Document of The World Bank Report No: 17991-CO PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF US$ 5 MILLION TO THE GOVERNMENT OF COLOMBIA FOR A PEASANT ENTERPRISE ZONES FOR PEACE PROJECT June 5, 1998 Environmentally and Socially Sustainable Development Sector Management Unit Colombia, Ecuador and Venezuela Country Management Unit Latin America and the Caribbean Region CURRENCY EQUIVALENTS Currency Unit = Peso US$1.00 = 1244.00 Pesos FISCAL YEAR Januarv 1 - December 31 ABBREVIATIONS ANTD ACRONYMS CAS Country Assistance Strategy CEUDES Corporation of Democratic Entities for Development (Corporacion Unidades Democraticas para el Desarrollo, Nongovernmental Organization) CMU Country Management Unit CJAC Coordinating Committee of Communal Action Boards (Comite Coordinadora de las Juntas de Acci6n Comunal) CPA County Presidents' Assembly (Asamblea de Presidentes de Veredas) CIMRC Interministerial Committee for Peasant Enterprise Zones DNP National Department of Planning (Departmento Nacional de Planeaci6n) GOC Government of Colombia IBRD International Bank for Reconstruction and Development ("World Bank") IDB Interamerican Development Bank IICA Interamerican Institute for Agricultural Cooperation INCORA Colombian Land Reform Institute (Instituto Colombiano de la Reforma Agraria) LCSES Latin America and the Caribbean Environmental and Socially Sustainable Development Unit MOE Ministry of Environment MOA Ministry of Agriculture NGO Nongovernmental Organization PEZ Peasant Enterprise Zone (Zona de Reserva Campesina) PLANTE Program for Substitution of Illicit Crops, EDB PMG Project Management Group SA Special Account SINCHI Amazonian Institute for Scientific Investigations SOE Statement of Expenses TG Technical Group (Grupo Tcnico) TOR Terms of Reference Vice President: Shahid Javed Burki, LCRVP Country Director: Andres Solimano, LCC4C Sector Director: Maritta Koch-Weser, LCSES Sector Leader: Jonathan Parker, LCSES Task Team Leader: William Partridge, LCSES Task Manager: Martien van Nieuwkoop, LCSES COLOMBIA PEASANT ENTERPRISE ZONES FOR PEACE PROJECT TABLE OF CONTENTS A. Project Development Objective ...............................................................2 1. Project development objective and key performance indicator ....................................2 B. Strategic Context ...............................................................2 1. Sector-related CAS goal supported by the project .............................................2 2. Main Sector issues and government strategy ....................................................2 3. Sector issues to be addressed by the project and strategic choices .....................3 C. Project Description Summary ........................................................5 1. Project components ....................................................5 2. Key policy and institutional reforms supported by the project ............. .............6 3. Benefits and target population ....................................................6 4. Institutional and implementation arrangements .................................................7 D. Project Rationale ........................................................ 10 1. Project alternatives considered and reasons for rejection ................................. 10 2. Major related projects by the Bank and/or other development agencies .......... 11 3. Lessons learned and reflected in the project design ......................................... 12 4. Indications of borrower commitment and ownership ....................................... 13 5. Value added of Bank support in this project ................................................... 13 E. Summary Project Analyses ................................... 13 1. Economic ................................................... 13 2. Financial ................................................... 13 3. Technical ................................................... 14 4. Institutional ................................................... 14 5. Social ..................... 14 6. Environmental assessment ..................... 14 7. Participatory approach ..................... 14 F. Sustainability and Risks ........................... 15 1. Sustainability ........................... 15 2. Critical risks ........................... 15 3. Possible controversial aspects ........................... 16 G. Main Loan Conditions ........................ 16 1. Effectiveness conditions ................... 16 2. Other ................... 17 H. Readiness for Implementation ........................ 18 I. Compliance with Bank Policies ........................ 18 Annexes Annex la Program Design Summary. l9 Annex lb. Project Design Summary .21 Annex 2. Project Description .24 Annex 3. Estimated Project Costs ............... 25 Annex 4. Procurement and Disbursement Arrangements .26 Table A. Project Costs by Procurement Methods and Prior Review 26 Table B. Thresholds for Procurement Methods and Prior Review .28 Table C. Allocation of Loan Proceeds .29 Annex 5. Project Processing Budget and Schedule .32 Annex 6. Documents in the Project File .33 Annex 7. Statements of Loans and Credits .35 Annex 8. Colombia at a Glance .37 Annex 9. Project Preparation Plan .39 Annex 10. Draft Project Implementation Plan .42 Annex 11. Quality Assurance Plan .45 Annex 12. Environmental Assessment Summary .47 Annex 13. Social Analysis Summary .50 Map. IBRD 29518 .56 Colombia Peasant Enterprise Zones for Peace Project Appraisal Document Latin America and the Caribbean LCC4C LCSES Date: June 5, 1998 _ Country Director: Andres Solimano Task Team Leader: William Partridge Sector Director: Maritta Koch-Weser Task Manager: Martien van Nieuwkoop Project ID: CO-PE-53243 I Sector: Social Development Program Objective Category: Poverty Alleviation Lending Instrument: LUI (Learning & Innovation Loan) Program of Targeted Intervention: [X] Yes [] No Project Financing Data [X] Loan [] Credit [] Guarantee [] Other [Specify] For Loans/Credits/Others: Amount US$ 5 million Proposed termns: [I] Multicurrency [X] Single currency, US$ Grace period (years): 3 [] Standard Variable [X] Fixed [] LIBOR-based Years to maturity: 9 Commitment fee: 0.75% Service charge: 0.0% Financing plan (USSm): 6.6 Source Local Foreign Total Government of Colombia 1.50 1.50 IBRD 4.75 0.25 5.00 Total 6.35 0.25 6.60 Borrower: Ministry of Finance, Government of Colombia Guarantor: Ministry of Finance, Government of Colombia Responsible agency(ies): Office of the President and Interamerican Institute for Agricultural Cooperation EstiP ated disbursements (Bank FYIUS$M): a 1998 1999 2000 2001 Annual 0.5 0.8 1.7 2.0 Cumulative 0.5 1.3 3.0 5.0 IProject implementation period: 3.0 years Expected effectiveness date: 6/01/98 Expected closing date: 12/3 1/01 2 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1): The project develops a replicable methodology for the establishment and operation of a Peasant Enterprise Zone (Zona de Reserva Campesina) for areas of colonization affected by violence and illicit activities and of prototype actions to protect rainforest reserves and nearby indigenous territories. It also achieves a proposal for a national program ready for government consideration. The project will develop the "model" from experience in three cases, one in the department of Caqueta, a second in the department of Guaviare and a third zone to be identified, where local communities, nongovernmental and government organizations have already agreed to initiate Peasant Enterprise Zones. The project will be considered successful when stakeholders in the community agree that they are maintaining their management capabilities, are regularly planning and setting their development priorities, are gaining access to regular support from existing state, NGO and private sector programs, and are enjoying a greater level of security in their lives. It would also be considered a success when authorities and third parties agree that economic, fiscal and environmental issues are being regularly addressed and are prepared to scale the experience up to other regions. Precise baseline objectives and indicators will be included in zone-specific operational manuals acceptable to the Bank. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 17107 CO Date of latest CAS discussion: October 1997 Social development is the first item on Colombia's development agenda. Reduction of poverty and promotion of peace are tvwin objectives of that agenda reflected in the Bank's CAS. Halting deforestation on the agricultural frontier is a major element of the environmental strategy outlined in the CAS. The CAS explicitly calls for new operations that include specific activities to reinforce in a cross-sectoral manner approaches to peace and civil coexistence in Colombia. Yet proven practices for achieving these objectives are not currently available to COG and no national program can be developed without them. The project will develop such practices and contribute to formulation of a broader program for achieving social development. 2. Main sector issues and Government strategy: In the last few decades, millions of people have fled the interior of Colombia to settle on the agricultural frontier of the amazonian and orinocan river basins where they have cleared land for farming (in the Departments of Aurauca, Casanare, Vichada, Meta, Guainia, Guaviare, Caqueta, Vaupes, Putumayo and Amazonas). At the outset, such colonists survive through subsistence cropping, selling timber cleared from their plots and fattening cattle for patrons in small towns that spring up just in back of the frontier. But such small-holder colonization has proven unsListainable. Such colonization is unsustainable for several reasons. Colonists are typically followed by investors seeking to acquire such newly cleared land, to consolidate it into large cattle ranches. Lacking land titles, the colonists are unable to defend their de facto occupancy. The better soils, which in the tropical and subtropical lowlands of Colombia are scarce, are thereby quickly alienated from cropping and devoted to extensive cattle ranching. The colonist also lacks the economic power to attract basic social and economic development services of the state and/or investment by the private sector, making them even more vulnerable to displacement. The result is a "movihg" firontier economy, inexorably replicating poverty and displacing colonists toward further destruction of forest and water resources. In recent years, illicit crops, which initially promised economic gains for colonists, have instead attracted a deadly combination of repressive eradication campaigns and extortionist "protection" rackets operated by anned political factions in frontier regions. Throughout the frontier areas of Colombia, farmers find themselves caught in a cross-fire between armed groups, resulting in millions of people being displaced from their home villages. Statistics indicate that by far the most violent mumicipios in the country are rural; among all rural areas, those on the "moving" frontier are affected most by violence. It is estimated that in Colombia there are over I million persons displaced by armed combatants. Some seek refuge in towns, while others flee to the forest and become colonists. The 1991 constitution establishes the precept that the state is to provide conditions for improving incomes and quality of life for the rural landless poor. Early initiatives in this regard have included the Environment Law (Ley 99 de 1993), which provides for protection of forest reserves and indigenous communities as well as the participation of communities in colonization or agricultural frontier areas in achieving these goals. The Bank has, since mid-1994, been supporting these efforts through the Colombia Natural Resources Management Project (Ln- 3692CL), involving communities in the processes of land title regularization and the establishment of indigenous reserves but with only modest and recent success. The GOC also established in 1994 the policy and legal framework to improve incomes and quality of life of the rural poor in its Agrarian Reform Law (Ley 160 de 1994). Article One of that law establishes its objectives as: promoting peace, social justice and participatory democracy for rural populations; preventing inequitable concentration of lands; helping the landless poor gain access to land through the market and subsidized and direct credit; generating employment and raising living standards of the rural poor; promoting sustainable utilization of land through rational distribution; increasing agricultural productivity and commercialization; promoting strong rural social organization; improving opportunities for rural women, indigenous groups and black communities. The Agrarian Reform Law foresaw two main instruments for achieving these goals, a land-market based redistribution program where land markets exist and the creation of Peasant Enterprise Zones in colonization areas where land markets do not exist. Chapter 13 (Colonization, Peasant Reserves and Development; Colonizaci6nes, Zonas de Reserva Campesinay Desarrollo Empresarial ) of the Agrarian Reform Law explicitly establishes Peasant Enterprise Zones as the principal instrument of the GOC to regularize colonization areas with the aim to achieve: (i) better access of landless poor to land, services and development opportunities; (ii) effective participation of rural communities in planning and implementation of development efforts; and (iii) more rational natural resources management at the agricultural frontier. By doing so, Peasant Enterprise Zones contribute to peace consolidation, reducing incentives for violence and fostering social justice and democratic participation. 3. Sector issues to be addressed by the project and strategic choices: The issue to be addressed in this project is to operationalize the concept of the Peasant Enterprise Zone. Progress in implementing the Peasant Enterprise Zones was initially hampered by the absence of an institutional and regulatory framework stipulating the procedures and norms for executing Chapter 13. In 1996, peasant organizations from the amazonian and orinocan river basins, stimulated by the combination of rural violence and aerial spraying of herbicides on their crops -- both licit and illicit -- mobilized marches on the capital to seek relief. 'the GOC responded by promising prompt implementation of the law to create Peasant Enterprise Zones, issuing Decree 1777 (Decreto No. 1777 de Octubre I de 1996) which established the institutional responsibility and regulatory framework, including the preferential and priority treatment to be given to Peasant Enterprise Zones, necessary for implementing the law in frontier areas affected by violence and illicit activity. The colonists in turn responded by submitting proposals for the creation of several zones in the Departments of Omqviare, Putumayo, Caqueta and Bolivar, two of which were approved by GOC in December 1997 (Caqueta and Guvi.Aarc). 4 Further progress is now slowed by the lack of a replicable model, based on practical experience, for operationalizing the provisions of the law and the decree on the ground. Apart from issuance of land titles, proven methodologies for formulating sustainable development alternatives, securing development investment resources, providing for technical assistance to commercialize production, establishing rational natural resources management systems, and for ensuring the farmers themselves participate directly in the design and implementation of the policy do not as yet exist. Given the political situation and the tradition of centrally-directed development activities, the GOC could have financed a number of Peasant Enterprise Zones focusing largely on land distribution and title regularization through INCORA (indeed, INCORA has identified some 14 possible Peasant Enterprise Zones so far). But the risks associated with this single-focused, top-down approach were recognized. Instead, the borrower has adopted a "learning and innovation" approach to formulating such a model, based on informed participation of the landless poor in three pilot cases in designing solutions to the foregoing problems. The strategy entails learning on the part of GOC institutions by empowering colonists to join in making strategic choices that identify development priorities for the zone, formulate sustainable development plans, secure adequate finance from institutional programs as well as the private sector, and promote local community participation in the implementation, management and evaluation of development outcomes. C: Project Description Summary 1: Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): Component Category Cost. % of Bank- % of Incl. Total finan Bank- Contin- cing finan gencies (US$M) cing (IJS$M) ____ ___ __ A. Project Management. consulting 0.65 10 0.65 100 Under this component a Project Management Unit services, (PMG) will be set-up in IICA, which will be equipment, responsible for overall project coordination, incremental monitoring and administration. The project would operating finance technical assistance, equipment and costs incremental operating costs. Implementation of this component would enable GOC and other stakeholders to systematically learn from the experiences in the various Peasant Enterprise Zones. B. Peasant Enterprise Zone Development, consulting 5.30 80 3.70 70 The component would include: (i) participatory services planning and implementation of land titling efforts, and agricultural production activities and environmental training, protection initiatives; and (ii) local capacity building incremental for community and economic development. In operating addition, a social and evironmental assessment costs, would be carried out in each PEZ. Under this equipment, component, TGs would be established in up to three pilot zones PEZs. The project would finance technical subprojects assistance, training, equipment, incremental operating costs and grants for small pilot zones subprojects' to facilitate "learning-by-doing". Implementation of this component would strengthen local capacity for selfmanagement regarding planning and implementation of income and employment generating opportunities in a sustainable manner. C. Evaluation and Strategic Design of Follow-on consulting 0.65 10 0.65 100 Actions. services Under this component an end-of-project development impact assessment and strategic design study would be carried out. Implementation of this component would enable GOC to apply the concept of peasant enterprise zones on a wider scale based on sound economic, social, and environmental criteria. Total 6.60 100 5.0 75 To be financed on a demand-driven basis, including, among other: (i) soil and pasture improvements; (ii) community forestry; (iii) watershed management and micro-irrigation; (iv) spot improvement of rural roads; (v) marketing; (vi) post-harvest community infrastructure; and (vii) TA for agriculture, livestock and forestry. Detailed sub-project eligibility criteria would be included in zone- specific operational manuals acceptable to the Bank. 6 2. Key policy and institutional reforms supported by the project: The key institutional reform supported by the project is the shift to promoting direct participation of the colonists in establishing and implementing development investment activities in their own communities. Hitherto, such investment in social and economic infrastructure and economic development assistance was centrally directed. The recent decentralization policy of GOC has not been fully implemented. The model being tested in three cases supports local community organizations in strengthening their capacity for accessing technical, financial and manageriall resources provided (on paper) under the agrarian reform legal and policy framework. The project also contributes a crucial test of a mechanism for reducing incentives for conflict and violence, and, thereby, represents a potential element of the peace process in Colombia. 