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PROGRAM INFORMATION DOCUMENT (PID) 
CONCEPT STAGE 
Report No.:  AB4059 
Operation Name 
Peru Programmatic Environmental DPL 
Region 
LATIN AMERICA AND CARIBBEAN 
Sector 
General water, sanitation and flood protection sector (40%); 
Mining and other extractive (30%); General transportation sector 
(30%) 
Project ID 
P101471 
Borrower(s) 
MINISTRY OF ECONOMY AND FINANCE 
Implementing Agency 
MINISTRY OF ECONOMY AND FINANCE with the support of 
the Ministry of Environment (MINAM), the Ministry of Energy 
and Mines (MEM), the Ministry of Transport and 
Communications (MTC), and the Ministry of Production 
(PRODUCE) 
Date PID Prepared 
August 28,  2008 
Estimated Date of 
Appraisal Authorization 
September 29, 2008 
Estimated Date of Board 
Approval 
December 16, 2008 
1. 
Key development issues and rationale for Bank involvement 
 
Peru is one of the most ecologically diverse countries in the world, endowed with a large and 
diverse territory and an enormous wealth of natural resources. Environmental quality and natural 
resource abundance are an integral part of 
the country’s sustainable growth and the well-being of 
its population. However, environmental degradation and the depletion of natural resources 
constitute a formidable obstacle to Peru’s efforts to eradicate poverty, reduce inequality, and 
develop a more diversified and resilient economy. The costs of environmental degradation 
represent more than 3.9 percent of the country’s GDP, mainly due to increased morbidity and 
mortality and decreased productivity. Over the past five decades, Peru has restructured its legal 
and regulatory landscape, undertaken numerous policy initiatives, and dramatically expanded 
and strengthened its institutional capacity for protecting and managing the natural resources and 
environmental quality. However, despite these advances, the country continues to face serious 
environmental challenges. 
Recent events have renewed public attention to the consequences of environmental degradation 
and depletion of natural resources. The media has provided extensive coverage of pollution from 
mining environmental legacies (MELs) –which have become the emblem of social conflicts in 
the country. Similarly, the high lead concentration levels in the blood of the population at La 
Oroya have raised international outcry. The devastating effect of natural disasters associated with 
the occurrence of El Niño in 1998, the collapse of the hake fisheries in recent years, and the 
challenges to the anchoveta industry have also triggered short-term institutional responses to 
these issues.  
Over the past decade, Peru has made considerable progress in improving its institutional and 
legal framework for environmental management by issuing laws and regulations defining roles 
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for environmental licensing, strengthening the environmental framework within key sectors 
(including mining, energy, forestry), enhancing natural protected area management, and earlier 
this year, establishing Peru’s Ministry of Environment. These efforts constitute the initial steps 
of the reforms that Peru needs to carry out to address its urgent environmental challenges and 
ensure that the environment is safeguarded as decentralization advances. With the creation of the 
Ministry of Environment and an accompanying maturing of public and private institutions, the 
timing of this DPL operation is very opportune for supporting policy reforms on the 
environmental front.   
In light of the ratification of the Free Trade Agreement with the United States, President Alan 
Garcia proposed the creation of a Ministry of Environment in December 2007
.
Following a 
consultation process with various actors in public and private sector, academia, international 
organizations and NGOs, Law No. 1013 was published on May 14, 2008 establishing the new 
Ministry of Environment (MINAM). This concentrates within MINAM many of the 
environmental management functions which had previously been shared by more than a dozen 
agencies (including the National Council for the Environment-CONAM, the National Institute of 
Natural Resources-INRENA, the General Directorate for Environmental Health-DIGESA, other 
sectoral environmental agencies, etc.). Furthermore, environmental enforcement which had been 
delegated to each productive sector will now be carried out by an autonomous Office of 
Evaluation and Environmental Enforcement (OEFA) linked to MINAM. In addition, the 
National Service of Protected Areas (SERNANP) has been established as an independent agency 
subscribed to MINAM (rather than being a third-level institution under the Ministry of 
Agriculture. Furthermore, MINAM has been included (for the second round of pilots) in the 
Result’s Based Budget of the Ministry of Finance (MEF), reflecting its priority and commitment 
to the sector.  
The Country Partnership Strategy (CPS) for Peru for FY07-FY11 (Report PE-37913) recognizes 
the need to raise the profile of environmental issues in Peru, and includes a potential set of DPLs 
that will enhance public environmental investments and strengthen the institutional framework. 
These environmental DPLs contribute directly to making growth environmentally sustainable 
(within pillar I)
1
of the CPS by supporting the environmental management of water resources, 
biodiversity conservation and forest cover, enhancing control over air and water pollution, and 
improving the sustainability of extractive industries (such as mining and hydrocarbons) and the 
sustainable management of fisheries resources. 
 The proposed Peru Environmental DPL is the first in a planned series of three operations 
(programmed for FY09, 10 and 11) to support the continuing efforts of the GoP in strengthening 
environmental sustainability in the country. The proposed policy reforms and activities under the 
ENVDPL are based on two core pieces of analytical work: (i) The Environmental and Social 
Dimensions of the Mining Sector in Peru (2005); and the Peru: Country Environmental Analysis 
(CEA-2006).   
1
The Bank’s program of activities to support the GoP in reaching these objectives is organized around three pillars 
and six clusters, as follows.  
Pillar (i)
 Economic Growth: 1. Maintaining macro stability and reducing 
vulnerabilities; 2. Accelerating growth and widening its base; 3. Making growth environmentally sustainable.  
Pillar 
(ii)
 Social Development: 4. Meeting Basic Needs; 5. Promoting a new social contract in education, health and 
nutrition.  
Pillar (iii)
 Modernization of the State: 6. Modernizing state institutions. 
 
