Document of The World Bank Report No: ICR3071 IMPLEMENTATION COMPLETION AND RESULTS REPORT (Loan No. IBRD-7169) ON A LOAN IN THE AMOUNT OF US$ 46.7 MILLION TO THE REPUBLIC OF GUATEMALA FOR A SECOND RURAL AND MAIN ROADS PROJECT May 12, 2014 Sustainable Development Department Guatemala, Central America Country Management Unit Latin America and the Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective March 18, 2014) Currency Unit = Quetzal GTQ$ 1.00 = US$ 0.130 US$ 1.00 = GTQ$ 7.716 FISCAL YEAR [January 1 – December 31] ABBREVIATIONS AND ACRONYMS ADIMAM Association of Municipalities in the Highlands of San Marcos Asociacion de Desarrollo Integral de Municipalidades del Altiplano Marquense CAS Country Assistance Strategy COMAVIs Maintenance Committees Comites de Mantenimiento Vial COFINEX Project Coordinating Unit (DGC) for External Financing Coordinadora de Financiamiento Externo COVIAL National Road Maintenance Fund Unidad Ejecutora de Conservacion Vial DGC General Roads Directorate Dirección General de Caminos EA Environmental Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan ENCOVI National Quality of Life Survey Encuesta Nacional de Condiciones de Vida ERP Poverty Alleviation Strategy Estrategia de Reducción de la Pobreza FY Fiscal Year FVR Regional Road Fund Fondo Vial Regional GDP Gross Domestic Product GoG Government of Guatemala GUAPA Guatemala Poverty Assessment HUISTA Association of Municipalities in the Huista Region in Huehuetenango Mancomunidad de la Región Huista de Huehuetenango IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results Report INFOM Municipal Development Institute Instituto de Fomento Municipal IPR Independent Procurement Review ii MAMSOHUE Association of Municipalities in the South West of Huehuetenango Mancomunidad del Sur Occidente de Huehuetenango MCIV Ministry of Communications, Infrastructure and Housing Ministerio de Comunicaciones, Infraestructura y Vivienda M& E Monitoring & Evaluation PAD Project Appraisal Document PCU Project Coordination Unit PDO Project Development Objectives QAG Quality Assurance Group RMRP Rural and Main Roads Project SMRRPP San Marcos Rural Roads Pilot Project TA Technical Assistance UCBM World Bank Project Coordination Unit in INFOM Unidad Coordinadora Banco Mundial UTAV Roads Technical Assistance Unit Unidad Técnica de Asistencia Vial Vice President: Jorge Familiar Calderon Country Director: Maryanne Sharp Country Manager: Oscar Avalle Sector Manager: Aurelio Menendez Project Team Leader: Stephen Muzira ICR Team Leader: Stephen Muzira iii GUATEMALA Second Rural and Main Roads Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph A. Basic Information....................................................................................................... v B. Key Dates ................................................................................................................... v C. Ratings Summary ....................................................................................................... v D. Sector and Theme Codes .......................................................................................... vi E. Bank Staff .................................................................................................................. vi F. Results Framework Analysis .................................................................................... vii G. Ratings of Project Performance in ISRs ................................................................. xiv H. Restructuring (if any) ............................................................................................... xv 1. Project Context, Development and Objectives Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 5 3. Assessment of Outcomes .......................................................................................... 10 4. Assessment of Risk to Development Outcome......................................................... 15 5. Assessment of Bank and Borrower Performance ..................................................... 16 6. Lessons Learned ....................................................................................................... 18 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 19 8. Additional Information ............................................................................................. 19 Annex 1. Project Costs and Financing .......................................................................... 21 Annex 2. Outputs by Component ................................................................................. 24 Annex 3. Economic and Financial Analysis ................................................................. 26 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 27 Annex 5. Beneficiary Survey Results (if any) .............................................................. 29 Annex 6. Stakeholder Workshop Report and Results (if any) ...................................... 30 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 31 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders ...................... 36 Annex 9. Impact Evaluation of Second Rural and Main Roads Program - Summary . 37 Annex 10. List of Supporting Documents .................................................................... 40 iv A. Basic Information Second Rural and Country: Guatemala Project Name: Main Roads Project Project ID: P055085 L/C/TF Number(s): IBRD-7196 ICR Date: April 15, 2014 ICR Type: Core ICR Republic of Lending Instrument: SIL Borrower: Guatemala Original Total US$ 46,700,000.00 Disbursed Amount: US$ 46,283,877.22 Commitment: Environmental Category: B Implementing Agencies: MCIV- Ministry of Communications, Infrastructure and Housing INFOM - Municipal Development Institute DGC - General Roads Directorate Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 08/21/2001 Effectiveness: 11/03/2004 11/03/2004 07/26/2006 11/27/2007 06/29/2009 03/11/2010 Appraisal: 01/13/2003 Restructuring(s): 06/24/2011 10/25/2011 11/07/2011 12/15/2011 09/14/2012 Approval: 05/06/2003 Mid-term Review: 03/15/2007 04/27/2007 Closing: 12/31/2007 09/30/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: High Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Unsatisfactory v C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry Moderately Satisfactory Government: Moderately Satisfactory Quality of Implementing Moderately Satisfactory Moderately Unsatisfactory Supervision: Agency/Agencies: Overall Bank Overall Borrower Moderately Moderately Satisfactory Performance Performance Unsatisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA) Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA) DO rating before Moderately Closing/Inactive status Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Rural and Inter-Urban Roads and Highways 90 90 Sub-national government administration 10 10 Theme Code (as % of total Bank financing) Rural services and infrastructure 67 67 Participation and civic engagement 33 33 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon David de Ferranti Country Director: Maryanne Sharp Jane Armitage Sector Manager: Aurelio Menendez Danny M. Leipziger Project Team Leader: Stephen Muzira Guillermo Ruan/Cecilia Corvalan ICR Team Leader: Stephen Muzira ICR Primary Author: Oswaldo Patino/Bexi Jimenez vi F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The overarching goal of the Second Rural and Main Roads Project (SRMRP) is to reduce rural poverty and build social cohesion by improving and maintaining access in rural areas to markets, schools, health centers and other social and economic infrastructure through broadened community participation. By emphasizing beneficiary involvement, the SRMRP will assure that local development decisions reflect the needs and priorities of rural communities. The specific project development objectives of the SRMRP are: (a) improve rural access on a sustainable basis by improving paths, rural roads, secondary/departmental roads, and main roads; (b) develop institutional capacity at the local and central level, for rural roads management and strengthening stakeholder participation; and (c) generate employment in rural areas by developing an entrepreneurial culture using cost-effective technologies, providing a demonstration effect through pilot programs, and promoting spillover activities. Revised Project Development Objectives (as approved by original approving authority) N.A. (a) PDO Indicator(s) – from Project Appraisal Document Original Target Formally Actual Value Achieved at Values (from Indicator Baseline Value Revised Target Completion or Target approval Values Years documents) PDO Indicator 1 : Improved access to social services and integration of rural zones. 1.400,000 people from 1. 400, 000 people 1. 355, 000 people ADIMAM in the San in ADIMAM benefited from improved Marcos region benefit continue to benefit access in both San from improved access from improved Marcos and access Huehuetenango from INFOM component 2. 500,000 people 2. 500,000 people 2. 408,820 people Value within two new in the benefited from the DGC (quantitative or associations in the Huehuetenango investments in both qualitative) Huehuetenango region will be provided departments do not have reliable with reliable access access 3. Existing travel times 3. Travel time 3. Travel time reduced by on core road network reduced up to 40 42 percent percent after rehabilitation of the core network Date achieved 01/01/2005 04/10/2003 09/15/2013 vii Targets substantially achieved. At appraisal, it was estimated that the project would benefit 900,000 beneficiaries; the data collected at the completion of the project corresponds to the total beneficiary population of each municipality that integrates the three mancomunidades. However, beneficiaries were separated by implementing agency (INFOM and DGC) during implementation and data reported is by the implementing agency and not by the municipality. Nevertheless, the project benefited 85 percent of the Comments planned number of beneficiaries. (incl. % The actual reduction in travel time of 42 percent was calculated based on the Highway achievement) Development and Management Model (HDM 4) by inputting the road conditions (as measured by the International Roughness Index - IRI) before project interventions, and running the model to establish a reference number, and then inputting the road conditions (as measured by IRI) after the improvements have been made and running the model to establish the new travel time number. The difference between the two model results is the percentage reduction in travel time. Strengthened institutional capacity to manage rural transport infrastructure on a PDO Indicator 2 : sustainable basis. 1. Municipalities do 1.Three municipal 1. Three municipal associations not co-finance works associations participating in participating in the program, co- the program, co-financing financing rehabilitation and rehabilitation and maintenance activities maintenance activities 2. UTAVs and FVR 2. UTAVs fully 2. UTAVs operational and non existent implemented and assisting assisting 21 municipalities in 21 municipalities in selecting and prioritizing roads selecting and prioritizing roads 3. Poor road 3. FVRs fully implemented. 3. FVRs operational and maintenance Each municipality within municipalities maintaining rural the municipal associations network rehabilitated. Value formed under the Project Municipal contributions to (quantitative or contributing Q75,000 per operations of at least Q80,000 Qualitative) year to finance operational per year activities 4. No national 4. Adoption of a national 4. National transport and rural transport and rural strategy for rural roads and roads participatory strategy roads participatory transport, including its done but not implemented. strategy discussion with stakeholders 5. No strengthening 5. National institutions 5. Strengthening of involved of involved involved in the strategy institutions (INFOM and DGC). institutions strengthened to fulfill their responsibilities 6. No mid-term 6. Mid-term impact 6. Mid-term impact evaluation impact evaluation assessment completed. done in May 2008. done viii Date achieved 01/01/2005 04/10/2003 09/15/2013 Targets substantially achieved. As part of the IBRD Loan 7169-GU, two municipal Comments associations were created, equipped and strengthened: HUISTA and MAMSOHUE. The (incl. % already created ADIMAM was also supported. The national institutions INFOM and DGC achievement) were strengthened with training, learning by doing through Project implementation, and hiring of consultants to strengthen capabilities. PDO Indicator 3 : Employment generated in rural areas. 1. No microenterprise 1. The 1. 180 COMAVIs project, and no micro- Microenterprise (maintenance committees) enterprises working on Pilot Project fully were created the maintenance of implemented and SMRRPP roads evaluated. About 20 microenterprises working in the maintenance of the SMRRPP roads rehabilitated under previous operation (Loan 4260-GU) 2. No community 2. Under the 2. 180 COMAVIs trained, organization and/or microenterprise equipped and carrying out micro-enterprise. No pilot program, maintenance functions permanent jobs created about 20 with about 120 workers Value community (quantitative or organizations Qualitative) and/or microenterprise created and fully operational (creation of 150 permanent jobs). 3. No entrepreneurial 3. Creation of an 3. Culture for maintenance culture for road entrepreneurial strengthened but not maintenance, no culture for road necessarily entrepreneurial enterprises created, and maintenance cultures since COMAVIs no training for activities through are not income receiving contractors and technical assistance enterprises consultants and the creation of 20 enterprises and training for 200 local contractors and consultants. Date achieved 01/01/2005 04/10/2003 09/15/2013 ix Target marginally achieved. Due to low financial capacity of the municipalities, and due to their request to retain the community model of maintenance without pay, the pilot program was dropped. Instead, the Project supported the creation of the COMAVIs, which were established to perform the rural roads maintenance function. These committees were equipped and Comments trained by INFOM. The COMAVIs were created in all three mancomunidades (incl. % (ADIMAM, HUISTA and MAMSOHUE) and not only in ADIMAM as achievement) originally planned. The failure to create paying maintenance jobs and consequent entrepreneurial culture is a major shortcoming although the culture of maintenance aspect was achieved. Jobs were also created in the works undertaken (which contributed to the entrepreneurial and spillover effects). (b) Intermediate Outcome Indicator(s) Component 1. Rural Roads Rehabilitated and Maintained. Formally Original Target Actual Value Achieved at Revised Indicator Baseline Value Values (from Completion or Target Target approval documents) Years Values IO Indicator 1.1 : 830 km of rural roads rehabilitated Value (quantitative or 0 830 km 819 km 749 km qualitative) Date achieved 01/04/2003 04/10/2003 09/24/2012 09/15/2013 Target partially achieved. 