Documentof The World Bank FOR OFFICIAL USEONLY ReportNo: 36072-NWN PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDGRANTFROMTHE GLOBAL ENVIRONMENTFACILITYTRUST FUND INTHE AMOUNT OFUS$12.0MILLION TO THE CENTRALAMERICAN COMMISSIONONENVIRONMENT AND DEVELOPMENT FOR THE NICARAGUA/HONDURAS CORAZONTRANSBOUNDARY BIOSPHERERESERVEPROJECT May 22,2006 Environmentallyand Socially SustainableDevelopment CentralAmerica CountryManagementUnit LatinAmerica andthe CaribbeanRegion This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 4,2006) Currency Unit = Lempiras, Cordobas, Quetzales 19.7 Lempiras = $1 17.9C6rdobas = $1 8.0 Quetzales = $1 RECIPIENT'S FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS AFE-COHDEFOR Administracidn Forestal del Estado-Corporacidn Hondureiia de Desarrollo Forestal (HonduranCorporation for ForestDevelopment) ATP-I1 SecondAgricultural Technology Project, World Bank, Nicaragua BNC BosawasNational Commission CAS Country Assistance Strategy CCAD Comisidn Centroamericanade Ambiente y Desarrollo (Central American Commission on Environment and Development) CONADETI ComisidnNacional de Demarcacidny Titulacidn (National Commissionfor Demarcation and Titling), Nicaragua CTBR Coraz6n TransboundaryBiosphereReserve DAF Departmentof Financial Administration (MARENA) DANIDA DanishMinistry of Foreign Affairs DAPVS Departamentode Areas Protegidas y de Vida Silvestre (ProtectedAreas and Wildlife Department)of Am-COHDEFOR EA Environmental Assessment EU EuropeanUnion FHAP Fondo HondureriodeAreas Protegidas (ProtectedAreas Fund of Honduras) FMR Financial Monitoring Report GEF Global Environment Facility IABIN Inter-American Biodiversity InformationNetwork IBRD InternationalBank for Reconstructionand Development (WB Group) ICB InternationalCompetitive Bidding IDB Inter-American Development Bank ILO InternationalLabour Organization INA Instituto Nacional Agrario (National Agrarian Institute), Honduras INTA National Institutefor Agricultural Technology, Nicaragua IP Instituto de la Propiedad (Property Institute), Honduras IPDP IndigenousPeoples DevelopmentPlan M&E Monitoring and evaluation MAG-FOR Ministry Agriculture, Livestock, and Forestry, Nicaragua MARENA Ministerio del Ambientey de Recursos Naturales (Ministry of the Environment and Natural Resources), Nicaragua MBC MesoamericanBiological Corridor NCB National Competitive Bidding NGO Nongovernmentalorganization OP Operational Program(GEF) or Operational Policy (World Bank) PAAR Proyecto de Administracidn de Areas Rurales (Rural Land ManagementProject), Honduras PATH Proyecto de Administracidn de Tierras de Honduras (Land Administration Project), Honduras PBPR Proyecto de Bosquesy Productividad Rural (Forests and Rural Productivity Project), Honduras PCU Project Coordination Unit PDF-B Project Development Facility Block B Grant (GEF preparatory grant) PDO Project development objective PIU Project Implementation Unit PROARCA ProgramAssessment of the Regional Environmental Program PRODEP Proyecto de Ordenamientode la Propiedad (Land Administration Project), Nicaragua PRORURAL Rural sector SWAP of Nicaragua PRSC Poverty Reduction Strategy Credit QCBS Quality and Cost-Based Selection RAAN RegidnAutdnoma del AtMntico Norte (Autonomous Region of the NorthAtlantic) RAAS RegidnAutdnoma del Atldntico Sur (Autonomous Region of the South Atlantic) RPBR Rio Platan0 Biosphere Reserve SAG Secretary of Agriculture and Livestock (Honduras) SEPCA Secretariade la Presidenciapara Asuntos de la CostaAtldntica (Presidential Secretariat for Atlantic Coast Affairs), Nicaragua SERNA Secretaria de Recursos Naturales y Ambiente (Secretariat of Natural Resources and the Environment), Honduras SETAB Secretaria Tkcnicade Bosawas (Technical Secretariat for Bosawas) SIAM Sistema de Informacidn Ambiental Mesoamerican0(Mesoamerican Environmental Information System) SICAP Sistema Centroamericanode Areas Protegidas (Central American System of Protected Areas) SINAP SistemaNacional deAreas Protegidas (National Protected Areas System) SINIA SistemaNacional de Informacidn Ambiental (National Environmental Information System) SOE Statement of Expenditure SWAP Sector-wide Assistance Program UNDP UnitedNations Development Programme UNEP United Nations Environment Programme UNESCO United Nations Educational, Scientific and Cultural Organization USAID United States Agency for International Development WB World Bank WWF World Wildlife Fund Vice President: Pamela Cox Country Director: Jane Armitage Sector Director Laura Tuck Task Team Leader: Douglas J. Graham CENTRALAMERICA Coraz6nTransboundaryBiosphereReserveProject CONTENTS Page A. STRATEGICCONTEXTAND RATIONALE .................................................................. 1 1. Country and Sector Issues ................................................................................................... 1 2. Rationale for Bank Involvement.......................................................................................... 