3. Benefits and target population Ultimately the beneficiaries of Peasant Enterprise Zones are landless, low-income peasant families displaced by violence from their places of origin who migrated to the agricultural frontier and colonized forest reserves. The beneficiaries who now lack land titles, are trapped in non-sustainable agricultural practices, threatened by armed combatants engaged in illegal activities and marginalized from the market, government services and development opportunities. Eligible families and communities would be identified by local community-based entities with both legal and defacto responsibility for development programs spanning the participating counties that make up the Peasant Enterprise Zone. An early estimate, to be confirmed, of the benefits accruing to a medium-term program would be up to 250,000 families (between 1.5 and 2 million persons) occupying about 10% of Colombia's cultivable land. In the case of the present project, in 1996 local Coordinating Committees of Community Action Boards (Comitd Coordinador de las Juntas de Acci6n Comunal, CJAC) in the Departments of Caqueta and Guaviare formally petitioned the GOC to create Peasant Enterprise Zones. Throughout 1996, with the assistance of nongovernmental organizations, they each developed agreements among participating communities and formulated proposed Sustainable Development Plans as required by the Law 160. These plans were submitted to Municipal Rural Development Councils which conducted local public hearings involving all stakeholders (local communities, nongovernmental organizations, national institutions). In the Department of Caqueta the proposed plan was approved by the Municipal Rural Development Council on 28 November 1997 and the public hearing was held on 29 November 1997 in the Municipality of San Vicente de Caguan, resulting in INCORA Resolution Number 00055 of 18 December 1997 legally constituting and delimiting the Peasant Enterprise Zone of El Pato y Valle de Balsillas, composed of 88,000 hectares and 1,000 families (6,500 people). In the Department of Guaviare the proposed plan was approved by the Municipal Development Councils and the public hearing was held on 27 September 1997 in the Municipality of San Jos6 de Guaviare, r esulting in INCORA Resolution Number 00054 of 18 December 1997 legally constituting and delimiting the Peasant Enterprise Zone of Guaviare composed of 400,000 ha and 16,000 families (100,000 people). An additional Peasant enterprise zone will be identified and added during the life of the project, bringing to three the number of pilots contributing to the learning process. The immediate benefits of the pilot zones will be the strengthening of local social capital, coordination of efforts to mobilize investment resources, building stronger conflict resolution processes, increased capacity of local organizations to manage human, financial and technical resources and inititation of processes of sustainable production. Over the medium term, the processes of sustainable production should yield improved commercial productivity, management of forests, national parks and indigenous reserves, opportunities for employment of women and youth, and relief from violence associated with insecure tenure, inequality, illicit crops and exclusion from the services of the state. Evidence that the methodology was successful would be the emergence of some of these benefits (details regarding documenting these to be agreed during the project launch workshop). 7 4. Institutional and implementation arrangements: Project Management Pilot Zone Level: The project will be implemented at the pilot zone level by legally constituted Coordinating Committees of Communal Action Boards (CJAC) formed in each zone. A CJAC is composed of members of the Assembly of Communal Action Board Presidents (Asemblea de Presidentes de Juntas de Accion Comw7al de Veredas) elected by the Assembly members and is the executive arm of the Assembly. The Assembly is composed of the Presidents of local Comunal Action Boards (Junta de Acci6n Comunal), which represents the interests of the counties (Veredas) in each PEZ. A CJAC usually covers part of the jurisdiction of a municipality. Since each municipality, by Law, can only have one CJAC, counties could alternatively represent themselves through a Comite de Colonos in those municipalities where a CJAC already exists. The equivalent of the Assembly in this case would be a Grupo de Presidentes de Comites de Colonos. The Coordinating Committee in that case would be composed of elected members of the Presidentes of a Grupo de Comites de Colonos. The CJAC will design and manage proposed activities at the local level, contracting and supervising the delivery of services. works and goods in their PEZ. The CJAC will be supported by a Technical Group (TG) consisting of a technical manager and a financial expert, both financed by the Project and appointed by the PMG, a representative of INCORA and three members appointed from the Assembly of Communal Action Board Presidents. TG specialists will be resident in the project area throughout the project period to work alongside the CJAC in taking investment decisions together with implementation supervision activities, including training CJAC counterparts in accounting, procurement, management and administrative skills. Approval of subprojects in amounts less than US$ 30,000 can be authorized by the TG. Subprojects above this ceiling will be cleared by the PMG. CJACs will contract nongovernmental organizations and the private sector and enter into agreements with public sector institutions for the delivery of services, goods and works needed for the project and subprojects. A pilot zone operations manual will be finalized for each zone within two months of effectiveness. It would cover all of the relationships between the PMG (at IICA) and the concerned CJAC and TG in managing each subproiect, (including respective duties, responsibilities, procedures for administration of funds -- including opening a local operating account -- and implementation of activities within the PEZ. Project Level: The GOC through the Office of the President will contract IICA to manage the implementation of the project. and to administer project funds. IICA will appoint a Project Management Group (PMG) for this purpose which will guide implementation of the project, The PMG will be headed by a Director, Peasant Enterprise Zone Project acceptable to GOC and the Bank. To facilitate coordination with INCORA's land titling efforts in the PEZs, its National Coordinator for PEZs will participate in the PMG as a liasion officer. The PMG will, through the TG working in the field, verify that all decisions of the CJAC are transparent and participatory and support implementation of those decisions by processing necessary documentation to ensure efficient and effective contracting and payment of contracts, in accord with Bank policies concerning procurement and use of consultant services. The PMG will authorize all expenditures proposed by the CJACs greater than US$ 30,000 and through IICA, secure efficient and effective contracting and payments of contracts, in accord with Bank policies concerning procurement and use of consultant services. As part of its obligations, IICA would agree to begin financing of subprojects in a PEZ only after an acceptable project operating manual has been agreed. National Level: To ensure overall coordination of support to Peasant Enterprise Zones from among various national agencies, an Interinstitutional Committee for Peasant Enterprise Zones (Comite Interinstitucionalpara Reservas Campesinas) has been established by the GOC (in 1996). This national committee is composed of the Director General of the National Planning Department, Minister of Agriculture, Minister of Environment, and the Director General of the Colombian Land Reform Institute (INCORA) and is chaired by the General Manager of Plan Sur from the Office of the President. The General Manager of Plan Sur has provided leadership for the design and implementation of the program to date. The Interinstitutional Committee is responsible for the overall coordination of policies related to implementation of the PEZs at the national level. It would meet periodically to assure adequate dissemination of information relevant to further scaling up of the pilot projects. During 8 Technical Discussions (held in Bogota, 1-3 April, 1998), it was agreed that the Interinstitutional Committee would include a representative of each of the PEZs and one representative of the national peasant organizations. Implementation Arrangements The outline of the project operational manual was agreed during Technical Discussions. It will include, inter alia, a description of: (i) administration arrangements and relationships; (ii) financial management arrangements and resource flows (including auditing requirements); (iii) procurement procedures, including a detailed description of division of responsibilities between CJAC, TG and PMG; (iv) a procurement plan; (v) standard TORs for consultants to be hired in the PMG and TGs; (vi) TORs of zone specific EAs and SAs; (vii) sample letters of invitation, procedures for evaluation and sample contracts for consulting services; and (viii) monitoring, evaluation and reporting requirements. Approval of the project operational manual is a condition of Loan Effectiveness. An Indicative Operating Plan is presented in Annex 10. Approval of a Plan outlining the activities to be implemented during the remainder of the calendar year -1998 is a condition of Loan Effectiveness. Thereafter, the PMG would present to the Bank for review and approval draft annual operating plans and budgets not later than November 15 of each year. Approval of zone specific operational manuals acceptable to the Bank would be a condition of disbursement for the financing of subprojects in the PEZs. The manual would include: (i) precise baseline objectives and specific indicators of project implementation and impact; (ii) specification of eligibility, cost sharing, definition of priority areas, duration and evaluation criteria, including environmental clearances, of pilot zones subprojects to be financed under the project; (ii) sample agreement between CJACs, IICA and sponsoring agencies specifying the fimancing, implementation and administration arrangements of pilot zones subprojects. A first year implementation plan and budget would be attached to the zone specific operational manual. Monitoring, evaluation and reporting Monitoring of the project inputs and implementation progress would be the responsibility of IICA, as part of its budget management and reporting system (this system has performed well within other Bank-financed projects). It would report quarterly, based on reports from the pilot areas. Project outputs would be monitored as part of this process, and would be evaluated (with inputs) in bi-annual implementation workshops. To maximize learning on the part of all participants, the PMG will be responsible to carry-out concurrent evaluations of the achievement of results, to provide feedback to the bi-annual implementation workshops. Broad qualitative (efficacy of capacity building, effectiveness of conflict resolution mechanisms, etc.) and quantitative (numbers of inputs, participants, etc.) indicators for the entire project were agreed during Technical Discussions and will be incorporated into a supplementary letter to the Loan Agreement. Zone-specific versions of these indicators will be formulated in launch workshops to be held in the first two months of project effectiveness and incorporated into each pilot zone operations manual. The bi-annual workshops will provide an opportunity to draw conclusions from experience and modify practices as required. The workshops would include members of the PMG staff, CJAC-TG staff, local government and NGO leaders collaborating in the project and will be open to the ,communities benefiting. Monitoring reports by IICA will reflect the findings and conclusions of these workshops. During Technical Discusssions it was agreed that IICA would carry out an ex-post annual physical performance review of subproject implementation, through an independent evaluator. The evaluator would assess, on a sample basis, the success of pilot zones subprojects financed by the project, in terms of the achievement of their specific objectives, and the quality, efficiency, and sustainability of the investments. The physical performance review would provide an indication of the effectiveness of procurement done by CJACs, compliance with and/or needed adjustments to cost indicators, physical/financial indicators and to the formats included in the operational 9 manuals, and the quality of project investments and the profile of distribution of project benefits. The annual physical performance review would be conducted on the basis of TORs agreed with the Bank and included in the Operational Manual. In the third project year, a final evaluation of experience would be undertaken by indepenent consultants. This evaluation would cover the economic, financial/fiscal, social and institutional factors relevant to the use of the methodology as a minimal-risk basis for a follow-on program. During Technical Discussions it was agreed that IICA would maintain a project information and monitoring system, with reports and format agreed with the Bank, throughout the project period. The Bank would receive quarterly progress reports not later than April 30, July 31 and October 31 of each year during Project implementation, commencing October 31, 1998 linking project expenditures to key monitoring indicators of activities carried out during the quarter. In addition, an annual progress report would be presented by January 31 of each year during Project implementation. Procurement Services (US$ 2.5 million): (a) Direct Project management services, costing approximately US$ 600,000, would be negotiated with IICA as a sole source supplier. This is justified on the basis of the continuity of key staff of IICA in the development and implementation of the GOC Peasant Enterprise Zone policy; the unique experience and rapport of these staff with all stakeholders in the process, including those associated with conflict; and IICA's demonstrated abilities in managing on-going IBRD-financed operations. The contract would include the obligation that IICA present audited statements of project accounts to the Bank. (b) Two key contracts for final project evaluation and follow-on strategic design work, approximately US$ 625,000, would be awarded to "firms" (firms, universities, major NGOs, foundations) on the basis of QCBS. In addition, three pilot zone environmental assessments and social assessments, approximately US$ 600,000, would be awarded through QCBS, advertised locally. (c) Individual consultants (approximately 12 years of service) valued at approximately US$510,000, would be employed under annual contracts, subject to continued good performance, initially awarded on the basis of their qualifications. Goods (US$ 250,000) Vehicles, office equipment and communications equipment for the PMG and the pilot zones would be procured in lots under US$ 35,000 each, owning to the different phasing of the needs, through national shopping. Pilot Zone Sub-projects (US$2.1 million) Management of each pilot zone would award cost sharing transfers to groups and/or individuals (sponsors) of about US$ 30,000 on average, not to exceed US$ 50,000 each, to share in the cost of social, economic and environmental protection initiatives relevant to the development of the Peasant Enterprise Zone. Conditions relating to eligibility, cost sharing, definition of priority areas, duration, and evaluation criteria would be defined in a zone-specific operating manual to be agreed during a project launch workshop. Procurement of goods and small works with the use of these funds would be on the basis of local shopping, and services on the basis of "consultants qualifications". Small amounts of sole source procurement may be allowed when options for shopping do not exist. Disbursements Disbursements will be made based oni documentation and SOEs. Once the the system and reporting arrangements have been finalized and agreed, the Bank will assess the situation, and if found satisfactory, disbursements will be made on the basis of quarterly cash projections linked to expected project activities during such period. Financial 10 controls at IICA and the CJAC, assisted by PMG and TG, respectively, shall provide assurances of appropriate and transparent use of resources. Support documentation of eligible expenditures shall be kept at the CJAC for community level expenditures (not exceeding US$ 30,000 per contract) and at IICA for the remainder of expenditures. In the event financial management arrangements acceptable to the Bank (following LACI requirements) are not yet fully in place by loan effectiveness, reimbursement of expenditures paid out of the advance to IICA shall be made initially on the basis of SOEs, following Bank standard disbursement procedures. Financial Reporting and Auditing IICA will prepare quarterly financial progress reports linking project expenditures to key monitoring indicators of activities carried out during the quarter. This reporting arrangement shall foster effective and efficient project management achieving full integration of the technical and financial functions in the project. The timeliness of quarterly reporting, assured due to its linkages to disbursements, also ensure the timely engagement and performance of the yearly audits. Project audits will be contracted for the length of the project with a private auditing firrn acceptable to the Bank. D: Project Rationale 1. Project alternatives considered and reasons for rejection: The proposed project builds upon social capital which already exists, as evidenced in locally generated proposals for the creation of a Peasant Enterprise Zone. Government-directed colonization efforts have historically failed in Colombia and elsewhere because they were designed and driven by centralized agencies and outside "experts" with scant knowledge of local conditions and little accountability to poor communities. In contrast, the Peasant Enterprise Zone is created by the rural poor who, with the technical, legal and financial assistance of nongovernmental and governmental institutions, identify, design and implement all development activities in their own communities. Participation of stakeholders is the bedrock upon which the project is based. But it goes beyond mere local consent to centrally-driven initiatives. The Peasant Enterprise Zone Project design empowers participants, through their elected leaders, to take investment decisions, manage project resources, supervised project activities, and, most importantly, to be accountable for and owners of their project's outcomes. Alternative approaches such as sectoral support to achieving the project objectives, for example, fostering land tenure security or agricultural technical assistance, are deemed insufficient by themselves to achieve the objectives. Such narrow sectoral approaches fall short of the challenge of building social capital, reducing local social constraints stemming from conflict among stakeholders, and establishing the local ownership needed to achieve social sustainability. The model for the present project provides a strategy wherein local community organizations address the complex and interrelated issues they face on the agricultural frontier, and determine for themselves which elements will be integrated into their Peasant Enterprise Zone. The model, therefore, tests the proposition that concerted government support of local community initiatives to reduce conflict through land tenure security, local management of natural resources and local administration of development investments will remove incentives for conflict and support peaceful co-existence. 