749 km completed, (of which 674 km were completed Comments under INFOM and 75 km completed under DGC) against a revised target of 819km (incl. % (91 percent). achievement) IO Indicator 1.2 : 300 km of tracks improved and 80 footbridges constructed 30 km of periodic Value 300 km pathways and maintenance (gravel, (quantitative or 0 N.A. 80 pedestrian bridges stone, etc.) and 37 qualitative) pedestrian bridges. Date achieved 01/04/2003 04/10/2003 09/15/2013 Target partially achieved. Local communities asked to replace the pathways with Comments the periodic maintenance works. The remaining bridges could not be contracted due (incl. % to contractor non-fulfillment of the bid criteria, and due to increased costs from the achievement) original 2003 estimates. Pilot of labor intensive road rehabilitation works implemented in some of the IO Indicator 1.3 : roads of the two municipal associations in Huehuetenango Value (quantitative or Not implemented Implemented N.A Implemented qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 x Formally Original Target Actual Value Achieved at Revised Indicator Baseline Value Values (from Completion or Target Target approval documents) Years Values Comments Target achieved. Some of the roads in Huehuetenango were constructed with labor (incl. % intensive methods i.e. cobblestone (empedrado) roads, and concrete roads. achievement) Approximately 2000m of spot improvements along segments of municipal IO Indicator 1.4 : roads outside the core road network Value (quantitative or 0 2000 N.A. 2000 qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Comments Target achieved. (incl. % achievement) Approximately 20 road maintenance micro-enterprises created in SMRRPP IO Indicator 1.5 : area Value (quantitative or 0 20 N.A. 180 Qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Target achieved. ADIMAM officials requested to stay with the model of Comments maintenance committees (COMAVIs) where work is voluntary and not paid. 61 (incl. % COMAVIs were set up in San Marcos, and an additional 119 were set up in achievement) Huehuetenango for a total of 180 COMAVIs. Project has provided tools and equipment. COMAVIs have also been trained. IO Indicator 1.6: 350 km of rural roads maintained by microenterprises Value (quantitative or 0 350 km N.A. 380 km Qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Comments Target exceeded. 380km maintained by 61 COMAVIS in San Marcos. An extra (incl. % 325km maintained by 119 COMAVIs in Huehuetenango (not measured in the achievement) indicator). Component 2: Secondary /departmental roads improved and/or rehabilitated Formally Original Target Actual Value Achieved at Revised Indicator Baseline Value Values (from Completion or Target Target approval documents) Years Values IO Indicator 2.1: Km of secondary/departmental roads upgraded Value (quantitative or 0 32 km N.A Dropped qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Comments Indicator and target removed in first loan amendment. By the end of 2006 the xi Formally Original Target Actual Value Achieved at Revised Indicator Baseline Value Values (from Completion or Target Target approval documents) Years Values (incl. % Bank received a request from the GoG to reallocate US$10.5 million that were achievement) initially aimed to finance this component to a Road Reconstruction Plan after hurricane Stan destroyed some important road sections; US$7.5 million were allocated to DGC to complete the rehabilitation of secondary roads in San Marcos (100 km) and US$ 3 million to INFOM to rebuild rural road networks. IO Indicator 2.2: Km of secondary/departmental roads rehabilitated and improved Value (quantitative or 0 175 km 145 km 75 km qualitative) Date achieved 01/04/2003 04/10/2003 2008 09/15/2013 Target partially achieved. To date 75 km of secondary roads have been completed Comments (52%). The remaining will be completed with Government financing. (incl. % This indicator was amended in the first loan amendment to integrate rehabilitation achievement) of departmental roads. The target was set at 100 km. However, in 2008, the target was revised upwards to 145 km. Average travel time reduced by 20 percent on secondary/departmental roads IO Indicator 2.3 : implemented under the Project Value (quantitative or 0 20% N.A 42% qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Comments Target exceeded on intervened roads. (incl. % achievement) Component 3: Main road (CA-1) improved and completed Formally Original Target Actual Value Achieved at Revised Indicator Baseline Value Values (from Completion or Target Target approval documents) Years Values IO Indicator 3.1: 65 km of critical sections of main road (CA-1) reconstructed Value (quantitative or 0 65 km N.A Dropped qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Indicator and target removed in first loan amendment. By the end of 2006 the Comments Bank received a request from the GoG to reallocate US$10.5 million that were (incl. % initially aimed to finance this component to a Road Reconstruction Plan after achievement) hurricane Stan destroyed some important road sections. The Government financed the works for the CA1 corridor. xii Component 4: Enhanced capacity of the associations of municipalities to support the maintenance and development of rural road infrastructure on a sustainable basis. Formally Original Target Actual Value Achieved at Revised Indicator Baseline Value Values (from Completion or Target Target approval documents) Years Values Permanent Technical Units (UTAVs) and Regional Road Funds (FVR) IO Indicator 4.1: implemented and strengthened in the associations included in the Project. Value (quantitative or Not implemented Implemented N.A Implemented qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Comments Target achieved. The FVRs were redesigned to include a Head and Treasurer in (incl. % each mancomunidad. achievement) 20 road maintenance micro-enterprise contracted and working satisfactory for IO Indicator 4.2: the maintenance of the roads rehabilitated by the San Marcos Rural Roads Pilot Project. Value (quantitative or Not implemented Implemented N.A. Implemented qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Target achieved. Though not under a micro-enterprise model, 61 COMAVIs were Comments set up in San Marcos, and an additional 119 were set up in Huehuetenango for a (incl. % total of 180 COMAVIs. Project provided tools and equipment. COMAVIs have also achievement) been trained. Satisfactory implementation at the national level of relevant components of the IO Indicator 4.3 : Social Management Plan Value (quantitative or Not implemented Implemented N.A. Implemented qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Comments Target achieved. Social Management Plan implemented as per its provisions. (incl. % achievement) Satisfactory implementation at the local level of relevant components of the IO Indicator 4.4 : Social Management Plan Value (quantitative or Not implemented Implemented N.A. Implemented qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Comments Target achieved. Social Management Plan implemented as per its provisions. (incl. % achievement) Component 5: Strengthened national institutional capacity to manage rural transport infrastructure and services on a sustainable basis. xiii Formally Original Target Actual Value Achieved at Revised Indicator Baseline Value Values (from Completion or Target Target approval documents) Years Values Project Coordination Unit from INFOM incorporated into the Organizational IO Indicator 5.1: structure of INFOM Value (quantitative or Not incorporated Incorporated N.A. Incorporated qualitative) Date achieved 01/04/2003 04/10/2003 09/15/2013 Target achieved. Coordination unit incorporated into INFOM structure. As a result Comments of the Project, INFOM has gained solid experience in financial management, (incl. % procurement and safeguards and is now equipped to implement other projects (and achievement) in addition to the Project, INFOM is also managing a loan financed by Japan). G. Ratings of Project Performance in ISRs Actual Date ISR Disbursement No. DO IP Archived s (USD millions) 1 05/30/2003 Satisfactory Satisfactory 0.00 2 11/26/2003 Satisfactory Satisfactory 0.00 3 12/02/2003 Satisfactory Satisfactory 0.00 4 05/28/2004 Satisfactory Satisfactory 0.00 5 06/15/2004 Unsatisfactory Unsatisfactory 0.00 6 11/30/2004 Unsatisfactory Unsatisfactory 0.00 7 04/22/2005 Moderately Satisfactory Moderately Satisfactory 0.47 8 02/16/2006 Moderately Satisfactory Moderately Satisfactory 2.51 9 10/03/2006 Moderately Satisfactory Moderately Satisfactory 3.28 Moderately 10 04/13/2007 Moderately Unsatisfactory 5.18 Unsatisfactory Moderately 11 11/19/2007 Moderately Unsatisfactory 6.16 Unsatisfactory 12 12/04/2007 Moderately Satisfactory Moderately Satisfactory 6.16 13 06/25/2008 Moderately Satisfactory Moderately Satisfactory 7.84 14 12/15/2008 Moderately Satisfactory Moderately Satisfactory 11.25 Moderately 15 04/04/2009 Moderately Unsatisfactory 14.41 Unsatisfactory 16 06/25/2009 Moderately Satisfactory Moderately Satisfactory 16.09 17 11/13/2009 Moderately Satisfactory Moderately Satisfactory 25.10 Moderately 18 01/26/2010 Moderately Satisfactory 25.10 Unsatisfactory xiv Moderately 19 05/10/2010 Moderately Satisfactory 27.30 Unsatisfactory Moderately 20 10/06/2010 Moderately Satisfactory 30.28 Unsatisfactory Moderately 21 01/24/2011 Moderately Satisfactory 38.96 Unsatisfactory 22 05/18/2011 Moderately Satisfactory Moderately Satisfactory 41.95 23 11/23/2011 Moderately Satisfactory Moderately Satisfactory 43.80 Moderately 24 05/28/2012 Moderately Satisfactory 44.79 Unsatisfactory Moderately 25 09/05/2012 Moderately Satisfactory 45.74 Unsatisfactory Moderately 26 03/19/2013 Moderately Satisfactory 45.74 Unsatisfactory Moderately 27 09/10/2013 Moderately Satisfactory 45.74 Unsatisfactory H. Restructuring (if any) ISR Ratings Amount Board at Disbursed at Restructuring Reason for Restructuring Approved Restructurin Restructurin Date(s) & Key Changes Made PDO Change g g in USD DO IP millions 1st Loan Agreement Amendment: To accommodate a modification to the Project description and a reallocation of loan 09/08/2006 MS MS 2.62 proceeds, allowing the loan to help finance some of the costs of Hurricane Stan related road infrastructure damage. 1st Closing date extension (18 months) - From Dec 2007 to June 2009 – to extend implementation time lost initially due to an 18 11/09/2007 MU MU 6.16 month delay in congressional approval and declaration of effectiveness of the loan; in addition, the restructuring modified the xv ISR Ratings Amount Board at Disbursed at Restructuring Reason for Restructuring Approved Restructurin Restructurin Date(s) & Key Changes Made PDO Change g g in USD DO IP millions action plan to adjust to the delay as well as to provide enough time to contract and carry out the works and consultancy services needed for the Project’s implementation. 2nd Closing date extension 06/29/2009 MS MS 16.09 (24 months) - From June 2009 to June 2011. 2nd Loan Agreement Amendment: to raise the financing percentage (from 75% to 85% for eligible 04/14/2010 MS MU 26.02 expenditures) of the loan for rural road works given financial constraints in the beneficiary municipalities. 3rd Closing date extension (6 months): From June 2011 to December 2011. Since resettlement had taken place in conjunction with some of the secondary road improvement works, the Government prepared and disclosed on April 26, 2011 06/24/2011 MS MS 43.07 a remedial action plan in line with Bank guidelines on involuntary resettlement. The extension allowed for: (i) support in the implementation of the Corrective Action Plan and (ii) completion of ongoing contracts for tertiary road and bridge improvements. 3rd Loan Agreement 10/25/2011 MS MS 43.80 amendment: to trigger the xvi ISR Ratings Amount Board at Disbursed at Restructuring Reason for Restructuring Approved Restructurin Restructurin Date(s) & Key Changes Made PDO Change g g in USD DO IP millions Bank’s safeguard policy on Involuntary Resettlement (OP/BP 4.12), including the implementation of the Corrective Action Plan 4th Loan Agreement Amendment: to reallocate funds within the loan so that 12/08/2011 MS MS 43.80 proceeds could be used to finance outstanding actions under the Corrective Action Plan. 4th Closing date extension (9 months) From December 2011 to September 2012. - The extension was intended to: (i) resolve all outstanding cases of involuntary 12/15/2011 MS MS 44.79 resettlement and, (ii) support the completion of ongoing contracts for secondary roads, tertiary roads and bridge improvements and impact evaluation study. 5th Closing date extension (12 months): From September 2011 to September 2013. The proposed extension was necessary to (i) complete the implementation of the Corrective Action Plan (to 09/14/2012 MS MU 45.74 resolve the outstanding resettlement issue), (ii) the completion of consultancy work on the impact evaluation of the Project, and (iii) the completion of the secondary roads construction in the departments of xvii ISR Ratings Amount Board at Disbursed at Restructuring Reason for Restructuring Approved Restructurin Restructurin Date(s) & Key Changes Made PDO Change g g in USD DO IP millions Huehuetenango and San Marcos. I. Disbursement Profile xviii 1. Project Context, Development and Objectives Design 1.1 Context at Appraisal 1. Country and Sector Background. At the time of Project appraisal in 2003, Guatemala was still suffering from the after-effects of a 35 year long civil strife that kept the economy from reaching its full potential with a GDP per capita of US$1,817 and relatively low growth rates (2.5 percent). According to the 2000 National Quality of Life Survey (ENCOVI), more than half the population was categorized as poor and nearly 2 million people (18 percent) lived in extreme poverty. This dire situation was more prominent in the rural areas, with poverty levels twice as high compared to those in the urban areas. The civil war had also created an untenable situation with the marginalization of the poor and indigenous populations that live in remote isolated areas. These populations remained disconnected from the main country fabric due to deficient infrastructure and a lack of basic services. Following the signing of the Peace Accords of 1996, the Government had committed to increasing social cohesion and reducing poverty. Physical connectivity was identified as a critical element to achieving these goals. 2. An unreliable and unsatisfactory road network, especially in rural areas, was a large determinant factor in the poverty profile of the country. The absence of all-weather roads limited access to basic services and the lack of an adequate distribution network for crops and essential products led to worsening welfare conditions. This created particularly grave circumstances for the rural poor who derived their income predominantly from agricultural labor and who lived in small (less than 10,000 people) municipalities with limited infrastructure service provision. Thus, a key step for poverty reduction called for integrating these smaller, rural municipalities with large percentages of poor populations, with services, access to markets and connectivity with the rest of the economy. 