Document of The World Bank FOR OFFICIAL USE ONLY Report No: 63430-CL PROJECT APPRAISAL DOCUMENT ON A PROPOSED GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF US$5.8 MILLION TO THE AGENCIA DE COOPERACION INTERNACIONAL DE CHILE FOR A SUSTAINABLE LAND MANAGEMENT PROJECT May 7, 2013 Sustainable Development Department Bolivia, Chile, Ecuador, Peru and Venezuela Country Management Unit Latin America and the Caribbean Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank's policy on Access to Information. CURRENCY EQUIVALENTS Exchange Rate Effective is October 2012 Currency Unit = Chilean Peso 480 = US$1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AGCI Chilean Agency for International Cooperation (Agencia de Cooperaci6n Internacional de Chile) BD-SP4 Biodiversity GEF Strategic Priority No. 4 BioCF Bio Carbon Fund CC-SP6 Climate Change GEF Strategic Priority No.6 CI Conservation International CPS Country Partnership Strategy CDM Clean Development Mechanism CERTFOR Chilean Forest Certification Program CONAF National Forestry Corporation (Corporaci6n Nacional Forestal) CO2e Carbon Dioxide Equivalent DA Designated Account DL 202 Land Management Program for Degraded Lands DL 701 Presidential Decree No. 701 EA Environmental Assessment EIA Environmental Impact Assessment EMP Environmental Management Plan EMF Environmental Management Framework ESMF Environmental and Social Management Framework FM Financial Management FSC Forest Stewardship Council GEF Global Environment Facility GEO Global Environment Objective GHG Greenhouse Gas GoC Government of the Republic of Chile IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IDA International Development Association IFC International Finance Corporation INDAP National Institute for Agricultural Development (Instituto Nacional de Desarrollo Agropecuario) IPF Investment Project Finance IPP Indigenous Peoples Plan LAC Latin America and the Caribbean LD-SP3 Land Degradation GEF Strategic Priority No.3 i LULUCF Land Use, Land-Use Change and Forestry MINAGRI Ministry of Agriculture (Ministerio de Agricultura) MMA Ministry of Environment MSP Medium Size Project M&E Monitoring and Evaluation NAP National Action Plan OECD Organization for Economic Cooperation and Development O&M Organization and Management PAD Project Appraisal Document PANCCD National Action Program for Combating Desertification (Programa de Acci6n Nacional Contra la Desertificaci6n) PDO Project Development Objectives PDTI Program for the Development of Indigenous Territories (Programa para el Desarrollo de Territorios Indigenas) PES Payment for Ecosystem Services PFM Project Financial Management PIU Project Implementation Unit PMT Project Management Team PRODESAL Rural Development Program (Programa de Desarrollo de Localidades Rurales) REDD+ Reduction Emission from Deforestation and forest Degradation RP Resettlement Plan SAG Agriculture and Livestock Service (Servicio Agricola y Ganadero) SBD Standard Bidding Documents SIF BioCF Afforestation and Carbon Sinks Project SLM Sustainable Land Management SNAPSE Natural System for Protected and Natural Areas (Sistema Nacional de Areas Protegidas y Naturales) SOE Statement of Expenditures TOR Terms of Reference UNCCD United Nations Convention to Combat Desertification VCS Verified Carbon Standards WB World Bank WWF World Wildlife Fund Regional Vice President: Hasan A. Tuluy Country Director: Susan G. Goldmark Sector Director: Ede Ijjasz-Vasquez Sector Manager: Laurent Msellati Task Team Leader: Robert Ragland Davis 11 CHILE Sustainable Land Management TABLE OF CONTENTS Page I. STRATEGIC CONTEXT ..................................................1 A. Country Context........................................................ 1 B. Sector and Institutional Context.................................................. 1 C. Higher Level Objectives to which the Project Contributes. ...........................4 II. PROJECT DEVELOPMENT OBJECTIVES...................4.... ............4 A. PDO/GEO .......... ................................................... 4 Project Beneficiaries.........................................................4 PDO/GEO Level Results Indicators..................................................5 III. PROJECT DESCRIPTION......................5...... ...................5 A. Project Components ......................................................5 B. Project Financing .......................................................7 Lending Instrument..........................................................7 Project Cost and Financing .....................................................7 C. Lessons Learned and Reflected in the Project Design...............7..........7 IV. IMPLEMENTATION........................................ ............ 8 A. Institutional and Implementation Arrangements. ........................ .......... 8 B. Results Monitoring and Evaluation .......................8...... ..............8 C. Sustainability .......................................................... 8 V. KEY RISKS AND MITIGATION MEASURES ....................... .......... 9 A. Risk Ratings Summary ....................................................9 B. Description.. .......................................................... 9 VI. APPRAISAL SUMMARY ....................9..........................9 A. Economic and Financial Analyses............................................9 B. Technical............................................................11 C. Financial Management.....................................................12 D. Procurement..........................................................13 E. Social (including Safeguards)..............................................13 F. Environment (including Safeguards)..........................................14 G. Policy Exceptions and Readiness............................................15 Annex 2: Detailed Project Description...........................................25 Annex 3: Implementation Arrangements..........................................34 Annex 4: Operational Risk Assessment Framework (ORAF)..........................48 Annex 5: Implementation Support Plan.......................................... 52 Annex 6: IBRD Map 39848............................................... 54 iii PAD DATA SHEET Chile Sustainable Land Management Project (P085621) PROJECT APPRAISAL DOCUMENT LATIN AMERICA AND CARIBBEAN REGION Sustainable Development Department Report No.: PAD487 Basic Information Project ID Lending Instrument EA Category Team Leader P085621 Investment Project Financing B - Partial Assessment Robert Ragland Davis Project Implementation Start Date Project Implementation End Date 15-Aug-2013 15-Aug-2019 Expected Effectiveness Date Expected Closing Date 15-Jul-2013 15-Aug-2019 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Laurent Msellati Ede Jorge Ijjasz-Vasquez Susan G. Goldmark Hasan A. Tuluy Borrower: AGCI Responsible Agency: AGCI Contact: Enrique O'Farrill Title: Director, Bilateral and Multilateral Cooperation Telephone No.: 56-2-827-5706 Email: eofarrill@agci.cl Project Financing Data(US$M) [ ] Loan [X] Grant [ ] Other [ ] Credit [ ] Guarantee For Loans/Credits/Others Total Project Cost (US$M): 63.86 Total Bank Financing (US$M): 0.00 Financing Source Amount(US$M) BORROWER/RECIPIENT 58.00 Global Environment Facility (GEF) 5.86 Total 63.86 Expected Disbursements (in USD Million) Fiscal Year 1 2 3 4 5 Annual 1.05 1.30 1.30 1.39 0.82 Cumulative 1.05 2.35 3.65 5.04 5.86 Global Environmental Objective(s) iv The project's Global Environment Objective (GEO) is to develop a national framework for sustainable land management to combat land degradation, mainstream biodiversity into national policies, and protect forest carbon assets. Components Component Name Cost (USD Millions) National Sustainable Land Management (SLM) Framework 4.86 Sustainable Land Management Pilot Projects 39.11 National Monitoring and Evaluation Program for Sustainable Land Management 9.60 Institutional Capacity Building and Lessons Learned 5.40 Project Management 4.90 Compliance Policy Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [X] Does the project require any waivers of Bank policies? Yes [ ] No [X] Have these been approved by Bank management? Yes[] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [X] Does the project meet the Regional criteria for readiness for implementation? Yes [X] No Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X Legal Covenants Name Recurrent Due Date Frequency Project Implementation Unit Yes n/a n/a Description of Covenant Schedule 2. Section I. AGCI shall cause CONAF to operate and maintain throughout implementation of the Project, a Project Implementation Unit ("PIU"), with functions, staffing (including but not limited to a technical coordinator and a financial management specialist), and responsibilities satisfactory to the World Bank and set forth in the Operational Manual. Name Recurrent Due Date Frequency National-Level Advisory Group Yes n/a n/a Description of Covenant Schedule 2. Section I. For purposes of providing general Project oversight and coordination, AGCI shall cause CONAF to operate and maintain throughout the implementation of the Project a National-Level Advisory Group, with functions, responsibilities and composition acceptable to the World Bank and specified in the Operational Manual, including representatives of CONAF, SAG, INDAP and MMA. Name Recurrent Due Date Frequency Three months following Management Committees Yes eetis once effectiveness Description of Covenant Schedule 2. Section I. No later than three months after the Effective Date, and for purposes of providing advice during the implementation of the Project, AGCI shall cause CONAF to establish, and thereafter operate and maintain throughout the V implementation of the Project, a committee ("Management Committee") in each Strategic Pilot Area, with functions, responsibilities and composition acceptable to the World Bank and specified in the Operational Manual. Name Recurrent Due Date Frequency Subsidiary Agreement Yes Effectiveness and recurrent n/a Description of Covenant Schedule 2. Section I. AGCI shall make the proceeds of the Grant available to CONAF under a subsidiary agreement ("Subsidiary Agreement") between the Recipient and CONAF, under terms and conditions approved by the World Bank Name Recurrent Due Date Frequency AGCI FM Specialist No Two months following Once effectiveness Description of Covenant Schedule 2. Section I. No later than two months after the Effective Date, AGCI shall hire a financial management specialist, under terms of reference approved by the World Bank, to carry out the financial management duties and responsibilities specified in the Operational Manual. Name Recurrent Due Date Frequency CONAF FM Specialist No Two months following Once effectiveness Description of Covenant Schedule 2. Section I. No later than two months after the Effective Date, AGCI shall cause CONAF to hire a financial management specialist, under terms of reference approved by the World Bank, to carry out the financial management duties and responsibilities specified in the Operational Manual. Conditions Name Type Subsidiary Agreement Effectiveness Description of Condition Article V. The Subsidiary Agreement referred to in Section I.B of Schedule 2 to this Agreement has been executed on behalf of the Recipient and CONAF. Team Composition Bank Staff Name Title Specialization Unit Teresa M. Roncal Operations Analyst Operations Analyst LCSAR Diana P. Rebolledo Language Program Assistant Language Program Assistant LCSAR Robert Ragland Davis Sr Forestry Spec. Team Leader LCSAR Jeannette Ramirez Operations Officer Operations Officer LCSAR Francis V. Fragano Senior Environmental Specialist Senior Environmental Specialist LCSDE Mi Hyun Bae Mbayo Senior Social Development Senior Social Development LCSSO Specialist Specialist Ana Lucia Jimenez Nieto Financial Management Specialist Financial Management Specialist LCSFM Ricardo Larrobla Consultant Consultant LCSEN Jean-Jacques Verdeaux Senior Procurement Specialist Senior Procurement Specialist LCSPT Jimena Garrote Counsel Counsel LEGLE Mario Alfredo Nanclares Consultant Consultant LCSSO Hector Pena Consultant Consultant LCSAR Seth David Factor Environmental Specialist E T Consultant LCSDE Diana Rodriguez-Paredes Junior Professional Associate Junior Professional Associate LCSAR Carolina I. Llavallol Consultant Consultant LCSAR Luis Felipe Banados Munita Consultant Consultant LCSAR Locations Vi Country First Location Planned Actual Comments Administrative Division Chile Region del Libertador Region del Libertador X General Bernardo General Bernardo O'Higgins O'Higgins Chile Region de Coquimbo Region de Coquimbo X Chile Region de la Araucania Region de la Araucania X Chile Region Aisen del General Region Aisen del General X Carlos Ibanez del Campo Carlos Ibanez del Campo Chile Region de Arica y Region de Arica y X Parinacota Parinacota Institutional Data Sector Board Agriculture and Rural Development Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Co- Mitigation Co- benefits % benefits % Agriculture, fishing, and forestry General agriculture, fishing and 100 10 15 forestry sector Total 100 D I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Environment and natural resources management Land administration and management 50 Environment and natural resources management Biodiversity 25 Environment and natural resources management Climate change 25 Total 100 Vii I. STRATEGIC CONTEXT A. Country Context 1. Chile is one of the most developed countries in the southern hemisphere and relies heavily on its natural resource base for employment and exports. The country has a wide range of ecological zones; including expansive arid desert, remote Pacific islands, a Mediterranean ecosystem, high-altitude grasslands and wetlands, and temperate rainforests, among others. This diverse landscape contributes to Chile's rich biodiversity, unparalleled natural beauty and highly favorable environmental conditions for its successful resource-based industries; including forestry, fisheries, and agriculture. Yet, despite its natural assets and economic prowess, the country is challenged by land degradation' problems including desertification2, accelerated soil erosion, and forest degradation. Climate change is exacerbating land degradation through changes in rainfall quantity and regimen, and rising temperatures. Government programs, though numerous, have not been effective in addressing the wider issues of integrating independent sector efforts needed for sustainable land management (SLM)3 at the landscape or producer level. B. Sector and Institutional Context 2. Important areas for conservation and biodiversity which overlap with productive landscapes include the Central Andean Dry Puna, the Chile Matorral, the Winter Rainfall Forest - Valdivian Temperate Rainforest, and the Patagonian Andes Nothofagus forests and steppe.4 The Chilean Hotspot5, which encompasses these ecosystems, is known for its high levels of biodiversity. Of the Hotspot's 3,893 native vascular plants 1,957 (50%) are endemic6. Yet, the Hotspot has lost over 70% of its original 300,000 km2 of native habitat due mainly to destructive land management practices and only 10.2% is under protection7. The most common causes of its 1 The GEF (2009) defines land degradation as "any form of deterioration of the natural potential of land that affects ecosystem integrity either in terms of reducing its sustainable ecological productivity or in terms of its native biological richness and maintenance of resilience." 2 Desertification is "land degradation in arid, semi-arid and dry sub-humid areas resulting from various factors, including climatic variations and human activities" (UNCCD. 1994. United Nations Convention to combat desertification in countries experiencing serious drought and/or desertification, particularly in Africa. A/AC. 241/27, Paris) Sustainable land management "combines technologies, policies and activities aimed at integrating socio-economic principles with environmental concerns so as to simultaneously: (i) maintain or enhance production/services (productivity), (ii) reduce the level of production risk (security), (iii) protect the potential of natural resources and prevent degradation of soil and water quality (protection), (iv) be economically viable (viability) and (v) be socially acceptable (acceptability)." (FAO. 1993. FESLM: An international framework for evaluating sustainable land management. Rome. Accessed at: http://www.fao.org/docrep/T1079E/tl079e00.htm#Contents) 4 Ecoregions are listed from north to south. 5 Arroyo, M.T.K., P. Marquet, C. Marticorena, J. Simonetti, L. Cavieres, F. Squeo, R. Rozzi and F. Massardo. 2006. "El Hotspot Chileno, prioridad mundial para la conservaci6n." En Biodiversidad de Chile: Patrimonio y Desafios. Ed. CONAMA. 6 ibid Arroyo et al. 2006 7 Myers, N., R.A. Mittermeier, C.G. Mittermeier, G.A.B. da Fonseca, and J. Kent. 2000. Biodiversity hotspots for conservation priorities, Nature vol. 403: 853-858. 1 deterioration are the use of poor agricultural practices on marginal lands, overgrazing by cattle and sheep, uncontrolled burning, and forest degradation due to over cutting and poor logging practices'. About half of Chile's 15.4 million ha of forests are already degraded, which is advancing at about 77,000 ha per year. Most degradation occurs in the southern natural forests, where fuelwood extraction is a major contributor to the problem. Despite Chile's internationally- recognized leadership in plantation forestry, an estimated 63% of all native forest management in the country leads to forest degradation9 3. Contributing to land degradation, inappropriate agricultural practices result in accelerated soil erosion on cultivated lands (over 60% of Chile's cultivated lands) 10 as well as desertification (48 million ha, which corresponds to two-thirds of national territory), putting at risk Chile's important terrestrial and aquatic habitats. These impacts are further exacerbated by climate change, which has already led to a decrease of 1,100mm in average annual rainfall over the last 50 years. By 2040, average temperatures are projected to climb by 2 'C in the north and 3 'C in the Central and Southern Regions of the country", leading to changes in seasonal warming and cooling patterns, including frosts. Of the 1.3 million people inhabiting lands affected by desertification, about 60 percent live in poverty. As desertification expands, it reduces the capacity of the land to support rural livelihoods through agriculture and ranching, jeopardizes resource-based industries, and eliminates or degrades natural habitats. It is thus no surprise that migration rates are high, up to 3% annually, in the areas most affected. Compounding the problem, as natural resources and available arable lands are reduced, human resource use intensifies in the remaining areas, progressively increasing threats to the country's vulnerable ecosystems. 