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The selection of key sectors and priority areas to be addressed under the proposed ENVDPL 
result from a series of consultations
 
led by MEF with the inputs and active participation from the 
following government agencies: (i) MINAM; (ii) the National Council of the Environment 
(CONAM); (iii) the National Institute of Natural Resources (INRENA); (iv) the General 
Directorate for Environmental Health (DIGESA); (v) the Ministry of Production (PRODUCE); 
(vi) the Ministry of Energy and Mines (MEM); and (vii) the Ministry of Housing (VIVIENDA).  
In addition, consultations have taken place with the Inter-American Development Bank (IDB), 
the Andean Development Corporation (CAF), the United Nations Development Program 
(UNDP), and the Peru-Canada (PERCAN) Initiative, to avoid duplication of efforts and ensure 
compatibility and synergies in agendas.  
Despite an initial demand to address a wide range of environmental issues (e.g. renewable 
energies, forest policy, indoor air pollution), the core sectors and themes to be supported by this 
DPL were selected based on the following (i) a level of national priority agreed on by MEF and 
MINAM
2
;
(ii) supplementary support from other loans/grants
3
,
and (iii) level of sectoral support 
and commitment. Consequently, the final selection of sectors to be supported (mining, fisheries, 
transport and fuels related to air quality improvements) reflect a cohesive strategy which would: 
(i) promote principles of sustainability and address core environmental issues in two natural 
resource-based and leading export sectors (mining and fisheries) which have largely grown in the 
past decade; (ii) address air quality which has been identified as the leading cause of morbidity 
and mortality in the country (particularly in large cities); and (iii) strengthen the overall 
environmental institutional and policy framework in order to support MINAM’s new tasks 
regarding: (i) policy making; (ii) biodiversity conservation; (iii) regulating the environmental 
licensing process; and (iv) environmental enforcement.   
 
2. Proposed objective(s) 
 
The overarching objectives of the proposed Environmental DPL program aim to support the 
government’s efforts to achieve the following: (i) improve the efficiency and effectiveness of 
environmental governance and institutions in Peru; and (ii) mainstream sustainability principles 
in the development agenda of key sectors to improve the management of the mining sector, 
improvements in air quality, and enhance the fisheries sector. The ENVDPL is one of the key 
pillars of the 2006 Country Partnership Strategy for Peru and of the government’s strategy to 
strengthen its sustainable development policies, and will contribute to Peru’s efforts towards the 
achievements of the Millennium Development Goals (MDGs).
4
This operation, under preparation for over a year, will be presented for Board approval in 
December 2008 and expected to be disbursed in the first quarter of 2009. The two subsequent 
ENVDPL loans for the environment sector (ENVDPL 2 and ENVDPL 3) are currently planned 
2
For example, natural disasters and indoor air pollution, which were identified as prominent contributors to costs of 
environmental degradation in the CEA, will not be addressed by this operation.   
3
Issues such as water resource management (identified as critical in the Peru CEA) are not included in the proposed 
ENVDPL as they are already being addressed by two separate IDB DPLs and an upcoming World Bank TA loan, 
and forest policy is being covered within the framework of the FTA and through an Andean Development 
Corporation (CAF) loan.   
4
The proposed ENDPL would contribute to the attainment of MDG’s Goal 7 which seeks the attainment of 
environmental sustainability, and Target 9 which promotes principles of sustainable development in country policies 
and programs.  
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for 2009 and 2010. The timing of this DPL program is opportune given Peru’s economic growth, 
the promising outlook for key sectors in which environmental issues are receiving government 
attention, the recent creation of a Ministry of Environment, as well as the approval of the Free 
Trade Agreement with the USA that includes requirements on environmental issues.  
 