2 3. Higher-level Objectives to which the Project Contributes .................................................. 3 B. PROJECTDESCRIPTION .................................................................................................. 5 1. Lending Instrument.............................................................................................................. 5 2. Program Objective and Phases ............................................................................................ 5 3. Project Development Objective and Key Indicators ........................................................... 5 4. Project Components............................................................................................................. 6 5. Lessons Learned and Reflected inthe Project Design......................................................... 8 6. Alternatives Considered and Reasons for Rejection ........................................................... 9 C IMPLEMENTATION . ......................................................................................................... 10 1. Partnership Arrangements ................................................................................................. 10 2. Institutional and ImplementationArrangements ............................................................... 11 3. Monitoringand Evaluation of Outcomes/Results .............................................................. 13 4. Sustainability andReplicability......................................................................................... 13 5. Critical Risks andPossible Controversial Aspects ............................................................ 14 6. Grant Conditions andCovenants ....................................................................................... 17 D APPRAISAL SUMMARY . .................................................................................................. 17 1 . Economic and Financial Analyses ..................................................................................... 17 2. Technical............................................................................................................................ 17 3. Fiduciary ............................................................................................................................ 17 4. Social ................................................................................................................................. 18 5. Environment ...................................................................................................................... 19 6. Safeguard Policies ............................................................................................................. 19 7. Policy Exceptions and Readiness ...................................................................................... 20 Annex 1:Country and Sector Background ............................................................................... 21 Annex 2: Major RelatedProjects Financed by the Bank and/or other Agencies ..................28 Annex 3: Results Framework and Monitoring ......................................................................... 32 Annex 4: DetailedProject Description ...................................................................................... 37 Annex 5: Project Costs................................................................................................................ 50 Annex 6: ImplementationArrangements .................................................................................. 53 Annex 7: Financial Management and DisbursementArrangements ...................................... 60 Annex 8: Procurement Arrangements ....................................................................................... 70 Annex 9: Economic and Financial Analysis .............................................................................. 75 Annex 10: Safeguard Policy Issues ............................................................................................. 76 Annex 11:Project Preparation and Supervision ...................................................................... 87 Annex 12: Documents inthe Project File .................................................................................. 90 Annex 13: Statement of Loans and Credits ............................................................................... 91 Annex 14: Country at a Glance .................................................................................................. 93 Annex 15: Incremental CostAnalysis ........................................................................................ 97 Annex 16: STAP Roster Review ............................................................................................... 