4. While the Chilean Government has a number of programs to promote agriculture and forestry, including degraded lands, they do not provide a coordinated approach to sustainable land management, nor were they designed to do so. Sector programs are managed in relative isolation and there is presently little incentive for agencies to work together. In addition, many of these programs are not tailored to the needs and constraints of small and medium producers, which often lack the technical capacity and up-front capital needed to participate. The newly promulgated Native Forests Law (no. 20.283) is a case in point, where its three years of implementation have resulted in a disbursement of only 25 percent of its allocation. Clearly, new approaches which work at the landscape level, reach across sectors to bring forestry, agricultural and conservation efforts together, and address barriers to small producers, are needed if sustainable land management is to be achieved in Chile, especially in the context of a changing climate. The main problem currently is "forest degradation", rather than deforestation. 9 INFOR. 2008. Chile's Readiness Plan Idea Note for the World Bank Forest Carbon Partnership Fund. 10 Ellies, A. 2000. Soil Erosion and Its Control in Chile in Acta Geologica Hispanica, v. 35, p. 279-284 " Estudio "AnOlisis de Vulnerabilidad y Adaptaci6n en agricultura, recursos hidricos y silvicultura, como parte del proyecto GEF Capacitaci6n de Chile para cumplir sus compromisos con la Convenci6n Marco de la Naciones Unidas sobre el Cambio Climitico", Centro AGRIMED, Facultad de Ciencias Agrarias y Forestales, Universidad de Chile, 2000. 2 Government commitment and complementary government efforts 5. The Government is committed to move toward OECD standards for environmental management. In 2008, the Ministry of Environment (MMA) approved its National Action Plan (NAP) on climate change, with the primary objective of "reducing adverse impacts from climate change, through an integrated approach". Desertification issues are addressed through the National Forestry Corporation (CONAF), which coordinates activities with the support of the National Consultative Committee on Desertification and Drought. The Committee brings together other national institutions such as the MMA, with ministries, universities, and civil society to prioritize actions under the country action plan for the UNCCD. 6. For biodiversity and ecosystem protection, Chile is guided by its National Biodiversity Strategy of 2003 under the aegis of the MMA. As part of its national and regional biodiversity strategies, MMA identified over 300 priority areas for conservation throughout the country. Included among these ecosystems are the Valdivian Forests in southern Chile, the Mediterranean Forests of central Chile, and the Central Andean Dry Puna (Atacama region) are considered hotspots 12,13 The biodiversity strategies include provisions for assessing the impacts of climate change for the flora and fauna of these areas, mitigation and restoration of degraded areas. The proposed project would target such areas through sustainable land management at the individual farm level within the context of an overall landscape management strategy. Rationale for Bank Involvement 7. As Chile increases its environmental management standards to meet OECD criteria, it has a unique opportunity and need to develop effective mechanisms for addressing land degradation, biodiversity conservation, and climate change mitigation and adaptation. Working in partnership with the Bank, the lessons learned and capacities of the country in these sectors can be transferred effectively to the region and at a global level. The GEF-funded initiative would complement other Bank and IFC-supported initiatives in the environmental and sustainable development sector while providing a platform for successful development outcomes from other priority areas of engagement. 8. The Bank has a long-standing history of GEF projects with satisfactory outcomes in Chile and the Southern Cone, including the GEF MSP Public Private Mechanisms for Biodiversity Conservation in the Valdivian Forest and the best practice project, the GEF Santiago Foothills Mountain Conservation. A BioCarbon (BioCF) fund project for afforestation and reforestation, the SIF Afforestation and Carbon Sinks Project is now underway with Fundacion Chile, and is now registered with the CDM. In neighboring Argentina, Bank financed projects include the successfully closed IBRD Forestry Development Project and the Native Forests and Protected Areas Project, and the full size GEF Biodiversity Conservation Project. Underway now in Argentina, are the IBRD Sustainable Natural Resource Management Project and the GEF Biodiversity Conservation in Productive Forestry Landscapes. The Argentina GEF Rural Corridors and Biodiversity Conservation is under preparation. 12 See also: http://www.conservation.org/explore/priority_areas/hotspots/south_america/Chilean-Winter-Rainfall- Valdivian-Forests/Pages/default.aspx " Myers 2003. BioScience, Volume 53, Number 10, pp. 916-917(2); Myers, Mittermeier, Mittermeier, da Fonseca & Kent, 2000, Biodiversity hotspots for conservation priorities. Nature 403, 853-858 3 C. Higher Level Objectives to which the Project Contributes 9. The World Bank Group 2011-2016 Country Partnership Strategy with Chile14 (Report no. 57989-CL), discussed by the Executive Directors on February 15, 2011, highlights the Government of Chile's development agenda called Chile Pais Desarrollado, which sets the goal for achieving high income developed country status by 2018. The primary challenges highlighted in the CPS are related to boosting economic growth and eliminating extreme poverty. In addition, the Government has committed to protecting the environment in order to ensure the long-term environmental sustainability of growth as well as respond to Chile's commitments to address climate change as a new member of the OECD. 10. Through its focus on sustainable land management and the incorporation of biodiversity and climate change considerations, the project targets several GEF priorities. In the implementation and piloting of Chile's existing legal framework for Water, Soil and Forest Conservation Districts (Conservation Districts), developing collaborative mechanisms and inter- sector alliances for addressing the project targets LD-SP3: Investing in New and Innovative Approaches in Sustainable Land Management. Conservation Districts are an innovative tool to promote conservation planning, given the lack of a formal legal instrument for promoting regional land-use planning in Chile. In the strategic pilot areas, the project aims to work across sectors with communities and social groups to integrate biodiversity and climate change considerations into productive activities and rural landscapes (i.e., diverse farming and production systems that promote sustainability, carbon sequestration and conservation of globally significant biodiversity conservation), all within the framework of sustainable land management. To support these pilot activities, the project will help to overcome critical knowledge barriers, develop institutional capacities and establish policies for a national framework for SLM that includes biodiversity mainstreaming, thus targeting GEF Strategic Priorities BD-SP4: Strengthening the Policy and Regulatory Framework for Mainstreaming Biodiversity, and CC-SP6: Management of Land Use, Land-Use Change and Forestry as a Means to Protect Carbon Stocks and Reduce GHG Emissions. Objectives of these activities include native forest management and regeneration as well as protection of globally significant biodiversity in Chile's priority regions. II. PROJECT DEVELOPMENT OBJECTIVES A. PDO/GEO 11. The project's Global Environment Objective (GEO)15 is to develop a national framework for sustainable land management to combat land degradation, mainstream biodiversity into national policies, and protect forest carbon assets. Project Beneficiaries 12. The main project beneficiaries will be: (i) the rural poor, including indigenous communities, whose lands are degraded or threatened and can benefit from improvements in soil 14 The World Bank. January 11, 2011. Country Partnership Strategy for the Republic of Chile for the Period FY11 - FY16. Report no. 57989-CL 15 The GEO serves as the PDO for the project. The terms are used interchangeably. 4 conservation and improved sustainability of production systems; (ii) private sector producers; (iii) civil society benefitting from an improved landscape that incorporates water, soil, biodiversity, carbon, and other intangibles as values; and (iv) native biodiversity in global priority hotspots. In addition, the project would aim to bolster the technical capacity and outreach of government institutions (national, regional, and municipal) working in the productive sector and natural resource management to provide technical, policy and regulatory leadership within. PDO/GEO Level Results Indicators 13. The project aims for the following impacts: * Development of an effective national frameworkl6 to mitigate land degradation, which includes biodiversity mainstreaming and protection of forest carbon assets. * Reduced land degradation in 5 target areas through the application of restoration and SLM * Improved capacity to monitor impacts and results through the development of a decision support system for effective SLM monitoring and early warning system for land degradation * Increased management and coordination capacity for mainstreaming SLM into the institutional architecture of the Ministry of Agriculture III. PROJECT DESCRIPTION A. Project Components 14. The project consists of the following components: Component 1. National Sustainable Land Management Framework, Total US$4,869,221 (US$469,221, GEF) (a) Carrying out of an assessment of the potential of the Member Country's existing agriculture, forestry, ranching and conservation programs, including MINAGRI Programs, to be part of the SLM Framework; and (b) based on the assessment referred to in (a) herein: (i) development of recommendations to update said programs in order to become part of the SLM Framework; and (ii) the identification of gaps between said existing programs and the requirements of the National SLM Framework and development of proposals to cover those gaps. . Classification of geographic locales in the Member Country's territory for SLM purposes based on, inter alia, their vulnerabilities and potential for replicating effective SLM. . Development and validation of eligibility criteria for beneficiary participation in SLM activities supported by the Member Country under the proposed SLM Framework including, inter alia, the creation of Conservation Districts. 16 For purposes of the project, the National Framework for Sustainable Land Management means the interlinked elements, including national programs, which support the objective of ameliorating land degradation and/or desertification. The framework would be flexible so as to add or remove elements to improve its function and efficiency over time or changing conditions. 5 . Development of an SLM Framework, incorporating lessons learned from the implementation of Subprojects and other Project activities Component 2. SLM Pilot Projects, Total US$39,112,015 (US$3,912,015, GEF) * Development of a Strategic Plan for each Strategic Pilot Area, including the identification of conservation corridors. * Carrying out of Demonstration Activities of desirable SLM practices in Strategic Pilot Areas; and (b) development and carrying out of capacity building activities and technical assistance on best practices for agriculture, forestry, ranching and conservation for SLM. * Provision of technical assistance for the preparation and carrying out of Subprojects, including, inter alia: (a) assistance in the design of farm-level plans (planes prediales) to support the implementation of Subprojects; (b) carrying out of capacity building activities to raise awareness of SLM benefits; and (c) assistance in the preparation and submission of applications to the Member Country for the financing of investments/activities under existing forestry, agriculture, ranching and conservation programs, for the purposes of carrying out Subprojects. * Carrying out of Subprojects by Eligible Beneficiaries in Select Regions. Component 3. SLM Monitoring and Evaluation System, Total US$9,591,600 (US$541,600, GEF) . Design of an SLM monitoring and evaluation system through, inter alia: (i) the carrying out of studies to identify the users' needs and technology requirements; (ii) the provision of required hardware and software; (iii) the provision of technical assistance for SLM data management; and (iv) the development of operational manuals. . Implementation of the SLM monitoring and evaluation system in the Strategic Pilot Areas. . Development of a website to publish Project results and SLM data. Component 4. Institutional Capacity Building, Total US$5,413,000 (US$463,000, GEF) . Development of inter-sectoral coordination mechanisms to support the SLM Framework. . Carrying out of capacity building activities to improve SLM. . Design and implementation of outreach activities and strategies to disseminate SLM information, including the design and implementation of communication campaigns and public awareness initiatives. . Development and implementation of a university-level course on SLM. . Development and carrying out of an international seminar on SLM. Component 5. Project Management, Total US$4,877,800 (US$477,800, GEF) . Support for Project management, through, inter alia: (a) the provision of training and workshops; and (b) the carrying out of the technical and fiduciary aspects of the Project, including Project audits. 6 . Support for Project monitoring and evaluation, through, inter alia: (a) the establishment of systems and capacities for monitoring Project activities; and (b) the carrying out of Project impact evaluation activities. B. Project Financing Lending Instrument 15. The project's total costs of US $63,863,636 will be financed through a GEF donation of US $5,863,636 and US $58,000,000 in Government co-financing implemented over a five year period. The lending instrument is Investment Project Financing (IPF). Project Cost and Financing Project Components GEF Financing Government Co-Financing TOTAL US $ % US $ % US $ 1. National Sustainable 469,221 9.6% 4,400,000 90.4% 4,869,221 Land Management Framework 2.SLM Pilot Projects 3,912,015 10.0% 35,200,000 90.0% 39,112,015 3. SLM Monitoring and Evaluation System 541,600 8.2% 9,050,000 91.7% 9,591,600 4. Institutional Capacity Building 463,000 8.5% 4,950,000 91.4% 5,413,000 5. Project management 477,800 9.8% 4,400,000 90.2% 4,877,800 Total Costs (excluding Agency Fee) 5,863,636 9.1% 58,000,000 90.8% 63,863,636 C. Lessons Learned and Reflected in the Project Design 16. The project design incorporates relevant project experiences from the Southern Cone, principally Argentina and Chile. Key projects considered include the Chile GEF Santiago Foothills Project (MSP) and the Chile GEF Medium-Sized Project (MSP) Valdivian Forest Zone Project: Public-Private Mechanisms for Biodiversity Conservation in Region Ten, The Argentina GEF Biodiversity Conservation, GEF Rural Corridors and Biodiversity Projects and Argentina IBRD operations including the Argentina Forestry Development Project, the Native Forestry and Protected Area Project, and the Sustainable Natural Resource Management Project. Lessons learned from these include (a) the need to work with private producers, including small- and medium-level producers, and across sectors in productive activities to ensure biodiversity conservation at the landscape level; (b) minimizing or eliminating risks for small producers in 7 the adoption of new techniques; (c) a strong field presence in the project design and implementation, (d) building on an established organizational base; (e) including local experts in the preparation; (f) ensuring broad stakeholder involvement from public, private and community organizations; and (g) strengthening monitoring and evaluation at the project level to provide more near real-time adjustments and feedback to project execution. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 17. The executing agency will be the Chilean National Forestry Corporation (CONAF), which will also manage procurement and share responsibility for financial management. The recipient, AGCI, will be responsible for undertaking the financial management functions of the project. B. Results Monitoring and Evaluation 18. Monitoring the impact and performance of the project will be undertaken by the Project under Component 3. This will be conducted through analysis of (i) baseline studies and collateral information relative to project objectives and performance, (ii) thematic inputs (spatial and collateral data) developed at the pilot sites relative to land degradation and impacts of project activities including carbon sequestration and biodiversity mainstreaming, (iii) program information from the government agencies involved, including CONAF, SAG, INDAP and MMA. CONAF has extensive experience with monitoring natural resources and project impacts. Proposed investments will strengthen their capacity to do so for sustainable land management. (ref. Annex 1) C. Sustainability 19. The proposed framework would provide both institutional and financial sustainability for long-term national efforts in sustainable land management, and the measures for mainstreaming biodiversity conservation and carbon sequestration into field implementation. The framework would exist as a government collaborative effort to bridge the gaps in the existing sector programs and ensure cooperation between its own agencies, as well as others, such as MMA. On-farm activities for forestry are protected by national laws 701 and 20.283 which prohibit the return of forested lands to other activities, helping to ensure the sustainability for forest carbon stocks established by the project. The sustainability of best practices in agricultural lands will be achieved by the capacities passed on to producers and extension agents for improved management, and an improved institutional framework to promote and execute SLM. Improved long-term financial returns beyond the project tenure would provide an important incentive for the entire effort. 