11 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Sector issue Project Latest Supervision (Form 590) Ratings (Bank-financed projects only) Implementation Development Objective Progress (IP) (DO) Bank-financed Poverty Reduction and Peace Colombia: Magdalena in preparation n/a Medio Rural Poverty Reduction Colombia: Land Reform in preparation n/a/ Natural Resources Colombia: Natural. S S Resources Mgt. (3692) Agricultural Research and Colombia: PRONATA S S Extension (3871) Post-conflict Reconstruction Rwanda, Angola in preparation n/a Rural Infrastructure 2nd Rural Roads (3157) ICR S Other development agencies Interamnerican Development PLANTE: Crop n/a n/a Bank Substitution Interamerican Development Social Solidarity n/a n/a Bank Network (poverty) Interamerican Development Peace, Coexisttence and n/a n/a Bank Security Interamerican Development Program of n/a n/a Bank Microenterprises IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) A variety of existing programs and services would be available to the local community CJAC if they could access them. The Ministry of Agriculture's programs supporting microenterprises and employment generation can be channeled to the Peasant Enterprise Zones. Nongovernmental organizations, such as the Corporation of Democratic Entities for Development (CEUDES), Center for Investigation of Sustainable Agricultural Production Systems (CIPAV) and the Habitat Group of the University of Valle (CITCE) are ready and willing to provide technical support services such as design and implementation of an agroecological zoning and development plan, design and implementation of sustainable agricultural production systems and design and implementation of needed infrastructure such as farm roads, electrification, communications and water and sewerage systems. GOC programs such as PLANTE supporting infrastructure construction, subsidized credit for land purchase and technical assistance, the Department of National Parks of the Ministry of Environment program for the creation of buffer zones, the Municipal Governments Unit of Technical Assistance in San Vicente Caguan and San Jose de Guaviare are each ready and willing to provide support to the Peasant Enterprise Zones. The land titling services of GOC through INCORA are presently being made available in support of the creation of these zones, and this support will be ongoing until all such work is completed (INCORA's team in El Pato-Balsillas has completed 60% of titling, and some 300 titles have been issued in the first four months of 1998 in Guaviare). Finally, private sector entrepreneurs and the CJAC can enter into contractual agreements to enhance product quality and to introduce new products and technologies tailored to market requirements both domestic and international A key indicator of success of a pilot zone will be the growing capacity of local community-based organizations to effectively draw in these existing external resources (human, technical and financial). The PMG will guide and assist the CJAC, through its field-based TG, in building capacity to access cofinancing resources, technical assistance and business agreements drawn from the menu of existing projects and programs that can be brought 12 into the Peasant Enterprise Zone. Project resources will be concentrated in building local capacity to manage, finance and supervise the provision of these services, goods and works. 3. Lessons learned cad reflected in the project design: Pilot studies carried out over 1996-1997 in preparation of the Land Reform Project, based on provision of subsidies for land purchase and technical assistance in formnulating farming plans to secure investment credit, have demonstrated, among other things, that the program works best when clusters of self-selected landless poor acquire a block of contiguous farms. Such clusters may or may not be formed by pre-existing social groups with sufficient social capital to expend in self-governance, mutual development assistance, conflict resolution and other group dynamics which facilitate access to needed infrastructure, equipment, social services, technical assistance and commercial contracts (transport, processing, etc.). The Peasant Enterprise Zone approach is strengthened by these findings precisely because these zones originate in cohesive communities with strong social capital, families which already occupy contiguous farms and already cooperate in their mutual development. The people of the two already identified pilot zones have established effective leadership structures based on a democratic process, as evidenced in their capacity to formulate formal proposals to local, departmental and national governments to create Peasant Enterprise Zones, to work with nongovernrmental organizations in formulating broad sustainable development plans and priorities and to successfully negotiate legal creation and delimitation of their Peasant Enterprise Zone. The Bank also learned through its earlier support of colonization projects in the Department of Caqueta (Colombia ('aqueta Land Colonization Project, Ln. 7390, ICR June 1978; Colombia Caqueta rural Settlement Project, Ln 1118, ICR December 1984). These projects were intended to organize the colonization process, but resulted instead in intensified deforestation, little attention to soils or farming constraints, no attention to indigenous neighbors, and lack of awareness of conflict and illicit cropping. The present project shows the important methodological lessons learned, by the shift from promoting colonization to consolidating and making secure alreaidy functioning colonist communities, from centralized planning and control to local participation to establish priorities and manage interventions, from forest clearing to creating more sustainable production systems and management of remaining natural resources. Finally, the lessons of Bank support for development in situations of conflict (e.g. Palestine, Rwanda, Cambodia, Afghanistan, Bosnia) indicate the importance of flexible procedures for taking decisions, delegating authority to field-level officials to design investments, and partnerships with other international agencies (see the Board Report R97- 14, 4 Frameworkfor World Bank Involvement in Situations of Conflict, January 30, 1997). The proposed project is designed to decentralize operational decisions to field-level officials in partnership with the IIAC (an institution of the Organization of America States). The project fits precisely the Colombian context reflected in the following quotation from the paper: "The Bank's relationship is with the government of a member state. As noted previously, it will not interfer in the domestic political affairs of a member. But, it should take steps to ensure that its project interventions and conditions do no harmr...for example, that they do not aggravate existing inequities. Moreover, when requested to do so by a member, the Bank should consider supporting government attempts to promote activities which ameliorate conditions which may lead to conflict, through attention to distributive policies; policies and regulations that affect access Ito resources (credit, land) and opportunities (education, employment); and participation of excluded groups, etc." (A FFrameworkfor World Bank Involvement in Situations of Conflict, page 20, paragraph 43). 13 4. Indications of borrower commitment and ownership: The legal framework for Peasant Enterprise Zones commits the government to find ways to implement this concept in an effort to promote peace in the countryside. Local, departmental and national government participation in public hearings, at which specific sustainable development plans for the zones were approved and recorded, is strong evidence of commitment. -GOC actions in late 1997 in response to decisions affirmed at said public hearings to create the first two such zones in the country, the Peasant Enterprise Zone of El Pato and Valle de Balsillas in Caqueta and the Peasant Enterprise Zone of Guaviare in Guaviare, is strong evidence of borrower ownership. In addition, INCORA has a plan for the development of 14 additional zones, but is awaiting signs of success in the methodology before proceeding. 5. Value added of Bank support in this project: Efforts at reform, in this instance, land reform, in a politically volatile environment in which levels of trust are low and policymakers respond unsystematically to emergent demands are usually unsustainable (World Development Report 1997). This has been the case historically in Colombia. The Bank's support to GOC to develop a model for operationalizing its reform strategy is important to creating a consistent and coherent approach which systematically builds on social capital, is responsive to initiatives taken by strong community- based organizations and demonstrates the efficacy of locally initiated, designed and managed development investments. The economic and sectoral objectives supported by the Bank are normally detailed rather precisely in the Country Assistance Strategy (CAS) and lending and nonlending operational documentation. The uncertainties inherent in conflict situations require a more flexible approach, as it is not possible, a priori, to define an complete overall strategy or its component elements. What is needed in conflict situations is a pragmatic "opportunistic" approach, learning by doing, in a situation where adopting rigid criteria at the outset is unfeasible (Board Report R97-14, A Framework for World BankInvolvement in Situations of Conflict, January 30, 1997). This flexible, learning approach is now provided by the Bank "learning and innovation loan" instrument which is proposed to support the present project. Bank experience with rural development and land reform in Colombia has deepened in recent years, which provides knowledge to firmly support operationalization of the government's land reform strategy. The Bank's ability to help government to articulate and pursue this approach brings strong value added obtained through experience with the Colombia Natural Resources Management Project, the Colombia PRONATA program, and the three projects under preparation: Magdalena Medio, Land Reform and Peasant Enterprise Zones. E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) I. Economic analysis: [X] Cost Effectiveness Analysis: As this applies to evaluating the methodology, it will be determined as part of the End-of-Project Impact Assessment. 2. Financial analysis: As for "economic analysis". Fiscal impact: As for "economic analysis". 14 3. Technical: Concerning strengthening of social capitai, experience exists which will be used in the project. The Resident Mission in Bogota might be strengthened by the addition of a social development specialist who will bring this kind of experience to bear on the project. Technical feasibility of subprojects will be analyzed as part of the decision-making process by the CJAC-TG. 4. Institutional: Executing agencies: At the pilot zone level, there is clear evidence of willingness to learn and develop, and the capacity to do so. Project management: IICA has a proven record of managing and guiding operations of this type. 5. Social Diagnostic level social analysis has been completed as part of project preparation (see Annex 13). Specifically, a diagnosis of living conditions as well as communal organizations and present productive system in the two first pilots, have been carried out through a one-year, participatory exercise among peasants and NGOs. The main socioeconomic constraints to rural development have been analyzed The participatory exercise has also defined some of the constitutive elements of the people's perception of existing social capital, including local knowledge, communitv organization, self initiative, social cohesion and the determination to improve living conditions and obtain stability and peace. In each pilot zone, more detailed social assessment will be performed during the first months o. project implementation, which will provide the baseline socioeconomic database, guidance criteria for the selection of subprojects (e.g. benefit streams for women, youth), organization of production in subprojects, participation mechanisms and institutional arrangements, and selection of performance indicators and monitoring and evaluation procedures. 6. Environmental assessment. Environmental Category [X] B Diagnostic level environmental analysis has been conducted as part of project preparation (see Annex 14) which identifies environmental issues and opportunities. A major environmental opportunity is testing a model for slowing the advance of the agricultural frontier into amazonian forest reserves. Environmental assessments will be conducted for each of the Peasant Enterprise Zones, which will establish overall environmental management plans for each zone as well as the requirements for subproject-specific EAs in satisfaction of good practice and Colombia.'s regulatory requirements. Terms of reference for the EAs to be conducted in the Peasant Enterprise Zones will be included in the project operating manual. 7. Participatory approach [key stakeholders, how involved, and what they have influenced; ifparticipatory approach not used, describe Why not applicable]: a. Primary Beneficiaries The primary beneficiaries of the establishment and development of the Peasant Enterprise Zones will be low incomne rural families currently living on public lands affected by colonization, violence, illegal crops. The activities to be supported by the Bank in this operation are prepared by beneficiaries themselves with technical assistance from the project. Their proposals clearly go beyond consultation regarding people's views, toward shared decision-making, management, and control of the projects, a concept beneficiaries call "co-govemance". Local community-based organizations initiated the process culminating in the legal creation of the first two Peasant E,nterprise Zones on September/December 1997. Public hearings were held in the municipal capitals concerned, where stakeholders participated in endorsing the community's proposal. The agreement was signed by the CJAC and the twenty one Presidents of Community Action Councils, the Ministry of Environment, the Ministry of Agriculture, INCORA, the NGO Corporacion Unidades Democraticas para el Desarollo (CEUDES), 15 CORPOAMAZONIA and the Corporacion Autonoma Regional del Alto Magdalena (CAM) (see records in annex 13). The same local-community-based organizations will design, implement and evaluate the activities sponsored by the project in their zones. b. Other Stakeholders: Local church, local government at the municipal and departmental levels as well as business associations representing land owners and cattle ranchers are social actors whose interests and own agendas coincide with those of the Peasant Enterprise Zones. Armed groups currently present in nearby areas as well as the National Arny are social actors to be informed, consulted and taken into account during project implementation. Initial social analysis confirms that these actors have been involved over several years in the public debate surrounding the Agrarian Reform Law-and, specifically, the two pilot Peasant Enterprise Zones. Some of the armned groups have been directly or indirectly consulted by local actors and they have allowed the process to go forward. During implementation, the social assessment will analyze the stakes of all local actors and identify means to enhance communication and reduce conflict and incentives for violence. F: Sustainability and Risks 1. Sustainability: A key premise of the project design is that land tenure security coupled with sustainable development investments that are identified, designed and implemented by local community-based organizations will ensure sustainability. This is presumed to be so because the Bank is joining an ongoing, grassroots-driven development initiative which by its nature promises a greater probability of sustainability because it is grounded in local initiative, experience and aspiration. Assessing the sustainability of the methodology developed through the project will be a key element of the End-of-Project Evaluation prior to any decision to scale up. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): The project is inherently risky, for although it represents a small outlay of funds, it directly addresses key dimensions of social and politicial turmoil in Colombia. It is the government's intention to foster, through Peasant Enterprise Zones, local and regional dialogue among actors in conflict to prepare the terrain for peaceful development in the next administration. The government proposes to do so, not by increasing military occupancy nor heightening the presence of the state in colonization zones, but by creating conditions for peace to emerge by building social capital, economic opportunity and commitment to peace at the local level. A key aspect of the Bank's work in countries where conflict is significant is the absence of effectively functioning goverment institutions in parts of the country. In such conditions, the Bank seeks to minimize risk by ensuring there is an effective.counterpart organization or agency with which to work (which may be something less than a full central governmental presence in the area; see Board Report R97-14, A Frameworkfor WorldBank Involvement in Situations of Conflict, January 30, 1997). In the present case, the project is designed to work through the few national governmental institutions which have had field presence in the Peasant Enterprise Zones for the last two years (INCORA, Department of Parks, Plan Sur), department and municipal governments which are fully operational in the regions, and nongovernmental organizations which have had permanent teams in the zones for the last two years. The project will also operate in partnership with IICA, an institution of the Organization of American States with 40 years of experience in Colombia. Yet the risk of violence remains, which concerns both beneficiaries as well as participating government officials and Bank staff responsible for supervision. To manage this key risk, assurances will be obtained from the GOC, based on agreements with the parties in conflict at the local level and the CJAC, for the security of each zone and officials involved. Through a process of low-key, informal but systematic dissemination of information and consultation with the parties, it is expected that such risks can be minimized. As regards security of Bank staff, clearance from United Nations officials charged with security for missions of multilateral institutions in Colombia will be obtained, and specific assurances will be obtained from the GOC with regard to the security of each 16 mission visiting the field. The Country Director and Resident Representative of the Bank in Bogota will, based on the foregoing, clear all field activities of Bank staff. Specific arrangements for ensuring security of Bank staff will be agreed at negotiations. Risk Risk Ratin Risk Minimization Measure Annex 1, cell "from Outputs to Objective" Commitment to learn under uncertain S Continuous presence of credible advice and support and possibly adverse conditions from a reputable implementation agency Responsiveness of service providers to S Proactive dissemination of results and issues to demands from the pilot communities Interministerial Committee Annex 1, cell "from Components to Outputs" Local stability permnitting work to S Bank's willingness to adjust the rate of support, but proceed not to abandon it in the face of instability Agro-ecological conditions permit M Environmental, social, economic and technical commercialization of certain crops analyses of specific production subprojects carried out prior to investment decision Overall Risk Rating S Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: Under normal circumstances, participatory community development is not controversial. However, the project itself is addressing politically sensitive aspects of Colombian life: violence, national dialogue on equity and justice, links to illicit activity. Such associations and resultant visibility make it controversial, domestically and internationally. G: Main Loan Conditions 1. Effectiveness Condition: * Borrower signs a legal agreement with the Interamerican Institute for Agricultural Cooperation to manage implementation of the project including the administration of funds and the monitoring and reporting system. * Approval of an indicative Annual Operating Plan for the remaining of the calendar year 1998 by the Bank. * Approval of the operational manual of the project, which would include: (i) procurement procedures, including a detailed clescription of division of responsibilities between CJAG, TG and PMG; (ii) a procurement plan; (iii) standard terms of reference for consultants to be hired in the PMG and TGs; (iv) terms of reference of zone specific EAs and SAs; (v) sample letters of invitation, procedures for evaluation and sample contracts for consulting services; (vi) terms of reference for auditors; and (vii) plan of accounts. 