106 MAPS 1 ProjectArea . Map # IBRD34787 2 Ecosystems Map # IBRD34788 3 InternalZoning Map Map # IBRD34789 4 Indigenous Peoples ... Map ## IBRD34832 CENTRAL AMERICA CORAZON TRANSBOUNDARY BIOSPHERE RESERVEPROJECT PROJECTDOCUMENT LATINAMERICA AND CARIBBEAN LCSEN Date: May 1, 2006 Team Leader: Douglas J. Graham Country Director: Jane Armitage Sectors: Forestry (100%) Sector Managermirector: Abel Mejia Themes: Biodiversity (P); Other rural Project ID: PO85488 development (S) Focal Area: Biodiversity Environmental screening category: Partial LendingInstrument: Specific Investment Loan Assessment [ ]Loan [ ] Credit [XI Grant [ ]Guarantee [ ] Other: For LoansICreditdOthers: Total Bank financing (US$m.): 0.00 ~~ Borrower: Comisi6n Centroamericanade Ambiente y Desarrollo (CCAD) Blvd. Orden de Malta Sur. San Salvador ElSalvador Tel: (503) 248-8888 Fax: (503) 248-8894 magonzales0sgsica.org http://www.ccad.ws SERNA 100metros a1Sur del Estadio Nacional Tegucigalpa, M.D.C. Honduras Tel: (504) 235-7833 Fax: (504) 232-6250 sdespacho0serna.gob.hn MARENA Km.1%, CarreteraNorte Managua Nicaragua Tel: (505) 233-1313 losejo@marena.gob.ni ResponsibleAgency: WorldBank Washington, D C UnitedStates dgraham@worldbank.org C'umulative) 0.00 1 0.84 I 2.38 1 4.61 1 7.18 1 9.82 1 12.00 1 12.00 1 12.00 Project implementation period: Start July 3,2006 End: August 1,2012 Expected effectiveness date: July 17,2006 Expectedclosing date: August 1,2012 Does the project depart from the CAS incontent or other significant respects? Ref. PAD A.3 [ ]Yes [XINO Does the project require any exceptions from Bank policies? Ref. PAD D.7 [ ]Yes [XINO Have these been approved by Bank management? ]Yes 1. IN0 [s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risksrated "substantial" or "high"? Ref. PAD C.5 [XIYes [ ]No Does the project meet the Regional criteria for readiness for implementation? Ref. PAD 0.7 [XIYes [ ]No Project development objective Ref. PAD B.2, TechnicalAnnex 3 The project development objective (PDO) of the proposed project i s to improve the national and binational management of the area of the proposed Coraz6n Transboundary Biosphere Reserve (CTBR), respecting the rights of traditional populations. Global Environment objective Ref. PAD B.2, TechnicalAnnex 3 The global objective i s to ensure the long-termconservation of the heart of the MBC, the largest contiguous area of natural habitat remaining inMesoamerica, andperhaps the best hope inthat area for the maintenance of ecological dynamics andprocesses at a large ecoregional scale. Project description Ref. PAD B.3.a, TechnicalAnnex 4 The proposedproject consists of six components: 1.Consolidation of the Coraz6n Transboundary Biosphere Reserve($0.79 millioninGEF funds): This component will support the creation, consolidation, and strengthening of binational coordination mechanisms for the Reserve area. This component also seeks to consolidate indigenous land rights. 2. Strengthening of the NationalProtectedAreas Systems ($2.12 million): InHonduras, the effective day-to-day managementof individual protected areas i s to fall under the responsibility of the Honduran Protected Areas Fund,which the project will support. InNicaragua, the project will similarly support the creation and strengthening of sustainable financing mechanismsfor protected areas. I 3. Implementation of ProtectedArea Management Plans ($2.73 million): This component will help the protected area administrations of Nicaragua and Honduras implement individual protected areas managementplans. 4. Community-Based Natural ResourceManagement ($3.56 million): This component focuses on community-levelmanagementof natural resourcesto mainstreambiodiversity conservation into productive activities. 5. Monitoringand InformationManagement ($0.99million): This component will strengthen biologicalmonitoringprograms for the entire project area, support researchprograms, and investments for informal and formal environmental education. 6. Project Administration ($1.80 million): This component supports the effective and efficient administration and operation of the proposed project. Which safeguardpolicies are triggered, if any? Ref. PAD 0.6, TechnicalAnnex 10 Although a Category "B" project, the following safeguardpolices are considered triggered: Environmental Assessment, NaturalHabitats, Pest Management, CulturalProperty, Involuntary Resettlement, Indigenous Peoples, andForests. A stand-alone EA has been prepared as well as a ProcessFramework and an Indigenous PeoplesDevelopment Plan (IPDP). Significant, non-standardconditions, if any, for: Ref. PAD C.7 Boardpresentation: None. Loadcredit effectiveness: Signature of Tripartite Agreement and association inter-institutional agreements. Covenants applicable to project implementation: There are two disbursementconditions: i)creation of satisfactory protected area funds for deposit of seed funds into them; and ii)preparation of a satisfactory implementation manual for subprojects and grants. A. STRATEGIC CONTEXT AND RATIONALE 1. CountryandSector Issues The Central American countries of Honduras and Nicaragua contain a wealth of biodiversity and natural resources, with ecosystems stretching