Document of The World Bank Report No: 21345-BO PROJECT APPRAISAL DOCUMENT ONA PROPOSED LEARNING AND INNOVATION CREDIT IN THE AMOUNT OF SDR 4.0 MILLION (US$ 5 MILLION EQUIVALENT) TO THE REPUBLIC OF BOLIVIA FOR AN INDIGENOUS PEOPLES DEVELOPMENT PROJECT January 25, 2001 Environmentally and Socially Sustainable Development Sector Management Unit Bolivia, Ecuador and Peru Country Management Unit Latin America and the Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective November 29, 2000) Currency Unit = Bolivianos I Boliviano = US$0.16 US$1 = 6.38 Bolivianos FISCAL YEAR JANUARY 1 - DECEMBER 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CIDOB Confederation of Indigenous People of Bolivia (Confederacion de Pueblos Indigenas de Bolivia) CSCB Confederation of Peasant Colonizers (Confederacion Sindical de Colonizadores de Bolivia) CSUTCB Peasant Confederation of Bolivia (Confederacion Sindical Unica de Trabajadores Campesinos de Bolivia) DUF Unified Fund Directorate (Directorio Unico de Fondos) FDC Small Farmer Development Fund (Fondo de Desarrollo Campesino) FIS Social Investment Fund (Fondo de Inversion Social) FMS Financial Management Specialist FSMCB-BS Bartolina Sisa National Federation of Peasant Women (Federacion Sindical de Mujeres Campesinas de Bolivia - Bartolina Sisa) IDA International Development Association IFAD International Fund for Agricultural Development INRA National Agrarian Reform Institute (Instituto Nacional de Reforma Agraria) GOB Government of Bolivia HIPC Highly Indebted Poor Countries LACI Loan Administration Change Initiative LPP Popular Participation Law (Ley de Participacion Popular) LIL Learning and Innovation Loan MACPIO Ministry of Peasant Affairs, Indigenous and Originary Peoples (Ministerio de Asuntos Campesinos, Indigenas y Pueblos Originarios) MSE Management Services Entity NGO Non-governmental Organization OM Operational Manual OTB Territorially Based Organizations (Organizaciones Territoriales de Base) PIP Project Implementation Plan PIU Project Implementation Unit PRS Poverty Reduction Strategy TCO Original Community Territories (Territorios Comunitarios de Origen) TOR Terms of Reference VAIPO Vice-Ministry of Indigenous Affairs and Originary Nations (Vice-Ministerio de Asuntos Indigenasy Pueblos Originarios) Vice President: David de Ferranti Country Manager/Director: Isabel Guerrero Sector Manager/Director: John Redwood Team Leader: David Tuchschneider Bolivia Indigenous Peoples Development Project CONTENTS A Project Development Objective ................................................................2 1. Project development objective .................................................................2 2. Key perfonnance indicators .................................................................2 B Strategic Context .................................................................2 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project .........2 2. Main sector issues and Government strategy .................................................................2 3. Learning and development issues to be addressed by the project ............... ...................6 4. Learning and innovation expectations ......................................... ........................6 C Project Description Summary ................................................................7 1. Project components .................................................................7 2. Institutional and implementation arrangements ..............................................................8 3. Monitoring and evaluation arrangements ................................................................. 9 D Project Rationale ................................................................ 10 E Summary Project Analysis ................................................................ 10 1. Economic ................................................................ 10 2. Financial ................................................................ 10 3. Technical ................................................................ 10 4. Institutional ................................................................ 11 5. Social ................................................................ 11 6. Environmental assessment ................................................................ 13 7. Participatory approach ................................................................ 13 F Sustainability and Risks ................................................................ 15 1. Sustainability ................................................................ 15 2. Critical Risks ................................................................ 15 3. Possible Controversial Aspects ................................................................ 16 G Main Loan Conditions ................................................................ 16 1. Effectiveness Conditions ................................................................ 16 2. Other ................................................................ 16 H Readiness for Implementation ........................ 16 I Compliance with Bank Policies ........................ 17 Annexes Annex 1. Project Design Summary Annex 2. Detailed Project Description Annex 3. Estimated Project Costs Annex 4. Cost-Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary Annex 5. Financial Summary for Revenue-Earning Project Entities, or Financial Summary Annex 6. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table Al. Consultant Selection Arrangements Table B. Thresholds for Procurement Methods and Prior Review Table C. Allocation of Loan Proceeds Annex 7. Project Processing Budget and Schedule Annex 8. Documents in Project File Annex 9. Statement of Loans and Credits Annex 10. Country at a Glance Annex 11. Social assessment Map IBRD 31131 Bolivia Indigenous Peoples Development Project Project Appraisal Document Latin America and the Caribbean Region Bolivia, Ecuador and Peru Country Department Date: January 25, 2001 Team Leader: David Tuchschneider Country Manager/Director: Isabel Guerrero Sector Manager/Director: John Redwood Equity Pillar Leader: John Newman Project ID: P057416 Sector: Other Social Sector Lending Instrument: Learning and Innovation Credit Theme(s): Social Development, Capacity Building. (LIL) Poverty Targeted Intervention: [x] Yes [] No Project Financing Data [ I Loan [x ] Credit ] Grant I[I Guarantee [H] Other [Specify] For Loans/Credits/Others: Amount: SDR 4.0 million (US$5.0 million) Proposed terms: [ ] To be defined [] Multicurrency [I Single currency [] Standard [x] Fixed [ ] LIBOR-based Variable Grace period (years): 10 Years to maturity: 40 Commitment fee: Standard Service charge: 0.75% Front-end fee on IDA None credit: Government 0.68 0.00 0.68 IDA 5.00 0.00 5.00 Beneficiaries 0.96 0.00 0.96 Total: 6.64 0.00 6.64 Borrower: Republic of Bolivia Responsible agency: Ministry of Peasant Affairs, Indigenous and Originary Peoples (MACPIO) Estimated disbursements (IDA FYIUS$M): Annual 0.19 1.47 2.09 1.25 Cumulative 0.19 1.66 3.75 5.00 Project implementation period: April 2001 - March 2004 Expected effectiveness date: 04/01/01 Expected closing date: 12/31/04 Implementing agency: Ministry of Peasant Affairs, Indigenous and Originary Peoples (MACPIO) Contact person: Wigberto Rivero Pinto, Minister Address: Av. Sanchez Lima 2072, La Paz, Bolivia Tel: 591-2-330707 Fax: 591-2-801-2192 E-mail: macpio@caoba.entelnet.bo OCS LIL PAD Forn: January 5, 1998 A: Project Development Objective 1. Project development objective: (see Annex 1) The objective of the project is to learn how culturally based productive initiatives of indigenous' communities can contribute to income generation and poverty reduction. The project will finance on a pilot basis a number of demand-driven, community or small-producer initiatives, which aim to improve the forms and conditions in which indigenous peoples produce and sell their products or services. The initiatives will be based on the existing knowledge and resources of the different ethnic groups, which in many cases provide them with a comparative advantage for improving their insertion into the market. The project will test a mechanism for financing these types of demands, and a system of participatory monitoring for incorporating the lessons learned into the policy and investment measures adopted by the Government of Bolivia (GOB). By bringing their own worldviews and cultural perspectives into the wider effort to reduce poverty, which GOB is implementing through the Poverty Reduction Strategy (PRS), it is expected that indigenous peoples' needs will be met in a more appropriate and effective manner. 2. Key performance indicators: (see Annex 1) a) % of economically successful and socially viable pilot initiatives. b) % increase in beneficiary community incomes. c) % increase in the number of culturally based initiatives financed by other sources as a result of PRS adjustments B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 17890-BO Date of latest CAS discussion: May 21, 1998 The Indigenous Peoples Development LIL, to be designed and implemented by indigenous organizations, was discussed and included in the CAS. The project would contribute to the CAS objective for the Equity Pillar which is to raise the standards of living of the poor, in particular through: (i) increasing social expenditure for excluded groups; (ii) improving the efficiency and quality of social services taking into account cultural conditions; and (iii) raising the productivity of indigenous producers. In so doing, the project will also contribute to the Opportunity Pillar objective of widening economic growth with better distribution. 2. Main sector issues and Government strategy: A Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis was conducted during project preparation. During the workshop, almost 100 indigenous leaders identified the following main sector issues and made suggestions on how to address them: a) Lack of organizational capacities. One of the main weaknesses identified relates to a self-perception of lack of organizational capabilities and low participation of rural women in community affairs. Participants stated that divisiveness, indifference and pessimism contribute toward poor organizational capabilities. This problem is compounded by the lack of training and possibilities for human resources development. There are few training programs provided in management issues resulting in few qualified indigenous technicians and professionals. ' For the sake of simplicity, the term "indigenous" is used in this document as encompassing a variety of identities, which in Bolivia may be referred to as "indigenas", "campesinos" or "originarios", depending on the region or even the situation in which a self-reference is provided. 