Report No. PID7726 Project Name Mexico-Rural Development in Marginal... Areas - APL II Region Latin America and Caribbean Region Sector AA - Agriculture; AD - Rural Development Project ID MXPE57530 Borrower(s) Nacional Financiera, S.N.C. (NAFIN) Implementing Agency Ministry of Agriculture, Livestock and Rural Development (SAGAR) and state authorities Environment Category B Date Initial PID Prepared May 17, 1999 Project Appraisal Date July 28, 1999 Projected Board Date November 16, 1999 1. Country and Sector Background Agriculture has traditionally been a weak sector of Mexico's economy. In 1995 the agricultural GDP accounted for about 7 percent of total GDP, down from 19 percent in 1960. The sector's slow growth, coupled with stagnating productivity and wages, has caused the population employed in the sector to drop from 50 percent of total labor force to about 25 percent during the same period. However, agriculture is expected to remain a significant economic force, counting on a competitive commercial sector that uses modern technology and achieves high yields, and on a productive potential largely untapped, especially in rainfed areas. Over the past ten years, Mexico's rural sector has been the subject of sweeping reforms. They led to the emergence of a largely liberalized, market-oriented, and private-sector-driven rural economy. The Government switched from distortionary commodity price subsidies to direct income transfers through the PROCAMPO program. It also embarked on the revision of the regulatory framework for land tenure (1992) and a subsequent land titling program (PROCEDE-1995), permitting ejido land transactions. The largely successful transfer of irrigation districts to the water users has formed the basis for the development of water markets. At the same time, the inclusion of the agricultural sector in international trade negotiations through the GATT and NAFTA agreements has created the basis for progressive exposure to global forces and the additional adjustments that will follow. Finally, the recent elimination of the tortilla subsidy has permitted to complete the reform agenda in the maize sector by relinquishing the intervention of CONASUPO. These important reforms permitted the establishment of a sound policy framework and fostered efficiency, but the performance of the sector has been lagging and growth has stagnated. While commercial agriculture has largely benefited from the reforms and has responded positively to the devaluation of 1994, the large ejido sector is going through significant adjustment, increasingly integrating into the non-farm economy, diversifying income sources, and pursuing greater labor market participation and migration. Moreover, Mexico's rural poverty has kept widening in recent years, especially among the rural indigenous populations. Two-thirds of the rural population in the southern states is considered poor (compared with one-third nationwide). Four out of every five indigenous people--who, as a group, account for a third of Mexico's poor--are considered poor. The high incidence and persistence of poverty among the indigenous population raises issues of equity, social inclusion, and access to productive assets--markets, land, labor, capital, infrastructure, and technology. If left unattended, this inequity is likely to threaten the social balance of Mexican society by polarizing the development agenda. It also challenges conventional government programs to find ways to address indigenous issues in a fashion that is consistent with cultural preferences, traditional community authority structures, and local knowledge and needs. The rural economy is poised for a sustainable enhancement of its productivity and performance, but a number of second-generation reforms will need to be pursued and constraints addressed to respond to the challenges posed by international competition, the need to diversify the production pattern, and the compelling responsibility to address equity issues. Promoting agricultural productivity, fostering employment and micro-enterprise development in rural areas while accompanying the progressive integration of the sector to the rest of the economy, and addressing poverty issues, are the main challenges of the rural development agenda. They underpin the following main sector issues: - the incentive framework for the sector shows declining real prices and negative nominal protection coefficients stemming from uncompetitive and segmented markets, high marketing margins, storage, and transaction costs. Also the low level of farmers organization hinders their capacity to better integrate in the production-marketing chain and in the rest of the economy; - improving the performance of financial services to the rural population remains one of the major issues facing the development of the sector. The shallowness of both formal and informal rural financial markets hinders the modernization of the sector and movement to more lucrative, non-farm activities; - the development of more efficient factor markets (land, water, and warehousing) could also be fostered through a better regulatory and legal framework, facilitating secure transactions and offering better collateral possibilities; and - public programs should enhance smallholder access to basic services, information, technology, and technical assistance and improve efficiency in the delivery of basic infrastructure and, when necessary, of seed capital for investments and innovation. In line with the fundamental structural reforms that have taken place in the sector over the past decade and the challenges still facing the rural agenda, the strategy that the Government and the Bank would be pursuing in the sector is oriented towards the following main lines: First, provide support to the current policy orientation and its ensuing second generation initiatives to (i) improve the efficiency of agricultural marketing channels and the management of inventories in following CONASUPO's closure, together with a - 2 - renewed effort to promote farmers organization and micro-enterprise development, (ii) develop financial services in rural