3. Guatemala´s road network was estimated to be approximately 26,000 km of roads, of which only 14,000 km was classified. Of the classified network, 10,000 km were unpaved, and only 45 percent were in maintainable condition. Jurisdictional competence for the main and secondary road network was under the General Roads Directorate (DGC) within the Ministry of Communications, Infrastructure and Housing, while the municipalities were in charge of the tertiary road network. Other actors such as the Municipal Development Institute (INFOM) and the National Fund for Peace (FONAPAZ at the time) have also been involved in the delivery of tertiary roads and bridges. According to ENCOVI 2000, 13 percent of the households primarily used dirt roads or paths and trails to reach places outside their community. Only 40 percent of the rural ENCOVI households had access to public transport (versus 65 percent of the urban ENCOVI households). 4. All of these facts underscored the need for rural road work interventions in Guatemala, including: (i) the rehabilitation and subsequent regular maintenance of rural roads; and (ii) the improvement of tracks, paths and footbridges used by residents of remote communities. The absence of a dependable road network implied that most households in San Marcos and Huehuetenango were hours away from a marketplace to buy and sell their products, and very poorly connected to the rest of the country. This situation was worse during the rainy 1 seasons when many roads became impassable and whole communities remained cut off from the rest of the country. 5. Rationale for Bank assistance. The Bank has supported the development of Guatemala’s road sector for over sixteen years and has maintained an important policy dialogue on the development and maintenance of the sector. At the time of appraisal, the Bank had an active Project: the Rural and Main Roads Project (RMRP I; Loan 4260-GU approved in 1997). This first Project focused in San Marcos, a rebel stronghold during the civil war and one of the most isolated parts of the country. Besides the isolation and years of underinvestment in basic infrastructure, there was the general mistrust that 35 years of conflict had generated between the central government and the local communities. RMRP was intended to be a first step towards a sustainable rural development agenda and bringing together central and local authorities in a combined effort to improve the livelihoods of the rural population. The Implementation Completion and Results Report of the RMRP rated the overall outcome as satisfactory, driven mainly by the successful completion of the rehabilitation of rural roads and the incorporation of the UTAV and ADIMAM. The current Project of focus (Second Rural and Main Roads Project or RMRP II as it was referred to in short) was proposed to anchor the efforts already started under the first Project, and further the Bank assistance and support in achieving the stated challenges following a similar framework in other areas of the country. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 6. The objectives of the Project were to assist the Borrower in: (a) improving rural access on a sustainable basis by improving paths, rural roads, secondary/departmental roads, and main roads; (b) developing institutional capacity at the local and central level, for rural roads management and strengthening stakeholder participation; and (c) generating employment in rural areas by developing an entrepreneurial culture using cost-effective technologies, providing a demonstration effect through pilot programs, and promoting spillover activities. To measure the Project’s achievement of its development objectives, the following key indicators were presented in the main text of the PAD: (i) improved rural road network in Mamsohue and Huista; (ii) strengthened institutional capacity to manage rural transport infrastructure on sustainable basis; and (iii) employment generated in rural areas. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 7. The original PDO remained unchanged during the Project’s implementation. However alterations were made in Project restructurings to some indicators (and their targets) due to changing circumstances as explained in the restructuring details, and in the results framework (see Data Sheet Section F). The PAD results framework also introduced two sub- indicators relating to: (i) satisfactory implementation at national level of relevant components of the Social Management Plan; and (ii) Satisfactory implementation at local level of relevant components of the Social Management Plan. 1.4 Main Beneficiaries 8. The indigenous population of western Guatemala was the primary beneficiary of the Project (see Maps IBRD 40903 and IBRD 40904). The Project was implemented in the 2 departments of San Marcos and Huehuetenango located in the western part of Guatemala. Thirty three municipalities 1 were the direct beneficiaries of the Project, totaling around 795,743 people. It is worth noting that the PAD referred instead to a total number of beneficiaries of 900,000 people (400,000 in the ADIMAM association in San Marcos area and 500,000 in the MAMSOHUE and HUISTA associations in the Huehuetenango area). The Project area is predominantly rural with about 70 percent indigenous population, mostly involved in agricultural and commercial activities. 1.5 Original Components (as approved) 9. The Project consisted of the following four components: Component 1 ̶ Rural Roads Program (US$20.3 million, including US$14.62 million IBRD financing): The component was implemented by the Municipal Development Institute (INFOM) and financed the rehabilitation of about 830 km of rural roads in both Huehuetenango associations to restore year-round transit and meet the specific transport needs of the local communities. This component was also to support the development and implementation of the following pilot projects: (i) road maintenance pilot; (ii) trail paths and footbridges pilot; and (iii) labor intensive road rehabilitation works. Component 2 ̶ Main, Secondary/Departmental Roads Program (US$24.45 million, including US$17.35 million IBRD financing): This component was implemented by General Roads Directorate (DGC) and included four subcomponents: (i) reconstruction of main roads; (ii) upgrading of unpaved secondary and departmental roads, (iii) rehabilitation of unpaved departmental roads; and (iv) road maintenance. Component 3 ̶ Support for Decentralized Rural Road Development (US$24.45 million, including US$17.35 million IBRD financing): This component was implemented by INFOM and supported the extension of sustainable arrangements and financing of local roads in rural areas developed under the San Marcos Rural Roads Pilot Project (SMRRPP) to other departments. To reach the scale of a cost-effective road network, the municipalities had to form the Association of Municipalities in the Huista Region in Huehuetenango (HUISTA) and Association of Municipalities in the South West of Huehuetenango (MAMSOHUE) associations to manage their respective municipal road networks. Each association was to create a Road Technical Assistance Unit (UTAV) staffed according to their specific needs. To support their activities, this component financed the following activities: (i) Project Coordination and Equipment; (ii) Municipal Capacity Strengthening; (iii) Technical Assistance (TA) for Project implementation; and (iv) Works Supervision. 1 These 33 municipalities were grouped among 3 municipal associations: (a) ADIMAM (Asociacion de Desarrollo Integral de Municipalidades del Altiplano Marquense) with 12 municipalities and a population of 367,207; (b) MAMSOHUE (Mancomunidad de Municipalidades del Sur Occidente de Huehuetenango) with 13 municipalities and a population of 243,945; and (c) HUISTA (Mancomunidad de la Región Huista de Huehuetenango) with 8 municipalities and 184,591habitants. 3 Component 4 ̶ Support for Main/Departmental Roads (US$6.25 million, including US$5.00 million IBRD financing): This component was implemented by DGC and financed operational costs and equipment for the Project Coordination Unit (COFINEX), during the Project implementation period, engineering studies and final designs, and works supervision. 1.6 Revised Components 10. Changes were introduced in response to the need to repair the road infrastructure damaged under Hurricane Stan in late 2005, and to the insufficiency of Project funds to achieve originally foreseen activities due to cost increases and changes in design and scope. In November 2011, a reallocation of credit proceeds was also approved to finance the reconstruction of houses that were affected by the civil works on secondary roads in Huehuetenango. The following changes were made to two Project components: Component 1 – Rural Roads Program: an activity was added for the “rehabilitation and improvement of about 250km of core rural network rehabilitated under the RMRP I and damaged by the Hurricane Stan”. Component 2 ̶ Main, Secondary/Departmental Roads Program: all four sub-components were replaced with one new activity “rehabilitation and improvement of about 100 km of departmental roads located in the RMRP’s areas that were damaged by Hurricane Stan”. 1.7 Other Significant Changes 11. Target revisions. No formal target revisions were made to the results framework. However, with the signature and countersignature of the first amendment to the loan agreement (with consequent changes in components and activities), some targets were invariably affected, especially the number of kilometers of roads to be rehabilitated, or improved. Since the Secondary and Main Roads component (Component 1) was restructured, the total target kilometers under this component, as well as the corresponding indicators, should have been replaced with one target indicator of 100 km. (Details in Section 1.3 above). 12. There have been four amendments to the loan agreement and five closing date extensions (see Data Sheet Section H). Two loan amendments are discussed under the revised components section (the first and fourth amendments). The second amendment (signed on March 23, 2010 and countersigned on April 14, 2010) raised the financing percentage of the loan for rural road works from 75 to 85 percent as a consequence of financial constraints in the beneficiary municipalities. The third amendment (signed on October 4, 2011 and countersigned on October 25, 2011) triggered the Bank’s safeguard policy on Involuntary Resettlement (OP 4.12) and the implementation of the Corrective Action Plan. The Project was extended five times to allow for the implementation of outstanding Project activities due to delays in effectiveness, delays related to Hurricane Stan, and to finalize the reconstruction of houses affected by secondary road construction in the Huehuetenango area. 4 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 13. The Project responded to an analysis of the national context and reflected experiences of a previous well-performing Project, the RMRP I and SMRRPP. As part of the completion process of the RMRP I, a stakeholder workshop was carried out, during which, the effectiveness and acceptability to the beneficiary population of the implemented model was confirmed and deemed a good base for the Project. Furthermore, the Project design incorporated lessons learned from other similar projects in Latin American countries, specifically the Rural Road Project in Peru. The Project design envisioned the following: (i) Extend the model of empowering local communities by setting up local institutions for selecting, funding and implementing rural roads rehabilitation and maintenance programs; (ii) Aid GoG in its poverty alleviation and employment generation focus; (iii) Pilot the improvement of non-motorized means of transport in ADIMAM through the improvement of tracks, paths and footbridges; (iv) Assist the GoG with financing rehabilitation works and road works that improve main, secondary, departmental and rural road networks; and (v) Provide critical support for capacity building in the region and for strengthening the capacity of INFOM, DGC, and municipal associations. 14. The chosen Project design faced two critical tests during implementation that magnified some of its inherent weaknesses. First, in some contracts, full engineering designs were not available and a design and build approach was adopted. This would have been a viable solution in theory but presented challenges in practice due to the lack of experience with the model and to the weak contract management environment. Second, at the time of Project appraisal, involuntary resettlement was not anticipated, given that none of the road sub-projects involved significant changes in width or alignment. As demonstrated by the chronology of Project closing date extensions, this resulted in significant implementation delays and challenges. On all other aspects, the Project design was appropriate, for instance, the rural roads component work, in particularly with setting up the municipal associations, helping to build capacities at the central and local levels in the administration, and management of road infrastructure assets. The design also failed to take into account lessons learned from RMRP I with respect to delays in implementation caused by the lack of strategy to deal with municipality requests for changes to agreed proposals. 15. Financial Management and Capacities. Financial management systems at both implementing agencies were deemed adequate during preparation. The financial capacity assessment of 2000 showed that the majority of municipalities would not have difficulties in meeting the expected costs of rehabilitation and maintenance of the road network. This assessment proved overly optimistic and failed to take into account the poverty levels in these areas. It was assumed that INFOM would assist through “adjustment programs” i.e. provide technical assistance to improve revenues. These optimistic financial assumptions created a number of constraints related to municipal local counterpart contributions throughout Project execution. At the same time, the planning for the realization of Project financial audits also faced 5 challenges, especially later in the Project, with delays in submitting the reports as required by the legal agreement. 2.2 Implementation 16. Project implementation suffered a number of setbacks, delay in the Project start date, and slow and challenging project execution. The RMRP II was approved by the Board of the Bank in May 2003 and became effective in November 2004. Since the early stages of the Project, progress was rated as unsatisfactory mainly due to the delay in loan approval by the Guatemalan Congress. Thereafter, the low rating of overall Project implementation process was due to the relatively stagnant disbursements and slow mobilization of works. Two years after the Project’s approval, only 11 percent of the loan had been disbursed and the first package of works was only in its very preliminary stages. 