2 b) Lack of knowledge of market mechanisms and conditions. Few economic pilot projects have been undertaken. Indigenous organizations lack information on market potential for their products as well as rules and regulations governing marketing of certain products including environmental legislation. c) Lack of financial resources and poor infrastructure. There are no credit facilities available to indigenous groups and most communities are isolated due to lack of road infrastructure and communication facilities. Social inequalities and poverty are deeply rooted in Bolivian society, which has not yet managed to overcome the colonial and republican heritage of racism and discrimination. Most Bolivian institutions still operate under implicit discriminatory practices. Indigenous peoples, though forming the majority of the population, have a restricted presence in managerial positions in government, the private sector and NGOs. Indigenous peoples still confront economic and socio-cultural barriers in attempting access to public and private services, ranging from health to credit. This heritage of exclusion is reflected in the poverty statistics. A comparison by ethnicity in terms of the probability of being poor or extremely poor (see Table 1 below) shows that in 5 out of 6 categories the probability of being poor is worse for indigenous than for non-indigenous individuals in urban and rural areas. Table 1: Probability of being poor or extremely poor by group 1993-99 October 1997 survey November 1999 survey Main cities Other urban Rural Main cities Other urban Rural Pov. E.P. Pov. E.P. Pov. E.P. Pov. E.P. Pov. E.P. Pov. E.P. Non indigenous 46.3 18.5 61.4 32.6 68.7 48.9 44.8 19.3 72.5 34.9 80.9 56.8 Indigenous 57.9 29.2 64.2 37.8 79.7 61.1 50.6 23.6 69.8 40.5 82.5 60.7 Source: Draft of Bolivia: Poverty Diagnostic 2000, June 30, 2000. "Pov." Is probability of being poor and "E.P." is probability of being extreme poor. Indigenous affiliation, controlling for household and geographical barriers, has an important bearing on income. As Table 2 shows, in November 1999, Aymara, Quechua or Guarani people perceive between 15% and 57% less income than Spanish- or foreign-speaking individuals. Table 2: Marginal percentage change in per capita income due to ethnicity or language spoken [The excluded reference category is speaking Spanish or a foreign langua el 1997 M99 November 1999 Rural Small Large Large Rural Small Large cities cities cities cities cities Speaking Quechua NS -0.13 -0.13 -0.13 -0.15 NS -0.13 Speaking Aymara NS NS -0.21 -0.18 -0.19 -0.57 -0.32 Speaking Guarani NS NS NS NS -0.17 NS NS Source: Draft of Bolivia: Poverty Diagnostic 2000, June 30, 2000. M99 is March 1999. NS means not statistically different from zero at the 10% level. Coefficients underlined are significant at the 10% level. Coefficients not underlined are significant at the 5% level Finally, an examination of trends (Table 3) shows that the gains in poverty reduction since 1993 are mostly concentrated in the urban areas. In rural areas, though on average there has been a small decline in the poverty gap, the proportion of the population below the poverty line has actually increased since 1997. About two-thirds of the rural population and one-third of the urban population can be classified as indigenous, which shows that the gains in poverty reduction are concentrated on the non-indigenous population. 3 Table 3: Trend in poverty and extreme poverty, 1993-99 1993 1997 1999 March 1999 November Pov. Ext. pov. Pov. Ext. pov. Pov. Ext. pov. Pov. Ext. pov. Incidence of poverty: Share of the population below the poverty line ("headcount") National - - 63.2 37.9 - - 62.72 36.82 Main cities as a whole 52.0 25.5 50.7 21.5 50.0 23.4 46.98 21.62 Other urban areas - - 63.7 34.3 - - 65.80 30.88 Rural areas - - 77.3 58.2 - - 81.71 58.80 Depth of poverty: Distance separating the poor from the poverty line ("poverty gap") National - - 33.43 18.59 - - 31.15 15.40 Maincitiesasawhole 24.37 11.42 21.05 7.42 21.70 8.92 19.37 7.49 Other urban areas - - 31.02 13.41 - - 32.32 13.73 Rural areas - - 48.69 33.69 - - 45.82 26.26 Source: Draft of Bolivia: Poverty Diagnostic 2000, June 30, 2000. All poverty estimates are based on per capita income, except the estimate for rural areas in November 1999 which is based on per capita consumption. In spite of the gains derived from social investment and the rising access to health, education and water sanitation, rural poverty remains high because of poor infrastructure and undeveloped markets. In the highlands, restrictions in access to land diminish the potential of the agricultural sector to increase farmer incomes. A Rural Productivity Study carried out by GOB with IDA assistance in 40 communities in the Bolivian Altiplano and valleys found that 80% of all focus groups perceive that their agricultural productivity has declined in the last decade. Most of these groups are immersed in perceived vicious cycles of declining soil fertility and environmental degradation. The study also shows that development efforts have reached a minority of farmers and that support for non-agricultural activities has been minimal. In the lowlands, indigenous groups are securing access to territories (TCOs), but are preoccupied with realizing their productive potentials in the market. One of the most important demands of civil society organizations, including indigenous and campesino organizations, is that resources be transferred directly to communities or small-producer organizations for them to manage small-scale development projects. Experience so far with this modality of funding by a handful of international NGOs, some of IFAD's rural development projects and the IDA-funded Participatory Rural Investment Project in Bolivia shows that many communities have basic capacities and social control mechanisms which, reinforced with managerial strengthening, provide them with the necessary resources for managing these initiatives. Support of productive activities came out as one of the top priorities of the National Dialogue, along with investment in the social sectors. This echoes the results of the participatory planning efforts carried out in almost all of the rural municipalities of Bolivia, with massive participation by local communities. Under the new compensation policy, Bolivia is transforming its social investment funds (FIS and FDC) into a new fund, which will be instrumental in operating transfers between the central government and municipal governments. These transfers will not finance small-producer groups or communities who have entrepreneurial or small-business initiatives. A mechanism for supporting micro-enterprise and small-business development is managed by the Viceministry of Microenterprise, but its reach barely covers rural areas and is restricted to technical assistance. Financing for developing culturally based initiatives is practically non-existent. GOB policies are contained in the Development with Identity document prepared by VAIPO. It states that the GOB will aim at improving living conditions of indigenous communities through economic progress, political participation and cultural assertion. The Government will ensure legal security of indigenous lands, further economically sustainable initiatives, sustain cultural values and provide for basic services. Main strategy thrusts include: (i) development of infrastructure and economic opportunities; (ii) development of social services with equity considerations; (iii) political development and (iv) cultural development with dignity and inclusion. VAIPO has recently been raised to the rank of Ministry (MACPIO) to signal a greater emphasis on satisfying indigenous demands. 4 Government strategy has evolved over time, in many instances under pressure from indigenous groups demanding territorial rights and better economic conditions. The Laws of Popular Participation (LPP) and the Agrarian Reform Service (INRA) have initiated the most important changes. The LPP has provided a simple mechanism for the recognition of the juridical personality of territorially-based organizations (OTBs), which has resulted in the registration of around 15,000 organizations, most of them representing indigenous or Quechua and Aymara campesino communities. These organizations can now exercise the legal representation of their communities in public and private transactions, and have legal rights over the identification and control of public investment, in particular at the municipal level. There has been significant devolution of responsibilities and resources to the 315 municipalities existing in Bolivia; most of them newly created by the LPP. There has been significant IDA and other donor support for this reform. The practice of community rights and duties and government compliance with them vary from place to place, but the LPP has provided the basis for a fundamental transformation of the public sector in Bolivia, promoting greater transparency, participation and accountability. The 1999 municipal elections permitted the massive participation of indigenous peoples as candidates. Almost 60% of elected municipal councilpersons are of indigenous origin, in contrast with less than 20% of representatives in congress. Not one minister or viceminister considers an indigenous language as his mother tongue. Indigenous employment in central government institutions (including prefectures) is restricted to the lower rungs of the scale. Institutional strengthening of indigenous groups is being undertaken with IDA and donor support within the context of the Popular Participation Law (LPP), but is mostly aimed at local level institutions in view of the rights and duties supported by this Law. Higher level (regional or national) indigenous and campesino organizations receive less support. The LPP also permits the creation of indigenous districts where the territorial boundaries of an indigenous group do not coincide with the formal jurisdictional boundary of one or more municipalities. Since 1994, the government has supported the creation of almost 100 indigenous districts, but less than 30 have been recognized by their municipalities, and most of these have not received clear administrative delegations nor sufficient budgetary support. Since the September 2000 siege of major cities, carried out by campesino and indigenous organizations, the GOB has renewed its commitment to this policy, which will be supported through the Participatory Rural Investment Project. The upcoming Decentralization project will also support government efforts in consolidating a clearer relationship between indigenous territories and municipalities. In the context of the INRA law, assistance has been provided to indigenous groups in defining their territorial rights and boundaries and providing collective titles (TCOs), as well as titling small-holders of Aymara and Quechua origins who have settled in the lowlands. TCO delimitation has advanced strongly in the lowlands, where indigenous groups mobilized early demanding territories. There are now a total of 33 ethnic demands over 50 areas. Titling has been slow, but work is advancing solidly. The total area under demand is 18.6 million hectares. In contrast to these advances, many highland indigenous peoples perceive that the 1NRA law has done little for them, and the GOB is negotiating changes in the law with their representatives. The convergence between the INRA and Popular Participation laws will permit providing TCOs with jurisdictional benefits either as indigenous municipalities or districts. The GOB is undertaking a major reform of poverty alleviation policies through the establishment of a Poverty Reduction Strategy (in the context of the HIPC and PRSP). This strategy will provide the basis for reorienting public investment and donor support in the future. The PRS is based on the results of the National Dialogue, a major participatory exercise carried out in the context laid out by the LPP. A draft of the PRS will be discussed with indigenous organizations, which are expected to include demands that cannot be solved at the local level alone. The PRS provides for the creation of a Social Control Mechanism in charge of overseeing the implementation of the strategy and negotiating its periodic adjustment with GOB. At the local level, the Social Control Mechanism will be based on the vigilance committees provided by the LPP, which articulate the demands and the oversight exercised by local communities. At the departmental and national level, there will also be institutional instances in charge of following up implementation and evaluating results. The institutional character, forms of participation by 5 civil society organizations and ways in which the mechanism will carry out monitoring and evaluation activities is under discussion now by these organizations. 