The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) REPORT NO.: RES36835 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PY PRODERS SUSTAINABLE AGRICULTURE & RURAL DEVELOPMENT APPROVED ON JANUARY 29, 2008 TO REPUBLIC OF PARAGUAY May 30, 2019 AGRICULTURE LATIN AMERICA AND CARIBBEAN Regional Vice President: Axel van Trotsenburg Country Director: Jesko S. Hentschel Senior Global Practice Director: Juergen Voegele Practice Manager/Manager: Preeti S. Ahuja Task Team Leaders: Maurizio Guadagni, Francisco Javier Obreque Arqueros The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) ABBREVIATIONS AND ACRONYMS AF Additional Financing CS Consulting Services GO Goods NON-CS Non-Consulting Services OP Operating Costs and Trainings and/or Workshops PDO Project Development Objective WK Works The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) BASIC DATA Product Information Project ID Financing Instrument P088799 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 29-Jan-2008 29-Nov-2019 Organizations Borrower Responsible Agency Republic of Paraguay MAG/PRODERS Project Development Objective (PDO) Original PDO To improve the quality of life of Small-Scale Farmers and Indigenous Communities in the Project Area in a sustainable manner,through the support of actions to strengthen community organization and self governance, improve natural resources management andenhance the socio-economic condition of said farmers and communities. Current PDO To improve in a sustainable way the socio-economic condition of Small-Scale Farmers and Indigenous Communities in the Project Area,through the support of actions to strengthen their communityorganization, self-governance, and access to markets and value chains. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-83160 05-Dec-2013 06-Dec-2013 25-Sep-2014 29-Nov-2019 100.00 84.69 15.31 IBRD-75030 29-Jan-2008 24-Jun-2008 30-Jun-2009 31-Dec-2015 37.50 37.50 0 The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Project was approved on January 29, 2008 and became effective on June 30, 2009. An Additional Financing (AF) in the amount of US$100 million was approved on December 5, 2013 and became effective on September 25, 2014. The original/parent loan, in the amount of US$37.5 million was fully disbursed and closed with a Moderately Satisfactory rating. In terms of the AF, 84.69% of the funds have been disbursed and the closing date is November 29, 2019. The proposed changes apply only to the Additional Financing (Loan 8316-PY). 2. The project is currently rated as Moderately Satisfactory both in terms of Progress towards achievement of PDO and Overall Implementation Progress. After a slowdown due to the change of administration in August 2018 (following the April 2018 national elections), implementation pace has been gradually recovering. Since May 2018, monitoring and evaluation significantly improved, allowing for collection of data and carrying out various analyses of the Project’s impact. The assessment of Environmental and Social risks was recently reduced from High to Moderate. 3. In addition to the 2013 AF, the project was restructured in July 2015 to allow the provision of "goods, works, consultants services and non-consulting services" to beneficiaries, in addition to cash transferred as Community Grants, to support demand-driven Community Subprojects. It was also restructured in 2017 and 2018 to extend the closing date by one year each time. There is no overdue or unacceptable audit report. 4. The proposed restructuring was requested by the Borrower on March 18, 2019 to (i) reallocate funds across disbursement categories based on the updated execution plans until project closing; and (ii) to add a new activity under the Project Management, Monitoring, and Evaluation component. II. DESCRIPTION OF PROPOSED CHANGES 5. The proposed changes consist of (i) an update of component 5, under which a new activity is added, (ii) a reallocation of loan funds across disbursement categories and change in component costs, and (iii) inclusion of the Safeguards Incident Response Requirement. (i) Change in component 5 The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) 6. The Borrower asked to add a new activity under this component: “financing of technical assistance to analyze and prepare possible interventions to strengthen community organizations and facilitate access to markets of Small-Scale Farmers and Indigenous Communities within the Project