17. During implementation, the Project had to face several unpredicted shortcomings that greatly impacted its outcomes. During the ten years of Project execution, two hurricanes, one major tropical storm, and a volcanic eruption hit the country, causing significant loss of life and infrastructural damage. Hurricane Stan (2005) was the first and most severe of these three natural disasters. According to the Economic Commission for Latin America and the Caribbean impact assessment, the total negative impact of the hurricane amounted to 3.4 percent of the country’s GDP in 2004 and damage alone was equivalent to 39 percent of the country’s gross capital formation in the construction sector for that year. The hurricane caused significant and widespread damage, affecting half of the country, burying whole villages, causing huge damage to road infrastructure assets (accounting for US$446.9 million), including previously reconstructed roads, and leaving the country with death toll of 1,500 people. The region most affected by Stan was the department of San Marco, which had 39 percent of its population negatively impacted. This ultimately led to a Project restructuring to assist with a road restructuring plan. In addition, the Project also spanned four different administrations throughout its execution phase. The ministers, vice-ministers and heads of the implementing agencies changed multiple times during Project execution resulting in the subsequent turnover in Project Coordination Unit (PCU) staff (Project Coordinators in particular). This turnover adversely affected the institutional memory and fiduciary capacity of the PCUs creating additional delays in the implementation of the Project. (a) Implementation efficiency and delays 18. Counterpart funding. The lack of counterpart funding for the main and secondary roads component under DGC adversely affected performance of Project implementation. The delayed release of Borrower´s counterpart funds, compounded by the insufficient amounts after the design changes, was a factor that affected the rehabilitation of secondary roads and the completion of the component (especially during the period 2010-2014). At the same time, the rural roads component required a contribution of 25 percent of the infrastructure cost from the beneficiary municipality. Some municipalities continued to have delays even when their counterpart contribution was reduced to 15 percent. 19. Changes in cost and delays due to the design and building approach. As part of the secondary roads component, road reconstruction works (consisting of a total of seven road sections) were incorporated in the San Marcos area. Three separate international competitive 6 bidding processes were launched in late 2007. The contracts were based on a design and build approach (the contractor was to prepare the final designs). However, at the request of communities, variations to the original contract were made to incorporate major design changes. These design changes were due to: (i) a change in the pavement design from a gravel and double surface dressing to an asphalt pavement due to beneficiary requests; (ii) increases in earthworks quantities due to road vertical and horizontal improvements including slope cuts, and replacement of unsuitable roadbed materials; and (iii) other ancillary items not previously incorporated in the initial preliminary design. The changes resulted in cost overruns in the amount of US$35.6 million (from US$18.8 million original contract value to US$54.4 million to complete works). The changes resulted not only in unfunded cost overruns but also in protracted delays during implementation, and insufficient funds to complete all the works prior to the closing date of the Project. 20. Procurement challenges. The road civil works have been paralyzed for more than three years due to changes in design and cost increase, and the government´s inability to extend the original contract with the contractor because contract modifications had already exceeded the 40 percent maximum increase permissible under national law. At the same time, Bank financing for these contracts was exhausted and, thus, the road civil works had to be financed 100 percent with national resources to achieve full target completion (with an extra financing need of Q192 million or US$24 million equivalent). The Bank has been making all efforts beyond Project closure to support the Government in this regard in order for the target beneficiaries to receive the total number of kilometers of roads under the Project. 21. Resettlement. In the course of Project implementation, resettlement took place as a result of road design changes, widening of some sections, and the presence of houses too close to the road in the Huehuetenango area. The PAD had not contemplated the possibility of these potential adverse impacts in its main text even though an annex was added referring to a Resettlement Policy Framework, which was also included in the Supplemental Letter to the Loan Agreement. The compensation of affected people with house reconstruction, reconstruction of other affected structures including alternative compensation took considerable time to implement in accordance with Bank’s policies and guidelines. In addition, the implementing agency was constrained by the need to comply with the national Expropriation Law No. 438, dated July 1948 which is outdated but still remains in force. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 22. The Monitoring and Evaluation system had some weaknesses in its design and its implementation proved challenging. The M&E measured Project indicators through the Project executing units of the DGC and INFOM. Although the PDO of the Project was too broad, most of the indicators were related to specific Project development objectives and components. The indicators were somewhat problematic with many repetitions within the framework, or with some confusing cross-references, or unclear sources of the adopted numbers and targets. This situation was remedied by the loan amendment after Hurricane Stan that affected Project scope in 2006, but no formal restructuring of the results framework and targets was undertaken. Despite challenges, the Project output indicators were monitored on a regular basis. Moreover, this ICR report had sufficient data to analyze and assess the Project performance on its specific 7 development objectives (broader Project objectives on rural poverty and social cohesion are not easily measurable in transport projects without robust, and longer-term impact evaluations). The Project also undertook an impact evaluation albeit with some weaknesses (see Annex 9). 2.4 Safeguard and Fiduciary Compliance Safeguards 23. Environmental. Environmental Assessments (EA) for this Project were completed in 2002 and no significant environmental impacts were anticipated. Consequently, the Project was classified as Category B. According to the information available when the EAs were prepared, none of the roads included in the Project required significant changes in road characteristics (vertical or horizontal realignments). The Project´s impacts were projected to be positive, especially the paving of roads that would lead to less erosion of road materials into river streams, and to less exploitation of borrow pits for continued gravel maintenance. Three policies were triggered at the time of appraisal: OP/BP 4.01 on Environmental Assessment, OP/BP 4.11 on Cultural Property, and OP/BP 4.10 on Indigenous Peoples. The main environmental impacts requiring mitigation during road construction were: slope stabilization, prudent exploitation of borrow pits and material deposits, earthwork management, disposal of hazardous and surplus materials, management of dusts and noise, and protection of road drainage and water sources. In order to ensure adequate environmental management during construction for each road sub- project, an Environmental Management Plan (EMP) was developed in compliance with the national legislation taking into account the Environmental Manual for Road Design and Construction, developed by the DGC. Compliance with the EMPs was satisfactory. As had been expected at design, no major environmental impacts were detected during Project implementation in relation to the road sub-projects. 24. Cultural Property. In regard to cultural property, no specific adverse effects were identified during Project implementation. 25. Indigenous Peoples. To ensure that Indigenous People within the Project area of influence fully benefitted from the Project and were adequately protected, a consultative process with communities was carried out as part of the social analysis and assessment conducted during Project preparation. During rural road sub-project preparation, a Social Management Plan, under the supervision of INFOM, was prepared to maximize positive impacts of the Project and to prevent and mitigate any adverse impacts. As part of this Plan, INFOM disseminated information on road sub-project characteristics, sub-project status, and measures to address adverse impacts through workshops and community assemblies. Presentation in Mam Maya, Sipacapense Maya and other Mayan languages were made with the support of the presidents of the Community Development Councils (Consejos Comunitarios de Desarrollo). A capacity building specialist was a member of the core PCU team for the Project, supported by two social promoters “promotores sociales” based in each of the three mancomunidades that participated in the Project. INFOM also developed public awareness campaigns. These activities were coordinated with the mancomunidades, which assigned qualified technical personnel to monitor and oversee the implementation of the Plan. 8 26. Involuntary Resettlement. At the time of Project appraisal, OP/BP 4.12 on Involuntary Resettlement was not triggered given that the proposed road sub-projects did not have significant changes in alignments. However, in November 2009, the Bank supervision missions found that resettlements in three sections of the secondary road sub-projects were being carried out by the DGC in Huehuetenango (Santa Barbara, La Libertad and Tohon – Santiago Chimaltenango). The resettlements occurred as a result of: (i) the inclusion, in the final road design, of the widening of some sections, which required excavations and side cuts of rock or slope; (ii) the design changes, and (ii) the construction of new houses very close to the existing roads. 27. As a result, the Bank requested the GoG on December 22, 2009 to: (a) identify the number and location of all resettlement cases in Huehuetenango; (b) provide information on the processes used to handle complaints and determine compensation; and (c) indicate the extent of any displacement in the case of the San Marcos roads and the response or compensation given to the affected households. The Bank also informed Government at that time of the requirement to trigger the involuntary resettlement safeguard policy and the need for compliance with the same. 28. Through DGC and the supervising consultants, the Government subsequently identified 82 cases of dwellings and other structures affected or to be affected to accommodate the final alignment of the secondary road improvements in Huehuetenango and San Marcos. Of the 82 cases, 56 involved total or partial loss of dwellings. In the remaining 26 cases, the fences, entrances and water structures were affected. The majority of the cases were on the road alignment of the Santa Barbara road in Huehuetenango. 29. A Corrective Action Plan was prepared dated 26th April 2011, and a Project restructuring was done to accommodate the triggering of the involuntary resettlement in October 2011. Two procurement processes were carried out for the reconstruction of houses and structures; however, neither process was successful. Finally, in 2012, the Government requested the Bank to finance the house reconstruction with loan resources. The impact of population displacement and of house reconstructions have been highly problematic and caused over four years of delays in Project implementation. Nevertheless, as a result of concerted efforts and continuous collaboration between the Government and the Bank, all resettlement issues were successfully resolved by the loan closing date. Fiduciary 30. Financial management (FM) and Procurement. Fiduciary aspects under the Project were handled, by DGC and INFOM, in a moderately satisfactory manner. Financial management reports and auditing reports were at times submitted after the agreed period. Most were considered satisfactory. There were significant issues at both DGC and INFOM in delayed contractors’ and supervisors’ payments relating to internal budgeting processes and resource allocations. There were also shortfalls in non-payment of some municipality contributions in the INFOM administered component. 31. Integrity Concerns. There were a number of weaknesses identified in the procurement processes in 2008. The Bank Team addressed these red flags by designing a comprehensive action plan, which included lessons learned and focused on: (i) reviewing the Independent Procurement Review (IPR) process; (ii) strengthening the capacity of bid evaluation committee members; training DGC staff on capacity building on contract management issues. The IPR 9 process and the capacity strengthening of bid evaluation committee members were completed, and training of DGC staff was undertaken to enhance capacity on contract management issues in July 2013. The Bank noted the GoG’s support in these processes. The implementation units endorsed lessons learned to ensure that the Project and future Project management took appropriate measures to conduct additional due diligence as needed. 2.5 Post-completion Operation/Next Phase 32. Despite concerted efforts from the Government and the Bank, some road sections that form part of the Project had not been completed by the closing date. Due to cost overruns, these road sections are to be financed 100 percent with Government funds since Bank funds were exhausted. In Huehuetenango, 19 km out of 32 km remain to be paved and are expected to be completed satisfactorily this calendar year. In San Marcos, 51 km out of 113 km remain to be paved and is expected to be completed in eighteen months. The road sections in San Marcos are distributed in three contracts. The first contract covers four road sections: Tejutla-Las Delicias (San Miguel Ixtahuacan), Desvio Concepcion Tutuapa-Concepcion Tutuapa, Tejutla- Comitancillo, and Santa Irene-Rio Blanco for a total length of 53 km. The second contract covers two road sections: Comitancillo-San Lorenzo and San Lorenzo-San Miguel for a total length of 26 km. The third contract covers the road section Desvio Sipacapa-Sipacapa for a total length of 34 km. 33. In order to enable the satisfactory completion of the San Marcos roads, the Government asked the Bank to issue no objections to the revised execution times and costs needed to complete the three contracts. In January 2014, the Bank issued its no objection to the first road contract extension. At the time of ICR preparation, the two remaining no objections were pending, conditional on the Government providing the requisite proof that a competent supervision firm has been contracted to supervise the works. 