3. Learning and development issues to be addressed by the project: Early on in the process of consultations, indigenous organizations focused the expected results from the project on the following: (i) indigenous groups are able to execute and manage productive economic ventures; (ii) culturally based innovative sub-projects are implemented with secure funding; (iii) a monitoring and evaluation system is in place; and (iv) institutional capacities of indigenous organizations and government agencies are strengthened. This focus was preserved and maintained in the whole consultation process and informs the main learning issues addressed by the project. The project aims to contribute to changing the dominant paradigm based on the exclusion of indigenous culture from development efforts. With the partial exception of LPP and INRA, most development policies and projects in Bolivia take into account only marginally the multicultural composition of the society and the advantages provided by indigenous social capital. Most development discourses and practices are defacto exclusionary. They predicate, implicitly or explicitly, that indigenous culture, knowledge, technology and resources are inappropriate for development and, thus, defeating poverty is synonymous with ceasing to be indigenous. This is a model based on replacement rather than inclusion. The project would be based on the opposite premise: that well being can increase by empowering indigenous peoples to develop from the basis of who they are and what they have. Economic and cultural development of indigenous communities has received scant attention in Bolivia with the exception of a limited number of projects fuinded by some donors. The main learning issue is related to the functioning of indigenous societies in a market economy on the basis of the comparative advantage provided by their culture and social capital. Innovations and lessons are expected to flow from: (i) the operation of a mechanism for direct financing of communities and producer groups; (ii) the design and self-management of subprojects by them; (iii) the systematic provision of information and lessons on culturally based productive initiatives to the indigenous organizations which are monitoring the implementation of GOB's Poverty Reduction Strategy; and (iv) the operation of an institutional framework in which indigenous organizations share principal responsibilities with GOB in respect to implementation and social control. 4. Learning and innovation expectations: [x] Economic [ ] Financial [x] Technical [x] Institutional [x] Social [x] Environmental [x] Participation [x] Other [legal] (a) Economic. Learning would emerge from an analysis of the nature of the economic enterprises created by the communities and their conditions for success. Analysis of subsistence versus market economies and the appropriate mix within indigenous groups should provide valuable insights for the design of new projects. At the end of the project, a full cost-benefit analysis of a sample of pilot subprojects will be undertaken in order to ascertain the viability of culturally based productive support. (b) Technical. Technical expectations are to (i) incorporate traditional technologies in modern production systems; (ii) assign value to traditional indigenous products; (iii) test potential uses of flora and fauna; (iv) try out different combinations of support for productive initiatives; and (iv) experiment with different forms of beneficiary subproject management and organization. (c) Institutional. Institutional learning expectations are divided in two levels. At the national project level, the functioning of an institutional framework in which indigenous organizations and GOB share the responsibilities for implementation will be closely monitored. The contracting of one or more MSEs for subproject administration forms part of this innovative framework. At the local level, examining the relationship between beneficiary groups carrying out investment subprojects and the traditional leadership and indigenous political organizations would test the institutional viability of indigenous enterprises. This 6 would provide insights on the complexity of private versus collective interest as seen by communities and indigenous leaders. (d) Social. The handling of social differentiation inside the communities and the distribution of the benefits deriving from the initiatives would provide insights into the social viability of supporting small- business initiatives. Gender positive discrimination would provide lessons on acceptance of new or expanded participation of indigenous women in economic initiatives and decisions within the household and the community. (e) Environmental. Analyzing the way in which producers manage natural resources in pursuit of profits would provide lessons and solutions to avoid negative environmental impacts in the future. (f) Participation. IThe success of the feedback that will be provided to indigenous organizations about culturally-based productive initiatives depends on: (i) the flow of information between indigenous communities and regional or national indigenous organizations; and (ii) the capacity of the latter to properly evaluate PRS implementation and influence the corresponding adjustments. (g) Legal. An assessment will be made on the nature of the enterprises formed by beneficiaries to ascertain the pertinence of the existing legal forms for creating and registering private companies and probably propose other culturally based alternatives. If successful, the project will permit demonstrating the economic viability of culturally based productive initiatives. Following expectations raised in the National Dialogue and the PRS, the lessons leamed from the experience would permit the design of policy and development instruments geared at supporting the indigenous poor in developing their potentialities from within their culture. The lessons derived from the execution of pilot subprojects are expected to reduce the information costs for future private sector involvement and to facilitate the formation of joint initiatives with indigenous peoples. At a minimum, the project should demonstrate how communities and small-producer groups could manage their ownI development initiatives. The project will aim to help mainstreaming the lessons derived from community management. The project would provide essential infornation for the adjustment of the Poverty Reduction Strategy and consequently permit refining donor support in Bolivia. C: Project Description Summary 1. Project components: (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown) 1. Culturallv-based pilot SY5.50 83 4.38 8 investments 2. Poverty-reduction monitoring SY 0.67 10 0.37 7 and learning 3. Project management BI 0.47 7 0.25 5 Total Project Costs 6.64 100 5.00 75 * Indicative costs include price contingencies of 5 %. 7 2. Institutional and implementation arrangements: Implementation period: The project will be implemented over a period of 39 months, beginning in April 2001. Executing agency: The Ministry of Peasant Affairs, Indigenous and Originary Peoples (MACPIO). Project oversight: Guidance and oversight in project implementation would be provided by a mixed civil society / government Directorate. The composition of the Directorate was agreed during the consultation process with all indigenous and campesino organizations. The Directorate will be composed, on the indigenous side, by representatives of the Peasant Confederation of Bolivia (CSUTCB), the Indigenous People's Confederation (CIDOB); the Confederation of Peasant Colonizers (CSCB); the Bartolina Sisa National Federation of Peasant Women (FSMCB-BS); and CONAMAQ. On the part of the government, there will be representations of MACPIO, the Ministry of Economic Development and the Viceministry of Microenterprise. The Directorate will have the following functions: (i) define project policies; (ii) approve and supervise the execution of the annual workprogram and budget; (iii) approve the Operational Manual; (iv) approve the selection of the MSE(s) and PIU personnel; (v) review and approve progress reports; (vi) review and approve impact evaluation reports; (vii) approve annual independent audit reports; (viii) provide information on project implementation to the national level indigenous organizations; and (ix) provide support for the socialization of the activities lessons derived from project implementation. Directorate approvals will be governed by an administrative silence clause. The regulations for the functioning of the Directorate will be included in the Operational Manual. Project coordination: A Project Implementation Unit in MACPIO will maintain overall administrative responsibility for the project's successful implementation, and will ensure that lessons learned are fed back into GOB and disseminated systematically to other government agencies, beneficiaries and the private sector. The unit will report to the Minister of MACPIO and the Project Directorate. The unit will be built on the basis of the presently-existing unit which is administering the PHRD grant being used for project preparation. When fully staffed, the PIU will include a Project Coordinator, a Financial Administration Manager, a Project Accountant and a Monitoring and Evaluation specialist. The latter will supervise a second group of 7 consultants in charge of monitoring and learning. Staffing of the PIU will be done under qualifications and TOR satisfactory to the association, as agreed in the actions plans for the Procurement and Financial assessments. The PIU will manage the special account and will ensure compliance with the Bank's auditing, financial reporting and procurement rules on the part of implementing agencies. It will prepare annual operating and procurement plans, budgets and implementation