Document of The World Bank Report No: RES12096 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE SECOND AGRICULTURAL TECHNOLOGY PROJECT CREDIT 4127-NI; GRANT H-537-NI BOARD APPROVAL DATE: November 29, 2005 TO THE REPUBLIC OF NICARAGUA DATE OF RESTRUCTURING: November 11, 2013 Agriculture and Rural Development Sector Unit Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Regional Vice President: Hasan A. Tuluy Country Director: Carlos Felipe Jaramillo Sector Manager / Director: Laurent Msellati Task Team Leader: Augusto Garcia 2 DATA SHEET Nicaragua Second Agricultural Technology Project (P087046) LATIN AMERICA AND CARIBBEAN LCSAR Report No: RES12096 Basic Information Project ID: P087046 Lending Instrument: Specific Investment Loan Regional Vice President: Hasan A. Tuluy Original EA Category: Partial Assessment (B) Country Director: Carlos Felipe Jaramillo Current EA Category: Partial Assessment (B) Sector Director: Ede Jorge Ijjasz-Vasquez Original Approval Date: 29-Nov-2005 Sector Manager: Laurent Msellati Current Closing Date: 31-Dec-2013 Team Leader: Augusto Garcia Borrower: Responsible Agency: Restructuring Type Form Type: Short Form Decision Authority: Country Director Approval Restructuring Level 2 Explanation of Level 2 restructuring Level: Approval Authority: (reallocation of credit proceeds) Financing ( as of 28-Oct-2013 ) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date P087046 IDA-41270 Effective 29-Nov-2005 24-Feb-2006 15-Sep-2006 31-Mar-2010 31-Dec-2013 P087046 IDA-H5370 Effective 10-May-2010 06-Jul-2010 29-Apr-2011 31-Dec-2013 31-Dec-2013 P087046 TF-99911 Closed 28-Jun-2011 28-Jun-2011 15-Aug-2011 30-Sep-2012 30-Jun-2013 Disbursements (in Millions) % Cancelle Disburse Undisbur Project Ln/Cr/TF Status Currency Original Revised Disburse d d sed d P087046 IDA-41270 Effective USD 12.00 12.00 0.00 12.40 0.24 103 P087046 IDA-H5370 Effective USD 10.00 10.00 0.00 3.30 6.44 33 P087046 TF-99911 Closed USD 2.05 2.05 0.00 2.05 0.00 100 3 Policy Waivers Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? Does the project require any policy waiver(s)? Yes [ ] No [ X ] A. Summary of Proposed Changes The ATP-II (P087046) is financed out of the IDA Credit No. 4127-NI and the IDA Grant H-537-NI. The proposed changes are: (i) the reallocation of proceeds of the Credit No. 4127-NI, and (ii) the reallocation of proceeds and the first extension of the closing date of the IDA Grant H-537-NI until June 30, 2014 (6 months cumulatively). The Government of Nicaragua is progressing towards full execution of the Credit No. 4127-NI by December 31, 2013. The proposed reallocation of credit proceeds will allow for a better distribution of project funds (reconciling investments with funds allocations) while reinforcing operational capacity of executing agencies to achieve the project development objective. The Additional Financing (AF) to the project P087046 through the IDA Grant H537-NI is aimed at scaling up project activities to strengthen the National Seed System. In 2013, after overcoming initial delays, the AF became fully operational. It is now providing technical and business development services to 1,114 seed producers (out of a target of 1,200 producers specialized in certified seed production), as well as by financing 14 business plans to 13 seed producer organizations (out of a target of 31 organizations). Currently, the AF is helping produce 1,980 metric tons of certified seeds and projects to reach 3,048 metric tons at the end of 2013 (63 percent of a total target of 4,852 metric tons). The proposed six-month extension (until June 30, 2014) and reallocation of grant proceeds is necessary to achieve the project development objectives. It will allow for completing planned activities to improve operational and storage capacity (1,800 metric tons) of the National Genetic Center, and inspection capacity of the Plant Health Office in the field (3,580 Ha/year). Also, it will help establish the Revolving Fund (US$3.0 million) by financing the last 25 business plans (12 of them are already prepared) to another 18 organizations to produce the remaining 1,804 metric tons of certified seeds to reach the original target. B. Project Status Overall, the implementation progress of the project has been Moderately Satisfactory (MS). To date, the Credit has disbursed 98 percent of funds. On the other hand, the Grant (AF) had a slow startup. Critical implementation issues faced by the AF included (i) a nine-month delay after signing, due to an additional assessment of the implementing agency for the credit line component, as requested by the Bank; and (ii) the administrative, legal and financial status of seed cooperatives, as well as seed market conditions turned out to be more complex than expected and the project needed more time to help a group of selected cooperatives