17 2. Other [classify according to covenant types used in the Legal Agreements.J: * Draft Annual Operating Plans and budgets would be made available to the Bank for review and approval by November 15 of each year; the Bank would receive a copy of the final plan and budget as soon as they are approved. A project information and monitoring system, with reports and format agreed with the Bank, would be maintained by IICA throughout the project period. The Bank would receive quarterly progress reports not later than April 30, July 31 and October 31 of each year during Project implementation, commencing October 31, 1998 linking project expenditures to key monitoring indicators of activities carried out during the quarter. In addition, an annual progress report would be presented by January 31 of each year during Project implementation. (i) Project accounts would be established, maintained, and audited annually in accordance witlh appropriate auditing principles and by independent auditors acceptable to the Bank; (ii) with respect to withdrawals on the basis of SOEs, that such audits would contain a separate opinion as to whether the SOEs, together with the procedures involved in their preparation, support the related withdrawals; and (iii) certified copies of audited accounts and of the auditor's report would be submitted to the Bank within four months of the close of each project fiscal year. Disbursement Conditions Pilot Zones Subprojects: Approval of zone specific operational manuals acceptable to the Bank, which would include: (i) precise baseline objectives and specific indicators of project implementation and impact; (ii) specification of eligibility, cost sharing, definition of priority areas, duration and evaluation criteria, including environmental clearances, of pilot zones subprojects to be financed under the project; (ii) sample agreement between CJACs, IICA and sponsoring agencies specifying the financing, implementation and administration arrangements of pilot zones subprojects. A first year implementation plan and budget would be attached to the zone specific operational manual. Agreements reached during Appraisal/Technical Discussions * It was confirmed that IICA would be selected as sole source supplier for Project Management based on similar procedures under which UNDP operates in Colombia. - The Colombian delegation informed that the selection of the Secretary General of the Presidency as exectuting agency of the Project through IICA was under review by the Ministry of Finance and Public Credit. - It was confirmed that legally established CJACs will design and manage proposed activities at the local level; be responsible for contracting and supervising the delivery of services, works and goods in their Peasant Enterprise Zone and that, with the assistance of PMG/TGs, project funds would be made directly available to them for this purpose. * It was confirmed that representatives of local and national campesino organizations would be allowed to participate in the Interinstitutional Committee for Peasant Enterprise Zones. * It was confirmned that the Junta Directiva of INCORA would formally allocate resources for land titling activities in the Peasant Enterprise Zones of Caqueta and Guaviare. INCORA's respective Regional Offices include these activities in their formal work programs. * Specific arrangements were agreed concerning monitoring, evaluation and reporting which allow for the active participation of local stakeholders. * It was aegreed that IICA, if applicable, would use Bank standard bidding documents for LIB procurement and standard bidding documents acceptable to the Bank for National Competitive Bidding. 18 H. Readiness for Implementation [ The engineering design documents for the first year's activities are complete and ready for the start of project implementation. IX Not applicable. [] The procurement documents for the first year's activities are complete and ready for the start of project implementation. INX Not applicable. [X] The draft Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. 0 The following items are lacking and are discussed under loan conditions (Section G): [X] Not applicable. I. Compliance with Bank Policies [X3 This project complies with all applicable Bank policies. Andrsol Martien van ieuwkoop, Task Manager 19 Annex la Program Design Summary Colombia: Peasant Enterprise Zones for Peace Summary Performance Indicators Monitoring and Assumptions and Risks Evaluation CAS Objective: Rural Social Development improved, Violence and (as agreed through Poverty reduced and consultations) Environmentally Sound Use and Management of Natural Resources achieved Program Development Objective: Land Reform in colonized "End-of-program" impact INCORA, DNP, with Positive economic growth areas and Stabilized Rural indicators of income, equity, support of third-party persists Communities sustainability and social evaluations of impact stability (e.g. new areas Policy favors economic proposed by additional equality colonist organizations) Political stability remains Stabilized and Rationalized "End-of-program" Natural Resources indicators of sustainable Management and Use environmental use (e.g. reduced tree cutting and encroachment in indigenous and forest reserves) 20 Outputs and Accountabilities: Conduct a Peasant Program objectives in terms INCORA, DNP, IICA in Agreement among Enterprise Zone Program: of income, social stability, conjunction with third-party stakeholders on the peace as a sequence of environmental stability and evaluations and stakeholder objective holds community-based economic quality of life, expressed assessments and social develop;ment over a 1 0-year time frame Agreement among projects and environmental (as in an APL) public/private resource uses and resource management is maintained projects Projects in sequence Evidence of key trigger triggered in early stages by indicators ("leading indicators of national indicators") receive ongoing management capacity, monitoring to permit timely supported by indicators of engagement of subsequent local implementation phases readiness, and at later stages by impact indicators of first projects Inputs: Individual geographically Development indicators of INCORA, supported by Availability of demonstrated defined projects (up to 8 each project to reflect DNP, IICA and third-party community-based over 10 years), each specific situations, within sources of evaluation development and including, according to the context of program goals, pacification model(s) needs of the specific zone, are formnulated in the local Systems within projects to investments in the areas of: communities with facilitate "within project Availability of technically - agricultural development participation of beneficiaries adjustments" to lessons sound and community- and marketing; learned tested environmental - community and social Resource use combining protection and resource development; those of: management practice(s) - rural infrastructure; - available government - institutional development programs; Agreement between (local in earlier projects, - NGO contributions and stakeholders on a national then national) services; program/strategy for rural - municipal and community enterprise zones resource generation; - bilateral and other donor programs; - new financing (IBRD) 21 Annex lb Project Design Summary Colombia: Peasant Enterprise Zones for Peace Narrative Summary Key Performance Monitoring and Critical Assumptions Indicators Evaluation CAS Objectives, Program . Goals and Outputs/Inputs (see Annex I a above) Project Development (objectives to CAS goal) Objectives Produce a replicable model Peasant enterprise zone An "End-of-Project" Stakeholders commitment to for Peasant enterprise zone model and prototype Evaluation will be continuing peaceful managemnet, for application environmental actions completed by an negotiation holds in "colonization areas" and judged successful by independent third party of prototype actions to stakeholders, based on Social capital is channeled protect rainforest reserves indications of economic, into peaceful activities and nearby indigenous fiscal, social, institutional, territories technical soundness. Produce an Agreed National Proposals to extend model A Strategic Design Study Program for Peasant and prototype actions to will be completed, based on Enterprise Zones new regions are received results of the independent evaluation, to formulate a national program 22 Project Outputs: (outputs to objectives) Up to three pilot cases Economic Parameters: Quarterly Progress Reports Commitment to learn under demonstrating the design (quantitative levels to be verified by supervision uncertain and possibly and initial management of agreed with communities) missions and discussed with adverse conditions is sustainable actions covering - 5000 families in zone CJAC which takes maintained - land, environment and receive titles and titles corrective actions; agricultural development registered; Responsiveness of service - economic and social - agreement reached on "End-of-Project" providers to new demands service delivery via NRM plan based on results Evaluations are prepared for from pilot communities is community-led process of EA; each pilot in collaboration timely and adequate. - complementary analyses - 80 subprojects with beneficiaries. and program design studies implemented benefiting approx. 2,000 families Social Parameters: - conflict resolution mechanisms are used; - consensus reached on priorization of subprojects based on results of SA - local capacity established for subproject identification, preparation and implementation 23 Project Components Project Inputs Monitoring and Critical Assumptions Evaluation (components to outputs) 1. Project Management. Consulting services, Performance status will be Local stability permits work Establishment of a Project goods and equipment and reviewed in implementation to proceed. Management Unit (PMG) in incremental operating costs workshops twice yearly, and IICA, which will be as specified in procurement adjustments made to responsible for overall plan enhance performance. project coordination, monitoring and administration. 2. In each pilot case, actions Short and long term to be supported in the consultant services, following areas: engagement of specialist NGOs and private sector - learning and development: advisers; training, goods, each pilot zone will have a operating costs and grants Technical Group (TG) to for pilot zones subprojects. support the CJAC in the design, implementation and - CJACs obtain legal evaluation of development status investments. - Interinst. Committee fully operational - land, environment and - TGs functioning pro- agriculture, including,but actively not limited to social, - Establishment of environmental and baseline indicators indigenous peoples concerning conflict, assessments; identification social capital and and management of buffer poverty zones; land use in sensitive and indigenous peoples areas; technical assistance for agricultural production and marketing - community capacity and social capital development, including but not limited to formalization of community leadership and administration; peaceful conflict resolution mechanisms; self- monitoring and evaluation of own performance; strengthening of sub- community groupings, including indigenous peoples, women's groups, youth, etc. - economic and social services, including identification, prioritization 24 Annex 2 COLOMBIA PEASANT ENTERPRISE ZONES FOR PEACE Project Description Project Component 1 - US$ 0.65 million: Project Management. (total cost of component) Support includes incremental costs of a Project Management Unit (PMG) to be created in IICA, consisting of a Project Manager, an Assistant Project Manager and an Administrator. TOR have been agreed with the Bank for the PMG. In addition, a series of technical advisors will be hired for short-term assignments in the field as well as to support the concurrent monitoring and reporting functions of the PMG. TOR will be reviewed by the Bank as needed for no objection. The project will also finance the incremental equipment needs for the PMG function, including a portable computer, laptop computer and accounting software. Project Component 2 - US$ 5.30 million: Peasant Enterprise Zone Development. (total cost of component) A. Learning and Development. Each pilot zone will have a Technical Group (TG) to support the CJAC in the design, implementation and evaluation of development investments. The TG will be composed of a Facilitator and an Administrator supported by the project and an official designated by INCORA who will be resident in the zone. The project will finance equipment for the TG office in the field, including a vehicle, laptop computer,, telephone, fax, photocopier, etc. The TG will have major responsibility for management of project investments, including capacity building, design studies, contracts management and generation of primary data for the monitoring and evaluation system, as well as building the capacity of the CJAC to carry out these functions. B. Land, Agriculture and Environment. Regional environmental assessments for each pilot zone will be contractedl by the project to develop an overall environmental management approach. Proposed subproject alternatives will each require a further environmental analysis to satisfy relevant regulatory requirements, if any, as part of the design/planning studies undertaken by the CJAC-TG. Issuance of land titles and their recording in the land registry is the responsibility of INCORA, utilizing counterpart funds (US$ 1.5 million). The Bank project will finance environmental analyses, resources assessments, adaptive research, extension services, soil/water waste management planning, marketing and commercialization analyses and small productive investments. C. Community and Economic Development. A social assessment of the various stakeholder groups comprising the Peasant Enterprise Zone will be conducted down to the county (vereda) level to ensure suitable inclusion of all groups, acceptable mechanisms for their participation, program designs tailored to their social needs and capabilities and a socioeconomic baseline against which progress can be measured. Based in this assessment, community capacity building programs will be formulated that are expected to focus upon rural finance, cooperative promotion, negotiations and conflict resolution, micro-enterprise development as well as special focus initiatives to address the needs of women, youth and indigenous peoples. Project Component 3 - US$ 0.65 million: Monitoring and Evaluation, Strategic Design Study.total cost of component) Independent contractors will carryout an end-of-project Development Impact Assessment and a Strategic Design Study for the follow-on stage. While the project management monitoring and reporting function will focus mainly upon performance indicators, the impact assessment will focus upon results on the ground as measured by outcome indicators. The latter may include indicators such as accumulation of assets, rising social cohesion, initiation of credit relationships with suppliers, purchase agreements with private sector buyers, etc. as measured against the baseline. The strategic design study will analyze results of the evaluation, and carry out analysis of economic effectiveness, financial analysis and an analysis of the social, institutional, political and environmental constraints and incentives to scaling up. 25 Annex 3 COLOMBIA PEASANT ENTERPRISE ZONES FOR PEACE Estimated Project Costs (US$ 000) Component 1. Project Management Personnel 575 Administration 75 Subtotal 650 2. Development of Peasant Enterprise Zones Leaming and Development Structure 800 Land, Environment and Agricultural Development 1200 Community and Economic Development 1700 Subtotal 3,700 3. Monitoring and Evaluation Concurrent 50 Impact Assessment and Strategic Design of Follow-on Subproject 600 Subtotal 650 Total Baseline Costs* .............. 5,000 * contingencies included in unit costs 26 Annex 4 Colombia: Peasant Enterprise Zones for Peace Procurement and Disbursement Arrangements Procurement Table A summarizes the project elements, with cost estimates, and proposed procurements methods. All procurement under the project will be carried out in accordance with Bank guidelines dated January 1995 and revised in January and August 1996. Table A: Project Costs by Procurement Arrangements (in US$ 000s equivalent) Expenditure Category | Procurement Method ICB NCB Other N.B.F Total 1. Consulting Services and 2,5002 2,500 Training (2,500) (2,500) 2. Goods and Equipment 2503 250 (250) (250) 3. Cost Sharing Transfers for 2,100 2,100 Subprojects (2,100) (2,100) 4. Incremental Operating Costs _ 2505 250 (150) (150) 5. Land Account 1,5006 1,500 (1,500) (1,500) Total 5,100 1,500 6,600 (5,000) (5,000) Note: N.B.F. = Not Bank-financed. Figures in parenthesis are the amounts to be financed by the Bank loan Total Cost including contingencies Consultant services (of which, firms contracts for US$1,225,000 through QCBS; US$150,000 through CQ; US$600,000 through sole source and individual contracts for US$525,000 3 Local shopping 4 Awarded to subregional sponsors following conditions agreed in zone-specific operational manuals, which specify local shopping or direct contracting Local shopping 6 Land purchase and titling costs by INCORA 27 The Bank would finance: (i) consulting services and training; (ii) goods and equipment for the PMG and TGs; (iii) grants for pilot zones subprojects consisting of works, goods and equipment, technical assistance, and agricultural inputs, and (iv) non-salary incremental operating costs. Consulting Services and Training. The services consist of: (i) consulting assignments for individuals working in the PMG and TGs for, inter alia, project planning, implementation, monitoring, and evaluation; and (ii) technical assistance and studies by eligible executing agencies (firms, NGOs) under contracts specifying concrete outputs, inter alia for the implementation of environmental assessments, social assessments, and end-of- project evaluation and strategic design studies. Training consists of workshops, study tours, and courses, including the cost of the trainers' and trainees fees, rental of training facilities, per diem of trainees or scholarships, and materials required for the training activities. Consulting services and training would be procured in accordance with the 1997 Bank Guidelines for the Use of Consultants. Goods and equipment. On behalf of the Office of the President, IICA would purchase vehicles, computers and office equipment for an amount of US$250,000 equivalent. Procurement of goods and equipment in contracts not exceeding US$35,000 per contract would be done through national shopping. Contracts for goods and equipment exceeding US$ 35,000 would be procured through national competitive bidding. Subprojects. Procurement for subprojects would be done by the CJACs with support from the TGs and in accordance with the guidelines specified in the zone-specific operational manual. Financing of subprojects would be limited to US$50,000 per subproject. All works financed under subprojects would be procured under lump sum, fixed price dontracts awarded on the basis of quotations from at least three qualified contractors in response to a written invitation. Similarly, goods, equipment, and agricultural inputs needed for the implementation and operation of the investment would be procured through national shopping. Due to the small size and isolated nature of sub-projects national shopping procedures may not be feasible in many cases. Therefore, for sub- projects below US$30,000 procurement of goods, works and services for subprojects would be done through a system of direct contracting, up to an aggregate amount of US$ 2,000,000. 