8 V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Stakeholder Risk Rating Low Imleenig gec (A) Rik (icuigFdcayRss Capacity Rating Moderate Governance Rating Low Design Rating Low Social and Environmental Rating Moderate Program and Donor Rating Low Delivery Monitoring and Sustainability Rating Low B. Description 20. Most specific risks are considered low, which is commensurate with an overall "low" risk rating. Appropriate measures to mitigate risks have been identified and negotiated with the government and are explained in Annex 4. VI. APPRAISAL SUMMARY A. Economic and Financial Analyses 21. The government agencies responsible for the country's agricultural and ranching sectors (SAG and INDAP) and for the protection, regulation and management of Chile's forests (CONAF)17 have made a formal commitment to dedicate resources for SLM to support the project objectives, including financing of investments with producers and by assigning headquarters and field staff to work on the project. The cumulative effect of strategic inter- agency efforts focusing on sustainable land management in priority locations will help to protect and restore vulnerable and degraded lands and natural resources in five priority areas, provide global environmental benefits, and contribute to the knowledge needed for scaling up SLM for implementation nationwide. The SLM approach is holistic and comprehensive, and contrasts with the piecemeal business-as-usual scenario where rural programs work in relative isolation. 22. Benefits from a coordinated SLM approach include the protection of watersheds, which are important to help regulate water quality, quantity and regimen; soils, which will be protected and rehabilitated from erosion, degradation and nutrient depletion due to unsustainable cropping and overgrazing, and have improved moisture retention; increased revenues from improved agricultural yields and livestock productivity, and the protection of native forests from degradation due to poor management and unsustainable rates of extraction. Protection of native habitats will provide improvements for biodiversity objectives. 17 MMA participates in the project also, but has a limited role in rural productive concerns. 9 23. National resources available for supporting conservation practices on vulnerable and degraded agricultural lands are available through Chile's Land Management Program for Degraded Lands (Law no. 20.412). Reforestation and native forest conservation and sustainable management are supported by two separate initiatives, the Native Forest Restoration and Management Program (Law no. 20.283) and the Afforestation and Reforestation Program (Presidential Decree no. 701). Chile has agreed to co-finance a total of US$35 million over five years for SLM investments under Component 2 of the project. Actual physical investments on farms and community holdings are expected to cover an area of around 119,360 ha. The component will also develop strategic-level participatory land-use plans for around 1.7 million ha, which will help to identify needs and prioritize conservation investments at the farm level; enhance landscape planning for biodiversity objectives, such as conservation corridors and set asides; and guide future actions in the strategic pilot areas to ensure their long-term sustainability. Experiences and lessons learned from the pilot activities will be used to inform the development of the national SLM framework under component 1. 24. The economic analysis indicates that negative returns are likely during the first year of implementing conservation practices on agricultural lands. Nevertheless, by year 5, average revenues on farms which use conservation practices are expected to substantially improve. Because small producers and rural and indigenous communities rarely have the financial capital to invest in the initial costs of conservation, the project (including the associated national programs) will provide the incremental costs for the investments, as well as technical guidance for planning, implementation and follow-up maintenance. In general, investment returns for plantation forestry in Chile are favorable. Internal rates of return (IRRs) for exotic species in Chile, such as Pinus radiata, are highest at 16.9%. Although some native species are competitive too -- IRRs for Nothofagus dombeyi are estimated at 13.6%, Nothofagus nervosa at 10.9% and 1819 Nothofagus alpina at 7.2% (8% discount rate)18 25. With an estimated 1.5 million ha of native forests owned by small producers20, there is a strong need to improve the management of their forests for fuelwood -- the second most important energy source in Chile21. Unsustainable fuelwood extraction, accompanied by poor or destructive management practices, is one of the main drivers of forest degradation in Chile. Each year, about 15 million m3 of fuelwood are extracted, mainly from native forests, without any regard to sustainability or impacts22. By improving management of forests for fuelwood, the project aims to help local populations meet their subsistence needs and improve incomes, while ensuring the sustainability of their forest resources over the long term. While no PES will be linked to the project, the assessment showed a high likelihood that forest-carbon-PES schemes 1 The World Bank. 2012. PROFOR Financial and Economic Evaluation Guidelines for Community Forestry Projects in Latin America. 19 Cubbage el al. 2005. Timber Investment Returns for Plantations and Native Forests in the Americas. 20 Leyton, J. 2009. Tenencia Forestal en Chile. En FAO. 2009. Tenencia forestal en AmericaLatina. Estudios de Caso. Consultado en abril de 2012 at http://www.fao.org/forestry/54367/es/chl/ 21 CNE. 2008. Politica Energetica: Nuevos Lineamientos. Transformando la Crisis, Energetica en una Oportunidad. Comisi6n Nacional de Energia. Santiago Chile. 22 G6mez-Lobo, A.; J.L. Lima; C. Hill y M. Meneses. 2006. Diagn6stico del mercado de la lefia en Chile. Informe Final. Departamento de Economia, Universidad de Chile. 10 hold the potential to generate sufficient revenue to cover the costs of bringing natural forest areas under protection and provide for their maintenance over the medium term (10 years). 26. In conclusion, the economic analysis based on SLM activities, including on-farm best management practices that include conservation, improved management of forests for small holders which enhance their sustainability is very promising. The collective effect of working across sectors helps to ensure the sustainability of the independent actions in each. For example, when agricultural areas are more stable and productive, there is less incentive to expand crops into forests or other natural areas; and when forests are managed sustainably for valuable fuelwood, producers will begin to value their protection and maintenance. Carbon sequestration through forestry provides important opportunities for climate change mitigation. Intangible benefits including improved protection of biodiversity in production landscapes, and the amelioration of soil erosion, provides for a more sustainable landscape over the long-term, thereby enhancing its resiliency to changing climate conditions, especially droughts and extreme storm events. Other global environmental benefits for ecosystem services will accrue from sustainable production practices. Strategic planning provides the framework for the entire range of activities, needed to steer production around sensitive habitats, balance productive and conservation concerns, and prioritize actions in the overall landscape. The sum of these efforts provides the knowledge and experience needed to build a national framework for SLM. B. Technical 27. According to the recently held UN Convention to Combat Desertification (UNCCD), over the next 25 years land degradation could reduce global food production by as much as 12% leading to a 30% increase in world food prices. In Chile the effects of this global phenomenon are already apparent. Two-thirds of the national territory (48 million ha) are affected or threatened by desertification, over 60% of Chile's cultivated lands are affected by accelerated soil erosion and 63% of all native forest management in the country leads to forest degradation. Representative areas selected for the subprojects contain a range of degradation problems that undermine rural productivity including forest degradation due to poor forest management and overcutting, soil erosion and loss of fertility from overgrazing and farming without conservation practices, and drought from changing rainfall quantity and regimen. 28. Degradation and desertification can affect biodiversity of global importance in the productive landscape. For example, the Central Andean Dry Puna (Putre pilot area) is considered vulnerable, and contains threatened wetlands (Oxichloe sp.), forests (Polylepis sp.) and animals, such as the critically threatened Royal Cinclodes (Cinclodes aricomae). In the strategic pilot areas of the Central Valley (Combarbala and Litueche) there are few protected areas, desertification and erosion are severe, and many species are at risk, threatened, or endangered, including the Vizcacha (Lagidium viscacia), the Pampas cat (Lynchailurus colocola), the marine otter (Lontra feline) and puma (Felis concolor). Further south in the pilot area of Carahue- Saavedra (Valdivian Temperate Rainforest), 11 woody species are classified as endangered, and some 57% of the mammals, 63% of amphibians, 50% of reptiles and 16% of birds are either threatened or endangered. In and around the Coyhaique pilot area (Patagonian Andes Nothofagus forest), an estimated 3 million ha of forests were destroyed by wildfires in the early 1900's, resulting in extraordinary losses of timber, biodiversity, habitats, and causing damage to soils. Some 54 species in the Coyhaique project area are considered threatened. 11 29. To address this situation, the project will develop a national framework for sustainable land management to combat land degradation, mainstream biodiversity into national policies, and protect forest carbon assets. The project aims to achieve this by developing, piloting and refining a national framework for combating land degradation through SLM. The SLM approach aims to integrate the application of existing land management programs so as to mainstream sustainable land management and biodiversity in productive landscapes, and carryout climate change mitigation in four priority regions of Chile. The project will also improve the coordination of ongoing government programs in the forestry and agricultural sectors through systematic inter-agency collaboration and the use of "conservation districts "23. 30. In conjunction with in-depth reviews and proposals for reforms of national programs in the forestry and agricultural sectors, the project will implement multiple subprojects in four different ecosystems identified during preparation as priorities for conservation and sustainable land management. Strategic planning with technical specialists, agency officials and producers and communities in each of the areas will help to pinpoint locations for proposed interventions, and to help assemble conservation corridors over the landscape of the pilot area. Technical teams will provide assistance to producers and communities for comprehensive planning and implementation of subprojects over their holdings so as to balance productive concerns with conservation at both the individual holding and landscape levels. 31. Community subprojects and training programs would aim to develop community and producer capacity to prepare, implement, operate and maintain subproject activities, as well as familiarize them with existing environmental guidelines at the regional and national levels. The results of the pilot activities will help to inform and guide the development of the national framework for SLM under Component 1, which will be complemented by reviews and proposals for reforms of existing instruments relevant for SLM, and the design of a new instrument to fill identified gaps, which cannot be addressed in the reforms. C. Financial Management 32. As part of project preparation, a Financial Management Assessment (FMA) was carried out to evaluate adequacy of the proposed financial management arrangements for the implementation of the GEF Sustainable Land Management Project. Project implementation will be under the responsibility of the National Forestry Corporation (CONAF), as project executing unit, and the Agencia de Cooperaci6n Internacional de Chile (AGCI), as project financial administrator. Under those arrangements, financial management responsibilities will be split between both entities, thus close coordination during project operation will be critical. 33. Both CONAF and AGCI are well-established entities that have developed expertise in IDB and EU financed projects; therefore, existing financial management arrangements will be followed, complementing or strengthening them only when needed in order to attend project specific demands. Based on DIPRES' approval of the proposed implementation arrangements, project transactions will not be included in the national budget as neither CONAF's or AGCI's 23 For purposes of the project, conservation districts means a geographic unit that has been defined and delimited for the purposes of guiding land-use and conservation measures that support sustainable land management. 12 approved budget can be increased; however, project transactions will be processed and accounted for in SIGFE following the "Administraci6n de Terceros" mechanism. For project purposes, CONAF's Project Implementation Unit will be strengthened by the contracting of an experienced financial management specialists for both institution. 34. The FM risk is considered moderate as i) project design requires interaction with several actors; ii) none of the two implementing entities (CONAF and AGCI) is familiar with Bank policies and procedures; iii) responsibility for financial management tasks is split between both entities; and (iv) project designs require that some activities eventually be carried out by CONAF's regional offices. Consequently, coordination to ensure satisfactory operation of the joint arrangement, including the provision of timely and reliable information, is imperative. In accordance with the preceding assessment, the proposed FM arrangements can be considered acceptable, subject to completion of the actions described in Annex 3. D. Procurement 35. With respect to procurement, the Bank conducted an assessment of the Recipient's capacity and particularly of CONAF which will carry out procurement processes under the supervision of AGCI. The overall procurement risk has been rated as low. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated January 2011; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated January 2011, and the provisions stipulated in the Grant Agreement, which includes the possible use of the national procurement system, "ChileCompra ", under specific conditions and thresholds. Key features of the procurement strategy for this project include (i) the review of thresholds consistent with the assessed level of risks for the implementation agency, and (ii) a Grant Agreement with Special Procurement Provisions to use the national procurement system "ChileCompra ". E. Social (including Safeguards) 36. During preparation, CONAF conducted a comprehensive Social Assessment (SA) to (i) identify and provide the socio-economic profile of indigenous peoples as well as other beneficiaries at the pilot area levels; (ii) provide an overview of the existing rural development programs, their gaps and issues of access by communities and forest producers; (iii) review CONAF's past and ongoing experiences in leading participation and consultation processes, specifically with indigenous peoples; (iv) analyze formal as well as informal institutions in the project areas; (v) provide a detailed stakeholder analysis; (vi) evaluate the available grievance mechanisms for project beneficiaries; and (vii) identify potential risks and positive impacts from the project and proposals for their mitigation. The assessment also included information dissemination, participation and a consultation framework throughout the project areas that included non-indigenous beneficiaries. The Social Assessment provides recommendations for a structured consultation and participation framework and process for non-indigenous beneficiaries. 37. Beneficiaries include non-indigenous producers and indigenous peoples. The indigenous peoples' communities are located in the strategic pilot areas of Putre and Carahue-Puerto Saavedra. Non-indigenous small- and medium-level producers are found in the strategic pilot 13 areas of Litueche and Coyhaique. Agricultural communities (comunidades agricolas) as defined by the Law of Agricultural Communities (Ley de Comunidades Agricolas) are located in the pilot area of Combarbald. The Project triggers the following social safeguards: Indigenous Peoples (OP/BP 4.10) and Involuntary Resettlement (OP/BP 4.12). The project does not involve physical involuntary resettlement nor land acquisition; and while it is unlikely, it may potentially restrict access to natural resources in protected areas or change land use practices. Given the demand-driven nature of the subprojects, specific activities at each locale will be identified in concert with beneficiaries during implementation. Accordingly, CONAF prepared Indigenous Peoples Planning Frameworks (IPPFs) for Putre and Carahue-Puerto Saavedra, laying out the information and consultation processes that are culturally appropriate along with the specific measures to assess and address particular issues pertaining to indigenous peoples based on the requested demand-driven activities. The pilot area of Putre includes the Lauca Biosphere Reserve (Reserva de la Biosfera Lauca) which is composed of (i) the Lauca National Park and (ii) the Las Vicufias National Reserve and the Natural Monument of Salar Surire. The elements of the Process Framework are integrated in the Indigenous Peoples Planning Framework (IPPF) for the pilot area of Putre in order to address any potential restrictions of access and provide alternative sustainable livelihoods of indigenous peoples communities. 38. Meetings and workshops were carried out in each pilot area with indigenous peoples, rural communities, and small- and medium-level producers. The objectives of the workshops were to present and inform potential beneficiaries about the project, receive feedback, and integrate their perspectives in the project design (ref. PAD Annex 3 and the Social Assessment). The Social Assessment, Indigenous Peoples Planning Frameworks were publically disclosed in country on January 2, 2013, through CONAF's website, cleared by the team's social specialist on January 7, 2013, and disclosed at the Bank's website on January 14, 2013. 