Area”. The underpinning rationale of the proposed change is to help the Borrower design complementary and/or follow-up interventions that enhances the sustainability of project results with respect to linking farmers to markets. It is important to develop complementary strategies and actions that address the shortcomings identified by the evaluation of the project’s first phase, conducted by FAO, and other assessments carried out by the Bank during implementation. Because of this change, ‘technical assistance’ would be added to the title of the component, whose full title would become: ‘Project Management, Monitoring, Evaluation, and Technical Assistance’. (ii) Reallocation of Loan Proceeds and change in component costs 7. The reallocation across disbursement categories is based on the current actual expenditures and updated plans until project closing. The Sustainable Rural Development Fund for community subprojects requires US$4 million less than originally estimated, while the Borrower is asking to redistribute unallocated resources. Components/categories that would increase their allocation are Rural Extension and Adaptive Research (the component that finances technical assistance to beneficiary communities) and Project Management, Monitoring, and Evaluation1. In addition, the increased allocation to Animal Health Improvement is expected to allow financing interventions to help improve implementation performance for this component. These changes are justified based on current use of funds and plans until project closing and does not imply any change to the Project Development Objective. The table below presents the proposed changes: Current allocation Proposed New Difference Change compared to Change compared Cat. Category Description Part/Component (US$) Allocation (US$) (US$) category allocation to total Loan Community Organization Development 1 GO, WK, NON-CS,CS, OP & TRN PART 1 1,300,000 1,200,000 -100,000 -8% -0.1% and Capacity Building 2 GO, WK, NON-CS,CS, OP & TRN PART 2 Rural Extension and Adaptive Research 27,000,000 29,850,000 2,850,000 11% 2.9% 3 GO, WK, NON-CS,CS & COMM GR PART 3 Sustainable Rural Development Fund 68,000,000 64,000,000 -4,000,000 -6% -4.0% 4 GO, WK, NON-CS,CS & TRN PART 4 Animal Health Improvement 500,000 800,000 300,000 60% 0.3% Project Management, Monitoring, and 5 GO, WK, NON-CS,CS, OP & TRN PART 5 2,600,000 3,900,000 1,300,000 50% 1.3% Evaluation 6 UNALLOCATED 350,000 0 -350,000 -100% -0.4% FEF Front End Fee 250,000 250,000 0 0% 0.0% TOTAL 100,000,000 100,000,000 0 0% 0.0% (iii) Inclusion of the Safeguards Incident Response Requirement 8. The restructuring provides the opportunity to include the new corporate requirement of reporting incidents. The loan agreement would be amended requesting the Borrower to notify the Bank of any incident or accident related to or having an impact on the Project which has, or is likely to have, a significant adverse effect on the environment, the affected communities, the public or workers, including, explosions, spills, any workplace accidents that result in death, serious or multiple injury, pollution, any violent labor unrest, any dispute between the Borrower or security forces (assigned to protect the Project) and local communities, any 1In the Borrower’s request, the revised amount for category 2 is US$30,100,000. However, the Borrower had not included category 7 (US$250,000 for the Front-End Fee). In a follow-up communication, the Borrower agreed to subtract this Front-End Fee from Category 2, which became of US$29,850,000. The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) case of gender-based violence and violence against minors, or any incidents in or related to international waterways or disputed areas. The notification must include sufficient detail regarding the incident or accident, indicating the immediate measures taken to address it (including information provided by any contractor and supervising entity). To provide specific guidelines for the implementation of this mandate in the project, the Operational Manual will be adjusted accordingly. I. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Reallocation between Disbursement Categories ✔ Legal Covenants ✔ Other Change(s) ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) C1 -- Community Organization C1 -- Community Organization Development and Capacity 4.40 No Change Development and Capacity 4.40 Building Building C2 -- Rural Extension and C2 -- Rural Extension and 36.00 No Change 36.00 Adaptive Research Adaptive Research C3 --Sustainable Rural C3 --Sustainable Rural 81.50 No Change 81.50 Development Fund (FDRS) Development Fund (FDRS) C4 -- Animal Health C4 -- Animal Health 2.90 No Change 2.90 Improvement Improvement C5 -- Project Management and C5 -- Project Management, 10.30 Revised 10.30 M&E M&E and Technical Assistance TOTAL 135.10 135.10 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-83160-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: GO, WK, NON-CS,CS, OP & TRN PART 1 1,300,000.00 687,047.89 1,200,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GO, WK, NON-CS,CS, OP & TRN PART 2 27,000,000.00 20,290,992.60 29,850,000.00 100.00 100 iLap Category Sequence No: 3 Current Expenditure Category: GO, WK, NON-CS,CS & COMM GR PART 3 The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) 68,000,000.00 53,198,993.52 64,000,000.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: GO, WK, NON-CS,CS & TRN PART 4 500,000.00 310,968.36 800,000.00 100.00 100.00 iLap Category Sequence No: 5 Current Expenditure Category: GO, WK, NON-CS,CS, OP & TRN PART 5 2,600,000.00 1,964,637.52 3,900,000.00 100.00 100.00 iLap Category Sequence No: 6 Current Expenditure Category: UNALLOCATED 350,000.00 0.00 0.00 0 Total 99,750,000.00 76,452,639.89 99,750,000.00 OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action Finance Agreement :Art. V. 5.01 | Description :Sub-UAF IBRD-75030 Complied with No Change and UOC units established | Due Date :04-Apr-2008 Finance Agreement :Art. V. 5.01 | Description :FM and After delay complied IBRD-75030 Procurement specialists have been selected | Due Date No Change with :11-Jun-2009 Finance Agreement :Schecule 2. Section I. B. (a) | Description :INDI and SENACSA Participation After delay complied IBRD-75030 No Change Agreements, and INDERT Agreement signed | Due Date with :31-Jul-2009 Finance Agreement :Schedule 2. Section I. C. a. | IBRD-75030 Description :Carry out environmental screening of Complied with No Change subproject on Component 3 | Frequency :CONTINUOUS The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) Finance Agreement :Schedule 2. Section I. D. | Description :Authority to audit Component 3 has been After delay complied IBRD-75030 hired and the Project#s Management Information No Change with System is in place and acceptable by the Bank | Due Date :30-Jun-2010 Finance Agreement :Schedule 2. Section I. L. | After delay complied IBRD-75030 Description :Human Resources firm selected | Due Date No Change with :30-Sep-2009 Finance Agreement :Schedule 2. Section I. D. | IBRD-75030 Description :Operational Manual updated. | Due Date Complied with No Change :30-Sep-2009 Finance Agreement :Schedule 2. Section I. Article L | Description :(i) web page; (ii) digital archive system; and IBRD-75030 Complied with No Change (iii) sub-project management system | Due Date :30- Jun-2010 Finance Agreement :Schedule 2. Section I, K(a) ii and (b) ii | Description :Establish, operate, and maintain at all TF-96758 Complied with No Change times during implementation a Project Management Unit [for the GEF Project] | Frequency :CONTINUOUS Finance Agreement :5.01(a) | Description :INDI Participation Agreement has been amended by the IBRD-83160 Complied with No Change parties thereto, in a manner acceptable to the Bank. | Due Date :29-Aug-2014 Finance Agreement :5.01(b) | Description :The Operational Manual has been updated by the Borrower, IBRD-83160 Complied with No Change in a manner acceptable to the Bank. | Due Date :Jan-30- 2016 IBRD-83160 Finance Agreement :Schedule 2, Section I.B(a)(ii) | After delay complied No Change Description :SENACSA Participation Agreement has with The World Bank PY PRODERS Sustainable Agriculture & Rural Development (P088799) been amended in a manner acceptable to the Bank | Due Date :30-Sep-2014 Finance Agreement :Schedule 2, Section II B.4 | IBRD-83160 Description :The auditor to carry out the audits of Part 3 Complied with No Change has been hired | Due Date :30-Jun-2014 Finance Agreement :Schedule 2, Section I.K | Description :Hire a human resources firm to assist MAG After delay complied IBRD-83160 in the selection of the Borrower's civil servants and No Change with individual consultants for the Project | Due Date :Jan- 30-2016- Finance Agreement: Section I of Schedule 2. Inclusion of IBRD-83160 Not yet due New . the safeguard incidence response requirement