28 Table B summarizes the Thresholds for Procurement Methods and Prior Review. Prior review arrangements have been minimized in favor of post-review efforts which would be incorporated in the project auditing arrangements. The Bank would conduct a prior review of: (i) contracts of goods and equipment exceeding US$ 35,000 each; (ii) consultant selection documentation (terms of reference, shortlists, selection, draft contract, etc.) for services with an estimated contract amount of US$ 100,000 or more for firms and US$50,000 or more for indiividuals; (iii) terns of reference for all consulting services contracts; and (iv) all consultants contracts based on a single source or of a critical nature. The Bank would carry out a post-review of procurement by sponsoring agencies and CJACs on a sample basis during supervision. IICA would recruit auditors who would not only examine financial implementation but also procurement procedures and physical implementation in the field. These auditors would carry-out annual audits on the basis of a sample not lower than 50% of the Bank- financed investments in the first two project years and 40% in the remaining year. Table B: Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Procurement Contracts Subject Category (Threshold US$) Method to Prior Review 1. Consulting Services and Selection according to Training Consultants Guidelines - Firmns/NGOs/Universities 100,000 and less TORs only over 100,000 All - Individuals 50,000 and less TORs only over 50,000 All 2. Goods and Equipment 35,000 and less National shopping NIL over 35,000 NCB All 3. Cost Sharing Transfers for 30,000 and less Community Participation None subprojects 30,001-50,000 National Shopping None Total value of contracts subject to prior review: US$1,800,000 (36%) 29 Disbursement The proposed Bank loan would be disbursed over a period of three years, beginning the first quarter of FY99 through the end of the second quarter of FY02. The project is expected to be completed by June 30, 2001, and the closing date of the loan is December 31, 2001. The allocation of loan proceeds by disbursement category is shown in Table C. Table C: Allocation of Loan Proceeds Expenditure Category Amount of the Loan % of Expenditures Allocated to be financed (in US$ 000) 1. Consulting Services and Training 2,400 100% 2. Goods and Equipment 200 90% 3. Grants for pilot zones subprojects 2,000 100% of the amount of the Grant 4. Incremental Operating Costs 150 90% 8. Unallocated 250 Total 5,000 Consulting services include contracts to carry out: (i) training; (ii) pre-investments studies; (iii) support to subproject implementation; (iv) monitoring and evaluation studies and events; (v) project coordination; and (vi) audits. Training, consisting of workshops, study tours, and (degree) courses, includes the cost of the trainers' and trainees fees, rental of training facilities, per diem of trainees or scholarships and materials required for the training activities. Grants for pilot zones subprojects would include civil works, goods, equipment, and agricultural inputs. Goods and equipment under grants for community subprojects include, inter alia, basic construction goods, tools, spare parts, basic machinery and furniture. Incremental operating expenditures include expenditures for travel, office rental, office materials and supplies, utilities, office and equipment maintenance, field materials and per diems. The term agricultural inputs means seeds, fertilizers and a positive list of chemicals to be included in the Operational Manual. For the purposes of disbursing for subprojects the CJAC would open an account in a local bank. Once a cost-sharing transfer for a subproject is approved (with the clearance of the PMG as needed), the subproject document would form the basis of the agreement between IICA and the CJAC for the purpose of financing the subproject. The document specifies the works, goods, equipment, inputs to be purchased as well as the contribution of the beneficiaries to the investment. Following the disbursement schedule included in the subproject document, IICA would transfer funds into the CJAC account. The CJAC, with support from the TG as needed, subsequently establishes the equivalent of "supplier credit" with the designated supplier or contractor in the name of the subproject beneficiaries. Simple, standard records, whose format would be included in the zone specific operational manuals, would be completed by a designated representative of subproject beneficiaries or the subproject manager. They would be used to record counterpart financing, consisting of cash contributions, materials and/or labor inputs and would be subject to project and audit procedures. 30 Disbursements would be made on the basis of full documentation for all expenditures made under contracts requiring prior Bank review as indicated in Table B, and amendments to contracts raising the value of such contracts above the prior review limits. For all other expenditures (goods costing less than US$35,000, individual consulting services with a contract value below US$50,000, and consulting services provided by firms/NGOs/Universities, with a contract value below US$100,000, all cost sharing transfers for subprojects and incremental operating costs) disbursements would be made against Statements of Expenditure (SOE) for which supporting documents would be maintained by IICA and would be available for Bank staff review. Special efforts would be made for the selective review of SOE documentation by visiting Bank missions and auditors. Retroactive financing of up to US$ 500,000 would be permitted for eligible expenditures made in accordance with procurement procedures agreed under the project from January 1998, provided that the loan is signed not later than December 31, 1998. If the loan is signed at a later date, the initial date for eligibility of expenditures for retroactive financing would be modified so that the period covered by retroactive financing would be no more than one year. Financial Management As the project is more complex than the PPF 282-CO currently being implemented by IICA, it was agreed during Technical Discussions that IICA would undertake the necessary steps to install a system compatible with the project's needs. These steps would include the development of a financial project monitoring mechanism which shall allow the preparation of reports including budget, actual and variance on a quarterly basis, disaggregated by the major project components and respective disbursement categories. System development shall be completed before the start of full-scale project implementation, expected to take place by the end of 1]998. Prior to this date, a Bank supervision mission, which shall include a financial management specialist shall review progress on the implementation of the agreed financial monitoring system. Organization. Under the project, the Project Management Group would include an Administrator who will be responsible for all financial management aspects of the project. Each Technical Group would employ one financial expert who would be responsible for administrative aspects of project implementation in each Peasant Enterprise Zone under the guidance of the administrator Bogota. Detailed TORs of all positions related to the financial management aspects of the project will be included in the Project Operational Manual. Budgetig It will be agreed during Negotiations that IICA would present by November 15 of each year an Annual Operating Plan for the subsequent year to the Bank for review and approval. The Annual Operating Plan would include an annual budget specified according to project components, expenditure categories and disbursement accounts, including counterpart funds. The budgeting process would be essentially bottom-up. Based on progress achieved and in collaboration with the CJACs, TGs would submit budget proposals to the PMG in Bogota. The PMG would consolidate the proposals in a single Plan to be presented and discussed with the Inter-Ministerial Committee for Rural Enterprise Zones. The Project Cost Tables would be used as a point of reference in the budgeting process. Accounts. IICA will establish and maintain activity based project accounts to record all project transactions from the commencement of project execution. The accounts shall be maintained in accordance with internationally and locally recognized accounting principles and practices satisfactory to the Bank. The project chart of accounts should allow the consolidation of financial information based on the project activities, category of expenditures, and sources of funds in order to prepare the quarterly progress reports. IICA would also maintain a register of assets purchased with project funds. The supporting documentation will be kept by llCA for at least one year after the end of the fiscal year in which the last disbursement for the project takes place and until it has been examined by the project's auditors. The information will be available at any time for review by the Government, World Bank Missions and/or independent auditors. 31 Internal controls. A good internal control environment will be ensured by IICA's strong organization structure, including its internal policies and procedures together with the specific Project Operating Manual. The Organization structure, the clear delineation of responsibilities together with detailed terms of reference for all project staff, to be reviewed and cleared by the Bank, provide a sound basis for project management and operational staff to perform in accordance with high internal control standards. As part of the annual reporting requirements, IICA would also conduct a physical counting of assets on hand and will compare these with the accounting records. Reporting. It will be agreed during Negotiations that IICA would present quarterly progress reports to the Bank not later than April 30, July 31 and October 31 of each year during project implementation, commencing October 31, 1998. In addition, an annual progress report would be presented by January 31 of each year during Project implementation. The reports would provide a clear linkage between financial accounting information and the project monitoring indicators included in the Supplemental Letter to the Loan Agreement. Financial accounting information included in the reports would indicate source and application of funds during the current financial year and cumulatively since the start of the project. Comparisons of actual expenditures would be shown against budgets agreed upon in Annual Operating Plans at the beginning of each fiscal year and explanations would be provided for significant variations. Audits. IICA would hire independent private auditors satisfactory to the Bank under a multiple year contract to audit on an annual basis the financial statements, the Special Account and SOEs. In addition, the auditors would prepare a (long-forrn) report on project management. The audit reports would convey the auditor's opinion and comment as necessary on the methodology employed in the compilation of the SOEs, their accuracy, the relevance of supporting documents, eligibility for financing in terms of the project's legal agreements and standards of record keeping and internal controls related to the foregoing. Copies of the audit reports would be provided to the Bank within four months of the end of each state fiscal year. The final version of the Project Operational Manual will include detailed terms of reference for the auditors, following the guidelines included in the World Bank's Financial Accounting Reporting and Auditing Handbook. 32 Annex 5 Colombia: Peasant Enterprise Zones for Peace Project Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual LCSES Social Development Compact 128 Consultant Trust Funds 148 B. Project Schedule Planned Actual Time taken to prepare the project (months) 5 First ]Bank mission (identification) 12/10/1997 12/10/97 Appraisal/Technical Discussions mission dept. 03/30/98 03130/98 Negotiations 04/03/98 Planned Date of Effectiveness 05/01/98 Prepared by: Plan Sur, Office of the President, Republic of Colombia Preparation assistance: Consultant Trust Funds (Spanish, Korean, Swedish) Bank staff who worked on the project included: Name Specialty William Partridge Lead Specialist, Social Development Martien van Nieuwkoop Natural Resources Economics Robert Crown Project Management Design Maria Clara Mejia Social Development Livio Pino Disbursements, Audit Enzo de Laurentis Procurement Natalia G6mez Institutional Finance Roberto Cucullu Counsel 33 Annex 6 Colombia: Peasant Enterprise Zones for Peace Project Documents in the Project File* A. Project Implementation Plan 1. Draft Project Implementation Plan, submitted February 5, 1998 (Plan Sur, Government of Colombia) B. Bank Staff Assessments 1. Social Aspects and Indigenous Peoples, Peasant Enterprise Zone Project. Maria Clara Mejia (LCSES). February 12, 1998.* 2. Aspectos Ambientales (Environmental Aspects), Peasant Enterprise Zone Project. Patricio von Hildebrand (consultant), February 11, 1998."* 3. Aspectos Sociales del Proyecto de Reserva Campesina-de El Pato-Balsillas (Social Aspects of the Peasant Enterprise Zone of El Pato-Balsillas). Hector Mondrag6n (consultant), February I1, 1998.* 4. Private Sector Involvement in Peasant Enterprise Zones. Ana Gabriela Mejia (consultant), February 11, 1998.* 5. Informe de Consultoria para el Soporte Agroeconomico del Proyecto Pato-Balsillas como Experiencia Piloto de Zonas de Reserva Campesina (Consultant's Reports on the Agroeconomic Support of the Pato-Balsillas Project as a Peasant Enterprise Zone Pilot Experience). Isabel Robles Bohorques (consultant). February 11, 1998.* 6. Propuesta de Estrategia de Financiamiento de Proyectos Productivos Campesinos en la Reserva Campesina de "El Pato" (Proposal for a Strategy to Finance Productive Investments in the Peasant Enterprise Zone of El Pato). Natalia G6mez (LCCO), February 12, 1998.* 7. Observaciones para la Memoria Banco Mundial (Observations for the Aide Memoire of the World Bank). Alfredo Molano Bravo (consultant). February 12, 1998.* 8. The Political Risks and Potential Benefits ofJlnstituting Peasant Enterprise Zones Amid Colombia's Violent Conflict. Marc Chernick (consultant), February 20, 1998* C. Government Documents and Project Reports 1. Congress of Colombia. Ley 160 de 1994, Reforma Agraria (Law 160 of 1994, Agrarian Reform).* 2. President of the Republic of Colombia. Decreto Numero 1777 de I Octobre 1996 (Decree 1777 of I Octob,r 1996) regulating Chapter XIII of Law 160 of 1994 as concerns Peasant Enterprise Zones.* 3. Colombian Institute of Land Reform (INCORA). Resolucidn Numero 00054 de 18 Dicienmbre 1997, Por la cual se constituye y delimita la Zona de Reserva Campesina del Guaviare (Resolution 00054 of 18 December 1997 Constituting and Delimiting the Peasant Enterprise Zone of Guaviare).* 4. Colombian Institute of Land Reform (INCORA). Resoluci6n Numero 00055 de 18 Dicieimbre 1997, Por la cual se consiizzryey delinita la Zona de Reserva Campesina de la Regi6n de la Cuenca Rio Pato y Valle de 34 Balsillas (Resolution 00055 of 18 December 1997 Constituting and Delimiting the Peasant Enterprise Zone of the Region of Pato River Basin and the Valley of Balsillas).* 5. Ministry of Environment. Resolucion Numero 0047 de 19 Enero 1998, Por la cual se amplia y se redelimita el Parque Nacional Natural Cordillera de Los Pichachos y se sustrae un cirea de la Zona de Reserva Forestal de laAmazonia (Resolution 0047 of 19 January 1998, Redelimiting the National Park of the Los Pichachos Mountains and Subtracting an Area of the Amazonian Forest Reserve).* 6. CEUDES, Sistemas de Produccion de la Region del Pato (Production Systems in the El Pato Region). Bogota, 1S'97.* 7. CEUDES, Version Preliminar del Informe Final del Plan de Ordenacion y Manejo Forestal Comitario para Seis V7eredas de la Regi6n del Pato (Preliminary Version of the Final Report on Environmental Management of Commual Forests in Six Counties of the Pato Region). Bogota, 1977.* 8. CEUDES, Metodologiapara la Propuesta de Zonifiaci6n Forestal - El Pato (Methdology for the Forest Zoning Proposal - El Pato). Bogota, 1997.* 9. Muanicipio de San Vicente de Caguan, INCORA, Ministry of Environment-Corpoamazonia and Comite Coordinador de Juntas de Acci6n Comunal, Regi6n del Pato, Plan de Desarrollo Sostenible de la Zona de Reserva Campesina de la Region del Rio Pato (Sustainable Development Plan for the Peasant Enterprise Zone of Pato River Region). San Vicente de Caguan, Department of Caqueta, November 29, 1997.* 10. Ministry of Environrent-Corpoamazonia and Comite Coordinador de Juntas de Acci6n Comunal (El Pato-Balsillas), Acta de Compromisos, Ordenamiento Territorial Ambiental con Participacion Comunitaria (Agreement for an Environmental Management Plan with Community Participation), San Vicente de Caguin, Department of Caqueta, December 8, 1996.* 11. Foundation Center for Investigation of Sustainable Agricultural Production Systems (CIPAV), Propuesta de Capacihacidn en Alternativas de Produccion Agropecuaria Sostenible para Reservas Campesinas (Proposal for Capacity Building in Sustainable Agricultural Production Alternatives for Peasant Enterprise Zones), Cali, Department Valle de Cauca, December 17, 1997.* 12. Arnazonian Institute of Scientific Investigation (SINCHI), Estudio de Prefactibilidadpara la Conformaci6n de una Zona de Reserva Campesina en el Departamento del Guaviare (Prefeasibility Study for the Formation of a Peasant Enterprise Zone in the Department of Guaviare). Bogota, July 1997.* 13. Amazonian Institute of Scientific Investigation (SrNCHI), Los Asentamientos Humanos del Guaviare: Dinamicas y Perspectivas (Human Settlement in Guaviare: Dynamics and Perspectives). BogotA, September 1996.* 14. Convenio (Borrador) Entre la Presidencia de la Republica de Colombia y el Instituuto Interamericano de Cooperaci6n para la Agricultura (Draft Agreement Between the Presidency of Colombia and the Interamerican Institute for Agricultural Cooperation) dated .................1 998 (to be submitted at appraisal).* *Including electronic files. 35 Annex 7 Statement of Loans and Credits Status of Bank Group Operations in Colombia IBRD Loans and IDA Credits in the Operations Portfolio Difference Between expected Original Amount in USS Millions and actual Loan or Fiscal - disbursements a/ Project ID Credit Year Borrower Purpose No. IBRD IDA Cancellations Undisbursed Orig Frm Rev'd liumber of Closed Loans/credits: 156 .i-ti'e Loans co-PE-46112 IBRD42420 1998 GOVERNMENT OF COLOMBIA PASTO EDUCATION 7.20 0.00 0.00 7.20 0.00 0.00 CO-PE-0691 IBRD42430 1998 GOV OF COLOMBIA ANTIOQUIA EDUCATION 40.00 0.00 0.00 40.00 0.00 0.00 CO-PE-40102 IBRD41380 1997 GOVT OF COLOMBIA REG.REF.TA 12.50 0.00 0.00 12.09 1.60 0.00 CO-PZ-6094 IBRD41960 1997 GOVERNMENT OF COLOMBIA FIN MRKTS DEV TA 15.00 0.00 0.00 14.65 1.99 0.00 CO-FZ-3?29I 18RD39730 1996 GOVERNMENT OF COLOHBrA gR8AM ENVIRONMENT TA 20.00 0.00 0.00 16.66 9.15 0.00 Co-PE-6972 IBRD4021A 1996 BOGOTA DISTRICT GOVERNMEN URBAN TRNSPRT 59.59 0.00 0.00 55.08 18.59 0.00 C.O-Ft-69i7 IBRD3954A 1996 GOVT OF COLOMBIA POWER MARKET DEVELOP 104.30 0.00 0.00 62.72 39.64 -3.21 CO-PE-6987 IBRD39550 1996 GOVT OF COLOMBIA POWER MARKET DEVELOP 145.00 0.00 0.00 136.54 39.64 -3.21 CO-PE-6694 IBRD39520 1996 GOVERNMENT SANTAFE I (WTR/SUPPL 58.00 0.00 0.00 47.35 37.72 0.00 CO-PE-6894 IBRD39530 1996 GOVERNMENT SANTAFE I (WTR/SUPPL 87.00 0.00 0.00 71.62 37.72 0.00 CO-PE-6880 IBRD38710 1995 GOVERNMENT OF CLM AGRICULTURE TECHNOLO 51.00 0.00 0.00 45.34 19.35 0.00 CO-PE-6e93 IBRD38270 1995 GOVERNMENT OF COLOMBIA ENERGY TA 11.00 0.00 0.00 5.78 3.13 0.00 CO-PE-6866 IBRD36830 1994 GOV. OF COLOMBIA SECONDARY EDUC 90.00 0.00 0.00 65.36 31.13 0.00 CO-PE-6368 IBRD36920 1994 GOV OF COLOMBIA NATURAL RESOURCE MAN 39.00 0.00 0.00 26.04 11.19 8.34 CO-PE-6889 IBRD36690 1994 GOVERMT OF COLOMBIA PUBLIC FINANCIAL MAN 30.00 0.00 0.00 12.32 6.53 0.00 CO-PE-6e54 IBRD36150 1993 GOV OF COLOMBIA IA MUNICIPAL HEALTH SER 50.00 0.00 0.00 37.81 26.30 6.58 CO-PE-685? IBRD33360 1991 GOVT OF COLOMBIA MUNIC DEVT 60.00 0.00 0.00 5.05 5.05 0.00 Total 879.59 0.00 0.00 661.61 288.73 8.50 Active Loans Closed Loans Total total Disbursed (IBRD and IDA): 217.98 6,908.83 7,126.81 of which has been repaid: 7.45 5,396.91 5,404.36 To:al now held by IBRD and IDA: 872.14 1,588.35 2,460.49 Amount sold : 0.00 50.99 50.99 Of which repaid : 0.00 50.99 50.99 Total Undisbursed : 661.61 76.01 737.62 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. h. Ratsna of 1-4: see OD 13.05. Annex D2. Preparation of Implementation Summary (Form 590). Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system will be used (HS - highly Satisfactory, S - satisfactory, U = unsatisfactory, HU a highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994. NDsbe: Disbursement data is updated at the end of the first week of the month. 36 Colombia STATEMENT OF IFC's Committed and Disbursed Portfolio As of 31 -Jan-98 (InI US Dollar Millions) Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1963/90 Coltejer 7.22 0.00 0.00 0.00 7.22 0.00 0.00 0.00 1967/70/74/84/86/87/88 Enka .38 0.00 0.00 2.29 .38 0.00 0.00 2.29 1969185/88193/95 CF del Valle 16.22 7.43 0.00 31.63 16.22 7.43 0.00 31.63 1977/89/92/94/96 Promigas 15.30 1.13 0.00 49.64 9.50 1.13 0.00 35.15 1981/85/87/89/91/92/94 Leasing Bolivar 5.80 .25 0.00 1.20 5.80 .25 0.00 1.20 1987 PRODESAL 0.00 .59 0.00 0.00 0.00 .59 0.00 0.00 1990/92 ODC 11.55 0.00 0.00 27.11 11.55 0.00 0.00 27.11 1994/95 Corfinansa 4.00 1.43 0.00 0.00 4.00 1.43 0.00 0.00 1995 Corfinsura 13.06 0.00 0.00 0.00 13.06 0.00 0.00 0.00 1995/97 Icollantas 14.00 .46 5.00 0.00 14.00 .46 5.00 0.00 1996 Proyectos 10.00 5.00 0.00 0.00 1.00 2.15 0.00 0.00 1997 Suleasing 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Portfolio: 127.53 16.29 5.00 111.87 82.73 13.44 5.00 97.38 Approvals Pending Comnmitment Loan Equity Quasi Partic Total Pending Commitment: 0.00 0.00 0.00 0.00 37 Annex 8 - Colombia at a glance 8/28/97 Latin Lower- POVERTY and SOCIAL America middle- Colombia & Carib. Income Development dlmond, Popuion mid-1996 (milons) 37.4 485 1.125 GNP percapha 1996 (US$) 2.190 3.710 1750 Life expecancy GNP 1996 (b//ions US$) 81.9 1,799 1.967 Averge annual growth, 1990.96 PoPUiston 1.8 1.7 1t4 GNP GM" Labor tome 2.7 2.3 1.8 per prrmry Most recent estimate (latest year available since 1989) capita enrollment Povty: headcount index (% ofpopulatiOn) 19 irban population (¶ oftotal population) 73 74 56 lill axpey at bnith (ears) 70 69 67 \rdant mftlt wer 1.000 6ve births) 26 37 41A s to saf watr Chid mainutfition (¶4 of children under 5) 10 A to . Access to safe water ('A of populabtion) 96 80 78 i_tey m ofpopLaon age* +) 9 13 Grou prkmary enrollment (¶4 of school-age popuation) 121 1i0 104 Colombia mle - 05 Lower-middle4ncome grup FeNale 101 L KEYECONNOMIC RATlOS and LONG-TERM TRENDS 1978 1SS 1 1996 1996 Econornlcratios GOP (bons USS) 131 34.9 78.1 87.3 Groa domestic MnveslentmGDP 17.0 19.0 23.5 23.4 ExposM d goods and servIcsGDP 15.8 13.8 174 16.6 Opennes of ecnomy Gross domet aynga/GDP 18.8 20.3 20.4 211 Oroe nlorial savtngsGDP IOA 16.9 17.2 17.5 Curent aemunt beance/GDP _ -4.6 -s.6 -s5. -ltra peymenttGDP 1.0 2.5 1.3 1.S Savins Iinvestment rolal debVGOP 29.7 40.8 321 33.3 Trota debt service/exports 14.3 40.0 25.0 41.9 Present value of dobVGDP _ 24.8 PrenrA value of dobexports _ 131.4 Indebtedness 1978-4 199646 1996 1996 1991746C gawPe annual growk-/) COP 3.7 4.2 5.A 2.1 4.1 GNP per oaptta. 1.1 2.9 1.6 2.0 2.8 gu Exportsofgoodsand aervle 3.1 8.7 2.7 5.2 3.8 _ _ MC1URE ot the ECONOMY 1976 19S8 1995 19SS Growth raeinof utannd lnv"emnt (n%) Agriciftue 23.9 17.0 18.9 1S.9 0 Indu- 29.2 34.8 23.0 19.5 4 ManluaftltA 23.2 21.7 18.8 15.5 ra Services 46.9 48.4 8t.1 64.6 B_ Private consumption 72.3 69.0 70.4 68.8 0 Gnerw gornment consumption 8.9 10.7 9.2 '1 0.1 IpII od oosand servies 14.0 12.5 20.0 1.0t 176485 1986.96 1996 1sis (average annuat gmth) Growth rates of esprfu and Importa (%) Ariltire 2£9 3.1 6.2 14 go _dtry 3.3 3.0 3.7 -1.2 Manifacturing 25 32 1.0 -2.5 40.. SevIcs 4.3 63 6.1 3.6 20 _ Private consumption 3.6 1.8 5.1 -2.2 Gerlmegovemment consumption 6.4 6.9 5.5 1 1.0 | e r4 n es Gos domestic Investment 5.0 1 1.9 9.8 2.6 4C-a Impor of goods and services 5.9 11 . 7.5 0.5 Gros national product 3.2 4.8 3.5 3.5- p Note: 1996 data are preliminary estimates, Figures in hlics are for years other than thes specifed. The diamonds show tour key ndicator In the country (in bold) compared with Rs incornemgroup average. If data are missing, the dciamond will be incompleta. 38 Colombia PRICES and GOVERNMENT FINANCE 1975 1986 1995 1996 Dometc pricos Intltlon (%) tf dange) 40 Consumer prkes 22.9 24.0 20.9 21.6 i O Impidt GDP deflator 22.9 24.9 20.8 21.2 20 Govomment finance* .. (X of GDP) a Cunent rovenue 20.3 30.4 31.5 91 *2 n u' Is e Curent budget balnce .. 4.3 6.S 8.1 - GDP dotd --CPI Ove0 l surplusidefcit .. -4.6 -1.4 -2.9 TRADE 1978 198$ 1995 1996 (mDuon USS) Export and Import levels (mill. US$) Tolwexports (fob) .. 3,650 10,201 10,630 c Coffee .. 1,702 1,832 1,577 Petmoleum .. . 2,164 2,889 Manactures .. .. 5,160 4,879 os r Toptal kports (cf) 12,921 12,755 Food . DHHFDIFHf Fuel and energy 466 264 240 Capital goods .. 1,165 4,776 4.237 ExportpflceIndex(1987100) _ ,, 145 164 o0 II 12 e 3 4 9 es Import price Index (19trI7100) _ .. 267 260 oE potu oD Tem of tade (1987.100) ,, .. 64 63 BALANCE of PAYMENTS__ 11975 915S 1995 1996 (mnlEs USS) Cunent acerat balance to GOP ratio (e) Expoe of goods ad evIes 2.105 4.642 13.771 14.545 s Imopts of goods and ,vI0es Z07 4,S99 16,211 16,541 ReAour balance U .347 -2,439 -1,997 I -, Not hnooe -318 -1.710 -2,750 -3,401 * Not aMnta tandes .. 455 797 614 e Cramnt account balance, 4 eo *2 52 |4 3 | 7 be offm cawr trene .. 1,602 -4,393 4.764 Fraing Rams (ne .. 1.371 4.715 8,356 5huhnettv 111 231 -322 -1,S72 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1-22 1:7 Cttangesin netr.e'm111 231 ~ .j,1~ Mema o:_ ___ Reseres bkudt gold (mlL USS) 633 2.202 8,458 10,041 ConvsIon ate OocJS1) 30.9 142.3 944.5 1,036.7 EXTERNAL DEBT and RESOURCE FLOWS 1i7s 1NS 11199 19s (Mm- US$) Tol dot outslanding and disbused 3.758 14,248 25,047 29,069 BRD 834 2.399 2.548 2,177 A IDA 23 18 11 10 | 21773 GoaiposI8eawmftt 1i(m!Us) Tald debt sevice 314 1,980 4,694 6,443 | N, 2787 IBRD 78 318 604 520 E IDA I 0 1 1 1738 CAwnpoelllon d ned resourc nows Officialg rnts 1 20 73 Ofildcredlo III 938 .472 1,531 Prt4 credIon 216 382 1,109 1,592 2 ' Foin dieth i nt - 37 1.023 2,501 3,253 Pondl equlty 0 0 131 -21 16473 World Bank program Commndments B6 490 207 334 A . IBRD E Ole"_ Dlsbumsments 105 590 238 152 8|-10 D-OOlrnwltlsterd F-Pne | Principal repayments 34 165 415 351 C - IMF G . Sh1rl4e0n "et lows 71 424 -177 -199 1 1 Interet paymen 45 153 191 170 Net tmnsfers 27 271 -366 .369 Devlopment Economcs 812197 39 Annex 9 Colombia Peasant Enterprise Zones Project Project Preparation Plan (January 1998- April 1998) 1. Role, Responsibility and Staffing for Project Preparation See attachment 1. 2. Bank Assistance to be Provided During Project Preparation i. The Task Team Leader, visited Colombia in December 1997 to identify the project and to discuss/review progress of local community committees in formulation of proposals for pilot subprojects, functioning of the interinstitutional committee supporting the project and proposals for project management arrangements at the community, project and national levels. ii. A mission consisting of all Bank staff and consultants assisting project preparation took place from January 27 through February 14, 1998. This mission assisted Colombian counterparts in the preparation of the project and conducted preappraisal reviews of social, environmental, technical, financial, economic, institutional and managerial arrangernents. iii Utilizing SIDA (Swedish Agency for International Development) funds, the Bank provided a grant of US$ 30,000 to the Colombian project preparation team to defray costs of participation of project beneficiaries in project planning (travel, lodging, etc). 3. Arrangements for Local/Foreign Consultant Inputs: a. Consultant Trust Funds (Spanish and Korean) are used to strengthen the Bank preparation team and assist the borrower tearn in the following areas: Environmental Assessment, Social Assessment, Agricultural Engineering, Private Sector Linkages and Political and Institutional Risk Analysis. 4. Timetable for Project Preparation i. Submission of draft technical studies February 1998 ii. Appraisal and Negotiations March-April 1998 5. Key Outputs of Project Preparation i. Legal instruments creating and delimiting Peasant Enterprise Zones December 1997 ii. Feasibility-level preparation studies for .two pilot zones February 1998 iii. Draft Implementation Plan February 1998 iv. Draft Legal Agreement for project implementation by Interamerican Institute for Agricultural Cooperation - March 1998 40 6. Proposed Public Consultation/Participation Process Preparation of the project involves direct participation of beneficiary communities, nongovernmental organizations, and representatives of cooperating government institutions in the formulation of draft proposals for pilot subprojects in Caclueti and Guaviare. This participation process took place during 1996 and 1997, culminating in public hearings conducted in the pilot project areas in September (Guarviare) and November (El Pato-Balsillas), and the issuance of legal instruments on the part of INCORA creating the two pilot zones. Local community-based organizations in each pilot area will be strengthened by tfie project provision of a Technical Group (TG) which, jointly with the local organization, will form a committee that will take all investment decisions, supervise execution of subprojects and monitor and evaluate outcomes on the ground. NGOs which have provided and will continue to provide technical support and capacity building services to the local community leaders are CEDUES (Corporacion Unidades Democraticas para el Desarrollo, CITCE (Centro de Investigaciones Teccnol6gicas de la Construccion y Estructura), CIPAV (Centro de Investigaciones para la Agricultura Sostenible del Vaille de Cauca), and SINCHI (Amazonian Institute for Scientific Investigation). The project provides a Private Sector Advisory Group (managers of a tropical fruit export corporation, a major food store chain, etc.) to ensure systematic attention and advice concerning linkages between production systems developed in Peasant Enterprise Zones and the transport, packaging and processing requirements of the domestic and international markets. The Private Sector Advisory Group will also introduce beneficiaries to private sector finance alternatives and commercial business contracting processes, as concerns the commercialization of small-holder agricultural production in Colombia. 41 Attachment 1 Core Project Preparation Team Bank Borrower Name Unit Role Name Agency Role W. Partridge LCSES Lead Specialist, Social Dario Fajardo, Office of Director, Project Development, Task General Manager, Presidency Management Group Team Leader Plan Sur (PMG) in IICA M. van Nieuwkoop LCSES Natural Resources Constanza Ramirez, Office of Assistant Director, Economist, Task Assistant to Gen. Presidency PMG, IICA Manager Manager, Plan Sur M. C. Mejia LCSES Social Scientist, social Hector Mondrag6n, Adviser, Nat. Consultant, assessment, Anthropologist Indigenous Org. Indigenous Peoples, resettlement, indigenous of Colombia PMG, IICA peoples Alfredo Molano, Independent Consultant, Social Sociologist Consultant Analaysis, PMG, IICA R. Crown LCOQE Technical Adviser, Dario Fajardo, Office of Director, PMG, IICA project management Generai Manager, Presidency design Plan Sur L. Pino LCOAA Accounting, Juliana Botia, Interam. Inst. for Financial disbursements, auditing Accountant Agric. Coop. Management, PMG, ICCA; IICA E. de Laurentis LCSES Procurement Jorge Truillo, Interam. Inst. for Administrator, PMG, Director Agric. Coop., ICCA Administation IICA R. Cucullu LEGLA Counsel, legal isssues Jorge Truillo, Interam. Inst. for Administator, PMG, and arrangements Director Agric. Coop., IICA Adminstration IICA N. G6mez LCCCO Operations Officer, Jorge Truillo, Interam. Inst. for Administrator, PMG, institutional finance Director Agric. Coop., [ICA Administration IICA A. G. Mejia Consultant Private Sector Linkages Javier Diaz Molina, National Private Sector President; Association of Advisory Group Exporters Juan Jose Perfetti Colombian Del Carral, Exec. International Director Corporation P. von Hildebrand Consultant Environmental Favio Arjona, Vice Ministry of Federal Support to Assessment Minister Environment Project, Env. Issuess Luis Edmundo Corpoamazonia Regional Support to Maya, Director Project, Env. Issues General 1. Robles Consultant Agricultural Eduardo Medina, Ministry of Federal Support to Engineering Adviser Agriculture and Peasant Enterprise Rural Zones, Agriculture Development Issues 42 Annex 10 Colombia Peasant Enterprise Zones Project DRAFT Project Implementation Plan 1. Institutional Arrangements Organization Responsible for the Project: Office of the President, Government of Colombia. Implementation Agreements: The Interamerican Institute for Agricultural Cooperation (IICA) will be responsible for project implementation under a Legal Agreement signed between the Office of the President and IICA. See draft Agreement (attachrment 1) Responsibilities for Coordination among Implementing Agencies: An Interinstitutional Committee has been appointed by the Government of Colombia to coordinate and facilitate all agencies contributing to the Peasant Enterprise Zones pilots, membership of which includes the Ministry of Environment, Ministry of Agriculture and Rural Development, Colombian Institute of Agrarian Reform, National Department of Planning together with NGOs supporting the pilots and representatives of local governments. Participation Arrangements: Local community-based organizations strengthened by a Technical Group (TG) supported by the project will take all investment decisions, supervised all subprojects and monitor and evaluate outcomes on the ground. Role of Bank during project implementation: The Resident Mission in Bogota, Colombia will be strengthen by an additional staff specialist in Social Development to support implementation of the Peasant Enterprise Zones pilots, in addition to regular supervision mission from headquarters. In both instances, staff supporting implementation will be those who have assisted project preparation. Administrative Arrangements for project implementation: IICA will create a Project Management Group to administer project resources, prepare, supervise and issue payments of contracts and consultant services agreements, maintain financial records to be made available to Bank missions and independent auditors, and submit quarterly progress reports detailing planned and actual expenditures which will trigger quarterly disbursements. The following figure shows these arrangements. r GOC Office of Presidenc Interinstituition . Mun.Govt al Committee Line Agencies Project Management Group (IICA) NGOs Private Firms CJACITG CJAC/TG CJAC/TG Pilot Z:one #1 Pilot Zone #2 F Pilot Zone #3 43 2: Implementation Schedule The figure below displays the timebound implementation schedule, including monitoring and reporting requirements and end-of-project impact evaluation and strategic design study for follow-on action. Project Activities 1998 1999 2000 June Sept Dec Mar June Sept Dec Mar June Sept Dec Mar IICA Mgt. Contract ---- - Monitoring' x x x x x x x x x x x Concurrent Eval. x x x x x Final Eval.Contract x x Final Eval. Report x Design Study x Design Report x Pilot # I Establish local TG x Launch Workshop x Subprojects Prep. x Subprojects Impl. Adjust Workshops' x x x x x Pilot # 2 Public Consultations x Prep. Devel. Plan x Establish local TG x Launch Workshop x Subprojects Prep. x Subprojects Impl. Adjust. Workshops x x x Pilot # 3 Public Consultations x Prep. Devel. Plan x Establish local TG x 'Disbursements will be made against quarterly reports, indicating projected cash flow, actual expenses, and implementation progress as measured against agreed indicators. I Adjustment Workshops will be conducted in the field by the PMG and the beneficiaries every six months, to jointly review progress on the ground and agree upon any changes in approach or re-design of activities/responsiblities based on results obtained to that point. Concurrent evaluation reports by an independent specialist will be presented to the workshop to enrich the information available to all participants. 44 3. Monitoring and Evaluation Monitoring of the project inputs and implementation progress would be the responsibility of IICA, as part of its budget management and reporting system. It would report quarterly, in a form consistent with the requirements of "LACI'', based on reports from the pilot areas. Project outputs would be monitored as part of this process, and would be evaluated (with inputs) in bi-annual implementation workshops. An independent concurrent evaluation would provide additional information to the bi-annual workshop participants. The workshops would include members PMG staff, CJAC-TG, the Bank, leaders of NGOs and local government entities and would be open to the community as well. The objectives of the workshops would be to draw conclusions from experience and modify practices as required. Overall indicators for project performance monitoring will be agreed at negotiations and recorded in a supplementary letter to the loan agreement. Specific indicators of project implementation performance and impact in the respective pilot zones would be agreed at the outset during individual project launch workshops and used as the basis of the evaluation of the program. In the third project year, a final evaluation of experience would be undertaken by consultants. This evaluation would cover the economic, financial/fiscal, social and institutional factors relevant to a recommendation on whether the methodology would serve as a minimal-risk basis for a follow-on program. During Technical Discussions it was agreed that IICA would carry out an ex-post annual physical perfornance review of subproject implementation, through an independent evaluator. The evaluator would assess, on a sample basis, the success of pilot zones subprojects financed by the project, in terms of the achievement of their specific objectives, and the quality, efficiency, and sustainability of the investments. For each subproject in the sample, the audits would focus on the following points: (i) the adequacy of the physical design in relation to the subproject's objective; (ii) the quality and cost of subproject execution; (iii) the efficiency of procurement procedures used, including the transparency of the process and the quality of the documentation to complete SOEs; and l(iv) the targeting of project beneficiaries. The physical performance review would provide an indication of the effectiveness of procurement done by CJACs, compliance with and/or needed adjustments to cost indicators, physical/financial indicators and to the formats included in the operational manuals, and the quality of project investments and the profile of distribution of project benefits. The annual physical performance review would be conducted on the basis of TORs agreed with the Bank and included in the Operational Manual. 