reports for consultation with the Directorate and IDA. Implementing agencies: Component 1, Culturally-based pilot investments, will be managed by a Management Services entity contracted by MACPIO, following a Quality- and cost-based selection process, under Terms of Reference to be included in the Project's Operations Manual. This agency would evaluate, approve, supervise and effect progress payments against contracts for subprojects from weekly advances for the PIU. The MSE will supervise each agreement with beneficiaries in order to ensure the use of funds for the intended purposes. Indigenous communities and small-producer groups would execute the subprojects. The funds will be disbursed on the basis of the contracts and the progress reports. Component B, Poverty-reduction monitoring and learning, will be implemented jointly by national-level indigenous organizations and MACPIO. The indigenous organizations will select 4 indigenous specialists who will be in charge of field monitoring for operational and learning purposes. These specialists will work under the Monitoring and Evaluation Specialist and his team in the central office of MACPIO. The component will be administered by the PfU. Accounting, financial reporting and auditing arrangements. The Financial Management Specialist for Bolivia conducted a review in MACPIO of the accounting, controls over disbursements and resources, planning and budgeting as well as the level of administrative staff, which will form the core of MACPIO's PIU. MACPIO is currently executing a PIRD grant related to the preparation of the project. It was determined that MACPIO has in place accounting and internal control systems that accord with 8 accounting standards and that reliably record and report all assets, liabilities and financial transactions, including the use of IDA funds. The systems provide sufficient financial information for managing and monitoring project activities. A project specific, LACI-compatible integrated financial management system is under development. This system was developed under TORs reviewed by IDA and will be implemented, tested and assessed by a Bank FMS before the Credit operations initiate. The Ministry will contract external auditors satisfactory to the IDA to conduct the annual external audit of the project under Terms of Reference which comply with the Bank's Guidelines for Project Audits, these will include field visits to ascertain the outcomes of the expenses reported under the sub-projects. Operational Manual: MACPIO will prepare a detailed OM, which will be approved by the Directorate of the project. This manual will contain inter alia the following: (a) eligibility criteria for subprojects and beneficiaries, including the environmental and cultural property filters; (b) project implementation plan and monitoring indicators; (c) learning and dissemination strategy aimed at indigenous organizations, GOB, international cooperating agencies, and the private sector; (d) project management, coordination and reporting aspects, including objectively verifiable performance and learning indicators; (e) detailed procedures for procurement of goods, consultants, management services and community participation; (f) sample procurement documents and model contracts; (g) terms of reference for key consultants and studies; (h) disbursement procedures; and (i) accounting system and audit aspects. IDA would review the manual. MACPIO's adoption of the Project Operational Manual, acceptable to IDA, would be a condition of credit effectiveness. Project Implementation Plan: A detailed PIP, including a basic procurement plan, has been prepared for Project Year I and examined during the appraisal. 3. Monitoring and evaluation arrangements: Bearing in mind the learning nature of the project and the innovative characteristics inherent in the project's institutional and implementation arrangements, a two pronged approach to monitoring has been devised: (i) developing indigenous self-monitoring at the community and the higher organization's level; and (ii) providing technical monitoring support. This distinction takes into account views expressed by indigenous organizations consulted during a final participatory workshop. Indigenous leaders expressed their views on project design placing special emphasis on the need to be fully involved in monitoring of activities, suggesting that: (i) indigenous experts be included under project management for the purposes of facilitating monitoring and social control, (ii) monitoring be brought closer to where projects are implemented; and (iii) beneficiary groups should be trained in self-evaluation processes. It was emphasized that indigenous involvement in monitoring activities ensures social control of investments to be made thus furthering transparency and accountability. Based on these suggestions, monitoring and evaluation activities have been included mainly under a distinct Poverty-Reduction Monitoring and Learning component while day- to- day implementation monitoring, and technical support has been left under the Project Management component. The objectives of the Poverty-Reduction Monitoring and Learning component are to: (a) measure the impact of productive indigenous initiatives funded by the project under a set of criteria to include their social, technical, economic and institutional viability; (b) establish a methodology for following-up inclusion of this type of indigenous demands under the PRS and assessing their implementation if adopted. In order to achieve these objectives two regional monitoring units will be established in the lowlands and in the inter Andean valleys and the High Plateau areas, staffed by two indigenous monitoring specialists in each area. Training will be initially provided to these specialists on the PRS and the mechanisms necessary for including indigenous initiatives under the strategy. Further training will be provided to assist indigenous monitoring specialists in transferring participatory monitoring techniques to project beneficiaries with special emphasis in the monitoring of project expenditures and income generated. With the view to deepen the self-monitoring aspects, participatory monitoring workshops will be convened annually. During these workshops beneficiaries will be able to analyze problems found and 9 discuss possible solutions. They will also be able to confront providers of services contracted by them under the culturally based productive initiatives component. Detailed monitoring and evaluation indicators will be established for: (i) the productive investment activities; (ii) the learning and dissemination strategy; and (iii) the institutional framework. These will be included in the OM. Other social impact and poverty reduction indicators will be determined as part of the baseline study to be contracted at project outset, and in relation to the indicators established in the PRS. An independent impact evaluation study will be conducted at the end of the project. A monitoring and evaluation specialist will assist the PIU in fulfilling the monitoring requirement for the learning process, as well as for the reporting requirements set out by GOB and IDA in terms of project progress and fulfillment of milestones and deliverables. This specialist will be responsible jointly with an economist and a social scientist for providing backstopping and technical support to the indigenous specialists on the field. An information technology specialist will assist in compiling and systematizing the information gathered. An end-of project evaluation will be conducted and an Intensive Learning Implementation Completion Report prepared. This report will inter alia: (i) ascertain the possibility of preparing and implementing follow-up actions or programs with acceptable levels of risk; (ii) determine commitment of stakeholders to the innovations introduced; (iii) evaluate community procurement approaches; (iv) evaluate the financial analysis carried out during project implementation of beneficiary initiatives; (v) establish the success of technical solutions tried mainly in terms of use of traditional technologies and customary uses of indigenous products; and (vi) determine the effectiveness of using a Management Services Entity (MSE). D: Project Rationale: (This section is not to be completed in a LIL PAD) E: Summary Project Analysis: (detailed assessments for those analyses applicable to LIL are in the project file, see Annex 8) 1. Economic: (supported by Annex 4) [ ] Cost-Benefit Analysis: NPV=US$ million; ERR= % [ ] Cost Effectiveness Analysis [x] Other (specify) The project has not been subjected to an economic rate of return analysis. Cost-effectiveness of the learning process has been ensured by: (i) dedicating most of the funding to pilot subprojects, which underlies the approach of learning-by-doing; and (ii) by developing a learning and dissemination strategy. A preliminary cost benefit analysis for a number of prototype indigenous initiatives that would be funded by the project will be carried out in order to provide guidance for establishing the baseline. A full cost- benefit analysis of pilot investments will be carried out at the end of the project. 2. Financial: NPV=US$ million; FRR= % The project is a pilot operation and full cost recovery is not an objective. However, fiscal sustainability is an important consideration in the design of the project. Under HIPC and the PRS, GOB is committed to increasing the amount of resources directed at poverty alleviation in general and at indigenous poverty in particular. Component 2 will facilitate indigenous organizations' feedback and monitoring of the implementation of the PRS. Social monitoring should permit policy and institutional adjustments that will increase the effectiveness of public expenditures and their sustainability. 3. Technical: The project will pilot the improvement of existing technologies. This improvement may be based on the 10 introduction of modem technologies or the recovery of forgotten indigenous technologies. A clear decision has been made in terms of supporting the use of indigenous knowledge and technologies. The project would not fund the introduction of exotic species, the use of pesticides or the production of commodities. The operation of the project will conform to all appropriate health, agronomic, environmental and technological standards. 