34. Once completed, secondary road sections under the Project would be transferred to the remit of the maintenance agency the National Road Maintenance Fund (COVIAL) to undertake needed routine and periodic maintenance activities. With respect to the improvements of rural infrastructure, INFOM has agreed, in principle, to maintain a road maintenance team in order to monitor and provide technical assistance, as required, to the 180 COMAVIs created under the Project. The INFOM and the DGC have developed and strengthened capacity, in particular with respect to fiduciary and safeguards, to implement similar development projects. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 35. The relevance of the PDOs is considered Substantial. The PDO remains aligned with the country’s goal to reduce poverty and improve social cohesion. The PDO remains in line with the current development priorities of GoG, which aims to foster inclusion and participation of beneficiaries through decentralized decision-making and implementation of local investment, while strengthening local government and rural communities in planning and investing in basic infrastructure. Furthermore, improving road access for rural areas continues to be a critical part of the GoG’s poverty alleviation policy matrix. Reducing poverty, building social cohesion and 10 strengthening participatory decision processes are fully aligned with the main goals of the Country Partnership Strategy for Fiscal Year (FY) 2013-2016. 3.2 Achievement of Project Development Objectives Rating: Moderately Satisfactory 36. In summary, the Project had three PDOs of which two were substantially achieved and one was marginally achieved. Of the thirteen intermediate results indicators, ten were exceeded or fully achieved and three were partially achieved (See Results Framework analysis). 37. The Project has made a significant contribution to: (i) improving access to social and administrative services in the departments of Huehuetenango and San Marcos (as a result of improved rural and secondary roads, pedestrian bridges, and periodic maintenance works); and (ii) strengthening institutions at both the central and local levels to manage and maintain the road infrastructure (with the formation and support of three municipal associations, capacity building of road technical units and road maintenance committees, and technical support to the implementing agencies INFOM and DGC). 38. An impact evaluation performed for the targeted areas of the Project, suggested positive effects of the Project on its beneficiaries’ self-reported income levels (See Annex 9 for more details). According to the respondents in the treatment group, the situation regarding poverty had changed positively in their favor as a result of the improved rural roads. According to the ranges of the income variable, the percentage of people earning below Q800 (US$103 equivalent) was reduced by 29.3 percent (from 53.6 to 24.3 percent) 2. With respect to travel time to the nearest village, comparing before and after rehabilitation, an average reduction of 35 percent was observed in the travel time in the treatment group. In terms of travel times to health services, a decrease in average travel times of 24.0 percent was noted. Women in the control group reported increases in their education levels with a 35.9 percent increase compared to the control women. According to the testimony of the focal groups, in terms of family and local economy , the improvement of roads, has helped improve agricultural production especially coffee, vegetables, white corn, avocado, fruit by facilitating the acquisition of fertilizer to their farms and plots, and by helping to get more production out to markets in time and with less losses. Specific Objective 1: Improve rural access on sustainable basis by improving paths, rural roads, secondary and departmental roads and main road 39. The Project contributed to improving access in rural areas to markets, schools and health centers. By Project completion a total of 749 km (vs. a target of 819) km of rural roads and 75 km (vs. a target of 100 km) of secondary/departmental roads were rehabilitated, 30 km of roads have received periodic maintenance (vs.300 km), and 37 pedestrian bridges (vs. 80) have been constructed. Due to changes in Project design, increases in costs and delays in Project implementation, the Project could not fully achieve its set physical targets. However, the 2 The study was conducted in 2012, using year 2007 as ex-ante and 2012 as ex-post. 11 outcome indicator for this objective was substantially achieved. Furthermore, taking into consideration the overarching Project objectives, this indicator should be given more weight in the final assessment of Project achievements. Specific Objective 2: Develop institutional capacity at the local and central level, for rural roads management and strengthening stakeholders’ participation. 40. The Project provided significant contributions to the institutional development capacity at the local and central level for rural road management of the transport sector in Guatemala. In particular at the local level the Project: (i) assisted in the creation of two municipalities associations (mancomunidades), MAMSOHUE and HUISTA, and in their strengthening of road management through the establishment of the UTAVs and securing funding for their operation during the Project implementation; (ii) supported the already created mancomunidad of ADIMAM; (iii) strengthened road planning and management basic infrastructure service at municipal level; (iv) supported active participation of the beneficiary population at all the road subproject cycle stages; and (v) strengthened and improved the implementation of road maintenance system by introducing more than 180 community committees (COMAVIs) for routine maintenance at local community associations, including training as well as the procurement of road maintenance equipment, tools and clothing for these COMAVIs. 41. The Project also had important impacts on the implementing agencies at the central level. The resources assigned to DGC for institutional development were mainly to support Project costs in the administration of the coordination unit for external financing (COFINEX). COFINEX already had extensive experience working with the Bank and other multilateral agencies. The DGC received funds to address: (i) updating of financial and procurement procedures; (ii) equipment; and, (iii) enhancing training of staff. In addition, the Project supported the recruitment of key procurement and financial specialists. With regard to safeguard issues, the unit responsible was the Environmental Management Unit (División de Gestión Ambiental) and the same received training on Bank`s environmental and social policies and procedures. Although, the DGC underperformed in terms of meeting final outcomes, all the initiatives of strengthening institutional capacity that were conceived at appraisal were executed. 42. With regards to INFOM, the Project financed the Project coordinating unit (UCBM), and provided capacity building for social and environmental management. The Project also financed a procurement specialist, financial management specialist, a social specialist and a full-time specialist on municipal capacity development to assist the mancomunidades in their “day to day” administration of the UTAVs. Simultaneously, the Project financed a group of social promoters “promotores sociales” who worked closer with the municipal and association agencies responsible for Project implementation at the local level. In addition, the Project contracted several engineers and environmental staff that worked actively in the rural sub- project design and execution, collaborating with staff of the mancomunidades’ UTAVs and municipalities’ Environmental Unit (Unidades Municipales Ambientales). 12 Specific Objective 3: Generate employment in rural areas by developing an entrepreneurial culture using cost-effective technologies, providing demonstration effect through pilot program, and promoting spillover effects. 43. The Project did not significantly contribute to generating employment in rural areas. The Project envisaged that rural local residents would be contracted to undertake routine maintenance of the roads financed by the Project. In turn, it was expected that the project would generate direct employment through the creation of microenterprises and the corresponding formation of an entrepreneurial culture. However, during Project implementation, the community-based micro-enterprise pilot program was cancelled at the request of the mancomunidad of ADIMAM. Instead, the Project supported the creation of 180 community based committees -COMAVIs – founded on voluntary work. The COMAVIs received training, tools and basic equipment to perform routine road maintenance without payment to their members. In addition, the Project also supported the creation of a number of jobs by contracting firms that carried out and supervised the individual works under the Project. Many of these were local firms. This helped to a certain extent in building local knowledge and capacity, and for making local companies more competitive in preparation for future contracts. The entrepreneurial culture spirit and related spillover effects envisaged under the project design could also have been reasonably furthered through the execution of these contracts. 3.3 Efficiency 44. A thorough ex-post economic analysis has not been undertaken for this ICR. However, overall, the Project achieved to a great extent its targets within the resources approved. Despite the fact that a full ex-post analysis of the secondary roads Project cannot be undertaken at the time of the ICR (since the road sections under the secondary/departmental roads component have not been completed, and final costs and benefits cannot be robustly calculated), some cost-effectiveness approaches and review of previous economic assessments are nevertheless presented to gauge how efficient the Project was in the use of allocated resources. At the time of appraisal, for the first year package of identified secondary road improvements, overall economic results obtained using the Highway Development and Management Model (HDM-3) yielded an overall net present value of US$5.99 million, with individual road sections Economic Internal Rate of Return (EIRR) ranging from 16 percent to 35 percent. When the cost increase of the roads in the San Marcos area was being approved, a revised economic analysis was done using the same model. The revised economic analysis showed these roads to maintain strong economic viability despite the increased costs, due to a disproportionate increase in benefits (higher values for travel times, higher projections in diverted and generated traffic due to the interconnection of the roads proposed for rehabilitation in San Marcos). The results as of May 2009 indicated a revised EIRR of 24.5 percent for the affected roads. The lower category rural roads improved under INFOM had since inception (appraisal) only a multi-criteria analysis approach defined for selection as they were not considered amenable to traditional cost-benefit analyses. 13 45. During the ICR stage, a cost-effectiveness analysis was undertaken to justify Project expense efficiency 3 . For the rural roads component under INFOM, the cost effectiveness analysis indicates Project spending at US$57 per beneficiary. For the secondary roads component (using costs to completion) under DGC, the cost effectiveness analysis indicates Project spending at US$196 per beneficiary. These results are on the conservative side of typical road project investments, representing prudent use of public resources 4. For the secondary roads, the costs as per 2012 updates of the civil works are also in line with country and regional estimates for single carriageway secondary road upgrading works with an average of about US$485,977 per km versus regional averages that range from US$400,000 to US$1.3 million. (See Annex 1). 46. On the whole, in support of the findings from the impact evaluation work and this cost- effectiveness analysis, the Project civil works have significant public value benefit, and represent good value for money on efficiency and efficacy grounds. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 47. The overall outcome rating is Moderately Satisfactory and is based on the following considerations: (i) the Project largely accomplished its planned outcomes; (ii) the positive agreement with the Government to complete the secondary road reconstruction in San Marcos and Huehuetenango; (iii) the satisfactory completion of the resettlement and house reconstruction, which directly mitigated social cohesion tensions; and (iv) the efficiency and efficacy of the civil works. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 48. The Project has had direct impact on improving the welfare of target beneficiaries in terms of a more reliable transport network with faster travel times, and improved travel conditions in the regions of San Marcos and Huehuetenango. The Project triggered job creation and provided access to markets and better connected the communities, reinforcing social nets through the creation and strengthening of the mancomunidades. 49. Poverty impacts were intended to be measured through an Impact Evaluation Study. Although the methodology used (propensity score matching combined with double difference) to estimate the impacts of the intervention have been tested in many cases to control for endogenous placement, the study’s main weakness is a lack of an accurate and reliable counterfactual group. Also, the baseline for HUISTA and MAMSOHUE was collected after the Project had begun implementation and no ex-ante data was collected for ADIMAM. The ex-post follow up study was undertaken in 2012, and by that time not all the civil works envisioned by 3 World Bank Transport Note TRN-9, “Notes on the economic evaluation of transport projects” dated January 2005. 4 For example, the Morocco rural roads project did a thorough cost-effectiveness analysis of rural road investments, with a threshold in 2013 values of US$620 per beneficiary. 14 the Project had been executed. Annex 9 provides more detailed information of the study and its findings. 