areas and provide support to the development of savings and loan schemes at the community level, and (iii) foster a better understanding of the functioning of land markets. Second, the living standards of the rural poor, especially indigenous populations, and of small-holders needs to be improved through increased targeted attention to the development of marginal areas and through the enhancement of agricultural productivity. Third, complete and consolidate the transfer of irrigation districts to water users associations, and developing co-financing mechanisms for their modernization. Fourth, develop a direct dialogue with the states and support the strengthening of local institutional capacity under the new decentralization framework (Ramo 33) for the provision of basic infrastructure in rural areas, and promoting more effective institutional coordination of Government programs for local regional development. The Bank will continue to deepen its knowledge of the social and cultural factors that affect the economic well-being of indigenous populations and their heritage and to mainstream its findings in the design and implementation of sectoral operations. In mid 1996 the Government launched a far-reaching national rural development program (Alianza para el Campo) aimed at addressing the issues that affect smallholder production and income. It fosters agricultural productivity through productive investments (under a matching-grants scheme) and the provision of more effective support services (research, extension, information, training) for a wide range of agricultural sub-programs. The cornerstone of the Alianza program is its decentralized approach and the delegation of administration and decision-making to the States. The program offers the opportunity and the operational vehicle to implement a decentralized, demand-driven approach to channel technical and financial assistance directly to small farmers and poor communities. 2. Objectives The project objective of the phase II of the APL for this program is consistent with the initial objective of improving smallholders' productivity and food security in a sustainable way in 11 new marginal areas i.e. Selva- Norte, Norte, Altos, and Sierra (Chiapas), Sierra Norte (Puebla); Altiplano and Pame (San Luis Potosi), Alto Balsas (Guerero); Zongolica (Veracruz); Meseta Purepecha and Tierra Caliente (Michoacan). This second phase expands geographically drawing from the experience of phase I which is currently operating in three regions in Oaxaca and three regions of the Huasteca. 3. Rationale for Bank's Involvement a) The Bank has built considerable experience in Mexico and worldwide on policy dialogue and operations dealing with poverty alleviation issues and rural investment funds. The Bank can facilitate access to information and advisory capacity on design issues and lessons learned with comparable projects and subsequent incorporation of the lessons of these experiences; b) the financial instrument of the Adaptable Program Loan is providing greater flexibility in adapting project design and financing to client needs as they evolve; and c) Bank's participation provides for better continuity of the long term national program. 4. Description Project activities that contribute to the project outputs are clustered in -3 - the following project components: Component 1: Productive Investments (US$ 52.0 million) The project will finance demand-driven investment sub-projects for agricultural production, natural resources management, processing activities, and minor productive infrastructure through a matching-grant system. Up-front farmers' contribution will be in kind or/and in cash and will not be less than 30t of project cost. As for the first phase, a cost recovery mechanism will be established at the beneficiaries' level to ensure sustainability of the activities. The grant-financing amounts are a function of the different type of activities that farmers want to improve, as defined in the new Operation Manual. Financing of the subprojects would include the following: farming equipment and tools; input for cultivation or livestock; animals; construction material; small works and installations; processing machinery; small irrigation and drainage works and equipment; plantations and nurseries; technical assistance and specialized training; and storage facilities for inputs and products. The project will cover various types of subproject in the following main areas: improvements in existing farming systems for basic grains (milpa), home garden production (traspatio), and rearing of small animals (birds, sheep, goats and, pigs); dissemination of sustainable grain production technologies that would improve soil and moisture conditions, mostly through minimum tillage methods, green manure, and live barriers; diversification of production systems and micro-enterprise development in the area of non- traditional crops (vanilla, macadamia, litchi, ginger, chilis, flowers, etc..); improvement of coffee productivity and the expansion of organic production; promotion of technologies and investments that would foster intensification of livestock activities, such as dual-purpose cattle raising (dairy and meat) which offers the main opportunities in the lower zones; natural resources management and agroforestry, establishment of seed and plant nurseries and recuperation and conservation of soil; small enterprise development, transformation and commercialization of products and inputs. Revolving Funds While the use of directed matching grants to finance rural productive investments could be considered as a second best approach to rural finance, it was chosen due to the low performance of rural financial markets in Mexico, which are particularly deficient or non-existent in rural poverty zones. International experience has shown that directed credit has low repayment rates and high administrative costs. The approach chosen in this project would not face comparable administrative costs since fiscal recuperation of the funds is not envisaged. Rather, in addition to up-front beneficiary contribution to the cost of the subproject, a