4. Institutional: MACPIO has been recently created on the basis of VAIPO. MACPIO has been executing a project funded by Denmark for the titling of indigenous territories in the lowlands. Project implementation capacity is limited and dependent on donor support. A number of altematives were considered and potential agencies evaluated during preparation. Implementation by the new fund, to be created by the Unified Fund Directorate (DUF) on the basis of FIS and FDC, was rejected since the transfer mechanism to be put in place would only finance municipal initiatives and not those coming directly from communities and small-producer groups. The creation of a new indigenous fund, as has been proposed by indigenous organizations, would be cumbersome and cause serious delays in project launching. Strengthening MACPIO through the creation of a PIU under the oversight of a mixed govemment / civil society directorate was judged to be the most viable alternative for project coordination and management. A small unit in MACPIO has been in charge of implementing the PHRD grant associated with this project's preparation. It would form the basis of the PIU to be established for project implementation. At present, the Unit is composed of a Project Coordinator, a Financial Administrator, and an Economist. The unit would be further enlarged to include a Project Accountant, an Accounting Assistant, a Monitoring and Evaluation Specialist, a Social Scientist, an Information Specialist and 4 field supervisors in charge of operational monitoring and learning. Draft qualifications and TOR for all personnel were agreed to during appraisal, on the basis of the Procurement and Financial management assessments, and will be included in the Operational Manual. The Culturally based indigenous initiatives component would be administered by one or several Management Services Entities, under contract with MACPIO. Besides ensuring accountability and transparency in implementing a financial resource transfer mechanism, subcontracting this mechanism would in itself be part of the learning process. Supervision of the MSEs will be done by the PIU. National-level indigenous organizations would implement the Poverty Reduction Monitoring and Learning component jointly with MACPIO. Their capacity, though variable, is generally low. The PIU will assist them in implementing their activities and will administer the funds. 5. Social: The Indigenous Diagnostic carried out by VAIPO with IDA funding and the process of collaboration with indigenous organizations during project preparation permitted an assessment of the number, capacity and intent of the main stakeholders. There are 35 ethnic groups in Bolivia, comprising an estimated 4.6 million people (58% of the total population) in the year 2000. Aymara and Quechua speakers form the majority of the indigenous population (35% and 50% respectively). The other 15% is distributed among 32 other ethnic groups that inhabit the lowlands. An estimated 54% of the indigenous population of the country inhabits in urban areas.2 Aymara and Quechua-speaking individuals are concentrated in the rural and urban areas of the highlands (Altiplano and valleys), though they are increasingly migrating to the agricultural colonization and urban areas of the lowlands as well. In the rural highlands, since the Agrarian Reform of 1953, many indigenous communities have adopted individual forms of land tenure. Most also embarked on a process of state-induced acculturation through the adoption of Spanish in schools and the formation of sindicatos 2 These are estimates based on projections from the 1992 Census, which did not pick up sufficient information for determining ethnic belonging, and underrepresented the rural population. A new census, to be carried out in 2001 will provide more accurate information. 11 as the predominant form of community organization. In most cases, sindicatos follow the rotational logic of power and representation existing in traditional Andean groups. In some parts of Oruro, North of Potosi and the highlands of Cochabamba, persist some Andean ethnic territories which have not been reduced to communities (ayllus), which preserve traditional systems of land redistribution and political organization. Most Andean (Altiplano and valley) communities identify themselves as "campesinos" (sometimes in conjunction with Aymara or Quechua), in opposition to the term "indian" or "indigenous" used commonly before the 1952 revolution and still in use in the lowlands. The most important lowland ethnic groups are the Guarani, Chiquitano and Ayoreo. The other 29 ethnic groups form very small population and some are on the verge of disappearing. Lowland peoples have succeeded in establishing large demands for territories (TCOs) which are being processed by the GOB. In the first workshop held during project preparation, leaders of all indigenous groups and campesino organizations outlined a vision of the future in which: (i) participation in local power structures would be strengthened; (ii) territorial rights would be consolidated; (iii) an Indigenous People's Law would be passed; (iv) a Ministry of Indigenous Affairs would be established; (v) productive initiatives would be self-managed; (vi) indigenous women would fully participate in all spheres; (vii) quality basic services would be provided; (viii) indigenous professionals and technicians would receive quality education; (ix) environmental conditions would be enhanced and natural resources conserved; (x) cultural values would be reinforced and, (xi) market access for indigenous products ensured. They also decided to focus the proposed project on supporting self-management of productive initiatives. It was further decided that testing should be focused on innovative initiatives that are based on indigenous culture. On this basis, the indigenous specialists selected by the organizations to work in the preparation team carried out a survey of more than 250 producers on the field. Indigenous producers identified the following crucial aspects for implementation: (a) Types of subprojects: The first option was handicraft production and marketing, followed by light agro-industry, food security, ethnotourism, indigenous medicine, communications, cultural services, forestry and biotechnology. (b) Factors involved in the success or failure of initiatives: For success, emphasis was placed on: capacity building in management; quality of products; technical assistance for production; appropriate technology; identification and access to markets; and partnerships with the private and public sector. For failure, they identified: weakness of economic organizations; lack of management capacity; interference by higher-level organizations. (c) Potential markets: For selling products, 49% identified the national market, 20% regional markets, and 15% international markets. (d) Type of organization for carrying out initiatives: Most producers (64%) prefer small enterprises; 24% community associations. (e) Partnerships: 59% of producers prefer to establish partnerships among indigenous peoples; 25% considered joint ventures; and 15% aim for partnerships with the private sector, NGOs and others. Recent evaluations of projects and programs in favor of rural and indigenous women have pointed out that, although indigenous women still remain marginalized, there has been progress achieved towards incorporating the gender dimension at the political and local government levels. Since passage of the LPP a few women leaders have emerged. Following the 1999 municipal elections the percentage of women elected officials rose to 15%. Women comprise 1 1% of OTB leadership and 10% of vigilance committee members. There is also a growing presence of rural and indigenous women in the participatory planning process of the LPP. 3 3Claudia de la Quintana, Cuanto hemos avanzado las mujeres en Bolivia? UNICEF/ COSUDE/ACDI/Netherlands Embassy/UNDP. 12 Most gender assessments of rural sector projects propose to include the following in development projects: (i) supplying technical assistance tailored to the demands of rural and indigenous women; (ii) developing agricultural and non agricultural productive activities, (iii) stimulating the development of financial services; (iv) and following up on the land titling process as it relates to rural and indigenous women. During the project preparation process indigenous groups also identified the need to fully incorporate indigenous women in project implementation. This issue has been considered in project design. It is estimated that 30 percent of sub-projects to be funded would benefit indigenous women groups mainly in handicrafts and management of flora and fauna. Potential impacts of subprojects on cultural property will be screened, ensuring that subprojects that may have negative impacts be excluded at the outset. The screening mechanism, including the instruments needed to avoid or address impacts on cultural property will be included in the operational manual for the project, which will be reviewed to ensure compliance with Bank policies and best-practices. 6. Environmental assessmentl: Environmental Category [ ] A [x] B [ ] C No negative environmental or social impacts are expected from project implementation. Privileging culturally based initiatives and the use of traditional technologies would limit any damaging environmental impacts. The project will not support the introduction of exotic species, nor the use of any pesticides. Some minor works may be involved but they will be restricted to artisan workshops and small-scale, demonstrative infrastructures related to ethno- and eco-turistic activities. The project will also finance small-scale, non-extractive activities related to existing flora and fauna, for example, for ethno-medical use. A simple screening mechanism will be implemented to ensure that minor works are properly located and executed, and that subprojects that may have negative environmental impacts are excluded at the outset. In addition, there will be a negative eligibility list, which will exclude activities involving protected or endangered species, or activities in sensitive areas. Eligible subprojects involving use of flora and fauna will require a management plan. The screening mechanism, TOR for management plans and engineering standards necessary to avoid environmental impacts will be included in the operational manual for the project, which will be reviewed to ensure compliance with Bank policies and best-practices. A private firm or NGO will administer subproject screening, financing and supervision, which will be subcontracted for that purpose under TORs agreed with the IDA. Project operation and compliance with fiduciary rules and safeguards will be controlled by a Directorate and, in addition, indigenous organizations and the Ministry of Peasant Affairs, Indigenous and Originary Peoples will carry out field monitoring and evaluation. 