50. Nevertheless, it is clear that having adequate transportation ensures better access to social and economic services and provides a mechanism to improve the level of income of beneficiaries. According to the testimony of the focal groups in HUISTAS and MAMSOHUE, in terms of family and local economy, the improvement of roads, has helped improve agricultural production especially coffee, vegetables, white corn, avocado, fruit by facilitating the acquisition of fertilizers and to get more production out to markets in time, and with less losses. In ADIMAM, the focus groups expressed that the facilitated transport of products to local or regional markets represents one of the major benefits from this Project to the small producers in the communities. The Project did not specifically address gender issues, which is an important lesson learned for future work in the sector. (b) Institutional Change/Strengthening 51. Institutional and capacity strengthening were part of the core objectives of the Project. DGC, INFOM and municipal associations (mancomunidades) were targeted to receive the technical assistance activities. As previously mentioned, the Project aimed to elaborate a national strategy of transport and rural roads. This intended to create useful synergies among all the agencies involved in the transport infrastructure sector of Guatemala. Evidently, the UCBM Project coordination unit had important institutional effects on INFOM. Capabilities of staff in project management, social aspects, environmental aspects, financial management and procurement were enhanced. This installed capacity was accompanied by the integration of these personnel in the INFOM institutional structure as had been designed by the Project. In DGC, training in procurement and social and environmental management enhanced the capabilities of staff working on these aspects. Also, there was learning by doing process through which a number of evolving problems during implementation were solved by Project staff. (c) Other outcomes 52. The Project assisted in the implementation of a road restoration and rehabilitation program for rural roads destroyed by the Hurricane Stan. These roads were financing under the main/secondary roads component. It could be argued that being able to respond to an emerging disaster (Hurricane Stan) was a positive development by the Bank and Government, showing Bank flexibility and ability to respond to emerging country issues, and adapting to new realities on the ground. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (See Annex 9). 4. Assessment of Risk to Development Outcome Rating: High 53. The risk to the development outcome at the time of the ICR is considered High. Going forward, with respect to the main/secondary roads investment component, the Government will need to: (i) finance the estimated US$45 million gap required to complete satisfactorily the three road contracts in San Marcos; (ii) supervise carefully the road civil works, through the Supervision Division of the DGC together with the supervision firm(s); and, (iii) 15 assume the responsibility for providing the resources for road maintenance through COVIAL. With respect to the rural roads component, the risk is also high because the operation and maintenance beyond the closing date requires resources as well as an active and equitable involvement of INFOM, the Municipalities and beneficiary communities in the maintenance of the rural roads which is not guaranteed. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 54. Bank performance on ensuring Quality of Entry is rated Moderately Satisfactory. The Bank carried out good analytical sector work and prepared the Project design based on replicating the SMRRPP, which was considered "best practice" during its implementation. In addition, the Bank brought several other best practice approaches to the design and implementation of rural road projects including the experience obtained in the Second Rural Roads Project in Peru which received an Excellence Award from the Bank. Also, the proposal, through the institutional strengthening component, to assist and develop the microenterprise model implemented successfully in Peru for rural roads maintenance was a worthy design goal. The envisaged institutional arrangement for executing municipal roads through the leadership of the Associations, creating and strengthening Road Technical Unit (UTAV and FVR) were also sound and ideal mechanism that would have provided sustainable funding arrangements for maintaining rural roads. In general the Project was innovative and was in accordance to the needs of the transport sector, specifically in the rural areas. 55. However, there were some shortcomings in Project design, including: (i) weaknesses in fully grasping the modalities and challenges with the design and build approach in a weak contract management environment; (ii) no reference to resettlement or resettlement related impacts; (ii) lack of plan to address the potential failure of the municipalities to make their local contributions both to the rehabilitation works and micro-enterprise maintenance model; (iv) flaws in the institutional strengthening component with funds allocated principally for the Project administration costs, equipment, studies and designs, and very little in terms of much needed road sector asset management and reform work; and, (v) failure to consider relevant aspects of design at entry due to the previously successful experience with the first roads Project and to incorporate lessons learned from that Project. For these reasons, the Bank performance for ensuring quality at entry is rated as moderately satisfactory. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Moderately Satisfactory 56. Given the complex issues that arose during the Project implementation, the Bank had to provide close and intense supervision with respect to technical, procurement, fiduciary, and social safeguard policies, to reduce Bank reputational risk. Issues that arose included: changes in Project design, increases in cost, Hurricane Stan, resettlement and house reconstruction, untimely provision of local counterpart funds, procurement challenges, and incomplete secondary road infrastructure. Although these issues were resolved by the Borrower 16 and the Bank, the solutions were slow, protracted and took considerable time to achieve. Admittedly, many elements were beyond Bank control. Nevertheless, some issues were caused mainly by the weaknesses identified in the design, and leave the Bank responsible to a certain extent in the supervision phase. Attention to updating the results framework was also sporadic in intermediate ISRs. For these reasons, the quality of the supervision is rated as moderately satisfactory. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 57. For the reasons indicated above, the overall Bank performance is rated Moderately Satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 58. The Government performance is rated Moderately Satisfactory on the basis of its role during the Project preparation and implementation. During the implementation phase of the Project, the Government ownership was strong. The Government was committed to empowering and developing institutional capacity at the municipal levels through the creation of mancomunidades. The Government’s foremost challenges that have contributed to delays in implementation were to ensure counterpart contributions, resolution of arising safeguards challenges, and the financing of the incomplete secondary road sections. The Government made efforts to satisfactorily address these challenges as they arose, and its performance is rated as moderately satisfactory given that the greater part of the efforts to resolve these issues rested with the implementing agencies. (b) Implementing Agency or Agencies’ Performance Rating: Moderately Unsatisfactory 59. The performance of DGC, through COFINEX, which managed the main and secondary road component, is rated as Moderately Unsatisfactory. The DGC was responsible for the: (i) poor management of the reconstruction of the houses and structures in Huehuetenango; (ii) tedious contract management in the secondary roads construction; (iii) failure to ensure timely budgeting and payment of contractors, supervisors and consultants; and (iv) unfinished road sections in San Marcos at the time of loan closing. 60. The performance of INFOM, through the UCBM, was Satisfactory. The INFOM made good progress on managing the rural road component with the re-graveling and periodic maintenance. It also performed well on activities related to rural pedestrian bridges, routine maintenance with rural road committees and local municipal strengthening. INFOM, however, failed to ensure that the municipalities made their local contributions and this was identified as the weakest element in INFOM’s performance. At the beginning of the Project, the delays in commissioning the rural road packages also had a negative effect on municipality expectations. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Unsatisfactory 17 61. For the reasons outlined above, the overall Borrower performance is rated Moderately Unsatisfactory. Delays in the provision of counterpart funds had a strong negative impact on Project implementation, and at times put the Project “at risk”. This rating is mainly driven by the performance of DGC and the significant shortcomings discussed above. 6. Lessons Learned 62. Closer attention should be paid to potential resettlement issues, taking into account cultural practices and land tenure issues. The Project should have prepared a more detail- oriented social assessment, and focussed on the potential resettlement given the unclear land ownership system in the Project areas, and the fact that people tend to build their houses as close to the road as possible. This could have minimized the problems that arose during the implementation of the Project. In particular, lessons learned include: (i) detailed plans delineating land and properties that might be affected due to horizontal road re-alignments should be prepared; (ii) full consultations with affected people should be carried out; (iii) establishing a cut-off date beyond which no new encroachment on the road would be recognized; and (iv) ensuring that funds are set aside to make the necessary compensation either within the loan or with counterpart funds. 63. PDOs and PDO indicators should be aligned with what a Project can realistically achieve, and the results framework should be updated following a restructuring. The overarching PDO and some indicators were defined too broadly, given the scale and scope of the Project. Indicators should be simple, measurable and non-repetitive. When changes are made during restructurings, the results framework should be updated, with indicators revised, targets changed, and a new framework officially adopted. 64. Assess capacity and ensure staffing of environmental and social management team in the Project implementing agencies. Issues encountered during Project preparation and implementation could have been avoided had the implementing agency been staffed with dedicated, full-time environmental and social management team from the very beginning of the Project to ensure due diligence in terms of: (i) quality assurance of environmental and social mitigation plans; (ii) supervision of the implementation of environmental and social management plans; and (iii) timely and systematic reporting of main findings on issues encountered in the field. 65. Adoption of the civil works procurement strategy for a design and build approach should be accompanied by a comprehensive capacity assessment and supported by vigorous strengthening of the implementing agency. The design and build approach requires a procurement capacity assessment and knowledgeable technical expertise of both the Bank and the executing agency. Also, if this approach is undertaken, the contractor should make final designs and submit them for approval to the Government within the agreed and set deadline, but before execution. This will ensure commitment to designs and that costs are known upfront as opposed to the design and build approach where costs change continuously during implementation. 66. Ensuring adequate financing for maintenance remains a challenge, and future Bank engagement in the sector should also pay special attention to this issue. Rural sector 18 financing still faces strong restrictions. Current budget allocations cannot sufficiently address rural transport sector needs. Further Bank support should facilitate a broader policy dialogue with the GoG, on how to ensure a better sustainability of rural road maintenance financing. 67. Local funding for civil works in roads segments might be unrealistic under the country context. The Project envisioned that the local municipalities would serve as counterparts in the financing of some of the roads Projects. However, lack of payment from the local authorities throughout Project implementation caused extensive delays and frequent cessation of works. It is advisable in the future to either use central government funds to finance the operation or use municipalities’ contribution as the advance payment to ensure timely completion of works. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Please refer to Annex 7. (b) Cofinanciers N.A (c) Other partners and stakeholders (e.g., NGOs/private sector/civil society) N.A. 8. Additional Information N.A. 19 Annex 1. Project Costs and Financing (a) Project Cost by Component and Sources of Funds (in US$ Million equivalent) Second Rural and Main Roads Project Appraisal Estimate Amount Disbursed at dic 2011 (US$ After Closing Date (1) (US$ (US$ millions) millions) Percentage of millions) Percentage of Components Total At Total At Appraisal Appraisal Total IBRD Gov. Mun. Total IBRD Gov. Mun. Total IBRD Gov.(1) Mun. A.1. Rura l Roa ds (INFOM) 20.30 14.62 5.68 20.30 17.60 2.70 100% 20.30 17.60 2.70 100% A.2. Ma i n a nd Seconda ry/Depa rtmenta l Roa ds Progra m - Works (DGC) 24.45 17.35 6.11 0.99 35.15 23.16 11.00 0.99 144% 80.27 23.16 56.12 0.99 328% B.1. Support for Decentra l i za ed Rura l Roa ds - TA a nd Cons ul ta nts (INFOM) 4.96 4.00 0.96 4.20 3.24 0.96 85% 4.20 3.24 0.96 85% B.2. Support for Ma i n/Depa rtmenta l Roa ds - TA a nd Cons ul ta nts (DGC) 6.25 5.00 1.25 2.36 2.24 0.12 38% 3.49 2.24 1.25 56% Total Baseline Costs 55.96 40.97 7.36 7.63 62.01 46.23 11.12 4.65 111% 108.25 46.23 57.37 4.65 193% Physical Contingencies 4.50 3.22 1.28 0.00 4.50 0.00 0.00 0.00 100% 4.50 0.00 0.00 0.00 100% Price Contingencies 2.79 2.04 0.75 0.00 2.79 4.65 100% 2.79 4.65 100% Total Project Costs 63.25 46.23 9.39 7.63 69.30 46.23 11.12 9.30 110% 115.54 46.23 57.37 9.30 183% Front-end fee 0.47 0.47 0.00 0.00 0.47 0.47 0.00 100% 0.47 0.47 0.00 100% Total Financing Required 63.72 46.70 9.39 7.63 69.77 46.70 11.12 9.30 109% 116.01 46.70 57.37 9.30 182% (1) The government wi l l fi na nce outs ta ndi ng contra cts 21 SAN MARCOS SECONDARY ROADS Amounts in US$ millions Aggregate Value Aggregate Value Latest Requested Aggregate Value Original Contract with 1st with 2nd Length Variations to complete works No. Contract Road Sections Value (Quetzales) variations variations (km) (Quetzales) (Quetzales) (2008) (Quetzales) (Quetzales) (2012) (2012) (2009) (2010) Unit Costs/km 251-2008- Comitancillo - San Lorenzo DGC & San Lorenzo - San Miguel 28 Q34,466,060.73 Q46,400,884.58 Q54,268,796.64 Q45,791,494.54 Q100,060,291.18 US$458,152 225-2008 - Tejutla - Las Delicias; Tejutla DGC - Comitancillo; Desvío Concepción Tutuapa & Rio 49 Q60,111,414.27 Q81,977,915.90 Q95,858,376.34 Q95,995,052.80 Q191,853,429.14 US$501,971 Blanco - Santa Irene 304 -2008 - Desvío Sipacapa - Sipacapa DGC 35 Q52,108,130.83 Q70,192,063.75 Q82,087,307.85 Q50,548,619.62 Q132,635,927.47 US$485,846 Total - DGC -Solel Boneh 112 Q146,685,605.83 Q198,570,864.23 Q232,214,480.83 Q192,335,166.96 Q424,549,647.79 US$485,977 Total - DGC -Solel Boneh (in US dollars) US$18,805,846.90 US$25,457,803.11 US$29,771,087.29 US$24,658,354.74 US$54,429,442.02 Percentage Change 35% 58% 189% Unit cost per km (final) US$485,977 22 HUEHUETENANGO SECONDARY ROADS Amounts in US$ millions Aggregate Value Aggregate Value Latest Requested Aggregate Value Original Contract with 1st with 2nd Length Variations to complete works No. Contract Road Sections Value (Quetzales) variations variations (km) (Quetzales) (Quetzales) (2008) (Quetzales) (Quetzales) (2012) (2012) Unit Costs/km (2010) (2011) 224-2008- RDHUE 6; CA 1 - La DGC Libertad and RDHUE 8; 16 Q73,284,887.87 Q77,991,874.90 Q91,606,109.84 Q0.00 Q91,606,109.84 US$734,023 Tohon-Santiago Chimaltenango 284-2008 - CA 1 - Santa barbara; and DGC CA 1 - San Juan Atitan 18.6 Q74,050,739.47 Q89,931,403.67 Q92,563,424.34 Q0.00 Q92,563,424.34 US$638,016 Total - DGC -COCISA 34.6 Q147,335,627.34 Q167,923,278.57 Q184,169,534.18 Q0.00 Q184,169,534.18 US$682,413 Total - DGC -COCISA (in US dollars) US$18,889,182.99 US$21,528,625.46 US$23,611,478.74 US$0.00 US$23,611,478.74 Percentage Change 14% 25% 25% Unit cost per km (final) US$682,413 23 Annex 2. Outputs by Component Component Output/Activity Comments Rural Roads rehabilitated 1.1 830 km of rural roads 1.1 Target was revised to and maintained rehabilitated 819 km and was partially achieved. 