cost recovery mechanism would be developed at the community level and would build on internal management practices and control systems for the establishment of revolving funds at the community/group level that would constitute the basis for the development of self-sustained savings and loan schemes. A specific technical assistance effort would be implemented so as to provide the required social intermediation support to progressively move towards more formal financial intermediation systems (existing savings and loan structures, regional revolving funds, credit unions, commercial banks, etc.). - 4 - Component 2: Community Development (US$ 7.0 million) This component mostly covers activities to be implemented by the communities and whose financing would not need to be recovered. Main activities include preparation and implementation of simple plans of community-based natural resources management using participatory rural assessment methods, small projects of indirect benefits related to community activities, studies for the preparation of community development plans and works, workshops and training for capacity building, participatory approaches, management of revolving funds, etc. Component 3: Technical Support (US$ 20.0 million) This component of the project covers the provision of extension services, technical support and training of farmers and producers organizations required for the implementation of subprojects, the establishment of demonstration plots, and the organization of workshops and training. During phase I, these services were mainly provided under the national extension system (the SINDER program) and other technical staff under the Alianza. However, results from preliminary experience under the program, have demonstrated much better results when technical support is provided through the services of a dedicated private firm. In phase II, the contracting of professional private support services would be promoted with the responsibility of i) selecting, coordinating and training the extension agents in the field; and ii) provide technical support to the Regional Councils for the appraisal and approval process of subprojects. By the same token, the cost-recovery mechanism and the management of the community revolving funds will need specialized, professional support from local operators experienced in micro-finance issues. Component 4: Institutional Strengthening and Project Administration. (US$ 5.0 million) Activities under this component would focus on the support to project management and administration and include (i) the establishment and operations of the technical support teams for each Regional Sustainable Development Councils (CRDS) and Coffee Council; (ii) capacity building and training for the CRDS and Coffee Councils; and (iii) institutional strengthening at the central and state level for project management, monitoring and evaluation, and auditing. Through the support provided to the CRDS and Coffee Councils, the project seeks to strengthen the decentralization process and foster the constitution of sustainable decision-making and coordination bodies that would permit better integration of programs at the regional level and better participation and ownership by the beneficiaries. At the central level SAGAR would be strengthened to implement the monitoring and evaluation system, carry out project administration, undertake project preparation and launching for the new regions under the national program. 5. Financing Total ( US$m) Government 21 IBRD 63 IDA - -5- Total Project Cost 84 6. Implementation Implementation period: Implementation of the phase II will extend over an approximate period of 5 years, as each phase supporting the national program. Executing Agencies: Ministry for Agriculture, Livestock and Rural Development (SAGAR) and participating state authorities of Puebla, Guerrero, Veracruz, San Luis Potosi, Chiapas, and Michoacan. Project Administration: Implementation of the project would take place under the Alianza para el Campo framework. In line with its decentralized strategy, the program would be implemented under a formal global agreement (Convenio) signed between SAGAR and each state participating in the program. Every program under the Alianza includes a document (Anexo Tecnico) describing the proposed activities and the annual budget with the financial commitment of the federal and state governments for the marginal areas program. At present, activities to be implemented in the different regions are covered by two Anexos Tecnicos, one for the marginal areas program and one for the coffee program (to the extent that coffee is grown in some of the regions). A strategy for more closely integrating the administration of the two programs is now under implementation with the aim of possibly merging operations of the two programs under the same Anexo Tecnico (see Annex 4). An Operations Manual describing implementation arrangements for the whole program was prepared during the first phase and it is being updated to meet the requirements of the second phase. It will cover operational rules and criteria for all states participating in the program. The innovative feature of the Alianza program is its cost sharing arrangements between the federal level, the states and the producers. A Trust Fund (Fideicomiso) has been established in each state to concentrate funds from the federal and state levels, and to manage disbursements for the various sub-programs of the Alianza. The state Rural Development Commission (CDR) is responsible for the overall coordination, planning and prioritization of resource allocation by sub-programs. CDRs comprise state representatives from the various institutions involved in rural development, the SAGAR delegate, and producer organizations. At the regional and local level, the aim has been to develop implementation arrangements that strengthen ownership and accountability at the community level and stimulate beneficiaries and civil society participation and involvement. Implementation mechanisms would also try to ensure access, relevance, and efficiency in the provision of services. At