from coral reefs off the Caribbean coast to inland mountainous tropical forests. Included within this diverse area i s the largest remaining area of humid tropical forest north of Colombia, the proposed Coraz6n Transboundary Biosphere Reserve (CTBR). The name "Coraz6n" derives from its location in the "heart" o f the MesoamericanBiological Corridor (MBC). This area of 34,000 square kilometers (km2)(3.4 million hectares) along the Nicaragua/Honduras border contains four established protected areas: the Bosawas Biosphere Reserve in Nicaragua, the Tawahka Asangni Reserve, the Patuca National Park, and the Rio Pliitano Biosphere Reserve inHonduras. This area harbors many threatened and endangered species that require large intact areas of pristine forest, such as Harpy Eagles, jaguars, and tapirs. More than 50 percent o f the ecosystem classes of the two countries are found within the proposed project area. (See the map inAnnex 17for the identity andlocation of the area's 14principal types of ecosystems.) The bulk of the Coraz6n area, with the exception of large parts of Patuca National Park that are uninhabited, include the traditional territories of indigenous peoples. These include approximately 70,000 Tawahka, Mayangna, Pech, Garifuna, and Miskito peoples. Any designation of protected area status superimposed on a traditional indigenous territory, and any effort to manage and protect its biodiversity, must recognize the ancestral rights of its occupants. Consolidating the land rights of indigenous peoples i s perhaps the best buffer against encroaching settlers at the agricultural frontier. Most of the Bosawas Biosphere Reserve in Nicaragua has been titled to the indigenous peoples of that area (although registration of titles i s pending), but recognition of ancestral land rights in Honduras i s less advanced. These ancestral rights mustbe consolidated inboth countries. However, the management regimes of these four protected areas have not been sufficient to protect the ecosystems and their human populations from encroaching threats. Despite a concerted effort by national and local authorities, and technical and financial assistance from international donors, the area's integrity i s threatened by a lack of sustainable income-generating activities and weak protection and enforcement practices. Deforestation continues to be a problem, with rapid losses still occurring at the agricultural frontier. While local agricultural and forest management techniques are partially responsible for the loss of forest cover, the greatest problem i s seen along the western agricultural frontier, where recent arrivals are clearing land for farming and cattle ranching at alarming rates. Among the indigenous communities, poverty and a lack o f economic options contribute to suboptimal land use practices. While the National Protected Areas Systems (Sistema Nacional de Areas Protegidas, SINAPs) of Nicaragua and Honduras are staffed by dedicated professionals, the systems are severely under funded and often lack the capacity and legal frameworks necessary to carry out their mandate. The individual protected areas suffer from similar problems, with a lack of resources and trained staff contributing to problems of planning, demarcation, enforcement, and 1 monitoring, critical to the effective management of protected areas. While there are numerous donor-funded efforts to create and consolidate protected areas, a lack of coordination among projects, and between national policies and regulations, creates additional challenges. In Honduras, these problems have been exacerbated by a lack of clarity in roles and coordination among the national agencies responsible for protected areas. The result is a weak protected areas system inboth countries. The rationale of the proposed project centers around two broad thrusts to reverse these trends. First, through its first two components and through the monitoring component, there will be an emphasis on large-scale territorial management of the four existing protected areas. No new protected area will be created, although, if formally accepted by the United Nations Educational, Scientific and Cultural Organization (UNESCO), a status of transboundary biosphere reserve would confer additional global recognition of the importance of the Coraz6n area. Biosphere reserves are mosaics of ecosystems that are nominated by national governments and recognized by UNESCO. They have core, buffer, and transition zones, allowingthem to fulfill conservation, development, and logistic functions. Productive, educational, research, and recreational activities are permitted inthe buffer and transitional areas, while only research, monitoring, and traditional extractive activities are allowed in the core zones. The superimposition of a UNESCO transboundary biosphere reserve on existing UNESCO biosphere reserves (Rio Platan0 and Bosawas Reserves) does not change the status or importance of existing reserves, but serves to further