7. Participatory approach: a. Primary beneficiaries and other affected groups: The primary beneficiaries of the project would be: (i) indigenous communities and small-producer groups, including indigenous women's groups; and (ii) higher-level indigenous organizations. Both these groups were consulted during the elaboration of the National Diagnostic of Indigenous Peoples and systematically involved in project preparation. The National Diagnostic was carried out by a multi-disciplinary team coordinated by VAIPO and supervised by IDA from 1998 to 2000. Besides specific studies, it included the following consultation activities: (i) a survey of 307 indigenous leaders and 140 public and private organizations; and (ii) twenty one focus group discussions in the highland, Amazonian and Chaco regions (see Annex 11). To ensure systematic collaboration and consultation with indigenous groups, the following measures were agreed with GOB at the outset and carried out during project preparation: (i) the formation of a Directorio Indigena de Preparacion de Proyecto, with representatives of higher-level organizations; (ii) the selection, by these organizations, of three indigenous specialists to form part of the preparation team in 13 VAIPO; and (iii) the realization of a structured process of consultation. Project preparation was not a smooth process. It was affected by major indigenous and campesino mobilizations that brought the country to a stand-still twice and impeded the work of the Directorio. Because of the unrest in the country, there were repeated postponements for carrying out the programmed participatory planning workshops. With the exception of the Andean specialist, the indigenous consultants have worked in VAIPO throughout the process. A total of 4 workshops were held with indigenous groups and organizations, with particular attention being paid to the participation of women (see section B2 and Annex 1 1). The first workshop, carried out in April 2000 with the participation of almost 100 leaders of 35 ethnic groups and higher level indigenous and campesino organizations permitted the definition of a broad vision for the development of indigenous peoples. On this basis, the leaders prioritized their demands and decided that the project should aim to support income-generating productive initiatives. Another 3 workshops were held in the Andean, Amazonian and Chaco regions respectively between June and October 2000. These workshops counted with the participation of potential direct beneficiaries (producers and producer groups) and representatives of higher level organizations in charge of economic matters. Discussions in the regional workshops were centered on the definition of: (i) eligibility criteria for beneficiaries; (ii) eligibility criteria for subprojects, including operational definitions of "innovation" and "cultural basis"; (iii) probable content of subprojects; and (iv) counterpart requirements. There were notable convergencies between all regions on most of the issues raised. A final workshop with regional and national leaders, plus representatives of producers who assisted to the regional workshops, was held in November 2000. This workshop focused on the following: (i) validating the results of the regional workshops; (ii) agreeing on the project components and their specific objectives; (iii) defining the project area; (iv) defining the institutional framework for implementation; and (iii) agreeing on the composition and functions of the Directorate of the project. The proposed project fully incorporates the results of the process of systematic collaboration and consultation with indigenous producers and their organizations. The project design ensures that the main stakeholder groups would have principal responsibility for its implementation. The project Directorate incorporates the three national level indigenous and campesino organizations (CSUTCB, CIDOB and CSCB) and the National Confederation of Peasant Women. These organizations would also be in charge of implementing the Poverty Reduction Monitoring and Learning component. Indigenous communities and producer groups will manage their own initiatives. b. Other key stakeholders: Key stakeholders in government include MACPIO, the Ministry of Economic Development and the Viceministry of Microenterprise. MACPIO coordinated project preparation and the other two will be incorporated into the Directorate of the project to ensure sectoral guidance and learning. Other key stakeholders include potential service providers and the private sector. Their concerns and involvement would be explored during project implementation, by incorporating them in the evaluation process. 14 F: Sustainability and Risks 1. Sustainability: (This section is not to be completed in a LIL PAD) 2. Critical Risks: (reflecting assumptions in the fourth column of Annex 1) From Outputs to Objective Beneficiaries do not have sufficient capacity to S Technical assistance and training in manage their own investments management will be provided as part of subproject financing. Beneficiaries do not perceive investments as N Subprojects will be financed on a their own and do not carry out proper demand basis; will require maintenance. significant beneficiary counterparts; and ex ante evaluation will discard potentially unsuccessful proposals. Subproject beneficiaries do not receive proper L Subproject approval will require community support. community-wide support, and formal community organizations will approve disbursements. Subprojects fail to provide positive financial M Subprojects will be financed on a returns. competitive basis, after the ex ante evaluation of preinvestment studies. National and municipal governments ignore S Informed participation by participatory follow up and evaluations in the indigenous organizations in the adjustments to the Poverty Reduction Strategy. PRSP social control mechanism will be partly financed by the project. MACPIO and indigenous organizations do not M Project will finance a PIU in have sufficient capacity to ensure effective MACPIO as well as a participatory project implementation and dissemination. monitoring, evaluation and dissemination strategy. From Components to Outputs GOB loses commitment to agreed non- H Indigenous organizations and GOB discretional rules and institutional framework will designate members to a project Board (Directorio), which will oversee project implementation. Subproject administration will be subcontracted to a private entity. Indigenous political organizations interfere in H Private entity subcontracted for subproject selection and execution subproject administration will handle investment cycle under rules approved and enforced by Board. Counterpart funds are not available on a timely N Beneficiary counterparts will be basis. assured by financing demand-driven proposals and by disbursing on subprojects that comply with counterpart requirements. GOB counterparts will be inscribed in the National Budget. 15 Beneficiaries have insufficient capacity to M The project will undertake extensive present culturally-based demands promotion and the best proposals will receive cofinancing for preinvestment studies. Communities and indigenous organizations are N Project will finance monitoring and unwilling to follow up activities, provide learning activities to be carried out information and participate in evaluations by beneficiaries and indigenous organizations. Personnel selection in PIU and indigenous S MACPIO selects on basis of TOR organizations is not based on merit and and procedures agreed in OM, and qualifications. under approval by Directorio; indigenous organizations select on basis of OM procedures and no objection by PIU Overall Risk Rating s Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: No possible controversial aspects are foreseen. G: Main Loan Conditions 1. Effectiveness Conditions: (i) The Operational Manual has been approved by the Directorate of the project and adopted by MACPIO to IDA's satisfaction. (ii) The independent auditors have been appointed. 2. Other: (classify according to covenant types used in the Legal Agreements) (i) The establishment of Management Service Contract(s) with the entities in charge of administering subprojects, to IDA's satisfaction, is a condition for disbursement of Component 1. H: Readiness for Implementation [ ] 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. [x] 1. b) Not applicable. [ ] 2. The procurement documents for the first six month's activities are complete and ready for the start of project implementation; and a framework for agreement on standard bidding documents that will be used for ongoing procurement during the project has been established. [x] 3. The LIL's implementation plan has been appraised and found to be realistic and of satisfactory quality. [x] 4. The following items are lacking and are discussed under loan conditions (Section G): the Project's Operational Manual. 16 1: Compliance with Bank POfolie [xl 1. This projc(vompfiies with all applicable Bank policies. [ ] 2. Tahe fol'owing exce tons a oles are rewmmended for approval. TI project complies with all other appficable Bank pS eam Leadr: ]David Tuchbelr or Maugerlfirector: Jobn Redwood cng Equity Pillar Patrii AhM 17 ANNEX 1: PROJECT DESIGN SUMMARY Bolivia: Indigenous Peoples Development Project ~~~~~~~~is Sector-related CAS Goal: Sector Indicators: Sector / Country (from Goal to Bank Poverty reduction by * Poverty headcount ratio (%) Reports: Mission) broadening growth through disaggregated by ethnicity * National household * Sustained greater inclusion of surveys implementation of measures indigenous peoples. * Poverty gap ratio (%) aimed at reducing obstacles disaggregated by ethnicity to broad-based economic growth. * Growth rates and macro-economic stability are sustained. Follow-on Development Objective: Community-managed initiatives are mainstreamed in poverty- alleviation efforts. Project Development Outcome / Impact Indicators: Project Reports: (from Objective to Goal) Objective: * % of financially successful * Bi-annual project * GOB commitment to Learn how culturally based and socially viable pilot reports community-based productive initiatives of initiatives indigenous development indigenous communities * Final project impact remains strong. can contribute to income * % increase in beneficiary evaluation and ICR generation and poverty community incomes * Economic sector reduction. . . policies are favorable for * % increase in the number of growth and not biased culturally based initiatives against the poor and small financed by other sources as a * PRS monitoring enterprises result of PRS adjustments reports * GOB commitment to * Public investment incorporating lessons reports learned in project into poverty-alleviation policies and financing mechanisms * Sustained GOB commitment to implementing the Poverty Reduction Strategy (PRSP) and the Social control mechanism 18 Output from each Output Indicators: Project Reports: (from Outputs to component: Objective) 1. Innovative investments * 120 pilot subprojects * Bi-annual project * Beneficiaries have based on indigenous implemented, of which at least 40 monitoring reports sufficient capacity to culture and social capita] are managed by women * PSR' MTR and manage their own are implemented and . 172 preinvestment studies I investments tested.