the level of each of the regions covered by the project, a Regional Sustainable Development Council (CRDS) will be established representing the members of communities and "ejidos", producer organizations, SAGAR, the State Government, relevant public institutions (INI, SEDESOL, FONAES, SEMARNAP), with the option of including NGOs recognized by producers and institutions. Its president would be a representative of the State. The CRDS would coordinate either with the correspondent Coffee Councils at regional level, where they exist, or with representatives of coffee producers, where Coffee Councils are at state level. The CRDS would have responsibility for the promotion, analysis, and selection of sub-projects submitted by producers groups and communities. The CRDS would be assisted by a small technical unit to carry out the technical, economic, and social evaluation of the proposals, and make recommendations. - 6 - Upon approval by the CRDS, the sub-project proposals would be forwarded to the Fideicomiso for payment to the provider of goods and services associated with the sub-projects. During its implementation, the project will consider the alternative of establishing a community fund where the Fideicomiso will disburse directly. The CRDSs will also promote inter-institutional coordination, foster synergy and complementarity of the programs already operating in the region. Financing for productive investments would operate under a matching grant scheme with an up-front contribution of the beneficiaries of not less than 30 percent of project costs. Moreover, for these activities, a cost recovery mechanism for the remaining 70 percent would be promoted at the community level to foster sustainability, generation of resources at the local level, and better accountability. Funds would be recuperated by the beneficiary groups through their community organizations with the help of specialized assistance (NGOs, existing savings and loan schemes, consultants) which, in many instances, are already involved in the management of revolving funds or informal micro-financing schemes. The incentive system for repayment into this revolving funds scheme would build on the concept of community/group responsibility and participation, including social peer pressure. In the case of non repayment to the agreed percentages by the beneficiaries, no new financing would be authorized by the CRDS to the members of the respective community. The CRDS, through their technical units, would have first line responsibility for monitoring implementation of the cost recovery mechanisms at the local level. Funds would keep revolving at the community level according to internal priorities and mechanisms as defined by the community/group. Project coordination: Project coordination would be carried out: (i) at the federal level by SAGAR's Sub-secretariat for Rural Development. It would be responsible for project oversight, overall policy guidance, the preparation of new phases, and expansion of the national program; (ii) at the state level by the CDR and state Coffee Councils, when they apply, and (iii) at the regional level by the CRDS and regional Coffee Councils. Accounting, financial reporting and auditing arrangements: The Fideicomiso would carry out financial accounting and maintain separate project accounts and records for project related expenditures in accordance with sound and accepted accounting practices. Financial reporting would be carried out by the SAGAR delegation and state Coffee Councils in each state, including preparation of the Statement of Expenditures (SOE). Financial reports would be consolidated at the central level by SAGAR and NAFIN for transmission and review by the Bank. The financial management, accounting system, and internal controls are already in place as part of the Alianza program and are being implemented under phase I. They have been operating satisfactorily and their use would be continued under phase II. SAGAR has begun to take steps to adapt its financial management system in line with the Bank's new Loan Administrtaion Change Initiative (LACI). A transition phase, tentatively expected to extend over the first two years, would be allowed for training, software development, and acquaintance with the new financial monitoring reports (FMRs). Under LACI, use of SOEs would be replaced by a system whereby disbursements (including the amount of the Special Account) would be granted to SAGAR on the basis of a set of agreed-upon quarterly reports. A new computerized monitoring and reporting system is being finalized and will be in place before effectiveness of phase II (it will also be applied to phase I - 7- regions). It will provide for a common framework at the central, state, and regional level, that will permit more effective and harmonized information flow and monitoring of physical and financial performance, including preparation of the SOEs. The system will be adapted so as to be LACI compliant. Accounts would be audited annually according to international audit standards by independent auditors acceptable to the Bank and GOM in line with the framework agreement existing between the Bank and the Secretariat for Administrative Control (SECODAM). Such framework has been reviewed to make it compatible with the new OP/BP 10.02 on financial management. Audit reports would be submitted to the Bank within six months of the end of each calendar year (Government of Mexico fiscal year). Procurement: Most of the procurement (goods, works and services) will be carried out as part of the approved sub-projects. The total cost of an individual project would not exceed US$30,000 and would be implemented with direct participation and contribution of the beneficiaries. Given the remote and scattered location of many rural communities and in order to encourage community participation in project execution, local shopping and direct contracting procedures would be applicable. Procurement would be carried out by the CRDSs, by the Coffee Councils and by the beneficiaries accordingly, and payments made by the State Fideicomiso. Ceiling amounts are included in the