Report No. 36459-GT Republic of Guatemala Public Disclosure Authorized Country Environmental Analysis Addressing the Environmental Aspects of Trade and Infrastructure Expansion Public Disclosure Authorized June 22, 2006 Environmentally and Socially Sustainable Development Department Latin America and the Caribbean Region Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank CURRENCY EQUIVALENTS Currency unit = Guatemalan Quetzal (GTQ) US $1 = 7.6 GTQ FISCAL YEAR January 1 – December 31 Vice President: Pamela Cox Country Director: Jane Armitage Sector Director: Laura Tuck Sector Manager: Abel Mejía Sector Leader: John Kellenberg Task Manager: Juan Carlos Belausteguigoitia Table of Contents Acronyms and Abbreviations ...........................................................................................v Acknowledgements ......................................................................................................... vii Executive Summary......................................................................................................... ix 1. Introduction................................................................................................................... ix 2. Institutional and Organizational Analysis..................................................................... xi 3. Managing the Environmental Implications of DR-CAFTA ........................................ xii 3.1 Trade and the Environment in Guatemala............................................................. xii 3.2 Trading Patterns and Implications for the Environment ...................................... xiii 3.3 Technical Barriers................................................................................................. xiv 3.4 Foreign Direct Investment .................................................................................... xiv 3.5 Implications for Agricultural Frontier Expansion ................................................ xvi 4. Managing the Environmental Implications of Infrastructure Expansion.................... xvi 5. Conclusions and Recommendations ........................................................................... xix 5.1 Strengthen Environmental Quality by Integrating Environmental Considerations into Sectoral Policies; and Improve Effectiveness of MARN to Plan and Oversee Environmental Policies.................................................................................................xx 5.2 Address Regulatory Gaps ................................................................................... xxiv 5.3 Promote Compliance with Environmental Laws..................................................xxv 5.4 Improve Effectiveness and Efficiency of Environmental Management............. xxvi 5.5 Support the Decision Making Process by Establishing a Unified Environmental Information System, and Promoting Public Participation...................................... xxviii 5.6 Manage the Environmental Implications of DR-CAFTA .................................. xxix I. Introduction ...................................................................................................................1 1. Background and World Bank Assistance .......................................................................1 1.1 Policy Challenges .....................................................................................................1 1.2 Development Plan and World Bank Assistance.......................................................2 2. Rationale, Objectives, and Value-Added........................................................................3 2.1 Rationale...................................................................................................................3 2.2 Objectives .................................................................................................................3 2.3 Value-Added.............................................................................................................4 3. Organization of this Country Environmental Analysis...................................................4 II. Key Environmental Problems ....................................................................................6 1. Natural Characteristics of Guatemala .............................................................................6 2. Summary of Key Environmental Problems ....................................................................7 2.1 Water Scarcity ..........................................................................................................7 2.2 Polluted Water ..........................................................................................................7 i 2.3 Air Quality................................................................................................................9 2.4 Indoor Air Pollution..................................................................................................9 2.5 Forest Loss................................................................................................................9 2.6 Land Degradation .....................................................................................................9 2.7 Natural Disasters.....................................................................................................10 2.8 Biodiversity Loss....................................................................................................10 2.9 Solid Waste.............................................................................................................11 III. Institutional Framework..........................................................................................12 1. Institutional Framework (the Rules of the Game) ........................................................12 1.1 Environmental Policies...........................................................................................12 1.2 Regulatory Framework...........................................................................................13 1.3 Environmental Policy Instruments .........................................................................18 1.4 Information .............................................................................................................18 1.5 Public Participation.................................................................................................21 1.6 Compliance.............................................................................................................23 2. Organization Analysis...................................................................................................26 2.1 Ministry of Environment and Natural Resources (MARN) ...................................26 2.2 Other Governmental Organizations........................................................................33 2.3 Organizations Responsible for the Administration of Justice ................................34 2.4 Municipalities and Urban and Rural Development Councils.................................37 3. Institutional and Organizational Strengths and Weaknesses ........................................38 IV. Trade and the Environment in Guatemala............................................................40 1. Trade and Environment Debate ....................................................................................41 2. Overview of the Literature............................................................................................43 3. Trading Patterns and Implications for the Environment...............................................44 3.1 Technical Barriers...................................................................................................50 4. Foreign Direct Investment ............................................................................................52 4.1 Implications for Frontier Expansion.......................................................................53 5. Recommendations.........................................................................................................54 V. Infrastructure Expansion..........................................................................................56 1. Transport Infrastructure in Guatemala..........................................................................56 1.1 Roads ......................................................................................................................56 1.2 Ports........................................................................................................................58 1.3 Government Strategy..............................................................................................59 2. Managing the Environmental Implications of Infrastructure Expansion......................59 2.1 Environmental Policy Instruments and Process Description..................................59 2.2 Screening ................................................................................................................64 2.3 Scoping ...................................................................................................................65 2.4 Public Participation.................................................................................................65 2.5 EIA Review, Evaluation, and Approval .................................................................66 2.6 Monitoring and Follow-up......................................................................................66