39. CONAF has a small, technically strong team at national and regional levels with experience and engagement with a broad range of stakeholders, including indigenous peoples, campesino communities, small producers, and others. CONAF currently leads national consultation efforts with indigenous peoples for a new forestry law (Ley de Fomento Forestal) which recognizes the country's obligation to apply ILO Convention No 169 to promote the rights of indigenous peoples. The project will finance a social specialist in each pilot area to ensure strong engagement with stakeholders and beneficiaries. F. Environment (including Safeguards) 40. The Borrower has prepared an environmental assessment (EA) for Components 1 (National Sustainable Land Management Framework) and 2 (SLM Pilot Projects). Notwithstanding, the impact of the project on the environment is expected to be overwhelmingly positive given its focus on sustainable land management, biodiversity conservation and climate change mitigation. Some limited, though relatively minor, risks do exist, primarily related to potential impacts from agricultural and forestry practices in strategic pilot areas, should they not be conducted according to the project design. Provisions for avoiding these impacts have been made in the design and the project team will guide investments to be compatible with conservation and sustainable land management concepts, and field teams will be in place in each pilot area. CONAF has an excellent record of environmental and social compliance, and hosts the government's principal unit charged with conducting Environmental Impact Assessments 14 (EIAs) for all activities potentially affecting the country's natural resources. Their experience is considerable and they are well staffed with qualified technical personnel. This unit will be responsible for monitoring project environmental safeguards in cooperation with the project team, which includes field personnel. 41. Based on the type of activities that it will finance, the Project triggers the following environmental safeguard policies: Environmental Assessment (OP/BP/GP 4.01), Natural Habitats (OP/BP 4.04), Pest Management (OP 4.09), Physical Cultural Resources (OP/BP 4.11), and Forests (OP/BP 4.36). An environmental management framework (EMF) was prepared and defines mitigation measures and to ensure compliance with Bank standards and operational policies. The EA, EMF, and PMP were published on the client's website on November 12, 2012; cleared by the team's environmental specialist on December 5, 2012; and disclosed on January 23, 2013. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4.01) X Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Indigenous Peoples (OP/BP 4.10) X Involuntary Resettlement (OP/BP 4.12) (ref. potential restriction X of Access) Safety of Dams (OP/BP 4.37) X Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X Piloting the Use of Borrower Systems to Address Environmental X and Social Safeguard Issues in Bank-Supported Projects (OP/BP 4.00) G. Policy Exceptions and Readiness 42. The project meets the regional criteria for readiness for implementation. The fiduciary arrangements are in place. Key project staff and consultants can be quickly mobilized upon project start up. Adequate monitoring and evaluation capacity is available. The Environmental Assessment and Social Safeguards Instruments were disclosed in the country and are available at the Bank's website and on relevant websites. 15 Annex 1: Results Framework and Monitoring Country: Chile Project Name: Sustainable Land Management Project (P085621) Results Framework Global Environmental Objectives PDO Statement The project's Global Environment Objective (GEO) is to develop a national framework for sustainable land management to combat land degradation, mainstream biodiversity into national policies, and protect forest carbon assets. These results are at Project Level Global Environmental Objective Indicators Cumulative Target Values Data Source/ Responsibility for Indicator Name Core Unit of Baseline YR1 YR2 YR3 YR4 End Frequency Methodology Data Collection Measure Target Development of an effective LI national framework to Project mitigate land Mid-Term reports, degradation, Review, interviews CONAF and the which includes Completion with Project Unit biodiversity Report participants mainstreaming and leaders and protection of forest carbon assets. Reduced land F] Number 0.00 50,000 100,000 Mid-Term Project CONAF and the 16 degradation in 5 Review, reports, field Project Unit target areas Completion visits, M&E through the Report reports application of restoration and SLM Improved capacity to monitor impacts and results through the Mid-Term development of a Project CONAF and the decision support Yes/No No Yes R ei reports, field for Completion ' Project Unit system forReport visits effective SLM monitoring and early warning system for land degradation Increased management and coordination capacity for Mid-Term Project CNAanth mainstreaming Yes/No No Yes Review, reports CONAF and the SLM into the Completion visits Project Unit institutional Report architecture of the Ministry of Agriculture Intermediate Results Indicators Cumulative Target Values Data Source/ Responsibility for Unit of EndMehdlgDaaClcto Indicator Name Core Measure Baseline YR1 YR2 YR3 YR4 Et Frequency Methodology Data Collection Measure Target Assessment of Bi-annual Interim CONAF and the Li Yes/No No Yes existing MAG and periodic progress Project Unit 17 instruments that reports and promote technical ecosystem reports restoration and future services for their use in SLM. National-level F-1 Interim priority area Bi-annual progress CONAF and the network for Yes/No No Yes anu reports and Framework ~and periodic tcial Project Unit Framework technical determined. reports Eligibility criteria .ntr established for SLM activities to Bi-annual progress CONAF and the be funded through Yes/No No Yes and periodic reports Project Unit technical PoetUi a National Framework reports Interim Mainstreaming pors Yes Bi-annual progress CONAF and the Climate Change Yes/No No Yes reports and CrNAF andt Issues ~and periodic tcnal Project Unit Issues technical reports Mainstreaming Interim SLM into Bi-annual progress CONAF and the .Yes/No No Yesreotan Existing and periodic reports Project Unit technical PoetUi Instruments reports reports Interim progress CONAF, the Direct project Nubr 0Bi-annual reports and Number 0 2000 Banul rptsnd Project Unit and beneficiaries and periodic investment prot Untand recrds fildpilot area teams records, field inspections Percentage . CONAF, the Female Sub-Type 0 25 Bi-annual progress Project Unit and beneficiaries Supplementl and periodic reports and pilot area teams investment 18 records, field inspections n r Interim Strategic Plans for . u progress CONAF, the SLM for Pilot Number 0 5 5 reports and Project Unit and Areas and periodic Areas review of pilot area teams plans Degraded Areas Interim Identified and progress CONAF, the Categorized in 5 Number 0 5 5Bi-annual reports and Project Unit and and periodic investment Pilot areas (at the res,feld pilot area teams Strategic Level) ecos inspections Land area where Interim sustainable land progress CONAF, the mgt. practices Hectare(Ha) 0 100,000 Bi-annual reports and Project Unit and and periodic investment were adopted as a res,feld pilot area teams result of project iecos inspections Producer training events on best Interim CONAF, the practices for SLM Number 0 60 progress Project Unit and and periodic prog and biodiversity reports pilot area teams mainstreaming New areas outside Interim protected areas progress CONAF, the Bi-annual reports managed as Number 0 25,000 B' Project Unit and biodiversity- and periodic pilot area teams friendly (ha) strategic plans CONAF, the Amount of tons of 1Project Unit and CO2e sequestered . Monitoring pilot area teams, through project Number 0 347,111 system and CONAF's investments over reporting Biomass 5 years Monitoring Program 19 Interim progress CONAF, the Area restored or H H 3464 Bi-annual reports, project Unit and re/afforested and periodic review of the pilot area strategic teams plans Interim Forest area progress CONAF, the brought under Hectare(Ha) 0 57,250 Bi-annual reports, project Unit and management and periodic review of the pilot area plans strategic teams plans Interim CONAF, the Forest users Bi-annual project Unit and trained and periodic pores the pilot area reports tem teams Number Interim CONAF, the Forest users Bi-annual project Unit and trained - Female B-ea050and periodic pores the pilot area Breakdown reports teams Forest users .NCONAF, the trained - Ethnic umberBi-annual project Unit and Sub-Type 0 60 progress minority/indigeno and periodic prog the pilot area us peopleBreakdown reports teams National LInterim monitoring Bi-annual progress fniorSYes/No No Yes reports and CONAF and the system for SLM and periodic technical Project Unit designed reports Interim Bi-annual progress CONAF, the SLM Training Number 0 60 and periodic reports and Project Unit and training pilot area teams reports University-level Yes/No No Yes Bi-annual Interim CONAF and the course on SLM and periodic progress Project Unit 20 and biodiversity reports and mainstreaming training developed and reports taught Interim Public outreach Annual and progress CONAF, the Yes/No No Yes reports and Project Unit and media pilot area teams reviews 21 Annex 1: Results Framework and Monitoring Country: Chile Project Name: Sustainable Land Management Project (P085621) Results Framework Global Environmental Objective Indicators Indicator Name Description (indicator definition etc.) Development of an effective national framework to For purposes of the project, the National Framework for Sustainable Land mitigate land degradation, which includes biodiversity Management means the interlinked elements, including national programs, which mainstreaming and protection of forest carbon assets. support the objective of ameliorating land degradation and/or desertification. The framework would be flexible so as to add or remove elements to improve its function and efficiency over time or changing conditions. Reduced land degradation in 5 target areas through the Successful piloting of a collaborative SLM approach for reducing land degradation application of restoration and SLM demonstrated on apx. 100,000 ha through individual subprojects in 5 pilot areas. Improved capacity to monitor impacts and results Land degradation and sustainable land management monitoring system is on line and through the development of a decision support system for supporting decision making at the policy level. effective SLM monitoring and early warning system for land degradation Increased management and coordination capacity for Improved capacity for institutional mainstreaming of SLM along with improving mainstreaming SLM into the institutional architecture of cross-sector coordination, especially between CONAF, SAG, INDAP, MMA and local the Ministry of Agriculture governments, as demonstrated through applying SLM through existing and new instruments and programs in eligible areas, designing and implementing programs and replicating project activities. Intermediate Results Indicators Indicator Name Description (indicator definition etc.) Assessment of existing MAG instruments that promote A detailed assessment of existing MINAGRI rural development programs, among ecosystem restoration and future services for their use in others, in the context of their potential for supporting SLM, including their strengths SLM. and weaknesses, and recommendations for reforms National-level priority area network for Framework Classification of geographic locales nationwide for SLM purposes, based on their 22 determined. vulnerabilities and potential Eligibility criteria established for SLM activities to be Development, validation and refined eligibility criteria for participation in funded through a National Framework government-supported sustainable land management activities under the new framework approach Mainstreaming Climate Change Issues Climate Change mitigation and adaptation are incorporated into eligibility criteria for SLM activities Mainstreaming SLM into Existing Instruments Proposal for revised procedures for application to, and allocation of MINAGRI instruments for SLM. Direct project beneficiaries Direct beneficiaries are people or groups who directly derive benefits from an intervention .Please note that this indicator requires supplemental information. Supplemental Value: Female beneficiaries (percentage). Based on the assessment and definition of direct project beneficiaries, specify what proportion of the direct project beneficiaries are female. This indicator is calculated as a percentage. Female beneficiaries Based on the assessment and definition of direct project beneficiaries, specify what percentage of the beneficiaries are female. Strategic Plans for SLM for Pilot Areas Strategic plans for each of the five strategic pilot areas to promote holistic and long- term land-use planning at the landscape level, over around 1.7 million ha total. The plans will identify priority locales for SLM interventions (or intervention areas), land capability for both productive and conservation concerns, as well as environmental considerations, such as ecosystem connectivity, to promote a balanced and sustainable approach to rural development and land management. Degraded Areas Identified and Categorized in 5 Pilot Land degradation characterized by class and type in the 5 strategic pilot areas over a areas (at the Strategic Level) total area of apx. 1.7 million ha. Land area where sustainable land mgt. practices were This indicator measures the land area that as a result of the Bank project incorporated adopted as a result of project and/or improved sustainable land management practices. This indicator can track progress toward sustainability at farm scale and at landscape scales within agroecological zones, watersheds, or basins. The baseline value for this indicator is expected to be zero. Producer training events on best practices for SLM and Outreach, training, demonstration activities and awareness building (to inform biodiversity mainstreaming producers, communities and stakeholders about the project benefits and SLM techniques New areas outside protected areas managed as This indicator measures the number of terrestrial hectares outside protected areas 23 biodiversity-friendly (ha) where, as a result of the World Bank operation, the site is managed at least in part to obtain biodiversity gains. Amount of tons of CO2e sequestered through project Tons of CO2e sequestered through project investments in the forest sector as attributed investments over 5 years to afforestation, reforestation and improved management of forests Area restored or re/afforested This indicator measures the land area targeted by the Bank intervention that has been restored or reforested/ afforested. The baseline value is expected to be zero. Forest area brought under management plans This indicator measures the forest land area, which, as a result of Bank investments, has been brought under a management plan. This includes production and protection forests as well as other forests under sustainable management. The baseline value is expected to be zero. Forest users trained This measures the number of forest users and community members that have received capacity building through training as a result of the project. The baseline value is expected to be zero. Forest users trained - Female Core indicator. Forest users trained - Ethnic minority/indigenous people Core indicator. National monitoring system for SLM designed Design of a system to (i) identify environmental conditions which could lead to land degradation and desertification (and scenario modeling), (ii) identify and quantify advances in degradation and desertification, and (iii) measure impacts of mitigation efforts from the SLM activities. SLM Training Training events (national, regional and local agencies) to promote inter-sectoral coordination needed for SLM and biodiversity mainstreaming University-level course on SLM and biodiversity Curriculum development and teaching a university-level course on SLM for mainstreaming developed and taught professionals and technicians. Public outreach program Annual public outreach program for SLM and biodiversity mainstreaming underway through media, fairs, and public training events during each year of project 24 Annex 2: Detailed Project Description Chile: Sustainable Land Management 1. Component 1. National Sustainable Land Management Framework, Total US$ 4,869,221 (US $469,221, GEF). The component would support the development of a national framework approach for mainstreaming existing (and possibly new) programs to bring the full complement of government resources needed to achieve sustainable land management, climate change mitigation and biodiversity mainstreaming in rural areas. For purposes of the project, the National Framework for Sustainable Land Management means the interlinked elements, including national programs, which support the objective of ameliorating land degradation and/or desertification. The framework would be flexible so as to add or remove elements to improve its function and efficiency over time or changing conditions. 2. Activities under the component would inter alia aim to focus relevant existing programs for agriculture, ranching, forestry and the environment on SLM by harmonizing implementation between agencies and improving the articulation between programs, institutions and interactions with producers. The main programs for in-depth analysis include the Afforestation and Reforestation Program (Law no. 701), the Native Forest Restoration and Management Program (Law no. 20.283), the Land Management Program for Degraded Lands (Law no. 20.412, formerly DL No. 202, 2001), and the Conservation Districts Law (Law no. 18.378). Though others may also be included in the review. 3. The Afforestation and Reforestation Program supports all classes of landholders in tree planting and management (for example, thinning and pruning). The program also provides co- financing for small on-farm conservation works such as infiltration drainages, check dams, and terraces. The Native Forest Restoration and Management Program supports sustainable forest management, restoration and conservation in native forests. The Land Management Program for Degraded Lands supports measures for combating soil erosion and fertility loss on agricultural lands. The Conservation Districts Law in theory would serve as an instrument to help organize efforts for soil and water conservation, but has not yet been implemented. 