3. Preliminary 
description 
The specific policy areas and the actions within these that are supported by the Peru 
Environmental DPL are outlined in the policy matrix. These policy actions are aimed at 
strengthening institutional and environmental governance; mainstreaming principles of 
sustainable development in key sectors including mining, fisheries, and those supporting 
improved air quality.    
Policy actions under ENVDPL I for environmental governance include the following: 
-
To 
strengthen the legal and institutional framework for environmental management
,
the 
operation supports the approval of the law creating, organizing, and establishing key 
functions of the Ministry of Environment; and the modification of law for the National 
System of Environmental Impact Assessment. Support will also be provided to as 
assessment and strategy to strengthen MINAM’s financial and administrative 
performance.   
-
For 
biodiversity conservation
,
this operation will support the issuance of supreme decrees 
which approved a regulation establishing functions of the National Service of Natural 
Protected Areas (SERNANP), including the Strategy for Natural Protected Areas.   
-
To strengthen the framework for 
environmental quality standards and better monitoring
,
this operation will support the issuance of various supreme decrees to set these standards 
as well as maximum permissible levels for air and water, and for fishmeal processing 
plants. 
Policy actions under ENVDPL I to support the mainstreaming of sustainable development in key 
economic sectors in Peru include the following:  
·
For the
 mining sector
,
this operation supports policy actions to improve information and 
capacity to remediate mining environmental liabilities by: (i) supporting a methodology 
to update the MELs inventory and assess priority sites; and, (ii) by supporting the 
government’s efforts to strengthen environmental and social governance in this sector 
through the issuance of a decree defining public and community participation during 
various stages of the mining process.
 
·
For 
improving urban air quality
,
this operation supports policy actions in two areas: (i) 
improving fuel quality, through the issuance of a supreme decree to promote vehicle 
conversion to natural gas and establishing supply stations; and the enactment of a law to 
reduce the content of sulfur in diesel by 2010; and (iii) improving vehicle performance 
through actions to enhance the vehicle inspection and maintenance system.  
·
In the 
fisheries sector
,
this operation supports the government’s program to reduce 
overcapacity in the anchoveta fleet and mitigate social impacts relating to displaced 
workers. This includes the regulation of anchoveta fishing quotas per vessel, and the 
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implementation of the funding mechanism for FONCOPES and the pension fund for 
workers.  
Looking forward, the Bank will support the GoP in implementing the reforms relating to 
environmentally sustainable improvements in these areas. T
he
Bank’s value added lies in its 
convening power, the provision of global expertise in this highly specialized field, and leverage 
in resource mobilization.  
 
4. Environment Aspects 
 
The provisions of OP8.60 on Development Policy Lending apply to ENVDPL. The policies and 
reforms supported by this operation are expected to have a positive effect on the country’s 
environment, by supporting improved environmental governance and management. As the main 
objective of this environmental DPL is to help the government mainstream environmental 
concerns in a number of key sectors (such as mining, fisheries, energy), the design of the 
operations are catered towards internalizing environmental and social safeguards issues  at the 
macro level. The operation seeks to achieve a dual objective of incorporating environmental 
considerations in key productive sectors of the economy, and by improving the effectiveness and 
efficiency of the environmental management process. Consequently it is expected that the 
policies supported under this operation are unlikely to cause significant negative effects, and will 
instead have positive effects on Peru’s environment, forests and other natural resources.  
The government’s commitment to improved environmental governance is evidenced by the 
creation of a new Environment Ministry in May 2008, and the allocation of its operating budget 
(more than twice the yearly budget of CONAM) as approved in August 2008. The government’s 
efforts at strengthening environmental governance through policy reforms are supported by this 
DPL operation. Positive impacts on the environment are expected to derive from improved 
environmental management at the national and local levels, in which the program places 
particular emphasis in assuring improved transparency and accountability with respect to 
governmental oversight and decision-making processes. The conservation of biodiversity and 
natural protected areas in Peru will also be enhanced through various reforms and activities being 
undertaken by GoP to strengthen institutional capacity and financial sustainability; while the 
approval of environmental quality standards and maximum permissible emission levels for air 
and water, supported by this operation, is expected to strengthen environmental monitoring. 
Key analytical work such as the CEA and the Mining Study has supported the integration of 
environmental concerns into sectoral policy development for energy, transport, mining, and 
fisheries. This has also facilitated the policy dialogue, the inter-institutional agreements and 
commitments among various stakeholders to address the respective environmental concerns 
(e.g., urban air quality, mining contamination, etc.). In the 
mining sector
,
government reforms 
aimed at updating the MEL inventory and assessing priority MELs in key watersheds is expected 
to improve government actions towards remediation of environmental impacts. Furthermore, 
various government actions supported by this operation to overcome the shortcomings of the 
EIA system, especially for large-scale and complex mining operation is expected to improve the 
overall quality of the EIAs process and strengthen the overall licensing framework. 
Improvements in 
urban air quality
 are another significant environmental effect of government 
actions in the energy and transport sector enhanced through the support of this operation. These 
include actions to encourage the availability of cleaner fuels, shift vehicles to clean natural gas, 
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and scrap older polluting vehicles. In the 
fisheries sector
,
this operation will support government 
efforts at boosting sustainability in this sector through regulations relating to the size, capacity, 
and catch quotas.  
The proposed operation incorporates actions to improve the effectiveness and efficiency of 
environmental management processes. The benchmarks that have been realized by the GoP 
indicate that the country is headed in the right direction with respect to protecting the 
environment and improving environmental quality.  
 
5. Tentative financing 
Source: ($m.) 
International Bank for Reconstruction and Development 
25.0 
Borrower 00.0 
 Total 
25.0 
 
6. Contact point 
Contact: Renan A. Poveda 
Title: Sr. Environmental Specialist 
Tel: +511 6150660 x.337 -  WB link 5357+337 
Email: Rpoveda@worldbank.org