Operation Manual. Prices would be compared with reference prices established at the state level where feasible. Monitoring and evaluation arrangements Monitoring: The CRDS would have primary responsibility for monitoring sub-projects implementation. The technical unit of the CRDS would implement the monitoring and reporting system described above, gathering information at the local level on project implementation combining both physical and financial information and submitting reports to the SAGAR delegation in each state, who would in turn consolidate the information and provide periodic monitoring reports to the federal level. M&E would be guided by the logical framework matrix (see Annex I) and permit to follow up on the output and impact indicators agreed upon. Evaluation: Evaluation of project activities, including project performance, level of participation, and efficiency of the administrative system, would be carried out once a year for each region through independent consultants. The evaluation process would be based on the trigger indicators. It would build on specific surveys and self-assessments. Information relative to project impact on productivity and income would be provided annually according to the agricultural cycles. Reporting and expansion to new phases: At the federal level, SAGAR will centralize and consolidate monitoring and evaluation information for the whole program. It will submit progress reports to the Bank twice a year. The monitoring & evaluation system will be key in providing lessons of experience and helping in the design of new phases. In particular, the annual evaluation report for every region would provide the information needed to carry out the appraisal process of each subsequent phase and assess the pace at which the program can be expanded. An Implementation Completion Report will be prepared at least six months prior - 8 - to the final disbursement of the loan; GOM will prepare its own evaluation of the project including a plan for its continued implementation. 7. Sustainability Sustainability Would be addressed at three levels: a) Technical sustainability would focus on the appropriate management of natural resources. The project would promote technologies capable of protecting the soil from degradation, particularly on the steep mountains. It would discourage development that may damage the natural resource base; b) institutional sustainability would be promoted: (i) at the federal and state level, by building on and strengthening existing institutional arrangements under the Alianza para el Campo program and involving state authorities; and (ii) at the local level, through a decentralized organizational set up that would promote ownership of the process of appraisal and approval of investment proposals; and c) financial sustainability would be pursued by promoting investments and activities that would generate regular income streams over time, and which the farmers themselves would be capable of managing and maintaining. Moreover, cost-recovery would be sought for commercial activities so as to stimulate the constitution of revolving funds at the community level. Some uncertainty will remain with respect to political commitment and therefore budgetary allocation at the end of the present administration in the year 2000. However, there is growing concern in the public opinion about the necessity to undertake a more proactive and targeted approach towards the most disadvantaged segments of the rural population. This makes it unlikely that major changes be introduced in the main sectoral orientations and priorities, as they benefit from wide support at the state and local level. 8. Lessons learned from past operations in the country/sector The proposed second phase builds on two sets of experiences: (i) the experience of decentralized, rural development investment programs, and (ii) the lessons learned from phase I, that provided the ground for the proposed project. Experience from Rural Investment Programs Rural investment programs, in general, indicate that flexibility and grass- root demand-driven approaches are key in building ownership, defining local priorities, and setting the ground for better implementation and sustainability. In Mexico, positive examples can be drawn from the first and second Decentralization and Rural Development projects (DRD I and II) as well as the Rainfed Areas Development project, which already operated under the Alianza Framework. The Bank's record of financing this type of programs is on the whole satisfactory, and there is consensus on continuing this line of financial assistance. Over time, however, some shortcomings have emerged: a) Past municipality-based demand-driven approaches have been globally successful in the promotion of rural infrastructure and social investments. However, because investment decision by municipalities tend to favor collective investments, little has been achieved in triggering production- oriented activities and tapping the productive potential of existing resources; b) notwithstanding their intrinsic merits, micro-investments tend to form a -9- disparate collection of interventions, and may not reach the critical development mass required to attract the private sector, generate buyers competition, facilitate access to markets, and foster the establishment of support services; c) it is important that access to resources for productive investments be accompanied by the required support for technology validation and community organization; and d) poor timing and lengthy administrative processes at times jeopardize the implementation of this type of programs particularly in agriculture where natural cycles impose rigid time constraints. Experience from the Implementation of Phase I Phase I had already addressed the above issues by proposing to: (i) focus on productive investments in areas with productive potential; (ii) promote a regional approach as a way to concentrate interventions and foster a more integrated level of development, driven by market opportunities; (iii) providing a broad range of technical assistance and training to producers