1.2 300 km of tracks improved and 80 1.2 Improved tracks were footbridges constructed replaced by periodic maintenance work 1.3 Pilot of labor intensive road rehabilitation works 1.3 Implemented implemented in some of the roads of the two municipal associations in Huehuetenango 1.4 Approximately 2000m 1.4 Completed of spot improvements along segments of municipal roads outside the core road network 1.5 Approximately 20 road 1.5 Cancelled, maintenance maintenance micro- was implemented through enterprises created in 180 COMAVIs SMRRPP area 1.6 Target exceeded by 1.6 350 km of rural roads 30km maintained by microenterprises Secondary/departmental 2.1 32 km of 2.1 Target eliminated in roads improved and/or secondary/departmental first amendment to legal rehabilitated roads upgraded agreement. 2.2 175 km of 2.2 Target revised in first secondary/departmental amendment to legal roads rehabilitated agreement to 100km. 145km contracted with 2.3 Average travel time 75km completed by loan reduced by 20% on closing date. secondary/departmental roads implemented under 2.3 Achieved 24 the Project Main CA-1 improved 3.1 65 km of critical Target eliminated in first sections of main road (CA- amendment to legal 1) reconstructed agreement. Enhanced capacity of the 4.1 Permanent Technical 4.1 Partially achieved. associations of Units (UTAVs) and municipalities to support Regional Road Funds the maintenance and (FVR) implemented and development of rural road strengthened in the infrastructure on a associations included in the sustainable basis Project. 4.2 180 COMAVIs 4.2 20 road maintenance micro-enterprise contracted and working satisfactory o the maintenance of the roads rehabilitated by the San Marcos Rural Roads Pilot Project. 4.3 Achieved 4.3 Satisfactory implementation at the national level of relevant components of the Social Management Plan 4.4 Achieved 4.4 Satisfactory implementation at the local level of relevant components of the Social Management Plan Strengthened national 5.1 Project Coordination 5.1 Achieved institutional capacity to Unit from INFOM manage rural transport incorporated into the infrastructure and services Organizational structure of on a sustainable basis INFOM 25 Annex 3. Economic and Financial Analysis Please refer to main text. 26 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending & Supervision Guillermo Ruan Senior Highway Engineer LCSTR TTL Cecilia Claudia Corvalan Senior Transport Economist LCSTR TTL Jose Vicente Zevallos Senior Social Specialist LCSSO Social Alfaro de Jesus Keisgner Senior Procurement Specialist LCSPT Procurement Monica Lehnhoff Procurement Analyst LCSPT Procurement Andres Mac Gaul Senior Procurement Specialist LCSPT Procurement Antonio Leonardo Blasco Senior Financial Mgt. Specialist LCSFM Financial Mgt. Sonia Rousseau-Lopez Program Assistant LCSTR Program Support Mary Lisbeth Gonzalez Senior Social Specialist LCSSO Social Stephen Jeremy Brushett Lead Transport Specialist LCSTR TTL Manuel Antonio Vargas Lead Financial Mgt. Specialist LCSFM Financial Mgt. Madrigal Elena Correa Social Specialist LCSES Social Diomedes Berroa Procurement Specialist LCSPT Procurement Stephen Muzira Senior Transport Engineer LCSTR TTL Luis R. Prada Villalobos Senior Procurement Specialist LCSPT Procurement Alvaro Larrea Senior Procurement Specialist LCSPT Procurement Fabienne Mroczka Financial Management Specialist LCSFM Financial Mgt. Hugo Amador Us Alvarez Consultant Rene Cortes Consultant Roberto Armijo Consultant Preparation Fernando Luis Abraham Transport Consultant LCSTR Engineer Leila Diana Sarquis Aquino Temporary Program Support Tomas Socias Senior Procurement Specialist LCSPT Procurement Licette M. Moncayo Program Assistant LCSTR Program Support Martin Huici Consultant Paloma Lopez Diez Program Assistant LCSTR Program Support Bexi F. Jiménez Mota Transport Consultant LCSTR ICR Marco Zambrano Consultant LCSEN Environment Oswaldo Patino Consultant LCSTR ICR 27 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) USD Thousands Stage of Project Cycle No. of staff weeks (including travel and consultant costs) Lending FY00 5 14.91 FY01 15 97.10 FY02 21 114.59 FY03 29 154.91 FY04 3 5.22 FY05 0.08 FY06 0.00 FY07 0.00 FY08 0.00 Total: 73 386.81 Supervision/ICR FY00 0.00 FY01 0.00 FY02 0.00 FY03 0.00 FY04 7 61.50 FY05 20 100.19 FY06 19 81.91 FY07 18 79.15 FY08 19 95.32 FY09 24 0.00 FY10 34 200.98 FY11 27 175.08 FY12 13 90.90 FY13 10 102.71 FY14 6 52.84 Total: 197 1040.58 28 Annex 5. Beneficiary Survey Results (if any) Summarized in Annex 9 on Impact Evaluation. 29 Annex 6. Stakeholder Workshop Report and Results (if any) N.A. . 30 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR The Borrower has submitted their version of the implementation completion report in Spanish. The summary of the Borrower’s ICR is presented below. Project Context, Project Development Objectives and Design After the signing of the peace accords in 1996, the Government of Guatemala (GoG) committed to a decentralization policy as an instrument for social cohesion and poverty reduction. One critical element for creating this “integrated society” was determined to be the promotion of physical connectivity and elimination of geographic isolation. The improvement of the country’s road network was determined as one of the key components of the Government’s Poverty Reduction Strategy (GUAPA 2012). The provision of good quality roads, with all-weather access roads all year round, is one of the key targets of the current administration. The Project is noted as being the follow up phase of GoG-Bank collaboration to the success with the first Main and Rural Roads Project (4260-GU) which had one of its main components the San Marcos Rural Roads Pilot Project (SMRRPP). In addition to replicating the successes of the first project, the design also sought to introduce new planning approaches, and service delivery models that promote greater participation of end beneficiaries and local community organizations, and strengthening the institutional policies and framework, and sustainability of the programs. The Project Development Objectives (general and specific) as well as the indicators are reiterated as per the PAD. Significant Changes noted • In May 2009, the Bank approved the change in road surfacing from double surface dressing to hot mix asphalt with an elevation in the cost of works, and a reallocation of loan proceeds from the unallocated category to the works category in 2-11 • In December 2011, the Bank approved the percentage of financing to 100% and transferred the remaining funds from INFOM to DGC to be used for the reconstruction of houses affected under the Project • The changes in roads to be intervened that were made as a result of the damages caused by Hurricane Stan in the San Marcos area are noted • The change in the micro-enterprise model to the community maintenance model (COMAVIs) is also mentioned. The COMAVIs work without receiving enumeration and the change is justified on the grounds that the model of maintenance on a community basis as opposed to a for-profit basis is heavily ingrained in the culture and a change would have generated significant social problems. 31 Preparation, Design and Quality at Entry • Problem noted of not having budgeted adequately for advance payments of signed contracts. • Problem noted of not having foreseen need to liberate the right of way with the widening of the secondary roads. • The design and build approach is also noted as having been problematic since the design was being made in parallel to the road works execution. Implementation • Design change for roads in San Marcos noted, with negotiation process that lasted 8 months to approval. • The contractor’s suspension of works in San Marcos in 2010 is also noted as having had negative effects environmentally due to unattended environmental needs. Similar environmental challenges noted in Huehuetenango with secondary road contract works there since works keep getting suspended, and restarted. Evaluation of Outcomes/Results • The current Government continues to see the need for road infrastructure improvements in order to advance productivity, competitiveness and the development of rural areas. This is also supported by Government efforts in programs like “Hambre Cero”, or “zero hunger” in English, that is intended to combat poor nutrition. • Connectivity/accessibility programs like the current project are noted as being important in delivering benefits to the target populations through improved access to basic series, health centers, schools, markets, social and economic infrastructure, while also allowing for direct participation of local communities. • The targets achieved with DGC secondary roads are noted at 50% of the 145km target. Extra funds are needed for the successful completion of the San Marcos roads (Q192 million or about 24.6 million dollars), and Huehuetenango roads (Q40 million or about US$ 5 million). • Efficiency results are quoted for a Gisystems analysis that indicated an ERR of 42.9%, and NPV of 41.9 million. • The cost changes for secondary roads are also noted from US$170,000 per km for the surface dressing to US$480,000 for the asphalt course and noted to be reasonable according to the Feasibility department review. • For the San Marcos roads, the Bank no objection is noted for the draft modification of one of the contracts, and works are foreseen to be completed by the first half of 2016. • Physical progress of the Huehuetenango secondary road contracts is noted as 37 percent for the contract serving La Libertad and Santiago Chimaltenango 32 municipalities (15.98 km total road lengths); and 76 percent for the contract serving San Juan Atitan and Santa Barbara (18.53 km total road lengths). • While project roads are not yet completed in their totality, it is noted that already some tangible benefits have been noted in beneficiary areas with improvements in living standards, with people becoming more involved in productive activities, and in the social and education sectors benefiting from road sections that were improved, with reduced travel times. • The failure to conclude works on time is primarily attributed to the failure to count on budget funds, a situation made worse by the refocussing of funds to attend to damage by natural disasters hitting the country over the later parts of the implementation period. • The results presented in the results framework and the comments provided are in line with those presented in the present ICR. • The report emphasizes the main impacts at the institutional strengthening at the local level including the technical support through workshops, equipment purchase, and training of the mancomunidad of ADIMAM which had been created in the first project, and is now a well-developed organization with technical, financial and administrative capabilities. The mancomunidad of MAMSOHUE, one of two created under the Project is also detailed as having a good level of development, and working efficiently on a teamwork basis. The other mancomunidad HUISTA is noted as being the weaker link, with significant challenges, especially financial Agencies like INFOM need to give continued support to this mancomunidad to ensure its continued proper functioning. • Major project impacts on poverty alleviation are noted as documented in the ENCOVI 2011 survey (Living Standards Measurement Survey). The same results in effects on income levels as noted in the ICR main text and impact evaluation annex are reported. • Other results are noted related to Bank support in the training courses offered to DGC staff in the topics of project administration, new pavement technologies, and involuntary resettlement. Evaluation of Bank Performance • For quality at entry, the report documents the project preparation work, approval of the loan and its effectiveness. The resettlement problems faced later and the changes in pavement design are also mentioned. No scoring of the Bank performance is entered. • For quality of supervision, bank visits are noted on a frequent semestral basis with aide memoires signed at the end of each mission. No scoring of the Bank performance is entered. Evaluation of Borrower Performance • Government participation of all relevant institutions is noted as having been complete with full commitment to the Project 33 • On implementing agencies performance, the challenges with the natural disasters are reiterated, causing a shift in financing priorities and allocations, but with commitment to complete unfinished works in the medium term. • On the basis of the delays in delivering all programmed project activities, the self- evaluation of the Borrower’s performance is noted as moderately unsatisfactory. Lessons Learned • Non-compliance with contract execution times • Need to count on budget allocations for contracts, and comply with national counterpart commitment payments • Improve the preparation and approval of designs, while ensuring that the same respond to the wishes/needs of the beneficiaries; case of the secondary roads in San Marcos is provided as a major lesson learned. • Carry out advance procurement of the needed right of way and register it as Government property • Get better linkages between the mancomunidades and the implementing agency, including support as necessary on administrative and financial issues • Constant monitoring and follow-through that institutionalizes such a large project as part of a national or regional strategy and avoid significant staff turnover at all levels to preserve institutional memory and continuity. Other Comments by Borrower • Important to link project with Government road sector policies, determine needed amounts, and include contingencies to enable the achievement of set targets, and avoid project execution delays. • Bank support for this type of program is noted as being of vital importance given that it has enabled rural communities to benefit from socio-economic development that has eluded them for many years. • Need to improve project proposals and designs and socialize the same with end beneficiaries to avoid future problems or delays • Need to involve the implementing agencies, and all authorities in the program execution for efficient results. General conclusions and recommendations • There is a need to establish better communication between the implementing agencies and the mancomunidades, and the end beneficiaries • There is a need to support, strengthen and promote the integration of the mancomunidades of MAMSOHUE and HUISTA. • There is a need for better information flow from INFOM to the communities, and their leaders on the status of issues, and possible solutions. • INFOM needs to help in strengthening the administrative and financial capabilities of the mancomunidades. 