become ready for credit services. An action plan was agreed in November 2012 which has been closely supported and monitored. To date, the AF has disbursements and commitments for US$4.8 million (50 percent of the total funds of US $9.7 million). Also, with a six-month extension, the AF is ready to commit additional US$ 2.5 million (25 percent) in November 2013 and would commit approx. US$ 2.1 million by late-January. There are no outstanding audit reports for the project. The 2012 Audit Report, submitted by the Borrower on July 4, 2013, has complied with the requirements established in the Terms of Reference. The Auditor’s opinion is unqualified. The team is preparing an action plan that will be agreed with the Borrower to address the internal control issues identified by the Audit. Neither this project, nor any other project in the country portfolio is currently subject to a suspension of disbursements. Project objectives continue to be considered achievable if a six-month extension of the grant’s closing date is approved. C. Proposed Changes 4 Financing Change in Loan Closing Date(s): Explanation As described above, implementation of the AF has improved. The Grant H-537-NI is ready to commit in November 2013 additional US$ 2.5 million (25 percent of grant funds) in works, goods, and sub-credits that would require an extension to be executed. Meanwhile, there is a remaining amount of sub-credits, works and goods for approx. US$ 2.1 million that the AF is scheduled to commit by end January, 2014, and disburse over the period of the proposed six-month extension, according to the specific action plan. This extension would help the AF complete planned activities to achieve the originally expected results. Original Closing Current Closing Proposed Closing Previous Closing Ln/Cr/TF Status Date Date Date Date(s) 31-Dec-2010, 31- IDA-41270 Effective 31-Mar-2010 31-Dec-2013 Dec-2013 IDA-H5370 Effective 31-Dec-2013 31-Dec-2013 30-Jun-2014 31-Dec-2013 30-Sep-2012, 30- TF-99911 Closed 30-Sep-2012 30-Jun-2013 Jun-2013 Reallocations Explanation Credit No. 4127. The Government of Nicaragua has honored the agreement of progressively reaching 100 percent financing of incremental staff salaries that were originally covered with credit proceeds. This has freed most of the Credit proceeds that are now being proposed for reallocation to reinforce operational capacity of executing agencies to provide agricultural services to 35,000 producers during the last year and achieve the project development objective. The proposed reallocation will finance rehabilitation works, as well as purchase, repairs and maintenance of vehicles and informatics equipment required by the three implementing agencies to deliver agricultural innovations to project beneficiaries during the last sowing cycle supported by the project. The reallocation would allow for the implementing agencies to be adequately equipped to continue providing this type of services. Grant H537-NI. Based on updated figures of the project's Credit Line, the Additional Financing will not use a small fraction of the category of expenditures originally allocated to Sub-credits. The proposed reallocation of the Grant proceeds will use these unused funds for sub-credits and the originally “unallocated expenses” to complete planned activities to improve the provision of agricultural research and certification services to seed producers, and carry out audit and final evaluation studies. Current Category of Disbursement % (Type Ln/Cr/TF Currency Allocation Expenditure Total) Current Proposed Current Proposed IDA-41270 XDR IDA41270 WORKS 652,978.00 771,000.00 100.00 100.00 IDA41270 0.00 0.00 0.00 0.00 UNALLOCATED IDA41270 CONSULTANT 217,647.00 269,000.00 100.00 100.00 SERVICES 5 IDA41270 SERVICES 40,000.00 117,000.00 100.00 100.00 (NOT CS) IDA41270 TRAINING 284,934.00 246,000.00 100.00 100.00 IDA41270 GOODS & 1,010,000.0 628,071.00 100.00 100.00 EQUIPMENT 0 IDA41270 AGRICULTURAL 253,647.00 258,000.00 100.00 100.00 INPUTS IDA41270 5,695,873.0 5,081,000.0 INCREMENTAL 100.00 100.00 0 0 SALARIES IDA41270 INTA COST 252,254.00 214,006.14 100.00 100.00 SHARING IDA41270 274,596.00 333,993.86 100.00 100.00 OPERATIONAL COSTS Designated Account 0.00 0.00 0.00 0.00 8,300,000.0 8,300,000.0 Total: 0 0 CONSULTANT'S TF-99911 USD 99,000.00 99,000.00 100.00 100.00 SERVICES OPERATING COSTS 4,380.00 4,380.00 100.00 100.00 NON-CONSULTING 1,899,620.0 1,899,620.0 100.00 100.00 SERVICES 0 0 GOODS 47,000.00 47,000.00 100.00 100.00 Designated Account 0.00 0.00 0.00 0.00 2,050,000.0 2,050,000.0 Total: 0 0 GO,CS,TRGN,OP PART 3,970,000.0 4,275,136.0 IDA-H5370 XDR 100.00 100.00 1C (EXCPT 1C(b)) 0 0 ELIGIBLE 2,210,000.0 2,024,864.0 SUBCREDITS PART 100.00 100.00 0 0 1C(b) UNALLOCATED 120,000.00 0.00 0.00 0.00 Designated Account 0.00 0.00 0.00 0.00 6,300,000.0 6,300,000.0 Total: 0 0 6