and communities; and (iv) promoting decentralized and agile mechanisms for sub- projects approval and disbursement. The experience from phase I already points to a number of elements in project design and implementation that are worth adjusting or improving (also see section B.4.). First, decentralization of decision making is a very powerful instrument to improve ownership and accountability at the local level, but it can face resistance from vested interests and suffer delays in project implementation while the new institutional and operational arrangements are internalized. In this respect, the new Operational Manual is proposing improvements in ensuring a balanced representativeness of institutions and civil society at the level of the Regional Councils, it also promotes better representation of the program at the level of the Rural Development State Commission (CDR), and simplification of bureaucratic requirements. Second, community participation can be improved through: (i) strengthening the participatory community development plans so that they can represent a more strategic base on which to identify subprojects, create economy of scale and limit the possibility of dispersion or lack of focus of program interventions; and (ii) developing a more effective strategy for cost recovery, building on more specialized and professional technical assistance and social intermediation, so that groups and communities can be an integral part in the definition of the mechanisms and rules leading to the development of self-sustained savings and loan schemes. A special effort and new resources will be devoted to this aspect. Third, it has proven difficult to sustain a satisfactory performance of the technical assistance in these marginal areas without a more effective training and organization effort of the extension agents. It is now proposed to hire specialized private services, knowledgeable about the program strategy and ensuring supervision, coordination and quality control on the provision of technical assistance and subproject preparation. Justification for the Integration of the Coffee Program Given the importance of coffee production in Mexico and its specific institutional and organizational context, the Government has been implementing a separate Coffee Support Program under the Alianza framework. In the first phase, the Rural Development in Marginal Areas project did not - 10 - contemplate financing for the coffee activities under the Coffee Program in the selected regions. However, many of the marginal areas considered under the program (in Phase I and II), have coffee as one of the main crop and its distribution is particularly important in the poorest areas. SAGAR's medium to long term strategy is to progressively integrate the two programs so that producers can have access to a broader menu of options, allowing for more flexibility and diversification opportunities. Project financing for the second phase would support such strategy and therefore also cover coffee development activities under the Coffee Program in the project regions. 9. Program of Targeted Intervention (PTI) Yes 10. Environment Aspects Issues: Overall, the project is environmentally beneficial or neutral. Separate environmental impact analysis have been developed by specialized private and public organizations, including INAGA, GEOSFERA, Universidad Autonoma Metropolitana, Colegio de Postgraduados, Colegio de la Frontera Sur, in close collaboration with several state and federal agencies such as SEMARNAP, SEDESOL, INEGI, INI and with international or national organizations such as WWF, FAO, CIMMYT, USAID. They have shown that the project, through the development of sustainable technical activities (sub- projects), such as conservation tillage, IPM, crop diversification, marketing of organic products, artisanal production, will contribute to the control of soil erosion, and the improvement of the quality of the land and water resources, while protecting the animal and vegetal biodiversity. The new Operations Manual provides clear guidance for the selection and implementation of these subprojects, as well as a list of activities that are not eligible, such as creation or rehabilitation of roads, over-use of agro-chemical inputs, inappropriate crop processing methods. Therefore, the main issue has to do with an efficient and effective implementation of integrated technological and economic activities at farm and (micro) regional level. This issue will be addressed by strengthening the environmental awareness and agro-ecological expertise of farmers men and women, extensionists and farmers organizations, through training courses, field visits, and specialized technical assistance provided by private services (despacho) or public organizations oriented to creating local capacities and know-how. The Rural Development in Marginal Areas project is consistent with the objectives of OP 4.09 Pest Management, namely in "relying as much as possible on non-chemical measures to keep pest population low [I selecting and applying pesticides (when they have to be used) in a way that minimizes adverse effects on beneficial organisms, humans, and the environment", and OP 4.06 Forestry " to reduce deforestation, enhance the environmental contribution of forested areas, reduce poverty, and encourage economic development" In coherence with OD 4.20 Indigenous People, the Project builds on diagnostic studies prepared by the Indigenous Peoples Profiles Project and on complementary socio-economic studies developed through participatory methodology during the preparation phase, to use practical ways of involving indigenous people in the selection and implementation of technical activities consistent with the social demand. 11. Contact Points: Team Leader Adolfo Brizzi The World Bank 1818 H Street, NW Mexico Office Washington D.C. 20433 Telephone: 525-4804239 Fax: (525) 4804282 The InfoShop The World Bank 1818 H Street, N.W. Washington D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Processed by the InfoShop week ending July 30, 1999. Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. - 12 -