34 • There is a need to disseminate the impacts of the project especially the benefits in terms of reduced travel times, increase in numbers and frequency of public transport and the impact on health and employment outcomes. • Link project benefits with other intervention benefits to demonstrate the cumulative and integrated impacts in improving accessibility and the quality of life of the people. • Make attempts to inform about the changes in family incomes as a result of project interventions even if this may only be on a qualitative information basis. • Expand focus made on the cobblestone (empedrado) projects and the pedestrian bridges given their wide acceptance and important benefits • Discuss and disseminate knowledge on gender impacts as a result of the project, and how the project interventions have contributed to reducing the gender gap. • Get a commitment from beneficiary municipalities to undertake road maintenance as a condition of their participation as beneficiary municipalities. • Continue with institutional strengthening efforts in the implementing agencies, and reduce staff turnover • More efforts are needed in capacity building, training, workshops, courses, and monitoring and evaluation of road projects • Continue the inter-change and support of strengths between DGC and INFOM with DGC providing its technical knowledge transfer to INFOM, and INFOM its social knowledge transfer to DGC on a sustained basis. • There is a need to ensure that road projects consider on an obligatory basis the incorporation of rural roads (intra-municipal network) given the wide-ranging significance of these roads for the local populations. • There is a need to make all necessary efforts to complete the secondary/departmental road projects. • There is a need to ensure that future designs incorporate the best designs (technical and financial) to avoid some of the problems that arose in the secondary/departmental roads component. 35 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders N.A. 36 Annex 9. Impact Evaluation of Second Rural and Main Roads Program - Summary A brief summary of the main features and results of the impact evaluation of the Project conducted by DMC Consultores SA and Borges y Asociados is presented below. Sources of information Information used as inputs for the study included a series of previous papers, as well as primary and secondary sources of information. Background documents consist of studies in the years 2006 to 2008. The primary sources of information consist of a recompilation of information gathered from in-depth surveys to selected households ( 2,836 ) and focus groups in the three mancomunidades ( 6) and the implementing units (PCU / INFOM ; DGC / MICIVI ) ( 1). Methodology The selection of treatment and control groups was accomplished using Propensity Score Matching (PSP), so that the groups compared are similar in some observable characteristics ( poverty , vulnerability and unmet basic needs) and whose only difference is the effect of receiving the benefit of the intervention or not ( counterfactual). This was done in order to establish causality of the changes that could occur among the treatment and control groups. It should be noted that using the combined method of propensity score matching and double differences, minimizes the bias and its error given that groups are selected in the region of common support. Also, specifically taking into consideration the closeness of the control observation to the treatment group helps to mitigate some spillover effects. The study was conducted in 2012, using year 2007 as ex-ante and 2012 as ex-post. Samples Size of the Municipal Associations MAMSOHUE and HUISTAS. Data from the 2007 baseline selected a sample size of 1,200 cases, of which 600 interviews were applied treatment households and the other 600 households corresponding to those that did not participate in the intervention. The sample is fixed for the 2012 study in 1,200 cases and with the same design parameters in a bilateral or two-tailed test with a confidence level of 95 percent, a statistical power of 80 percent and with an expected loss ratio of 15 percent. The universe of the study was of 66,409 households (330,691 inhabitants) corresponding to the 211 towns and villages that receive benefits directly from the intervention (26 municipalities) and 326 villages selected as a control group without intervention or (5 municipalities). ADIMAM. The universe of the study was 137,229 households. Some households were discarded because they were outside the common support area (54,039) and others because, despite being in the region of common support, they were within the area of influence of a parallel intervention implemented by Compañia Minera Montana (11,100 37 households). In this case a sample size of 818 surveys, 409 treatments and 409 controls, with a statistical confidence level of 95 percent, a statistical power of 80 percent, and 15 percent loss. Based on the foregoing, 12 municipalities were part of the treatment group and 9 municipalities were controls. For this municipal association, no baseline data had previously been collected. Results of impact estimates MAMSOHUE and HUISTAS • In relation to physical access, respondents reported an increase in the volume and types of vehicles for passenger and cargo circulating in their villages. In the case of the autos (taxis) an increase of 34.25 percent was reported, for trucks 65.57 percent and 82.14 percent for pick-ups. • With respect to travel time to the nearest village, comparing before and after rehabilitation, an average reduction of 35 percent was observed in the travel time in the treatment group. Replicating the same analysis for the travel time to reach a nearest primary or secondary road, the treatment group verified a decrease on average time of 29.13 percent. For travel times to attend schools, this was calculated on average at 32.73 percent in the treatment group (this was significantly higher than that reported in the control group). In terms of travel times to health services, a decrease in average travel times of 24.0 percent was noted in the treatment group. Nonetheless, the control group reported a significant and higher reduction than the treatment group. This finding was not explained. • Women in the control group reported increases in their education levels with a 35.90 percent increase compared to the control women. • According to the respondents in the treatment group, the situation regarding poverty had changed positively in their favor as a result of the improved rural roads. According to the ranges of the income variable, the percentage of people earning below Q800 was reduced by 29.3 percent (from 53.6 to 24.3%). The proportion of people earning between Q801 to Q1,600, was increased by 12.2 percent (from 40.2% to 52.4%); the proportion of people earning between Q1,601 to Q3,200, was increased by 16.4 percent (from 6 to 22.4%) and the percentage of people earning more than Q3,200 was increased by 0.7 percent (from 2-9%). • According to the testimony of the focal groups, in terms of family and local economy , the improvement of roads, has helped improve agricultural production especially coffee, vegetables, white corn, avocado, fruit by facilitating the acquisition of fertilizer to their farms and plots, and by helping to get more production out to markets (in time and with less losses). ADIMAM • With regards to physical access, respondents reported increases in the volume and types of vehicles for passengers and cargo passing through their towns. In the case of the cars 38 an increase of 15.90 percent was reported, and for trucks, the increase noted was 17.28 percent, both significant at the 95 and 99 percent confidence interval levels. • In the case of accessibility benefits arising from less transit interruption, a better situation was evidenced in the treatment group with the group reporting on average 29.82 percent less interruption by rain and erosion than the control group. • As for the cost of tariff for passengers, the treatment group reported an 8 percent lower cost than the control group with a 95 percent significance. Meanwhile the cost of freight, showed no significant differences. • With respect to travel time to the nearest primary or secondary road, comparing before and after rehabilitation, an average reduction of 12.49 percent in the travel time was noted for the treatment group. Replicating the same analysis for the travel time to reach the nearest school, the treatment group and control group did not reveal any significant changes (travel time remained around 38 minutes). This could be attributed to the fact that most of the students in the area indicated that they still predominantly walked to school. In terms of travel times to health services, a decrease in average travel times of 45.77 % was observed in the treatment group. • With regards to road safety, many road accidents in the rural areas have predominantly affected pedestrians or occupants of non-motorized vehicles. The study found that the level of accidents reported by the treatment group is 51.78 percent lower than that reported by the control group. This might be explained by the fact that while improved roads may lead to faster speeds, the impact may be related to the fact that more people are now using motorized transport, with fewer casualties reported in the non-motorized category. • With regards to family income, the treatment group reported a significant improvement in their economic condition by 10 percent over the control group. Regarding employment, both groups indicated similar occupational distribution with 69.4 percent engaged in agriculture and 11.2 percent in trade. • The facilities to transport products to local or regional markets represent major benefits for small producers in the communities. It was mentioned by the focus group that the production of vegetables, legumes and perishables were previously lost by difficulty or delays in getting these to the market. At the time of the surveys, there was almost no crop losses, reported as most of the product could be sent to the market in less time and in proper condition for sale. 39 Annex 10. List of Supporting Documents The following documents have been used as sources for the preparation of this ICR, and can be found in the Project File. • Country Assistance Strategy for the Republic of Guatemala, April 11, 2005 (Report. No.31776-GT) • Country Partnership Strategy for the Republic of Guatemala for the period FY 2013- 2016, dated August 17, 2012 (Report No. 69229-GT) • Estrategia de Reducción de la Pobreza, November 2001, Government of Guatemala. Available at http://www.iadb.org/regions/re2/consultative_group/gu/erp-esp.pdf • Estrategia Nacional de Caminos y Transporte en el Area Rural, Municipal Development Institute (INFOM), Contract No. 001-2002, The Louis Berger Group, July 2003 • Evaluación de Impacto y Efectos del Segundo Programa de Caminos Rurales y Carreteras Principales , DMC Consultores S.A, September 2012 • Implementation Status and Results Reports, series 1 through 27 • Informe de Consultoría sobre el Reasentamiento Involuntario, S. Elías, August 25 , 2010 • Plan de Accion Correctivo (Corrective Action Plan) dated April 26, 2011, and updated version September 18, 2012 • Integrated Safeguards Datasheet, Restructuring Stage, Report No. AC5652 • Ley General de Descentralización, Decree No.14-2002, Congress of the Republic of Guatemala. Available at: http://www.unicef.org.gt/1_recursos_unicefgua/publicaciones/leyes_convenciones/Le yDescentralizacion.pdf • Loan Agreement, Loan 7169-GU, October 27, 2004 • Poverty in Guatemala, Report No. 24221-GU, February 20, 2003 • Project Appraisal Document, Report No:25118, April 10, 2003 • Project Concept Note, August 21, 2001 • Project’s Aide Memoires, 2003 -2013 • Restructuring Paper, Report No. 53663-Gt, March 11, 2010 • Restructuring Paper, Report No: 54970-Gt, June 22, 2011 • Restructuring Paper, Report No: 62521-Gt, June 22, 2011 • Restructuring Paper, Report No: 65972-Gt, December 15, 2011 • Restructuring Paper, Report No: 72352-Gt, September 14, 2012 40 • First Amendment to the Loan Agreement, September 8, 2006 • Second Amendment to the Loan Agreement, April 14, 2010 • Third Amendment to the Loan Agreement, October 25, 2011 • Fourth Amendment to the Loan Agreement, December 8, 2011 41 IBRD 40903 91˚30' GUATEMALA 15˚30' 92˚00' 15˚30' GSDPM Map Design Unit SECOND RURAL AND This map was produced by the Map Design Unit of The World Bank. The boundaries, MAIN ROADS PROJECT colors, denominations and any other information shown on this map do not imply, on San Marcos Department the part of The World Bank HUEHUETENANGO Group, any judgment on the PROJECT ROADS legal status of any territory, or any endorsement or acceptance of such boundaries. Tectitán San Miguel Ixtahuacán San José Ojetenan Concepción Malacatancito Tacaná Tutuapa 18 Sipacapa 15 2 12N 16 CA1 17 Calapte Sibinal Ixchiguán Ixmulca 2 Tejutla 0 2 4 6 8 10 Kilometers 2 Tajumulco 7 Comitancillo Cabrican San Sebastian 1 0 2 4 6 8 10 Miles SAN 12N San Lorenzo Rio Blanco Huitan Santa Finca La Patria Teresa 1 13 9N 15˚00' Finca Palmira MARCOS 24 San Pedro 13 16 San 15˚00' 3 Sibilia Sacatepéquez Carlos Sija SAN MARCOS San Antonio Sacatepéquez 15 San Rafael Pie de la Cuesta Santa Palestina 1 San Pablo Irene 14 1 Esquipulas 12S de los Altos Malacatan El Rodeo San Francisco Palo Gordo La Victoria Cajolá La Union MEXICO 8 13 San Cristobal Cucho 1 San Miguel Siguila Guativil Sibilia Ostuncalco Catarina El Tumbador Concepción La Esperanza 11 Chiquirichapa 1 Plan de San Mateo Finca La Sola San Juan QUETZALTENANGO la Gloria Sacatepéquez Almolonga QUETZALTENANGO 12 CA2 La Reforma Nuevo Progreso Zunil 3 12 13 6 12 CITO Palin El Quetzal 3 4 91˚30' 8 Laguna Seca 12S Pajapita Buena Vista 92 90 88 33 Colomba La Union Coatepeque M E X I C O CA2 18 18 Ciudad Tecún Umán BELIZE 7 DEPARTMENTAL ROADS CA2 Gulf of 12N NATIONAL ROADS Honduras 4 6W 16 16 CA2 CENTRAL AMERICAN ROADS Area of Map SELECTED TOWNS GUATEMALA MUNICIPAL CAPITALS DEPARTMENT CAPITALS Guatemala HONDURAS 13 City DEPARTMENT BOUNDARIES Ocos 14˚30' 14˚30' 14 14 INTERNATIONAL BOUNDARIES EL SALVADOR PA C I F I C OCEAN PA C I F I C OCEAN 92˚00' 92 90 88 MAY 2014 IBRD 40904 92 90 88 GUATEMALA 18 M E X I C O 18 SECOND RURAL AND MAIN ROADS PROJECT Huehuetenango Department BELIZE PROJECT ROADS Gulf of Honduras PAVED ROADS 16 16 NON-PAVED ROADS Area of Map UNDER CONSTRUCTION, FONAPAZ/BCIE GUATEMALA MAIN ROUTES WORLD BANK ROADS Guatemala HONDURAS SELECTED TRACKS/TRAILS City MUNICIPALITY CAPITALS 14 14 DEPARTMENT CAPITAL EL SALVADOR DEPARTMENT BOUNDARIES PA C I F I C OCEAN INTERNATIONAL BOUNDARIES 92 90 88 This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. MEXICO HUEHUETENANGO QUICHÉ GSDPM Map Design Unit SAN MARCOS APRIL 2014