4. In addition, the component would develop proposals for modifying or reforming existing programs, designing a new mechanism to fill gaps, and planning to support the long-term sustainability of land management activities, as well as economic concerns. To develop the architecture of the new SLM framework (which includes biodiversity mainstreaming), specific activities under component one include: (a) a detailed assessment of existing MINAGRI rural development programs, among others, in the context of their potential for supporting SLM, including their strengths and weaknesses, and recommendations for reforms; (b) evaluation and proposal for the use of Conservation Districts24 for organizing SLM actions across the country; (c) classifying geographic locales nationwide for SLM purposes, based on their vulnerabilities and potential; 24 For purposes of the project, conservation districts means a geographic unit that has been defined and delimited for the purposes of guiding land-use and conservation measures that support sustainable land management. 25 (d) design and proposal for a new SLM-focused mechanism for covering gaps in existing 25 government programs (e) develop, validate and refine eligibility criteria for participation in government-supported sustainable land management activities under the new framework approach; and (f) elaboration of a comprehensive national framework for SLM in Chile which incorporates reviews, analyses, and proposals from the component, and lessons learned from the pilot project experiences under component 2 and monitoring methodologies from Component 3. 5. Component 2. SLM Pilot Projects, Total US$ 39,112,015 (US $3,912,015, GEF). The National SLM framework approach will be piloted in four geographic regions that are globally and nationally recognized as priority areas for conservation, including (i) the Central Andean Dry Puna, (ii) the Chile Mattorral, (iii) the Winter Rainfall Forest - Valdivian Temperate Rainforest, and (iv) the Patagonian Andes Nothofagus forests and steppe. A total of five strategic pilot areas were identified during preparation, one in each of the ecological regions, except for the Chilean Mattoral, which has two sites. 6. A major aim of the component is to pilot a collaborative approach to provide added value to national programs for forestry, agriculture and ranching (as described in component 1), so as to focus them on SLM in apx. 100,000 ha through individual subprojects. In addition, the component will finance the development of strategic plans for each of the five strategic pilot areas, and provide training and technical assistance in SLM themes. Through improved forest management and protection, the project will increase carbon sequestration for climate-change mitigation. The work will be led by inter-disciplinary technical assistance teams26 (one for each pilot site) financed by the project. Experiences and lessons learned during implementation will provide feedback to the development of the national framework to be developed under Component 1. 7. Strategic Plans. Strategic plans for each of the five strategic pilot areas will be developed under the component to promote holistic and long-term land-use planning at the landscape level, over around 1.7 million ha total. The plans will identify priority locales for SLM interventions (or intervention areas), land capability for both productive and conservation concerns, as well as environmental considerations, such as ecosystem connectivity, to promote a balanced and sustainable approach to rural development and land management. 8. The development of a strategic plan in each strategic pilot area will be led by the project- financed technical assistance teams and developed as a broad vision for sustainable land management. The teams will organize a management committee in each strategic pilot area to include government agencies operating in the rural sector, communities, farmers and other stakeholders to provide input to the strategic plan and provide feedback to the project during implementation. In addition, inputs such as land cover and use, biodiversity hotspots, degradation status, physiography, climate, and threats, among others, will be used as elements to 25 GEF funds would be used only for the design of the instrument. No GEF funds would be used for its implementation. 26 Technical assistance teams may include agricultural and forestry engineers, biologists, geographers, sociologists and other technical specialists, as needed according to the needs and conditions in the strategic pilot area. 26 build the strategic plan. Ecosystem connectivity and mainstreaming of biodiversity protection in productive landscapes would be promoted through the establishment of conservation corridors27 The five strategic plans will include small-scale maps, GIS coverages and supporting documents. The plans are intended to be flexible and adaptable over time, and are non-binding. Summary Situation for Strategic Pilot Areas Project Parameters/Strategic Putre Combarbala Litueche Carahue - Puerto Coyhaique Pilot Areas Saavedra Strategic Pilot Area (ha) 590,250 225,750 61, 900 174,200 729,020 Forest Overgrazing, Severe erosion, Destructive agricultural Massive historical degradation, poor agricultural destructive practices, forest deforestation from wetland practices, agricultural degradation due to wildfires which destruction, unsustainable practices overlogging and reduced forest overgrazing by timber accompanied by fuelwood cutting, cover, destroyed Major Degradation Issues camelids, and extraction, loss of arable invasive species, habitats and drought invasive species, lands, forest wetland destruction, damaged soils. contribute to urbanization, degradation, and forest Overgrazing and desertification. drought and drought, fragmentation. poor agricultural desertification. desertification practices. Forest degradation from fuelwood cutting. Forest Carbon Sequestration through Project (tons of CO2e) 32,595 53,041 67,091 117,270 77,113 in 5 years 9. Subprojects. Sustainable land management will be carried out on around 100,000 ha through subprojects on individual or community landholdings in cooperation and agreement with producers in the five pilot areas. By participating in the project, beneficiaries will have access to a broad array of technical support not otherwise available, and benefit from the long- term planning of their holdings. Activities for subprojects are expected to follow the national programs. 10. In general, the steps for carrying out subprojects includes: 27 For purposes of the project, the term "conservation corridors" has been adopted, according to the guidelines provided in CBD Technical Note No. 23, as this corresponds closely with the project's objectives, and includes both conservation and sustainable development aspects. Characteristics of conservation corridors include the involvement of stakeholders, sustainable use, a wide geographical setting, connectivity between both protected and non-protected areas, and the incorporation of both ecological and social considerations in its design (IUCN. 2004. Memorias, Taller Regional, 3 a 5 Junio de 2004. Quito, Ecuador). 27 (a) Verification of the location and fit within the strategic plan and strategic pilot area (to identify priority locales for SLM and pilot projects within the strategic pilot areas according to technical criteria); (b) outreach, training, demonstration activities and awareness building (to inform producers, communities and stakeholders about the project benefits and SLM techniques); (c) agreement with interested landholders/communities to participate in the project; (d) design of subprojects through the development of farm-level plans or planes prediales (to plan SLM interventions on land holdings in participatory ways); (e) application and support to SLM investments through national programs according to the requirements of the design of the farm-level plans; (f) implementation of SLM by land holders; and (g) technical assistance to producers by the project for SLM and planning (through all stages of the process). 11. The GEF project will finance technical assistance to help beneficiaries with the design and implementation of subprojects and for best practices relative to SLM, limited goods (such as subsoiling plows, containers for seedlings, irrigation equipment, etc.), non-consulting services (for example for mapping) and incremental operating costs. (Producers who do not participate in the project would still have access to the government programs, but not necessarily the value- added aspects of the GEF.) Counterpart financing will cover on-the-ground investments through the existing national programs and associated operating costs. During implementation, experiences and lessons learned will provide feedback to the development of the national framework developed under Component 1. 12. To design the subprojects, the technical assistance team will work hand-in-hand with beneficiaries to analyze their own holding's potential, determine appropriate land uses and develop a long-term sustainable vision for their use in the form of a farm-level plan (or plan predial). Subproject design will be site specific to ensure the sustainable use of productive areas, remedial measures on degraded areas and to protect natural habitats. All planning will be participatory and respect landholders' perspectives. The strategic plans will help to identify priority locales for focusing the subprojects in more specific locales where impacts are expected to be greatest. Each plan predial will be comprehensive and consider productive, conservation and environmental concerns over the entire holding. (Though the full range of SLM practices will not necessarily be required in each holding.) Maps will be developed for each holding as an aid to planning and for monitoring purposes. 13. Technical assistance teams will liaise with agency counterparts to help connect beneficiaries to the appropriate national programs for agriculture, ranching and forestry, which will provide financing for the implementation of the SLM investments. By bringing together multiple agencies28 in planning and execution of sustainable land management, the collaborative approach ensures a multi-disciplinary effort through existing government programs. Once financial support has been secured through the national programs, the technical assistance teams will continue to work with producers and provide technical assistance for activities included in the plan. They will also liaise with government agencies to gamer their support when possible 28 Includes SAG, INDAP, CONAF, and MMA. As the project progresses, other programs will be sought to participate. 28 and necessary. In a few isolated cases, the GEF may operate without support for investments from national programs, for example for technical assistance for sustainable land management planning that would set the stage for investments at a later date. 14. Following an agreement in principal between a given producer (or community) and the project's technical assistance team, a participatory plan predial would be developed. The plan predial would inter alia consist of (i) a description of current land cover and use; (ii) the proposed sustainable land management activities; (iii) a map showing the spatial dimensions of the plan, (iv) a chronology for the implementation of the plan. The plan would incorporate best practices for sustainable land management and a description of the applicable project safeguards. To ensure that the plan is understood and agreed by both parties, and that it will be implemented in accordance with its terms, an agreement would be signed by the beneficiary and a representative of CONAF. Following signing of the agreement, the plan would be presented by the technical assistance team on behalf of the producer to the regional authorities in SAG, INDAP and CONAF for a technical review and compliance with applicable safeguards by the project safeguard's specialists. The plan may be approved, rejected or returned for modifications and resubmission. 15. Training. The GEF project will provide participating landholders with training in best practices for agriculture, forestry, ranching, and conservation in the context of sustainable land management through workshops, dids del campo and informal encounters in the field. Demonstration activities in each strategic pilot area will illustrate planning concepts and best management practices to producers through on-the-ground models of SLM practices. Promotion, outreach and education activities will be carried out to educate local producers on the benefits of the program and SLM, including biodiversity mainstreaming. Counterpart financing from MMA programs will provide training in environmental management themes. 16. During preparation, formal agreements were reached between CONAF, SAG, INDAP and MMA to participate cooperatively in the application of their programs in the pilot areas for project purposes, mainly for strategic planning, farm-level investments and training from MMA. Articulation of National Programs and GEF Project Interventions. Soil conservation practices including, inter alia, terraces, contour plowing, subsoiling, use of crop residues, water barriers, SAG and INDAP -- Land Management Program for infiltration and diversion ditches, fertilization and mineral Degraded Lands (Law no. 20.412) supplements, establishing and protecting vegetative cover, removal of physical barriers to soils, grassland protection, and management of "espinales". Forestry practices including, inter alia, tree planting and CONAF -- Afforestation and Reforestation Program plantation management (thinning and pruning), infiltration (Law no. 701) drainages, check dams, and terraces. 29 Forestry practices in native forest formations, including, inter alia, silvicultural practices to stimulate natural regeneration, CONAF -- Native Forest Restoration and Management thinnings and prunings, protection of forests with fences, Program (Law no. 20.283) firebreaks, enrichment plantings with natives, removal of exotics, re-establishment of native forest cover, and trails for environmental education or control. Environmental education and training in environmental management themes MMA -- Fund for Environmental Protection, National System for Environmental Certification and the Local Environmental Management Program 17. Component 3. SLM Monitoring and Evaluation System, Total US$ 9,591,600 (US $541,600, GEF). The main objective of the land degradation and sustainable land management monitoring system is to develop a decision support system for policy makers. The system would be to (i) identify environmental conditions which could lead to land degradation and desertification (and scenario modeling), (ii) identify and quantify advances in degradation and desertification, and (iii) measure impacts of mitigation efforts from the SLM activities. Parameters such as change in carbon stocks and habitats for biodiversity would also be included. The component will also monitor and evaluate impacts in the five strategic pilot areas for project purposes, as well as to validate and provide feedback to the system required for scaling up to the national level. Forest degradation detection and monitoring in the context of land degradation and sustainable management, will be a unique feature of the system, compared to other monitoring efforts around the world, which mainly focus on forest cover and deforestation. 18. The design of the system would be national, while the geographic scope for implementation would focus on the strategic pilot areas during the project's tenure. During preparation a number of independent and specific monitoring efforts were identified that could provide inputs to the project's SLM monitoring system. Rather than duplicate existing efforts, it was determined that a system that integrated and complemented ongoing monitoring programs would be more effective and cost efficient. In addition to generating unique information needed for SLM monitoring, the system will compile and analyze data presently available or programmed from other Chilean efforts within CONAF, MINAGRI, CIREN, and other national and international agencies, integrated with field checks. 19. One of the many barriers to building a robust information system with different data sources is to ensure they are compatible, and that their attributes are known. To overcome this challenge, during preparation, CONAF began working with MINAGRI's Center for Information on Natural Resources (CIREN) to develop a common spatial database infrastructure. CONAF now has a fulltime staff member assigned to CIREN that will provide the link for the project, as well as other CONAF initiatives. 20. CONAF already manages the National Land Cover Monitoring Program (Catastro Forestal) and the National Biomass monitoring system (Proyecto de Dendroenergia y Carbono), which will provide critical information for the SLM monitoring. New data layers will be provided from the field efforts in the strategic pilot areas, such as strategic and farm plans. The 30 project will explore linkages with the new MAPS Chile Programme29, which may provide information on climate change. In addition, in 2012, Chile ratified an agreement to participate in the Forest Carbon Partnership Program with the World Bank, which will contribute to improvements in the design of forest-carbon monitoring efforts already underway with CONAF. 