45 Annex 11 Colombia Peasant Enterprise Zones Project Quality Assurance Plan Date: March 2,1998 PCD Review Date: n/a Appraisal Date: March 30, 1998 Team Leader: William Partridge Task Manager: Martien van Nieuwkoop Technical Director: Maritta Koch-Weser Country Director: Andres Solimano 1. Quality Approach on Major Issues (a) Economic Analysis: As this applies to the methodology, it will be determined as part of the impact assessment. (b) Financial Analysis: To be determined as part of the impact assessment. (c) Technical/Engineering: The project will provide each subproject management unit (CJAC) Technical Group to assist in design and appraisal of proposed subproject activities, to be verified by the Project Management Unit. (d) Institutional Capacity:The project will finance capacity strengthening at the local community level, including management of subproject components contracting and supervision, financial management and accounting procedures, and impact monitoring and evaluation. National institutions, nongovernmental organizations and private sector actors collaborating in delivery of the subproject activities are deemed capable of taking needed actions in an efficient and effective manner, and are, therefore, not in need of capacity building. (e) Environmental Assessment: Envirdnmental issues are at the core of the project design, and have been identified and assessed at a diagnostic level by relevant national government institutions and nongovernmental organizations. Environmental mitigation and management plans will be formulated as integral elements of each subproject design approved by the CJAC and its Technical Group (TWG) which will include environmental specialist support, and verified by the PMG which includes an environmental specialist. (f) Social Assessment: Social, political, cultural and institutional factors are integral to the design of the Peasant Enterprise Zone, and have directed its formation from the beginning. These factors will be the subject of a locale-specific social assessment preparatory to the design of each pilot subproject by the PMG and the CJAC-TG. Social development action plans will be formulated as contributions to subproject design approved by the CCCP, assisted by its Technical Group (TG) which will include social development expertise, and verified by the PMG which includes a social development specialist. (g) Procurement: All goods, works and services will be procured at the local level. The Bank's guidelines for community-based procurement and disbursement will be utilized by each CJAC-TG, and verified by the PMG. IICA is experienced with Bank procurement and disbursement policies and will provide technical guidance and capacity building for each CJAC-TG. (h) Operational Quality: The project is a response to needs which have been articulated clearly by local communities requesting the establishment of a Peasant Enterprise Zone and to the desire of the Government of Colombia 46 to meet those needs. It will assist local communities in establishing conditions for the reduction of violence, poverty and environmental degradation. It will assist the Govemment of Colombia in piloting approaches to decentralized, demand- driven, participatory rural development within the context of existing agrarian reformn legislation to which it is committed, and contribute to the formulation of a national program of peace and development in rural areas struck by violence. The Bank team will closely cooperate with the PMG to ensure a sustainable and enabling institutional environment for decentralized and participatory development. A social development specialist in the Bank's Resident Mission will provide continuous technical support to the PMG to help assure quality. 2. Internal Quality Support Arrangements and Schedule (a) Quality Assurance Team (i) Mr. Nat Colletta (SDV): participation and social conflict issues (ii) Mr. Gonzalo Castro (ENVGC): environmental management (iii) Mr. Marc Chernick (Georgetown University): institutional and political risk (b) Role of Country Team The Country Team has been regularly involved in decisions during early phases of project preparation. The Director convened a subcommittee to coordinate team work on peace projects in Colombia composed of the Lead Specialist for Governance, Lead Specialist for Social Development and Sector Leaders for LCSES and LCSHD which have guided preparation work. The Country Team will review the PAD prior to departure of the appraisal mission, and will ensure appropriate staffing of technical support functions during implementation. (c) Time Schedule for Quality Assurance Function (i) Constitution of the QAT February 1998 (ii) Review of draft PAD February 1998 (iii) Implementation Support Throughout As Needed 3. Budget QAT Member Dates Staff Weeks USS Nat Colletta Feb.-March 1998 1.0 2,800 Gonzalo Castro Feb.-March 1998 1.0 2,800 Marc Chernick Feb.-March 1998 1.0 2,000 Total (estimate) 7,600 4. Checklist of Bank Policies [x] Indigenous Peoples [Riparian water rights [ I Cultural Property []Financial management [x] Significant environmental impacts []Financing recurrent costs [x] Natural habitats [x] Local cost sharing [x] Gender issues []Cost-sharing above country three-year average []Involuntary resenlement []Retroactive financing above normal limit [x] Significant consultation []Disputed territory [x] Significant participation L] Other 47 Annex 12 Colombia: Peasant Enterprise Zones for Peace Environmental Assessment Summary General Framework The proposed project to establish Peasant Enterprise Zones is embedded within the context of sustainable development, which places fundamental importance on sustainable management of natural resources. All proposed activities have the following main components in common: land titling, development of new models for agricultural production, forest conservation, service infrastructure, consolidation of peasant organizations in the decision-making process and the co-administration of projects. Each of these elements has direct implications for the environment. Land Titling. In the process of changing the legal status of public lands to become private property, the land acquires a new ecological function (Article 58 of the Constitution of Colombia) and should be managed in a way that causes the least amount of damage to the environment. With regard to protected areas that are to be regularized, any party interested in an uncultivated land parcel greater than 50 ha must demonstrate that he or she will either maintain 20% of the total terrain as forest area or plant trees equaling the same percentage of the total amount of land (Decree 2278/53, article 14). The samne decree under article 1 5 states that aside from lands in protected areas, at least 10% of the areas destined to colonization (Amazonian forest reserve, in this instance) should be maintained as forests. In addition, areas of slopes greater than 40 degrees and areas in the zone of 50 meters on either side of waterways must be kept under forest cover. Development of New Farming Activities. One of the fundamental aims of the Peasant Enterprise Zone is the stabilization of the colonization process. In large part, the permanent expansion of colonization at the expense of the forest areas stems from the use of inappropriate production systems, which drain and ultimately destroy the soil. Therefore, in the Peasant Enterprise Zone it is necessary to develop alternatives to the traditional bush-fallow agricultural approach. The alternative models should be individually chosen to fit the particular environmental situation and in this manner ensure ecological soundness. Forest Conservation. The feasibility of the Peasant Enterprise Zone is intrinsically linked to forest conservation, as these forests are the ones that protect the soil, prevent erosion, maintain water supplies, contribute to the rural economy and are fundamental to protecting the biodiversity of the region. Thus, the subprojects chosen in each zone must guarantee not only adequate management of the forests in the areas of human habitation and in critical areas (e.g. slopes, springs) of the Peasant Enterprise Zone, but also in adjacent areas subject to indirect impacts including forest reserves and national parks. Service Infrastructure. The development of tubed water supply, sewage systems, access roads, points for storing or processing products, strategies for waste disposal, electrification and so forth requires detailed planning by the institutions invplved. In this way, creation or exacerbation of negative environmental impacts can be avoided. In addition, it is expected that each such activity will comply with the requirements of the Ministry of Environment for environmental studies necessary to acquire an environmental permit. Consolidation of Local Community Organizations. The adequate management of water and soils, points for storing or processing products, strategies for waste disposal, forest conservation -- all presume a change of mentality regarding the environment on the part of rural beneficiaries. The presence of strong farmers organizations and leadership capacity in the Peasant Enterprise Zone provide the mechanisms to foster that change in attitude among the population and to encourage environmentally sound initiatives without which the zones will not succeed. 48 Specific Framework Up to the present time, two pilot Peasant Enterprise Zones have been selected: the El Pato-Balsillas and the Guaviare zones. The focus in this analysis is upon the former, in order to identify the kinds of environmental issues likely to be encountered generally and the specific recommendations for handling them in the course of formulating mechanisms for operationalizing them in Peasant Enterprise Zones. The analysis is based upon a review of documents provided by nongovemmental and governmental organizations that have conducted environmental studies in the region of El Pato-Balsillas (see Annex 6), plus satellite images of the region from UAESPNN, the environmental management plan for the Department of CaquetA. technical studies of the National Parks Departnent "Los Picachos" concerning the nearby national park, and interviews with professionals of the Ministry of Environment, NGOs and others who have conducted research in the region. Overview. The El Pato-Balsillas region corresponds to the Caguan River Basin, which is a tributary of the Caqueta River. It extends from the apex of the Eastern Mountain Range (over 3,000 meters above sea level) to the vast forests of the Amazon. The region contains numerous ecological zones. At its highest reaches, the region contains part of the last (in Colombia) remaining unbroken forest corridor uniting the high Andean Mountain Range and the Amazon forest. This segment of the region is being protected through the creation, in the 1970s, of "El Parque Nacional Natural Cordillera de los Picachos" or the Picachos Mountains National Park, noted for its high biodiversity. The Peasant Enterprise Zone of El Pato-Balsillas has this park as its northern limit. Further down but still in its upper reaches, the region contains many examples of previously fertile soils of the altiplano that have now been completely deforested. The largest of these alitiplano valleys in Balsillas, which falls within the Peasant Enterprise Zone, which has been devoted to cattle rearing for decades. Other areas are marked by steep slopes and poorer soils still covered by dense forest. This area is described as irregular with pronounced slopes (more than 50% of the land area) defined by acidic soils, little soil depth, good drainage and a high aluminum content. This is the region of most human settlement which occurs in the form of dispersed farms. The lower parts of the river basin have been almost completely deforested and are also the sites of scattered human settlements as well as one of the two concentrated populations in the region, some 80 houses known as Guayabal (the other being 60 houses on the road entering Balsillas valley). The Issues. The local economy was in the past heavily dependent upon logging. Cutting forest has been prohibited by the guerrilla since 1995, and the economy is today based on extensive cattle ranching and subsistence farming, both compounding the negative effects on the environment of prior human extractive activity. Farms are about 50% wooded at present, with the remainder in pasture and crops. Neither production system is considered sustainable over the long term due to declining soil quality once vegetation is removed. An unpaved road connecting the region with the city of Huila and the municipal capital of San Vicente del Cagu3an cuts across the area of El Pato-Balsillas. This road has little stability and no drainage. Some 15 kilometers still remain to be finished in the lower reaches of the river basin. During the rainy season, the road is not usable. The Picachos Mountains National Park has been invaded in the past, and mechanisms are needed to ensure this will be controlled. Introduction of electricity, roads, sewage and other services are being planned by colonists, which must be licensed by the environmental authority before work is allowed to begin. Recommnendations. The Peasant Enterprise Zones should be considered, first and foremost, projects of environmental recuperation in colonization zones which have been damaged by human activities. This can be achieved through innovating socioeconomic strategies that are environmentally sustainable. For this reason, an overall Environmental Assessment (EA, including an Environmental Management Plan for the Zone as its major output) should be completed. Terms of reference for both the overall EA of each zone and the specific analyses required for environmental licenses (discussed below) should be agreed at appraisal. Before committing to new production systems being proposed by colonists, NGOs and government specialists, it is important that localized, specific environmental analysis be conducted for the major areas of human occupation. The 49 objective should be to evaluated the environmental implications of proposed activities as well as to provide infornation regarding alternative production systems which can be sustainable in the local environment. For example, it is clear that much of the poor soils of the sloping uplands region is suitable only for forest. Efforts to intensify crop agriculture or livestock production on these soils are not going to prove sustainable. Proposals by an NGO to create a sustainable system for commercial production of wood from the remaining forest in the Peasant Enterprise Zone (50 year production cycle) are not well grounded in necessary analysis. Sustainability is based on assumptions of natural regeneration and management of organic stubble matter, which have proven impractical elsewhere. Other proposals for fruit and nut tree farming appear more sustainable, but these have not been investigated for economic, social and technical feasibility. Another example is the valley called Balsillas which has historically been devoted to pasture for cattle. Plans by colonists, NGOs and government specialists envision commercial agriculture in this area. Yet at this point, soils studies have not been completed nor have hydological studies, so it is not possible to determine is this activity would be sustainable. CIPAV has been contracted to provide technical and capacity building services with regard to sustainable production systems in these two areas. This is quite welcome, as CIPAV is an organization with 15 years successful experience with innovative production models which are economically viable and ecologically sustainable. It seems quite reasonable to pursue this kind of strategy, defining production system alternatives only afterward. This exercise will have important consequences on the size of farms, products and technologies chosen, capturing upstream values, conservation of soils, water and forests, and so on. The demarcation of the Picachos Mountains National Park has been completed. Areas previously occupied by colonists have been subtracted, and a corresponding area (or greater size, in fact) has been added to the park in compensation. What remains to be done is to establish a buffer zone in the areas of human habitation bordering the park. For this, support for building a structure to house personnel of the National Parks Department in the region is needed. As regard basic services, the are several proposals on the table for which specific environmental analyses are required. Colonists, NGOs and government specialists have proposed installation of a public sewage system in Guayabal, provision of septic tanks and sanitary services for Balsillas valley, rural electrification and improvement of footpaths into roads. All of these proposal require an environmental assessment in order to obtain an environmental license from Ministry of Environment (Law 99/93). Additionally, it is not clear that the completion of the road Neiva-San Vicente has an environmental license nor that the terms establish by that license, if it has one, are being met. Finally, there is a proposal for a additional road linking the Neiva-San Vicente one with the Indigenous Community of Altamira. This proposal also requires an EA. 50 Annex 13 Colombia Peasant Enterprise Zones Social Analysis Summary This annex has been structured in two chapters: Chapter one on general social aspects related to the project and Chapter Two on indigenous peoples and territories located nearby the Zones. CHAPTER ONE Social Assessment Because of the nature of a Learning and Innovation Loan (LIL) a full Social Assessment (SA) has not been carried out during the preparation stage. Instead, a preliminary social analysis of social, political, cultural and organization factors has been completed and incorporated into the design of each pilot subproject at a diagnostic level, by relevant national governmental institutions and non-governmental organizations, in alliance with beneficiaries of each pilot in this operation. As part of the implementation process, a full SA for each pilot will be carried out and a Social Development Plan will be formulated as an integral element of each subproject design to be approved by the community, assisted by a Technical Group (TG), and verified by the Project Management Group (PMG). Attachment 1 presents terms of reference for the SA. Following is a preliminary overview of the social dimensions of the first of three pilots of the project, the Peasant Enterprise Zone of El Pato-Balsillas. It describes: a) main social actors and their socioeconomic characteristics and stakes in the project; b) key social factors for project design and implementation; c) consultation and participation of beneficiaries in project design and execution; d) socioeconomic and political conflicts surrounding the establishment of the PEZs and, e) expected contribution of PEZ to the creation of peace conditions. The second part of this annex presents the core elements of an Indigenous development Plan to be prepared during project execution. Inclusion of neighbor indigenous groups in both planning and execution of specific interventions will be a condition "For project implementation. Project Objectives The proposal for establishing a Peasant Enterprise Zone in El Pato-Balsillas has the following objectives: (a) reordering the territory on the bases of a social and environmental sustainable plan; (b) resolution of main conflicts dealing with land tenure and use of natural resources, in order to reduce the historical incentives for violence; (c) stabilize the colonization process and neutralize current trends toward concentration of land in the hands of cattle ranchers, by giving access to land title, credit, and technical assistance to peasants and rural landless families; (d) prevent further expansion of the agricultural frontier and destruction of the Amazonian natural resources; (e) support altemative commercial value activities to raise peasants income level and facilitate accumulation of capital in the hands of peasants associations and other communal organizations; (f) give preferential treatment to the Peasant Enterprise Zone, by the governmental institutions that encompass the six subsystems created by the Agrarian Reform Law. Potential Beneficiaries According to the Agrarian Reform Law (Ley 160 de 1994), the establishment of a Peasant Enterprise Zone has the following fundamental objectives: elimination of inequity in land tenure and promotion of social redistribution by guaranteeing low-income rural families and landless people, access to land, title and social development opportunities. The direct beneficiaries of a PRZ are then, rural families living in predominantly non- 51 adjudicated public lands (valdios nacionales), areas affected by colonization, violence, illegal crops, or areas in which there is a need for territorial ordering, land distribution and regulation. Millions of poor people in Colombia can be beneficiaries of PRZ. Many areas inside and outside the agricultural frontier might be benefited as well, provided the areas occupied fulfill the requirements established by the Agrarian Reform Law and related decrees and regulations. Finally, the program might also be a suitable strategy for more than a million people that have been displaced by violence nationwide, for whom there are no other option than migration to urban poverty belts or permanence in precarious refugees camps. Direct Beneficiaries of El Pato-Balsillas Peasants Reserve Zone In the case of the first pilot project to