*12pevsmn tde ICR tested. carried in the first two years, * Ownership and including 12 resource inventories maintenance of investments and management plans executed by beneficiaries in the first two years * Subprojects are socially viable * Subprojects are * Number of governmental, financially successful private sector, international cooperation and indigenous National and municipal 2. Effective dissemination organizations aware of the project * Yearly PRS govemments adjust the of the experiences and lessons evaluations Poverty Reduction Strategy lessons derived from on the basis of participatory project implementation * Number of indigenous * Bi-annual project follow up and evaluations organizations receiving monitoring reports systematic reports to support * PSR's, MTR and participation in the formal PRS ICR control mechanism * 6 Participatory regional evaluation workshops carried out over a period of 3 years Sufficient capacity in 3. Efficient project * One independent impact MACPIO and indigenous execution evaluation study carried out at organizations to ensure end of project * Bi-annual project effective project * Subcontract(s) with MSE(s) monitoring reports implementation and signed 3 months after * PSRs, MTR and ICR effectiveness * Subproject cycle and overall disbursements to comply with time and quality standards defined in the OM * 4 market and demand studies carried out in the fields of handicrafts, tourism, and management of flora and fauna 3 months after project effectiveness * 12 regular meetings of the Directorate carried out over a period of 3 years 19 Project Inputs: (budget for each Project Reports: (from Components to Components/Sub- component) Outputs) components: * US$ 5.50 million (4.38 IDA) * Bi-annual project * GOB remains committed 1. Culturally-based pilot monitoring reports to agreed non-discretional investments * PSR's, MTR and rules and institutional 1.1. Investment ICR framework subproiects * Indigenous political * Handicraft production organizations do not and marketing interfere in subproject selection and execution * Ethno- and eco-tourism * Counterpart funds are * Productive available on a timely basis management of flora and fauna. 0~~~~~~~~~~~~~~~~~ Beneficiaries have fauna. sufficient capacity to present * Other. culturally-based demands 1.2. Pre-investment studies 2. Poverty-reduction ~~~~~~~~~~Communities and 2. Poverty-reduct ion * US$0.67 million (0.37 IDA) * Bi-annual project indigenous organizations ire monitoring reports willing to follow up 2. 1. Monitoring and * PSR's, MTR and activities, provide 2.1.aMonitoring and ICR information and participate evaluation of culturallv in evaluations based productive initiatives 2.2 Studies and dissemination 3. Project management US$0.47 million (0.25 IDA) * Bi-annual project * Competitive, merit-based 3.1. Proiect monitoring reports personnel selection Implementation Unit * PSR's, MTR and ICR 20 Annex 2: Project Description Bolivia: Indigenous Peoples Development Project By Component: Project Component 1: Culturally-based pilot investments - US$5.50 million Eligible investments 1. The project would address community identified economic initiatives by providing financial assistance to proposals that are culturally based, and economically, socially and environmentally viable and sustainable. It would introduce an element of positive discrimination in favor of initiatives presented by groups of indigenous women and further self-management by assigning communities the responsibility for identifying, implementing and evaluating their own productive initiatives. Depending on the specific needs of each group of beneficiaries, technical assistance and training (including for management, administrative purposes and the establishment of partnerships with the private sector) would be part of the financial package for investment ventures. Information on marketing conditions, opportunities and potential partnerships would be provided. Due to tho experimental nature of this type of financing, the Operational Manual would specify conflict resolution strategies and subproject exit strategies. This component would include grant financing of pre-investment studies, technical assistance, small works, goods and operational costs for investments of the following types: Pilot subprojects (i) Handicraft production and marketing; (ii) ethno- and eco-tourism; (iii) productive management of flora and fauna; (iv) other culturally-based investments. Pre-investment studies (i) Feasibility studies of pilot subprojects; and (ii) resource inventories and management plans. Eligibility Criteria for Beneficiaries 2. Above investments would be financed under the following conditions and eligibility criteria: (a) Subprojects are presented by indigenous communities and small-producer groups with legal status; (b) the formal organization of the communities provides its consent and agrees to oversee subproject execution; (c) beneficiaries contribute all local labor and materials, and may also contribute in money, a minimum of 15% of the cost of subprojects; (d) design and cost of the individual subprojects are subject to economic, financial, technical, environmental and sustainability criteria which are included in MACPIO's Operational Manual and form part of the TOR of the subcontractor(s) in charge of administering the component; (e) flora and fauna management subprojects may require Resource Inventories and Management Plans, which would be financed as part of the pre-investment studies; (f) beneficiary communities and small-producer-groups inhabit in rural municipalities. 21 Disbursement mechanisms 3. The funds would be made available to the beneficiaries in the following manner: (a) MACPIO would enter into one or more management service contracts with one or more private entities, following a QCBS process, for the purpose of administering the funding for this component. The Directorate of the project would approve these contracts. (b) The management service entity (MSE) would review subproject proposals and pre-investment studies. Following a technical and field evaluation, approved pre-investment studies would be ranked according to criteria included in the Operational Manual, and the best proposals would be approved for funding. (c) The MSE would sign agreements, not exceeding US$ 30,000, with eligible beneficiaries (communities or small-producer groups) to carry out the subprojects. Beneficiaries would conduct all the procuremen t specified for the subproject under detailed procedures included in the Operational Manual. Disbursenients for subprojects would be carried out in tranches, on the basis of field supervision reports that would verify the execution of works, services and equipment purchases in correspondence with the approved budget and implementation schedule. The supervision of the subproject, approval and execution by the MSE. through the assignment of supervision tasks for each contract would ensure the use of funds for the intended purposes. The funds would be disbursed on the basis of the contracts and the progress reports. Detailed procurement and disbursement procedures would be included in the Operational Manual. (d) The MSE would be paid a percentage fee on the basis of disbursements. Project Component 2: Poverty-reduction monitoring and learning - US$0.67 million 4. This component would be implemented jointly by MACPIO and indigenous organizations. It includes institutional strengthening and training of national level indigenous/campesino organizations (CSUTCB, CIDOB and others) and their regional organizations. This strengthening would allow these organizations and the project to accompany the implementation of the pilot subprojects in the field for the purposes of: (i) operational monitoring; (ii) collection of basic information necessary for the learning process; (iii) participatory evaluation; and (iv) feedback into the PRS's Social Control Mechanism. Systematic monitoring of the performance, context and relations to other efforts at the local level in which the pilot subprojects are implemented would provide indigenous organizations with a practical'model for conducting more general monitoring of the implementation of the PRS. The institutional framework and implementation arrangements are expected to attract further funding by other cooperating agencies for the purposes of scaling up the support of indigenous organizations. 5. The assistance and training of the organizations would include the following: (a) 4 consultants for 3 years for field monitoring, information collection and feedback into the learning process. These consultants would be selected by the indigenous/campesino organizations, would work in their respective regions and would form part of the PIU in MACPIO. (b) 6 training and consultation workshops for project evaluation and learning and for PRS adjustment. 6. In addition, MACPIO, through the PIU would: (a) Hire 4 specialists for the purpose of coordinating the monitoring and learning process. (b) Design and operate a Monitoring and Evaluation System; (c) Contract an independent impact evaluation study to be conducted at the end of the project. Project Component 3: Project management - US$0.47 million 7. The project would be managed by a small Project Implementation Unit (PIU) to be created within MACPIO and responding to the Directorate of the project. This Unit would be in charge of project coordination, financial administration, and dissemination of lessons learned. 22 8. Financing for the operation of the PIU would include the following: (a) 3 consultants for 3 years in the following areas: coordination, financial management, monitoring and evaluation; (b) Market and demand studies; (c) Office equipment and supplies, travel and incremental operating costs; and (d) Support for the development and functioning of the projects Directorate. 23 Annex 3: Estimated Project Costs Bolivia: Indigenous Peoples Development Project Culturally based pilot investments 5.27 0 5.27 Poverty reduction monitoring and learning 0.64 0 0.64 Project management 0.45 0.45 Total Baseline Cost 6.36 0 6.36 Physical Contingencies 0 0 0 Price Contingencies 0.28 0 0.28 Total Project Costs 6.64 0 6.64 Total Financing Required 6.64 0 6.64 Goods 0.03 0 0.03 Services 1.44 0 1.44 Community subprojects 4.96 0 4.96 Incremental operational costs 0.21 0 0.21 Total Project Costs 6.64 0 6.64 Total Financing Required 6.64 0 6.64 24 Annex 4: Cost Benefit Analysis Summary [To be completed only to the extent applicable for LIL] Country: Project Title Summary of Benefits and Costs: Main Assumptions: Sensitivity analysis / Switching values of critical items: 25 ANNEX 4: OTHER - To be completed only to the extent applicable to LIL) Country: Project Title Summary of benefits and costs: Main Assumpt Dns: Sensitivity ana/ysis / Switching values of critical items: 26 Annex 5: Financial Summary Bolivia: Indigenous Peoples Development Project Years Ending: December 31 1. Implementation Period Year I Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total Financing Required Project Costs Investment Costs 0.57 2.58 2.29 0.29 Recurrent Costs 0.24 0.30 0.29 0.08 Total Project Costs 0.81 2.88 2.58 0.37 Total Financing 0.81 2.88 2.58 0.37 Financing IDA 0.56 2.20 1.97 0.27 Government 0.15 025 0.23 0.05 Beneficiaries 0.10 0.43 0.38 0.05 Total Project Financing 0.81 2.88 2.58 0.37 0 0 0 27 Annex 6: Procurement and Disbursement Arrangements Bolivia: Indigenous Peoples Development Project Procurement A) Procurement Arrangements Procurement for the proposed project would be carried out in accordance with the provisions stipulated in the Credit Agreement and IDA's Guidelines for Procurement (published in January 1995, revised in January and August 1996, September 1997 and January 1999) for goods; and IDA's Guidelinesfor Selection and Employment of Consultants (published in January 1997, revised in September 1997 and January 1999) for consultant assignments and management contracts. Standard bidding documents agreed with the GOB would be used where applicable. 