21. Updated satellite imagery from the new Chilean earth observation satellite (EOS), Sistema Satelital de Observaci6n Terrestre (SSOT) or FASat-Charlie, will be provided under an agreement between CONAF and the Chilean Aerial Photogrammetric Service, Servicios Aereo Fotogrametrico (SAF). The new imagery is available at 1.4m resolution (panchromatic) and 5.7m (color infrared). The spatial and spectral resolution makes it uniquely suited for the project purposes, more so than any other EOS imagery currently available. The satellite was launched in December 2011 and is now beginning to provide imagery to CONAF for their national forest cadastre program. In addition to the imagery and collateral data provided through inter- institutional agreements, subprojects will provide the strategic and on-farm plans in spatial digital format for uploading into the system, field verification, and assistance in developing protocols for data collection on the ground, quality control, and feedback for improvements. Other potential data sources for the system for climate and rainfall, erosion, infrastructure, and agricultural production were identified during preparation and will be made available for project use from a wide range of sources. Illustrative list of data sources for the monitoring system. Data Type Responsible Organization Website Rainfall, temperature, evapotranspiration and other climate data Infrastructure, transportation network, general Maustry_offiria_ce_http_//www.i_ne.cl cartography and related data Ministry of Defense http://www.igm.cl/ NationalGovt.'ofChile http://www.sn itcl Soil and erosion data Association of Rural Producers htt://www schs I Agricultural production, forestry and forests II ,http://www.odep .ob.cl/sp/i nfodepalin Minisry ofAgriclturefod*- .. -s-isesini=242EE1ED4FCDB Ministry of Agriculture http://www.redarochile.cl/ High-resolution satellite imagery Straegi andon-arm lan forsusainale andInformation to be developed from year one Strategic and on-farm plans for sustainable land CONAF PIU and pilot project teams through project closure and archived in the management, land-cover and -use monitoring project's monitoring system and field offices. 29 Mitigation Action Plans and Scenarios (MAPS) supports collaboration with developing countries to establish the evidence base for long term transition to robust economies that are carbon efficient. In this way MAPS contributes to climate change mitigation that aligns economic development with poverty alleviation. MAPS is funded by the Swiss Agency for Development and Cooperation (SDC). The agreement was formalized with Chile on June 28, 2012. (http://www.mapsprogramme.org/) and (www.mapschile.cl). 31 22. Activities for Component 3 include: (a) Conceptual design of the monitoring system including a user needs analysis and technology requirement study; (b) Hardware and software including connections, installation and debugging; (c) Data procurement, archiving and retrieval system, and formatting; (d) Development of operational manuals; (e) National monitoring system designed and fully operational in 5 strategic pilot areas; (f) Experts for system design, installation and operation; (g) Detection and analysis of changes and project impacts relative to land degradation and sustainable land management in the 5 project areas; (h) Project indicator monitoring and GEF tracking tools for biodiversity, SLM and climate change; (i) Website with project results and access to monitoring products; and () Associated operational costs 23. Component 4. Institutional Capacity Building, Total US$ 5,413,000 (US $463,000, GEF). This component would strengthen capacities for institutional mainstreaming of SLM along with improving cross-sector coordination, especially between CONAF, SAG, INDAP, MMA and local governments. Institutional strengthening will aim to improve capacities for applying SLM through existing and new instruments and programs in eligible areas, designing and implementing programs and replicating project activities. A wide range of stakeholders in the public sector and private extension services would be included in the training A national- level public outreach and awareness building through various media is included, as well as an international event to highlight the project's outcomes and lessons learned. 24. Activities under this component include (a) development of inter-sectoral coordination mechanisms to support the new SLM framework to encourage the participation of strategic stakeholders; (b) training and workshops to improve the capacity for management of SLM activities, including biodiversity mainstreaming (for professionals, technicians, extension agents and local governments); (c) design and development of outreach activities for disseminating information on SLM to replicate project activities; (d) development and teaching a university-level course on SLM; (e) an international seminar on SLM (in Chile); (f) specialized activities for communication, outreach and public awareness building for SLM; and (g) operating costs for coordination of capacity-building and public outreach activities covered under the component. 32 Component 5. Project Management, Total US$ 4,877,800 (US $477,800, GEF) 25. Component 5 provides the technical and fiduciary support elements to ensure efficient execution of the project through administration, reporting, auditing and coordination. The central project management unit in Santiago will provide the support and strategic direction to the five field units in the strategic pilot areas, gather and compile information for reporting purposes, and ensure a close coordination with CONAF, AGCI, SAG, INDAP and MMA. Information from the monitoring and evaluation carried out under component 3 will be screened and compiled for indicator reporting and GEF tracking tools. (a) Consultancies for project administration and technical support (b) Annual audits, mid-term and final reports, World Bank and GEF reporting (c) Procurement and financial management (d) Office rental and office and technical equipment (e) Operating costs to support the project (including travel costs for project personnel) 33 Annex 3: Implementation Arrangements Chile: Sustainable Land Management Project Institutional and Implementation Arrangements 1. AGCI is both the recipient and the financial administrator for the grant, and is responsible for undertaking the financial management functions of the project including budgeting, accounting and financial reporting, internal control, disbursements and documenting expenditures to the Bank and external auditing arrangements. CONAF will be responsible for project execution and procurement and share responsibilities for financial management with AGCI. A subsidiary agreement between CONAF and AGCI, acceptable to the Bank, provides the description of responsibilities for the two agencies. 2. A national-level advisory group composed of representatives from SAG, INDAP, MMA, and other stakeholders will work with CONAF at the national level and provide guidance to agency personnel at the regional level (i.e. in the strategic pilot areas) in matters related to cooperation in the project. A project implementation unit (PIU) will be established within CONAF and will be responsible for the management, coordination, supervision, and monitoring of project activities. In addition it will work with AGCI on the financial management functions of the project and ensuring compliance with the Project's Environmental and Social Management Framework and World Bank safeguard policies. The team will include a national technical coordinator as well as financial management, procurement, legal, communications and administrative functions. 3. Day-to-day technical implementation will be managed by the technical coordinator in CONAF's central office in Santiago. A technical coordinator in each of the five strategic pilot areas will supervise a multi-disciplinary technical assistance team financed by the project. The teams will be responsible for technical assistance to producers, communities and agency representatives in the formulation and development of strategic and farm-level SLM plans, stakeholder coordination and other project activities in the field. They will also conduct training for capacity building and monitoring of the activities on SLM, climate change and conservation. Team composition will vary somewhat according to the specific needs at each site, and over time. However, the range of disciplines expected to be represented includes foresters, agronomists, veterinarians, sociologists, geographers, and conservation biologists, among others. 4. Representatives from CONAF, SAG, INDAP, and MMA, will participate in management committees, to be formed within each strategic pilot area. The committees, which are advisory in nature, will work with the project financed technical assistance teams to provide input for the strategic plans and feedback and guidance to the project during implementation. The regional head of MINAGRI will chair the committees. To ensure broad participation, the committees will include other stakeholders, such as representatives of other government agencies, local city councils, indigenous peoples' groups, rural associations (non-indigenous), representatives of landowner families, and other public and private stakeholders, depending on the local situation. 34 5. On July 1, 2012, separate MOUs to support inter-agency cooperation in the GEF project between CONAF SAG, MMA, and INDAP were authorized. Subsequently, on August 14, 2012, the Minister of Agriculture formally informed MINAGRI's regional representatives (SEREMIs) about the project and instructed them to cooperate in project activities. Overview of Institutional Arrangements for Project Implementation AGCI R R CONAF R R R R MINAGRI P SAG P INDAP P MMIA P Other Stakeholders P R (responsible) and P (participates) Financial Management, Disbursements and Procurement Financial Management and Disbursements 6. As part of project preparation, a Financial Management Assessment (FMA) was carried out to evaluate adequacy of the proposed financial management arrangements for the implementation of the GEF Sustainable Land Management Project. 7. As stated in section IV of the PAD, project implementation will be under the National Forestry Corporation (CONAF), as project executing unit, and Agency for International Cooperation (AGCI), as project financial administrator. Under those arrangements, financial management responsibilities will be split between both entities, thus close coordination during project operation will be critical to avoid not only difficulties to provide timely and reliable information, but also to avoid delays in project implementation. Both CONAF and AGCI are well-established entities that have developed expertise in IDB and EU financed projects; therefore, existing financial management arrangements will be followed, complementing or strengthening them only when needed in order to attend project specific demands. Based on DIPRES's approval of the proposed implementation arrangements, project transactions will not be included in the national budget as neither CONAF's or AGCI's approved budget can be increased. However, project transactions will be processed and accounted for in SIGFE following the "Administraci6n de Fondos de Terceros" mechanism. For project purposes, 35 CONAF's and AGCI's Management and Finance Units will be strengthened by the contracting of experienced financial management specialist under each institution. 8. Based on the information available, the FM risk is considered moderate, mainly because: i) project design requires interaction with several actors which demands for a close coordination to avoid delays in project implementation; ii) none of the two implementing entities is familiar with Bank policies and procedures; and (iii) responsibility for financial management tasks is split between CONAF and AGCI, and it will therefore require adequate coordination to ensure adequate operation of those arrangements, including the provision of timely and reliable information. Additionally, project designs require that some activities are carried out by CONAF's regional offices. 9. On the basis of the review performed, actions taken by AGCI and CONAF, along with the pending requirement for the recruitment of the financial management specialists under AGCI (part-time) and CONAF (full time), to be monitored before project implementation, the Bank's FM team concludes that proposed financial management arrangements are acceptable to the Bank. Summary of Financial Management Arrangements 10. Organization and Staffing. Financial management tasks will be split between CONAF and AGCI. To this end, specific functions are being assigned to each entity, as follows; CONAF, as project executing entity, would be in charge of (i) preparing project's budget and operational annual plan; (ii) managing a local currency bank account where funds transferred by AGCI would be deposited; (iii) managing procurement and contracting processes; (iv) processing and recording project transactions in SIGFE, v) controlling and monitoring project implementation; and (v) preparing financial reports on the use of the funds received from AGCI. AGCI would be responsible for: (i) managing the Designated Account and a local currency account from which advances of funds to CONAF will be made; (ii) preparing and submitting withdrawal requests; (iii) reviewing documentation provided by CONAF to record project expenditures at an aggregated level; (iv) preparing project financial statements; and (v) coordinating audit reviews. 11. Both, AGCI and CONAF have well-established financial units staffed with experienced and qualified staff, who are in charge of accounting, budgeting and treasury functions. For project purposes, those teams will be strengthened with two Financial Management Specialists, one full-time for CONAF and one part-time for AGCI, under ToRs approved by the Bank, to be financed out of grant proceeds. Main duties and responsibilities are being specified in the Operational Manual. 12. Programming and Budgeting. As project executing unit, CONAF, will be responsible for: (i) budget preparation and execution; (ii) preparation of annual operation program (AOP); and (iii) procurement plan, all of them to be reviewed by the Bank, and which will be used for monitoring purposes. As stated in the communication issued by Direcci6n de Presupuestos - DIPRES in relation to project implementation arrangements, no additional expenditures are expected under either AGCI's or CONAF's approved budget; therefore, project transactions will 36 not be incorporated under either of the entity's budget, and instead they will be only controlled and recorded following the "Administraci6n de Fondos de Terceros" mechanism. 13. Accounting Policies and Information System. The regulatory FM framework in Chile includes: (i) the Ley Organica de la Administraci6n Financiera del Estado, Decreto ley No 1263 de 1975; (ii) Accounting procedures manual for the Public Sector (Manual de Procedimientos Contables) issued by the Supreme Audit Institution (CGR); (iii) the annual Law of the General Budget of the State; and (iv) the Ministry of Finance regulations and manuals. 14. Within such framework, project transactions (payments made by CONAF) will be accounted for in SIGFE (national government's integrated financial management system) under account Administraci6n de Fondos de Terceros. The use of SIGFE will be complemented by Excel records to record project transactions by cost category (and subproject, as needed). Excel records will be used by CONAF to prepare monthly financial reports in the format and content described below. 15. Financial reports submitted by CONAF, would also be used by AGCI to record and control advances made to and documented by CONAF in AGCI's institutional project information system. 16. Processes and procedures (including Internal Controls). AGCI and CONAF have to comply with local requirements related to financial management, including internal controls and internal procedures to adequately control, record, carry out of payments and generate timely information. The project will benefit from the use of accounting procedures manual for the Public Sector, in particular Resolution 759, which defines main accounting and reporting procedures for the administration of resources provided by a third party (Administraci6n de Fondos de Terceros). Within those approved procedures, roles and responsibilities, funds flow arrangements and reporting arrangements between AGCI and CONAF have been reviewed and agreed, and are reflected in the Simplified Operational Manual. 17. Financial Reporting and Monitoring. Considering above section of accounting and information system, AGCI would be main responsible for preparing project financial statements (including Interim Financial Reports). Project financial reports will be prepared on the basis of Excel records and information -on project expenditures- provided by CONAF. Specific financial reporting arrangements include: 18. Financial reporting between CONAF and AGCI will be based on Resolution 759 (Accounting procedures manual for the Public Sector issued by the Supreme Audit Institution of Chile). CONAF would send to AGCI -on a monthly basis and no later than eight working days after the end of each month- the following information to document advances received: (i) monthly reconciliation of amount received, expenditures paid and cash balances; and (ii) detailed report on expenditures by main disbursement category. These reports will be also used as a Customized SOE for disbursement purposes as agreed with AGCI and CONAF. 19. Project-Interim financial reports (IFRs) will be prepared by AGCI on the basis of monthly reports submitted by CONAF. IFRs will only include grant proceeds and will be 37 prepared in local currency and U.S dollars and submitted to the Bank on a semi-annual basis, but no later than 45 days after the end of each calendar semester. They will include: i) a statement of sources (funds disbursed by the Bank) and uses of funds (expenditures paid and documented by CONAF), reconciling items (advances made to CONAF not yet documented) and cash balances; (ii) statement of cumulative investments; (iii) designated account reconciliation; and (iv) explanatory notes to the financial statements. The core content of the reports has been agreed with AGCI and CONAF. 20. Annualfinancial statements for the project (with the content and format described above) would be prepared by AGCI to be audited, as specified below. 