLIMATE VULNERABILITY REDUCTION PROGRAM BL-L1028 Financial Terms and Conditions Borrower: Belize Flexible Financing Facility(a) Amortization Period: 25 years Executing Agency: Ministry of Works (MoW) Original WAL: 15.25 years Disbursement Period: 4 years Amount Source % Grace Period: 5.5 years (US$) Supervision and 10,000,000 100 (b) IDB (Ordinary Inspection Fee: Capital(e): Interest rate: LIBOR based Credit Fee: (b) Dollars of the United States of Total: 10,000,000 100 Currency of Approval: America Project at a Glance Project Objective/Description: The program’s objective is to reduce Belize’s climate vulnerability and risk through the implementation of climate resilient measures in the tourism sector and by improving the governance of Belize’s Disaster Risk Management (DRM). Special Contractual Clauses prior to the first disbursement of the financing: The first disbursement will be subject to the following conditions precedent: (i) establishment of the Program Management Unit (PMU) and the appointment of the program coordinator, the project manager, the fiduciary (financial and procurement) specialists and the administrative assistant (¶3.1); and (ii) approval of the Program Operations Manual (POM) (OEL-10) (including the Environmental and Social Management Report - ESMR) (REL-3) (¶3.4). Special Contractual Clauses of execution: Other special conditions for execution are included and described in the ESMR (see Annex B of the EMSR). Exceptions to Bank Policies: None Strategic Alignment Challenges(c): SI PI EI Cross-Cutting Themes(d): GD CC IC (a) Under the Flexible Financing Facility (FN-655-1), the borrower has the option to request modifications to the amortization schedule as well as currency and interest rate conversions. In considering such requests, the Bank will take into account operational and risk management considerations. (b) The credit fee and inspection and supervision fee will be established periodically by the Board of Executive Directors during its review of the Bank’s lending charges, in accordance with the relevant policies. (c) SI (Social Inclusion and Equality); PI (Productivity and Innovation); and EI (Economic Integration). (d) GD (Gender Equality and Diversity); CC (Climate Change and Environmental Sustainability); and IC (Institutional Capacity and Rule of Law). (e) Pursuant to Document AB-2990, the disbursement of Loan resources will be subject to the following maximum limits: (i) up to 15% during the first 12 months; (ii) up to 30% during the first 24 months; and (iii) up to 50% during the first 36 months. All these periods will be counted from the time the loan operation is approved by the Board of Executive Directors (¶2.2). - 2 - I. DESCRIPTION AND RESULTS MONITORING A. Background, Problem Addressed, Justification 1.1 Background. Belize is a small, open, and export-based economy. Annual economic growth rates have fluctuated over the past ten years, ranging from 9.3% in 2003 to -0.8% in 2016, reflecting the country’s high vulnerability to external shocks such as changes in trade and natural disasters. The fiscal deficit has been expanding, reaching 8% of the Gross Domestic Product (GDP) in 2016, and driving public sector debt to 100% of GDP (IMF, 2017).1 After four years of missing its fiscal targets, the Government of Belize (GoB) is proposing severe cuts on capital expenditure and increases in tax revenues for the 2017/18 fiscal year. The fiscal adjustment may hamper the government’s capacity to tackle external shocks, such as natural disasters and other challenges caused by the negative effects of Climate Change (CC). 1.2 The tourism industry is a major economic pillar for Belize, is the largest foreign exchange earner and most important productive sector, accounting for 38% of total GDP (WTTC, 2017).2 As of 2016, the sector generates 50,000 jobs (formal and informal) that represent 34.3% of the labor force and is expected to rise to 91,000 jobs by 2027 (43.2% of the projected labor force) (WTTC, 2017). Moreover, the GoB has identified sustainable tourism growth as critical to its continued national development in Belize’s Horizon 2030 Strategy. What is more, the Growth and Sustainable Development Strategy 2016-2019 (GSDS) built upon the strategies of Horizon 2030 and set a detailed