1) Procurement methods IDA would finance community-based subprojects, consulting and management services, goods and equipment, training and incremental operating costs. The methods described below and their estimated amounts are summarized in Table A. The threshold contract values for the use of each method are established in table B. Procurement of Community Subproiects Community-based subprojects, totaling US$ 4.96 million (of which 4.00 by IDA), include technical assistance, small works, goods and equipment, operational costs or a combination thereof. The management service entity(ies) would sign lump-sum contracts with legally established communities or small-producer groups to carry out approved subprojects in accordance with guidelines established in the Operational Manual and acceptable to IDA. Grants for community-based subprojects would have a ceiling of US$30,000 and would require beneficiary communities and small-producer groups to provide at least 25% in labor, kind, cash or a combination thereof towards the cost of the subproject. The Operational Manual would stipulate the requirement that procurement would be done through the comparison of three price quotations from qualified suppliers and contractors, to the extent that this is possible. Goods and equipment for MACPIO The total cost of goods and equipment for the MACPIO's Project Implementing Unit (PIU) is estimated at US$ 35,000. This amount includes office equipment, furniture and office supplies. Whenever possible, procurement of goods and equipment would be grouped in packages to cost $35,000 or more. Procurement of goods under contracts estimated to cost US$50,000 equivalent or less shall be based on the comparison of price quotations (shopping) obtained from three local suppliers and would based on a model request for quotations satisfactory to IDA. Consulting. Management Services and Training Consulting services under the project would amount to US$ 1.44 million (US$ 0.88 million of which would be IDA financed). The services consist of: (i) management service contracts with MACPIO for administering the grants for community subprojects; (ii) consulting services provided by individuals and technical assistance by firms to MACPIO and national-level indigenous organizations; and (iii) technical assistance services by individuals, NGOs or firms to indigenous communities and small-producer groups for pre-investment studies. To facilitate the work of communities and small-producer groups as to technical assistance provision, MACPIO would prepare a list of eligible, pre-qualified consultants and NGOs from which they would be able to contract. This list would not imply an endorsement by the project nor would it limit the eligibility of consultants. It would be updated yearly through advertising and a special registration procedure; nonetheless, access to enroll in the register should be open to qualified consultants during the whole year. The initial list and contracting procedures would be included in the Project Operational Manual. 28 Contracts for consultant and management services exceeding US$100,000 per contract would be selected on the basis of quality and cost (QCBS) in accordance with the Guidelines. For consultant services estimated not to exceed $100,000 equivalent per contract: (i) specialized studies and performance evaluation assignments would be selected on the basis of quality-based (QBS) methods as provided in paragraph 3.2 of the Consultant Guidelines; (ii) financial audits would be selected on the basis of quality and cost (QCBS) method as provided in Section 11 of the Consultant Guidelines; and (iii) services of training, procurement audits and evaluation workshops would be selected on the basis of comparison of qualification as set forth in paragraph 3.7 of the Consultant Guidelines MACPIO would recruit personnel for the PIU on the basis of merit and through competitive processes. National-level indigenous organizations and indigenous communities and producer groups would recruit individual consultants from a short list of at least three candidates. The selection would be based on the consultant's qualifications. A sample letter of invitation, award criteria and a sample contract, all acceptable to IDA, would be included in the Project Operational Manual. The single source selection of consultants firms up to an aggregate amount of $80,000 would be applied when rapid selection is essential and for very small assignments of less than $20,000. Incremental Operating Costs The project would finance incremental operating costs of the PIU and Regional Monitoring and Evaluating Units (PMEUs) that include office supplies, utilities, travel expenditures, publications and communication services. These items would be procured according to shopping procedures to the extent that this is practical. 2) Prior Review Thresholds The thresholds assigned for prior review are summarized in Table B below. They have been established on the basis of a procurement capacity assessment carried out to the Project Implementing Unit and thresholds approved for Bolivia in the CDF context. In addition to this prior review of individual procurement actions, the project procurement plan would be reviewed and approved annually by the Bank. B) Procurement Risk Assessment An assessment of MACPIO's capacity assessment to administer project procurement on December 1, 2000, and findings and recommendations, as well as the action plan were cleared by the Regional Procurement Advisor on December 5, 2000. During the assessment due consideration was given to the institutional framework and participatory arrangements foreseen in the design of the project to be applied during project implementation. The assessment covered the review of the legal framework which governs MACPIO's operations in procurement and related administrative tasks; organizational units and functions; staffing; use of procurement documents; appropriateness and dimensions of available technological infrastructure (hardware and office equipment) and information technology and communications which provides daily support to the agency's operations; procurement planning; management of the procurement cycle; support and control systems; record keeping and filing systems and readiness of the PIU to issue PMRs. The risks identified in the assessment include: (i) no previous experience on Bank procurement procedures; (ii) the likelihood of MACPIO and indigenous political organizations interfering in subproject selection and award contracting activities; (iii) unrealistic procurement planning due to lack of previous experience in the use of this kind of tools. Specific actions are proposed in the capacity assessment report and action plan attached to it for management of these risks. The overall project risk for management of procurement is HIGH. In the context of the Bolivia Pilot, it corresponds to assign the prior-review thresholds defined for Group C approved for Bolivia and specified in Section A.2 above. Upgrading of this risk level for management of procurement contingent upon satisfactory implementation of the action plan included in the agency capacity assessment report. 29 C) Procurement Plan At appraisal, the Borrower's implementing agency developed a preliminary procurement plan for project implementation which provided the basis for the aggregate amounts for the procurement methods (per Table A). This plan should be approved by the Regional Procurement Advisor. At the beginning of each calendar year, and every six months thereafter, the Borrower shall update the procurement Plan including a detailed procurement schedule for the forthcoming semester and a preliminary schedule for the subsequent semester. D) Monitoring and Progress Reporting Starting with the completion of each fiscal year of project implementation, MACPIO would prepare annual reports on the implementation of the culturally-based pilot investment subprojects and poverty-reduction monitoring and learning components, including results achieved on project procurement implementation. These reports would include an updated Annual Operation Plan (POA) for implementation of the said components during the corresponding year. The POA would provide, in turn, the basis for the preparation and implementation of the procurement plan. E) Frequency of Procurement Supervision In addition to the prior review supervision to be perforned from Bank offices, the capacity assessment has recommended to carry out two full supervision missions, including field visits. Based on the overall risk assessment (HGH), the post review field analysis should cover a sample of not less than I in 5 contracts signed. Annex 6, Table A: Project Costs by Procurement Arrangements' in US$million e uivalent 1. Goods 0.00 0.00 0.03a/ 0.03 _______________________ ( ) ( ) (0.02) ( ) (0.02) 2. Consultants 1.44b/ 1.44 Services ( ) ( ) (0.88) ( ) (0.88) 3. Community 4.96 4.96 Subprojects ( ) ( ) (4.00) ( ) (4.00) 4. Incremental 0.21 0.21 operating costs ( ) ( ) ~~~~~(0.1I0) ()(0.1I0) Total 6.64 6.64 ( ) ( ) (5.00) ( ) (5.00) Note: N.B.F. = Not Bank-financed (includes elements procured under parallel cofinancing procedures, consultancies under trust funds, any reserved procurement, and any other miscellaneous items). The procurement arrangement for the items listed under "Other" and details of the items listed as "N.B.F." need to be explained in footnotes to the table or in the text. For details on presentation of Procurement Methods refer to OD 1 1.02, "Procurement Arrangements for Investment Operations." Details on Consultant Services can be shown more easily in the Table Al formnat (additional to Table A, where applicable). 30 Figures in parenthesis are the amounts to be financed by the Bank loan/IDA credit Footnotes: a/ Shopping (Local): contracts awarded on the basis of price quotations obtained from at least three local qualified domestic suppliers. b/ Consultant Services: contracts awarded to firms using Quality-and Cost-Based Selection Method; Quality-Based Selection Method (up to an aggregate amount of $.24 million) and to individual consultants on the basis of comparison of qualifications (up to an aggregate amount of $.66 million) in accordance with provisions of paragraphs 5.1 to 5.3 of the Consultants Guidelines. Annex 6, Table Al: Consultant Selection Arrangements (in US$million equivalent) _ ______ _ _ QCBS QBS SFB LCS CQ Other N.B.F. | _l A. Firms 0.54 | 0.24 | l l | { | 0.78 (0.38) (0.18) ( ) ( ) . ) (0.56) B. Individuals l l l l | 0.66 0.66 ( ) [( ) lf l( ) ( ) |(0.31 D_ ) (0.31) Total 0.54 0.24 0.66 1.44 (0.38) (0.18) ( ) ( ) ( ) (0.31) ( ) (0.87) Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per paragraphs 5.1 to 5.3 set forth in Section V of the Consultants Guidelines). N.B.F. = Not Bank-financed. Figures in parenthesis are the amounts to be financed by the Bank credit. 31 Annex 6. Table B: Thresholds for Procurement Methods and Prior Review2 Annex 6, Table B: Thresholds for Procurement Methods and Prior Review3 us U$ | US $ millions 1. Goods and lll| Works|ll l > $200,000 ICB Prior review: All $50,000