21. Audit Arrangements. Annual audit reports on the Project financial statements, including management letter, would be submitted to the Bank within six months of the end of the Borrower's fiscal year. The audit will be conducted by the Supreme Audit Institution of Chile (CGR) in accordance with International Standards on Auditing (ISAs) issued by the International Federation of Accountants (IFAC) and the audit will include visits to AGCI and CONAF. If due to any unforeseeable circumstances, where CGR is not able to perform the audit of the project, an independent private auditor -acceptable to the Bank- may be hired. Under these circumstances audit terms of reference will require Bank's no objection and audit costs will be financed out of grant proceeds. The scope of the audit would be defined by the project in agreement with the Bank. Audit requirements would include the following: Table 1: Audit report Audit Report Due date Project financial statements June 30 Management Letter June 30 22. Funds Flow and Disbursement Arrangements. The Bank will disburse grant proceeds using the disbursement methods of reimbursement, advance and direct payment. Under the advance method, a Designated Account (in US Dollars) will be opened and maintained in the Banco Estado by AGCI. Funds deposited into the DA as advances, will follow Bank's disbursement policies and procedures -as described in the Disbursement Letter-. AGCI will also open a local currency bank account in pesos at Banco Estado, where funds withdrew from the DA will be deposited and subsequently transferred to a second operating bank account to be opened in local currency in the Banco Estado by CONAF to exclusively make payments under the project. Payments will be made by CONAF central office; however, the nature of some project activities may require that under special circumstances some operational expenditures - eligible under the project-, may eventually need to be made directly by CONAF's regional offices. For those cases, it has been agreed, that upon submitting the supporting documentation, Regional Office would receive a reimbursement from CONAF's central office. 23. Funds flow arrangements under CONAF will be detailed in the Operational Manual, as well as CONAF's obligation to maintain records evidencing eligible expenditures, copies of receipts and supplier invoices, etc of the project for ex-post reviews from the Bank and external auditors. 38 24. Partial advances may be made to the DA as long as the aggregate amount advanced does not exceed the ceiling of US$500,000. It has been proposed and agreed that financial reports prepared by CONAF on expenditures made under each cost category be also used as a customized Statements of Expenditure (SOEs) to support withdrawal requests. 25. Retroactive Financing would be available for payments made prior to the date of the Grant Agreement (12 months before this date), the project has to assure that payments have been procured in accordance with applicable Bank procurement procedures; and such payments do not exceed 20 percent of the grant amount. 26. Grant proceeds would be disbursed against the following expenditures categories: Table of Grant Proceeds Category Amount of the Grant Percentage of Allocated Expenditures to be (expressed in US dollars) financed (inclusive of taxes) Goods, training, consulting services, non- 1,951,621 100% consulting services and operational costs under Part 1, 3, 4 and 5 of the Project. Goods, consulting services, non-consulting 3,912,015 100% services, operational costs under Part 2 of the Project. TOTAL AMOUNT 5,863,636 27. Implementation support Plan. Financial Management implementation support would include on-site and off-site implementation support. On site implementation support missions will be carried twice a year to the extent possible, to review project implementation. Off-site implementation support will comprise desk reviews of interim financial reports and audited financial statements. Procurement 28. As part of the preparation process of the Chile Sustainable Land Management Project, an assessment of the procurement capacity of CONAF and AGCI was carried out by the team, to address all risks. The overall project risk for procurement is low. 29. General. Procurement for the proposed project will be carried out in accordance with the World Bank's "Guidelines: Procurement of goods, works, and non-consultant services under IBRD Loans and IDA Credits and Grants" dated January 2011, and "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011, and the provisions stipulated in the Grant Agreement. 30. The various items under different expenditure categories are described below. For each contract to be financed by the grant, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and 39 timeframe, are agreed between the Recipient and the World Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 31. An Operational Manual for the project has been prepared, and includes further details on the procurement processes and arrangements. 32. Procurement of Works. No procurement of civil works is expected under the project. 33. Procurement of Goods and Non Consulting services. A few purchases of goods and non-consulting services are expected; Framework Agreements (FA) - "Mercado Publico" of ChileCompra will be used for the procurement of goods and non-consultant services as an alternative to shopping and NCB methods for (a) goods that can procure off-the-shelf, or are of common use with standard specifications and (b) non-consulting services that are of a simple and non-complex nature. Alternatively, CONAF will use procurement processes as defined by the "Guidelines: Procurement of Goods, Works and Non-Consulting Services by World Bank Borrowers" of January 2011. 34. Selection of Consultants. consultant services under this project will include consultant services for design, studies, impact assessments, monitoring and evaluation tools, program developments. Most pilot projects, under Component 2, will be designed through the contracting of consultant services. Most contracts will be procured using ChileCompra, which was recognized as a valid method of contracting consultant services; this option will be available up to a threshold determined in the Grant Agreement. Alternatively, CONAF will use procurement processes as defined by the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers". 35. Selection of Individual Consultant Services. Several Individual consultant services will be contracted for specific tasks that could not be carried out by a firm. The selection of these individuals will be procured in accordance with section V "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" of January 2011. 36. Training. Training would include expenditures (other than those for consultants' services) incurred by the Borrower to finance logistics for workshops, meetings, and seminars, and reasonable transportation costs and per diem of trainees and trainers (if applicable), training registration fees, and rental of training facilities and equipment. 37. Operating Costs. The project will finance expenses for project administration. These expenses will include major project operating costs, including staffing and procuring hardware and software. These operating costs will be procured through ChileCompra for small expenditures. Procurement Plan 38. In general, the Procurement Plan shall set forth those contracts which shall be subject to the Bank's Prior Review. All other contracts shall be subject to Post Review by the Bank, except 40 for those contracts terminated by the recipient's agency for which the recipient shall seek the Bank's no objection prior to the proposed termination. An 18-month procurement plan for the project was approved by the Bank on March 14, 2013, and includes the consultants, goods, and non-consultant services required for the project during the first year and a half of the project's tenure. 39. Prior Review Threshold. Procurement Decisions subject to Prior Review by the Bank as stated in Appendix 1 to the "Guidelines: Procurement of Goods, Works and Non-Consulting Services by World Bank Borrowers" and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers": Thresholds for procurement methods and prior review (thousands of USD) Contract Category Contract Value (Thresholds) Procurement Method Contracts Subject US $ thousands to Prior Review 1. Non-consulting Services >350 ICB All 100-350 NCB or FA* First <100 Shopping or FA* First Regardless of value DC All 2. Goods >350 ICB All 100-350 NCB or FA* First <100 Shopping or FA* First Regardless of value DC All 3. Consulting Services Firms >=300 QCBS, QBS, FBS, LCS All QCBS, QBS, FBS, LCS, First contract of <300 CQS, CCompra** each procurement Regardless of value SSS All >=50 or First (only Individuals 3CVs TORs) 41 SSS All (only TORs) Note: ICB = International Competitive Bidding NCB = National Competitive Bidding FA: Framework Agreement DC = Direct Contracting *Mercado Publico of ChileCompra QCBS = Quality- and Cost Based Selection QBS = Quality-Based Selection FBS = Fixed Budget Selection LCS = Least-Cost Selection CQS = Consultants' Qualifications Selection SSS = Single-Source Selection **CCompra: ChileCompra Frequency of Procurement Implementation Support 40. In addition to the prior review implementation support to be carried out by Bank offices, the capacity assessment of CONAF has recommended one full annual procurement implementation support mission, including field visits, post-reviews of procurement actions. 41. A ratio of 1:10 contracts will be post-reviewed by the Bank. Based on the finding of the Procurement Post Reviews (PPRs) and the proposed ratings, the Bank may determine the revision of the prior review requirements. Special Procurement Conditions 42. The following special conditions would apply to the procurement of: a. Goods and Non-Consulting Services: "Mercado Publico" of ChileCompra may be used as an alternative to National Competitive Bidding or Shopping, as this procedure has been deemed acceptable by the Bank. b. Consulting Services: contracts estimated to cost below US$ 300,000 equivalent, the procedures of ChileCompra may be followed as a form, acceptable to the Bank; the call for expression of interest and award of contracts for consulting services costing US$ 300,000 equivalent or more, and which are selected following the procedures set forth in the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers", shall be published in the ChileCompra portal. 42 Details of the Procurement Arrangements Involving International Competition Goods, Works, and Non Consulting Services 43. ICB contracts for goods and Non-Consulting Services estimated to cost above US$ 350,000 per contract and all direct contracting will be subject to prior review by the Bank. Direct Contracting regardless of the amount, will be subject to prior review by the Bank, as well as the first contract of each procurement method used under the Project. Consulting Services 44. Consultancy services estimated to cost above US$ 300,000 per contract and all single source selection of consultants (firms) will be subject to prior review by the Bank, as well as the first contract of each procurement method used under the Project. Individual consultants services to cost US$ 50,000 or above per contract or single source, regardless of the amount, will be subject to prior review by the Bank, as well as the first contract. 45. Shortlists composed entirely of national consultants: Shortlists of consultants for services estimated to cost less than US$ 500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Environmental and Social (including safeguards) 46. The Borrower has prepared an environmental assessment (EA) for Component 2 (SLM Pilot Projects). The impact of the project on the environment is expected to be overwhelmingly positive given the nature of the investments on sustainable land management, biodiversity conservation and climate change mitigation. Some limited minor risks do exist, primarily related to potential impacts from agricultural and forestry practices in strategic pilot areas. Provisions for avoiding these impacts have been made in the design and the project team will guide investments to be compatible with conservation and sustainable land management concepts. Because field teams will be employed fulltime in the project sites and CONAF has offices in each area, deviations from the design would be detected and corrected quickly. Moreover, CONAF has an excellent record of environmental and social compliance, and hosts the government's principal unit charged with conducting Environmental Impact Assessments (EIAs) for all activities that may affect the country's natural resources. Based on the type of activities that it could finance, the Project triggers the following environmental safeguard policies: Environmental Assessment (OP/BP/GP 4.01), Natural Habitats (OP/BP 4.04), Pest Management (OP 4.09), Physical Cultural Resources (OP/BP 4.11), and Forests (OP/BP 4.36). 47. CONAF has a well-staffed environmental assessment capacity within the institution and a dedicated unit, which is well-trained in sustainable forest management principals and in environmental assessments for a range of impacts in the rural sector. Most of Chile's productive forestry activities conform to Bank-acceptable guidelines for certification, either through CERTFOR or FSC. Environmental policies for rural programs require that natural forests remain intact and environmentally sensitive areas are not planted. Inspections are required by CONAF 43 and compliance is uniformly high by producers. Certified timber and fiber originating from Chile provides an important value-added in their international marketing strategy and environmental compliance is taken very seriously. 48. As an added safeguard, an environmental management framework (EMF) was prepared and defines mitigation measures and to ensure compliance with Bank standards and operational policies. The Environmental Assessment and its EMF were placed on the client's website on November 12, 2012; cleared by the team's environmental specialist on December 5, 2012; and submitted to the infoshop on January 23, 2013. 49. During preparation, CONAF conducted a comprehensive Social Assessment (SA) to (i) identify and provide the socio-economic profile of indigenous peoples as well as other beneficiaries at the pilot area levels; (ii) provide an overview of the existing rural development programs, their gaps and issues of access by communities and forest producers; (iii) review CONAF's past and ongoing experiences in leading participation and consultation processes, specifically with indigenous peoples; (iv) analyze formal as well as informal institutions in the project areas; (v) provide a detailed stakeholder analysis; (vi) evaluate the available grievance mechanisms for project beneficiaries; and (vii) identify potential risks and positive impacts from the project and proposals for their mitigation. The assessment also included information dissemination, participation and a consultation framework throughout the project areas that included non-indigenous beneficiaries. The Social Assessment provides recommendations for a structured consultation and participation framework and process for non-indigenous beneficiaries. 50. Beneficiaries include non-indigenous producers and indigenous peoples. The indigenous peoples' communities are located in the strategic pilot areas of Putre and Carahue-Puerto Saavedra. Non-indigenous small- and medium-level producers are found in the strategic pilot areas of Litueche and Coyhaique. Agricultural communities (comunidades agricolas) as defined by the Law of Agricultural Communities (Ley de Comunidades Agricolas) are located in the pilot area of Combarbald. The SA indicated a lack of access to credit or financial capital as barriers for small holders to participate in CONAF's forestry programs, especially when up front investments are required. Secure land title can also be a barrier in some situations, especially among indigenous people. In order to access the programs, potential beneficiaries need to demonstrate land ownership, or the legal right to use the land. 51. The Project triggers the following social safeguards: Indigenous Peoples (OP/BP 4.10) and Involuntary Resettlement (OP/BP 4.12). Indigenous peoples are present in two strategic pilot areas of Carahue-Puerto Saavedra and Putre. Given the demand-driven nature of the subprojects, specific activities at each locale will be identified in concert with beneficiaries during implementation. To address this situation, CONAF prepared two Indigenous Peoples Planning Frameworks (IPPF) for each of the strategic pilot areas of Putre and for Carahue-Puerto Saavedra laying out the information and consultation processes that are culturally appropriate along with the specific measures to assess and address particular issues pertaining to indigenous peoples based on the requested demand-driven activities. The IPPFs include site-specific participatory methodologies of MAIA (Modelo Ambiental Intercultural Andino) for the area of Putre and MOFIM (Modelo Forestal Intercultural Mapuche) for the area of Carahue-Puerto 44 Saavedra that incorporate traditional and cultural components as well as aspects of territory, natural resources and socio-economic factors particular to the indigenous peoples communities for land use planning. The MAIA and MOFIM methodologies were developed by CONAF in consultation with the communities and will guide the subsequent preparation of the Indigenous Peoples Plan (IPP). 52. The project does not include physical involuntary resettlement nor land acquisition. The pilot area of Putre includes the Lauca Biosphere Reserve which is composed of (i) the Lauca National Park, (ii) the Las Vicuhas National Reserve and (iii) _the Natural Monument of Salar Surire. The elements of the Process Framework are integrated in the Indigenous Peoples Planning Framework (IPPF) for the pilot area of Putre in order to address any potential restrictions of access and provide alternative sustainable livelihoods of indigenous peoples communities, in the unlikely event they should occur. 