be tested through this operation, the beneficiaries constitute a group of approximately 1,000 low-income families located in the El Pato Region, an area under colonization since 1949, and historic scenario of violence and confrontation. El Pato zone is localized in the Municipality of San Vicente del Caguan, Departamento del Caqueta in the so-called "transicion andino-amazonica", with an extension of around 90,000 Ha. Colonization of El Pato was initiated decades ago by indigenous Paeces and peasants displaced by violence in Tolima, Huila and Cauca Departments. The majority of the population lives in the mountainous zone of "Alto Pato", which was subtracted from the Amazonian Forest Reserve in 1984. Since then, peasants have been awaiting government support, property titles and land regularization, a process that just started at the end of 1997 as a consequence of peasants marches to Bogota and the subsequent establishment of the Peasant Enterprise Zone requested by thousands of poor peasants and promised by the President of the Republic. Beneficiaries of the titling and regularization program in El Pato have been identified in each county by the local community organizations named Juntas de Accion Comunal (JAC). Governmental institutions such as INCORA have also identified and selected a group of 60 landless families that will be entitled to receive a plot in Balsillas valley in the first farm already bought by the government to start the land distribution program. This two groups of beneficiaries define in turn the two-fold strategy titling and regularization of public land already occupied by colonists and distribution of land purchased to private owners. At this point, some 60% of the farms have already been titled and registered to their owners. Socioeconomic and Political Characteristics Approximately 1,000 families reside in the El Pato-Balsillas zone, the majority of which are colonists dedicated to wood extraction, subsistence crops, commercial products (in minor scale: lulo, coffee, beans and corn), and small amounts of livestqck fattened for patrons. The average family income among rural families in the zone is equivalent to 1.5 minimum salaries. The average size of the plots occupied by family is about 40 Ha. About 25% of the households are widowed women. The people of El Pato have lived in isolation with regard to governmental assistance -- lack of public services, precarious infrastructure and communications, weak presence of the state, armed confrontation and illicit crops have shaped the region. Regarding public services, El Pato counts two health posts and a few schools to attend thousands kids spread throughout 90,000 ha. Two small villages Guayabal and Balsillas with approximately 80 houses each, are the only place for trade and services. There is no road that communicates rural counties in El Pato and the Municipality of San Vicente del Caguan. Commercial exchange and business take place with the nearby Departament of Huila, centered on the city of Neiva. The zone has been colonized, bombarded by the army, abandoned and resettled several times during the last several decades and has historically been an scene of confrontation between the national army and the guerrilla. Because of its location, difficult access and sociopolitical conditions, El Pato is consider by the Colombian Government as a "Zonia de Orden Pubhlico". The area has been articulated to only local commercial circuits and has 52 not either been favored by governmental development programs. Occupation of the area by arned groups has left the civil society caught in the middle, with no alternatives for establishing stability and improving living conditions. During the 1 980s, the presence of drug dealers and illicit crops added a new element to local conflicts. Illicit crops are today marginal mainly due to the fumigation carried out by the national arny in 1993 and low prices of coca leaf. However coca fields accounted for a big portion of forest clearing, as well as timber sales. In addition to land tenure conflicts, armed confrontation problems and illegal crops, 35 years of irrational occupation of the territory has taken place with the consequent environmental degradation resultant poverty. El Pato has been an area of agricultural frontier in permanent expansion, putting pressure on the highly sensitive Amazonian ecosystem and the Picachos Mountains National Park. Because of the fragile biophysical environment, transformation of forest into grassland and extensive open-field crops have exacerbated an irrational system of production that reproduces poverty. Perhaps what best characterizes peasant communities in El Pato is their level of organization, self management capacity and genuine initiative. Peasants have participated and have become main actors in several attempts to establish peace and insertion within the legal institutional framework. Local community-based organizations have made part of federations and confederations of poor peasants, landless and indigenous peoples. and have actively f-ought for genuine agrarian reform. In spite of agreements reached with the Colombian Government, local associations have been subject to attacks by powerful economic groups and vested interests related to cattle ranching. But in the imidst of such adverse historical processes, El Pato communities have emerged with an outstanding strength and self-determination to make reality the promised Zonas de Reserva Campesina Community Participation The establishment of a Peasant Enterprise Zone in El Pato-Balsillas area is the response of the Colombian Government to the petitions posed by thousands families that marched to the city of Bogota in August 1996 to request govemment action to stop fumigating the area with poisonous pesticides that destroy both illegal and legal crops and to provide land security and alternatives for social development to the poor. In that occasion, the government of Colombia signed an agreement, that was nothing else than the governments obligation to comply with the mandate expressed in the Agrarian refonn Law approved in 1994. The subsequent negotiation process has been rather difficult. Peasants were threatened and the maximum leader that organized the peasant marches was assassinated in 1997. In spite of the difficulties, local communities and governmental organizations have continued the process. Several public audiences resulting in written agreements have been carried out involving the main social actors. Attachment 2 presents the following records and official agreements: a) Acta de la Asamblea de Concertacion entre las Instituciones del Sistema Nacional Ambiental y el Comite Coordinador de las Juntas de Accion Comunal de la Region del Pato; Guayabal; San l'icente del Caguan; Diciembre 9 de 1996; b) Acta de Compromisos Comunidad-Incora; Guayabal;San Vicente del Caguan, 1996; c) Acta de Audiencia Publicapara la Formulacion de la Zona de reserva Campesina del Valle del Balsillas y la region del Pato; Guyabal. Noviembre 29 de 1997. The prograrn for establishing a Peasant Enterprise Zone in El Pato-Balsillas has, therefore, resulted from a wide participatory process and has been preceded by a popular initiative at the national and local level. The Sustainable Development Plan approved by the municipal government, INCORA, and community leaders is in itself a community development plan to reorder the territory, develop sustainable productive activities improving living conditions for the poor, strengthening local capacity and empowering peasant beneficiaries. 53 Community Organization Peasants in El Pato have developed a solid community organization and a well-organized decision-making system. Participation is understood by community leaders as co-management and empowerment. With no doubt, the most important assets and key factor for project success is the existent social capital, expressed in social cohesion and high level of cooperation among the 35 Juntas de Accion Comunal, Presidents Assembly, a multiactive cooperative (COOMULTIPATO - 48 members), women's association and cultural committee. In 1997, a Coordination Committee of Juntas de Accion Comunal (CJAC) was created as an executive organism to represent the community and expedite the process of the establishment the Peasant Enterprise Zone in El Pato-Balsillas. In addition to the high level of social cohesion, the community of El Pato, influenced in part by the guerrilla movement, has developed a very complex moral and juridical system that includes punishments for those that cut forest, rob, rape women or children, etc. Such sociopolitical norms have been recognized by governmental and non- governmental organizations that work in the area. Main Conflicts The zone declared by INCORA as "Zona de Reserva Campesina del Pato-Balsillas" is an scenario of multiple social conflicts in constant interaction. Some conflicts are internal to the region while others are external and more related to the course of the war at the national level. Main internal conflicts that currently shape the local life in El Pato are: (a) land tenure conflicts; (b) land use conflicts; and (c).conflicts related to illegal crops such as coca and amapola (dramatically reduced since 1993) and (d) administrative and jurisdictional conflicts with the municipal government and local powers. The main external conflict is related to the agrarian reform process and its social foundations in front of which, powerful vested economic, political and military interests have manifested degrees of opposition. On the other hand, the two-year process of creating the Peasant Enterprise Zone of El Pato-Balsillas has been allowed to go on by these external armned combatants. The evolution of the armed conflict and peace process at the national level will undoubtedly affect project outcomes. Specific actions for non-violent conflict resolution will be designed during the social assessment. Whatever the strategy will be, it is clear that a series of meetings and negotiations and mediations will be necessary to promote the idea that the project is not a post-war action, but one to be developed to create conditions for peace, tolerance and non-violent options for conflict resolution in the midst of ongoing conflict. The project will not take the place of any of the sociopolitical actors. Instead, it will convoke them in sustaining a common effort, that is, stability and social development for poor peasants and sustainable use of land and natural resources. The establishment of Peasant Enterprise Zone is a recognition of the role played by social injustice and inequality in terms of access to land, market, education, etc. in violence and confrontation, and is a clear expression of government commitment to search for elements of a peace dialogue. Inclusion of the Ministry of Interior within the Inter-institutional Committee is important as well to assure peace monitoring (Veedurias Civicas). The strategy for conflict resolution will require dialogue and negotiations with the following actors: * Powerful groups (paramilitaries-caKtle ranchers whose interest might appear as threatened). * Information provided to and consultation with guerrilla leaders. * Information provided to and consultation with officials of the National Army and Ministry of Defense. Hypothesis to be Tested During Project Life In order to develop a replicable model for Peasant Enterprise Zones, the following hypothesis should be tested during project life: * Strengthening of civil society reduces incentives for resolving conflict through violence. * Organized communities will influence the decisions of armed groups. 54 * Decentralization of the decision-making process and transference of responsibilities from national to local levels and from institutions to community organizations for the design and execution of their own development projects, will contribute to reduce unilateral control by armed groups. * Improving the material and cultural conditions of peasant families will turn them into allies in the protection and sustainable use of the surrounding natural resources and protected areas. * Land regularization in the agricultural frontier will prevent further expansion of the colonization process with consequent protection of rainforest biodiversity. Arrangements far Community Participation and Empowerment In spite of the tradition of community organization in- El Pato, there is a need for improving their institutional capacity to adequately face the new challenge of managing economic development through environmental and socially sustainable options. Moreover, because the relationship with the nation state in the region has been plagued with mutual distrust, a long mutual learning process between the parts will be necessary. The following are elements of a social development strategy for reinforcing and channeling social capital toward project objectives: Decision-making and execution. It is clear that the core of the pilot operation will be strengthening the Comitd de Juntas de Acci6n Comunal (CC-JAC) which represents, in turn, the 35 Juntas at the county level that constitute the Peasant Enterprise Zone. Helping the Committee to get legal recognition within the municipal institutional framework will necessarily be the first step to enable the community to participate and be accountable for taking decisions that truly represent the interests of the beneficiaries. Supported by the Bank, the CC-JAC is preparing the request for legal registration (personeriajuridica). Technical Assistance. While decision-making is a function that will rest in community organizations, the technical assistance will be provided by a Technical Group (TG) assembled by the Project Management Group (PMG), to work together with peasant representatives. In addition to the technical assistance function, the PMG will facilitate the interinstitutional coordination among governmental actors, private sector, NGOs, etc. Progressive transference of responsibilities to community organizations should take place as a condition for co-management and beneficiary empowermnent. Administration of Funds. There is great interest among social actors involved in the pilot to transfer responsibilities for administration of funds to local organizations. Management of expenditures and investments for less that 30,000, will fall under the responsibility of the CJAC-TG. Amounts over 30,000 will be managed by the PMG. Centralized administration of these funds is desirable, provided that application of funds and investments will be based in proposals and decisions made by the community, and that interactions will be characterized by transparency, accountability, and an open and mutual learning process. Special emphasis should be paid to facilitating wide discussions among beneficiaries around specific programs or actions to be financed under this loan. Democratically election of members of the CJAC-TG that will function at the local level, parity in the composition of such group and open consultation and negotiations will be keys to the success of the project. CHAPTER TWO' Strategic Neighbors: Indigenous Peoples and Territories According to the Agrarian Reform, indigenous territories can not be declared Peasant Enterprise Zones. However, indigenous Paez (Naso) that pertain to the Altamira Indigenous Reservation (Resguardo Indigena de Aliamira), located nearby the already declared Peasant Enterprise Zone in El Pato-Balsillas, have participated in public hearings and expressed support to the project. They have also expressed aspirations of their own, including -the construction of a road to link them to the market city of Neiva and participation in fruit production programs and 55 corn processing. Attachment 3 presents a document elaborated by the Colombia Indigenous Organization (Organzaci6n .ndigena de Colombia, ONIC) expressing indigenous support to the creation of the Peasant Enterprise Zone. The Altamira area has an extension of 10,556 ha and is one of the indigenous territories of the Paez ethnic group. Like peasant, indigenous Paez migrated from their ancestral territory (El Cauca Department) to Caqueta in the violent period when hundreds of indigenous families were annihilated. To preserve their lives, the Paeces opted to live in the most isolated territory as far as possible from the war. They moved to El Pato. They have constituted and elected the members of a Cabildo, the maximum traditional authority, according to the Paeces' rules. In 1993, the Cabildo requested the government to create a Resguardo Paez de Altamira. The Resguardo was created in 1996 and it is constituted by 145 persons that pertain to 21 families. Currently, the resguardo receives and manages funds transferred from the National Budget to indigenous territories as mandated by the Constitution of 1991 and other related legislation. Although the resources are administered by the municipality, they are communally owned and it is the Cabildo who decides how to use them. Indigenous Development Plan A full participatory process to design an Indigenous Development Plan that makes indigenous beneficiaries of the development program of the Peasant Enterprise Zone and that protects their rights, culture and territories will be carried out as part of project execution. The participatory indigenous development plan will be financed under this loan. As an advance, a strategy for inclusion-development options and protection of indigenous rights has been prepared with the help of a Colombian consultant who is in turn Advisor to the ONIC and Paeces in the region. The strategy will be based on the following premises: * Indigenous Paeces have achieved a high degree of organization and revival of their culture. Education in lengua naso (ancestral Paez language) is now transmitted by Paez indigenous teachers in el Cauca. Since the group of Altamira has been relatively isolated, it is desirable that the project facilitates their interaction with the Consejo Regional Indigena del Cauca (CRIC) and other Paez organizations and movements, so that they can benefit from the process of ethno-development and self-empowerment undertaken by other Paeces groups. * The cultural, economic and environmental impact of a new road to the resguardo should be assessed by the Paeces themselves. Information-sharing with other Paez groups that have already gone through similar experiences should be supported by the project, prior to any decision. * Any strategy put in place with the indigenous of the Resguardo de Altamira should be carefully monitored in order to learn and adjust the methodology before extending it to the indigenous in Guaviare and other Peasant Enterprise Zones. * As much as possible, project activities aimed at strengthening the autonomy and managerial capacity of colonists, should be extended to indigenous Paez of Altamira, based of course on previous consultations and framed within their socio-cultural identity. MAP SECTION 4r 71 -' 4 , t 40 > I ; .7TOLIMA' C70 40A ( TOLIMA $/ | V I C H A D A PEASANT ENTERPRISE / -t'~' j META I -1-' ZONES OF EL PATO Y . _ g / ~1 x_. / M. E T A <.,--VALLE DE BALSILLAS AND GUAVIARE h / ( - v X O u A, 1 N I A ~~~~~~~~~~~~~~~~~~PROJECT SITES CAUCA1H[L / 0 U A~~~~~~~~~~~~~~~~~~~~'I N A~~~~~~~~~~~~- RIVERS s . -/ z eEL PATO Y 'sas,, ! ,2 G GUAVIARE UA - / DEPARTMENT BOUNDARIES ) ^ / VALLE DE r - - - INTERNATIONAL BOUNDARIES BALSILLAS ', / - / . . X Z (D l.b A 8 ' iri 2 E , . ,, 7' ', V A ( ~ ~ ~ ~ ~ ~~~~0,.,, ~~~~~~~MILES '5, J X . > J r ~ ~ - 0 50MILES 100 (~~~~~~~~~~~~~ , /} 0ss 100; ! o t loo 200 . -'-''', t ^ QU0 4 '= j-A I';. " 9 ' . " ---' . (-- - , ! ^._ KILOMETERS 75° 700 s . \ X -v<; ~~~~~~~~~~~~~~~~~~~V Ae U r- E S ><>/ r'--PUTLJMAYO 0 , "N,--., / ¾ . . |B R A Z I L / x ,j '-s ~~~~~~~~~~~VENEZUELA, ECUADOR L _ M B I A @to@M;,>g, 0 /- - X t.-1, du i, cJ S-E _ STA~~~~~~~~~~~~50 deBoqota This map was produced by the . Map Design Unit of The World Bank. Arca of sapo The boundaries, colors, denominoations ,. _ o0 ', , and anyother information shownon P E R U 7.- this map do not imply, on the part of A M A Z O N A S EC DOR JBRAZIL The World Bank Group, any judgment 7U I J . ' N 3 . JR on the legal status of any territory, or B ; any endorsement or acceptance of I / such boundaries. 7P0 j R U 7. rn J \ I _ g - ( I ,, v _-_) 074' 70' 75