53. Meetings and workshops were carried in each of the 5 strategic pilot areas with indigenous peoples, rural communities, small- and medium-level producers. The objectives of the workshops were to present and inform potential beneficiaries about the project, receive their inputs and feedback, and integrate their perspectives in the project design (ref. PAD Annex 3 and the Social Assessment). The Social Assessment, Indigenous Peoples Planning Frameworks for Putre and Carahue-Puerto Saavedra are publically disclosed in Chile on January 2, 2013, through CONAF's website, and cleared by the team's social specialist on January 7, 2013. The instruments have also been disclosed at the Bank's Infoshop on January 14, 2013. Summary of Stakeholder Meetings Pilot Area Name of Date Key Observations and Comments from Stakeholders Comuna Putre Putre June 2012 * Request to work together to define the specific actions in the territory. * Work under the standard of ILO Convention 169 with respect to the Aymara Indigenous Peoples * There is no objection regarding the preparation of the Project. * Request for a protocole of broad information dissemination that is permanent and constant * Request for informed consultation process * Request for finding alternatives to facilitate and eliminate the obstacles and barriers with respect to government programs. CombarbalU CombarbalU June 2012 * Stakeholders overall are in accordance with the preparation of the Project. * Request to consider the Development Plan of the Agricultural Community and the Policy for Rural Development. * Request to be part of the Committee for Local Management. * Explanation of the existing government programs and how they are proposed to be focalized in the terrain. Litueche Litueche June 2012 45 * Important to take into account the small forest producers and communities * Suggestion to include the Municipality as part of the process Carahue Puerto Puerto Saavedra and Jaur Saavedra Carahue * Discussion on the participatory methodology during project implementation. * There was a previous project (not from CONAF) that did not respect the traditional territorial organization of indigenous peoples. The project worked in modules separating communities and grouping them into families of other sectors. * Inventive programs from INDAP work at the household or individual level, and not with the entire community. * There is lack of water resources. The small landowners need support to access water resources for consumption and for productive activities. * A large number of families need to finalize their land demarcations and are unable to access the government programs offered by the State as a result. * Consultations need to be carried out in a culturally adequate manner, respecting their time, customs and processes. * There shouldn't be any exotic plantations such as pines and eucalyptus. Carahue Puerto Puerto Saavedra (June 26, 2012) Puerto Saavedra and June 2012 Saavedra Carahue Carahue (June 28, 2012) * The entire Area around the Borde Lake need to be included as part of the pilot Area given that other non-indigenous small size forest producers need to be included. * Native species should be incorporated and not exotics (pine and eucalyptus) as they deteriorate the land. * Include the cultural and social components as part of the Project planning in order to strengthen the identity of indigenous peoples communities. * Request to have the assistance and support from CONADI, with respect to their knowledge regarding land tenure, titles of Merced and Real Usage. * Generar programas de reuniones durante la duraci6n del proyecto para asegurar la mAxima participaci6n. * Many families are unable to Access the government programs, specifically those from INDAP and the families that need them most are the poorest. * Many families do not have their land demarcated and their land tenure is unclear. Coyhaique Coyhaique June 2012 * Community interested in reforestation experiences with other species. * Important to reforest with native species. * Suggestion to have one sole entity that can channel all the various government programs. * Communication and participation is fundamental. 54. In terms of implementation capacity, CONAF has a small dedicated and technically strong team at the national and regional level with experience and systematic engagement with a broad range of stakeholders, including indigenous peoples, campesino communities, small producers, etc. CONAF is currently leading the national consultation efforts with indigenous 46 peoples on the proposed new Forestry Law (Ley de Fomento Forestal) taking into account the country's obligation of ILO Convention No 169 to promote the rights of indigenous peoples. Given the large size of the country, the number of strategic pilot areas proposed and the differing implementation arrangements for each of the strategic pilot areas, additional human resources will be needed for supporting continuous and systematic engagement with stakeholders throughout project implementation. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4.01) X Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Indigenous Peoples (OP/BP 4.10) X Involuntary Resettlement (OP/BP 4.12) X Safety of Dams (OP/BP 4.37) X Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X Piloting the Use of Borrower Systems to Address Environmental and X Social Safeguard Issues in Bank-Supported Projects (OP/BP 4.00) Monitoring & Evaluation 55. During project implementation, regular monitoring of results will be used to improve the impact of project activities. Data will be gathered periodically through project reports, field visits, technical reports, surveys, studies and workshop reports carried out throughout the Project by CONAF. CONAF has prior experience with monitoring the impact of this type of project and proposed investments that will be of help in ensuring that the task is done properly. In addition, improved indicators for SLM, biodiversity, and climate change will be developed early in Project implementation, and training workshops will be carried out in order to strengthen CONAF's capacity to manage information system inputs and analysis, as well as strengthen capacity of local institutions and stakeholders in on-the-ground data gathering and monitoring techniques. 47 Annex 4: Operational Risk Assessment Framework (ORAF) Chile: Sustainable Land Management Project (P085621) Stakeholder Risk Rating Low Description: Risk Management: Lack of interest in participation by producers. In order to mitigate this potential risk, the project includes a strong outreach, Currently, producers are not very well informed of the consultation, dissemination, and capacity-building programs while integrating new services offered by the government in the rural sector. In programs in the productive sector. Permanent teams will be in the field at each project addition, changing the approach of agriculture and land site, and include a sociologist to help manage social and consultation issues. use systems could be a longer process due to a possible Resp: Status: Stage: Recurrent: Due Date: Frequency aversion to risk or lack of information on the new strategies. However, Chile has been noted for its adaptability and willingness to innovate. Client In Progress Implementation Yearly Capacity Rating Moderate Description: Risk Management: (1) While CONAF and other key agencies are Training programs designed to build capacity and familiarity with Bank processes will strong institutions, they do not have recent experience be developed and carried out for CONAF and AGCI. This includes training in with World Bank projects. (The most recent experience procurement, financial management and safeguards. This training program will with CONAF was the National Forest Inventory in the include CONAF regional offices as well. mid-i 990s.) However, the Bank has a long-standing history of GEF projects with satisfactory outcomes in Resp: Status: Stage: Recurrent: Due Date: Frequency Chile. In addition, the design of the project has been based on relevant project experiences in Chile. (2) Both In Progress Both Yearly Fiduciary -- Project implementation will be under the responsibility of the National Forestry Corporation Risk Management: Financial management and procurement arrangements for the (CONAF), as project executing unit, and the Agency for implementation of the GEF Sustainable Land Management Project. Roles, processes International Cooperation (AGCI), as project and procedures, including funds flow, disbursements, and financial reporting will be reflected in the Project Operational Manual. 48 administrator and recipient. Both CONAF and AGCI are well-established entities that have developed expertise in IDB and EU financed projects; therefore, existing financial management arrangements will be followed, complementing or strengthening them only when needed in order to attend project specific demands. Resp: Status: Stage: Recurrent: Due Date: Frequency Client In Progress Both Quarterly Governance Rating Low Description: Risk Management: The team will continue to monitor the situation during implementation, and work with the govt. and management should an unforeseen Counterpart funding. The present global economic situation arise. situation remains volatile and may affect allocations for counterpart funding downstream. Nevertheless, because Chile plans to use the new system toward compliance with OECD criteria for environmental management, the new SLM program remains an important priority for the country. Resp: Status: Stage: Recurrent: Due Date: Frequency Client In Progress Both : Yearly Design Rating Low Description: Risk Management: ComplexityA major aspect of the project is to lend coherence to the multi-disciplinary approach to Complexitys ofed landscape approachesietedsg land management. The project will ensure good participation and will optimize the use of programs based on landscape approaches (Conservation Districts) tends to be more holistic than of existing governance structures or leadership capacities. Participatory approaches sector-driven initiatives, they also add complexity, will be used in addition to the strengthening of existing coordination and land- particularly in governance, given their multi-sector management structures. approach and frequent lack of tie-ins to administrative Resp: Status: Stage: Recurrent: Due Date: Frequency 49 units. Client In Progress Both Yearly Project activities cover a large and decentralized Risk Management: geographic area: Project activities are decentralized into CONAF, the implementing agency, has regional offices in each of the 5 geographic 5 diverse geographic hotspots throughout Chile, which areas covered by the Project. Day-to-day operations and monitoring would be could result in complex and costly decentralized into the regional offices in order to have day-to-day presence in project monitoring/implementation support efforts. Also each of activities. the 5 hotspots require unique interventions as they face different land use management challenges. The appropriate interventions for each target area have been developed in a collaborative manner between CONAF, the regional offices, project beneficiaries and the Bank task team. The government has committed substantial resources to the project, including agency personnel in field offices. Resp: Status: Stage: Recurrent: Due Date: Frequency Client In Progress Both Yearly Social and Environmental Rating Moderate Description: Risk Management: Small producers and indigenous communities: Although A Social Assessment and an Indigenous Peoples Planning Framework has been most rural communities are made up of small producers, prepared as part of the Project to evaluate the project's potential impact on Indigenous indigenous agricultural communities are also present in Peoples. Free, prior and informed consultation will take place to establish broad the Project area in two sites. This complexity of community support for the operation. No resettlement or land acquisition is planned or beneficiaries requires the implementation of diverse envisioned. However, a process framework was developed to address any potential mechanisms to adjust services to meet characteristics of restriction of access, though none were identified in preparation. each type of producer. An Environmental Management Framework was developed to evaluate the potential The overall environmental impacts from the proposed environmental impacts and includes measures to avoid, minimize or mitigate any interventions are expected to be largely positive. Any adverse impacts as needed. activities which would result in adverse impacts to Resp: Status: Stage: Recurrent: Due Date: Frequency natural habitats and forested areas will be avoided. Both In Progress Both Yearly Program and Donor Rating Low Description: Risk Management: Sustainable Land Management is a priority. The Project The team will monitor the situation should any unforeseen situation arise. is consistent with the World Bank 2011-2016 Country Resp: Status: Stage: Recurrent: Due Date: Frequency 50 Partnership Strategy and the Government of Chile's development agenda. Sustainable Land Management is a Both In Progress Both Yearly priority for the Government of Chile. Delivery Monitoring and Sustainability Rating Low Description: Risk Management: The Project covers three GEF thematic areas The indicators have been screened by both the Bank and GEF to ensure they are (biodiversity, climate change, and land degradation), manageable and provide meaningful information. which results in the need for a more complex Moito rin nd n systm.refles Resp: Status: Stage: Recurrent: Due Date: Frequency Momitoring and Evaluation system. Careful design and monitoring of key and intermediate indicators for each thematic area is essential in order to monitor results and Both In Progress Both Yearly clearly assess project impacts. However, there are various M&E mechanisms which already existing data available in different government institutions. Implementation Risk Rating: Low Comments: no changes 51 Annex 5: Implementation Support Plan Chile: Sustainable Land Management Strategy and Approach for Implementation Support 1. The Implementation Support Strategy has been designed based on the following considerations: * Diversity of thematic needs for implementation support (SLM, forestry, agriculture, conservation, etc.) * All subprojects will comply with the national eligibility criteria for financing. * Since the Project will have national coverage, extensive travel will be needed during implementation support. 2. The Implementation Plan will be revised regularly during the project's tenure on the basis of its progress and a continuous risk assessment. Implementation Support Plan 3. Technical Support * Component I requires expertise in the areas of policy relative to aspects of climate change, land degradation, forestry and possibly ecosystem services. Implementation support for this component will be carried out by sector and technical specialists in the team, supported by Bank consultants. * Component 2 requires expertise in the field planning and implementation of operations, including SLM. biodiversity conservation, climate change, land degradation, procurement, financial management, social and environmental safeguards, and capacity building. Implementation support under this component will be carried out by technical specialists in the team, supported as appropriate by Bank consultants. * Component 3 requires expertise in the areas of monitoring and evaluation, capacity building, climate change and biodiversity monitoring. Implementation support under this component will be carried out by technical specialists in the team, supported as appropriate by Bank consultants. * Component 4 requires expertise in the areas of institutional strengthening, capacity building, communications, and outreach. Implementation support under this component will be carried out by technical specialists in the team, supported as appropriate by Bank consultants. * Component 5 requires expertise in the areas of financial management, procurement, project administration, and monitoring and evaluation. Implementation support under this component will be carried out by technical specialists in the team, supported as appropriate by Bank consultants. 4. Fiduciary Support. CONAF does not have experience in the implementation of Bank- financed programs. Consequently, measures to be taken during implementation to strengthen their capacity include: 52 * Procurement: Implementation support will include: (i) providing training to members of the CONAF and AGCI; (ii) reviewing procurement documents and providing timely feedback to the procurement units/specialists; (iii) providing detailed guidance on the Bank's Procurement Guidelines; (iv) monitoring of procurement progress against the Procurement Plan, and (v) ex-post review of community and alliance subprojects. * Financial Management. Implementation support will include review of the Project's financial management system, including but not limited to, accounting, reporting and internal controls. Implementation support will also cover sub- projects on a random sample basis. 5. Safeguards Support. To support the management of social and environmental issues at the subproject level a special focus will be placed on safeguards implementation support. The Bank's team will include an Environmental Specialist and a Social Development Specialist. Post-review of ESMF screening of subprojects will be annually. 6. Thematic Support. Specific support from other sector specialists including climate change will be needed at certain times of project implementation. 7. Focus of Support. The following summary table presents the main focus in terms of support to implementation during the different phases of the Project. Time Focus Resource Estimate First 12 months Start-up. Close monitoring of initial batch of subprojects. 100% of norm Monitoring of initial procurement activities at central level. 12-24 months Continue implementation support/monitoring of Budget based on norm implementation 24-36 Continue implementation support/monitoring of 100% of norm implementation Mid-term review mission. Mid-term evaluation. 36-Closing Keep project implementation on track. Drawing lessons Budget based on norm/ICR learned and mainstreaming good practices. ICR. allocation 8. Skills Mix Required Skills Needed Number of S/W Number of Trips Comments Forestry Specialist/TTL 12 11 Based in HQ Biodiversity Specialist 12 6 Based in HQ or CO SLM Sector Specialist 12 6 Based in HQ Environmental Specialist 6 5 Based in HQ or CO Social Specialist 12 8 Based in HQ or CO Procurement Specialist 4 4 Based in Country Office Financial Management Specialist 3 4 Based in Country Office Disbursement Specialist 1 0 Based in Country Office Consultant(s) on Productive Alliances 10 6 International and local Consultant - M&E 6 2 International Consultant Other consultants 6 4 International and Local 53 IBRD 39848 85oW 80TW 75W 70W 65oW 60.W PERU Aricae XV quique OLIVIA 20'S Antofagasta~ 0 A GUA stooeste iiPARAGUAY PACIFIC OCEAN lopiop . -f REGIONS OF (HILE I. TARAPACA II. ANTOFAGASTA Ill. A TA (AMA IV. COQUIMBO V. VALPARAISO RM. REGION METROPOLITANA DE SANTIAGO Valparaiso SA VI. LIBERTADOR GENERAL BERNADO O'HIGGINS VII. MALILE VI/I. BI Bio IX. LA ARAUCANIA A G N I X. LOS LAGOS (oncepcion XI. AISEN DEL GENERAL CARLOS IBANEZ DEL CAMPO XII. MAGALLANES Y DE LA ANTARTICA CHILENA XIV. LOS RIOS XV. ARICA-PARINACOTA 440oS This map as produced by the Map Design Unit of The World Bank Puerto MonttD The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. ATLANTIC CHILEOCEAN CHILE GEF SUSTAINABLE LAND Coihoique MANAGEMENT PROJECT * PROJECT SITES LEVELS OF DESERTIFICATION: 0 200 400 600 Kilometers SERIOUS I I I I MOEAE0 200 400 Miles MoDERATE ELEVATED NOT AFFECTED NO DATA e O ATALS FALKLAND ISLANDS (ISLAS MAVINAS) 1 A DSPT TE CONCERNINGS SOVEREIGNRTY OVER THE REGIN CPITLS -I;t_reas SLANDS EXISTS BETWEEN ARGENTINA WHICH CLAIMS NATIOAL CAITALTHIS SOVEREIGNTY AND THE Sc. WHICH ADMINISTERS @ NATIONAL CAPITALTEISNS - REGION BOUNDARIESRM INTERNATIONAL BOUNDARIES 80TW 75oW 70oW 65oW 60oW 55oW 50*W MARCH 2013