consolidate their recognition as globally important areas, and serves as a tool to strengthen management of all included areas. Improved management of this large territory also requires strengthening and consolidating indigenous land rights, creating and strengthening a binational management framework, particularly to include civil society and indigenous voices, and strengthening the SINAPs so that the four protected areas are supported by strong national systems. Second, the project focuses on smaller-scale community-level management of natural resources. The third and fourth components would implement protected area management plans and support locally-driven, community-based natural resourcesmanagement activities. Country EliPibilitv and Countrv Drivenness Both Honduras and Nicaragua are eligible to receive Global Environment Facility (GEF) funding. Honduras i s a party to the Convention on Biological Diversity, having signed the convention on September 13, 1992, and ratified it on July 31, 1995. Nicaragua i s also a party to the Convention, having signed it on the same day as Honduras and having ratified it on November 20, 1995. 2. Rationale for Bank Involvement To address the challenges outlined above, the governments of Honduras and Nicaragua have requested the assistance of the World Bank in preparing a proposal to the GEF. This proposed World Bank/GEF project would be partially-blended with two Bank-financed projects in Honduras and Nicaragua: the Forests and Rural Productivity Project (PBPR) in Honduras, and the Second Agricultural Technology Project (henceforth "ATP-II") in Nicaragua, which falls under the umbrella of PRORURAL, the government of Nicaragua's sector-wide approach to productive rural development. This cofinancing leverages the GEF investment in the area of 2 community-level management of natural resources and promotes the mainstreaming of biodiversity concerns into the forestry and agriculture sectors. These projects also address many of the systematic policy and national capacity issues noted above. The coordination and collaboration between the Bank-financed operations in Honduras and Nicaragua (see section on Associated Projects in Annex 4), together with the proposed project; will be instrumental in resolving the complex set of problems that have inhibitedeffective protected area management, biodiversity Conservation, and sustainable rural development in Honduras and Nicaragua in the project area. Although not formally linked to the proposed project, Nicaragua and Honduras are also implementing land administration projects with World Bank funding, which in both cases include components focused on indigenous land rights. These are the Honduras Land AdministrationProject (PATH) and the Nicaragua LandAdministrationProject (PRODEP). Inthe areaof environmentalinformationmanagement,theWorldBankis playing aleadingrole inMesoamerica. InNicaragua, the National Environmental InformationSystem (SINIA) is being supported under the Bank's Second Rural Municipalities Development Project. The Bank has played an important role in moving forward the agenda of the Mesoamerican Environmental Information System (SIAM), and i s currently supporting the hemispheric Inter-American Biodiversity InformationNetwork Project. Finally, this project falls within the overall framework of the Mesoamerican Biological Corridor (MBC). Since 1995, the Bank has been recognized as one of the key international players supporting the implementation of this concept through a number of national and regional projects stretching from Mexico to Panama. 3. Higher-level Objectives to which the Project Contributes The global objective to which the project contributes i s the conservation of the globally important biodiversity of the Coraz6n Reserve through more effective protection and through improved and more sustainable use of natural resources in the project area. As a higher-level objective, the Project also modestly contributes to poverty alleviation in these extremely poor areas of Honduras and Nicaragua. The proposedproject responds directly to the Operational Programs for Forest Ecosystems (OP3) and Mountain Ecosystems (OP4) within the biodiversity window of the GEF. The objective of OP3 i s the conservation and sustainable use of biological resources in forest ecosystems. The objective of OP4 i s the conservation and sustainable use of biological resources in mountain ecosystems. The proposed project, which strives to ensure the conservation and sustainable use of a large swath of tropical forest primarily located in mountainous terrain in Mesoamerica, i s fully consistent and complementary with the Forest Ecosystems and Mountain Ecosystems Operational Programs of the GEF. Emerging strategic priorities for the GEF are also reflected in the fundamental concept of the project, in particular the two main strategic directions of the GEF: Strategic Priority (SP) 1, Sustainability of NationalProtectedAreas Systems, and Strategic 3 Priority 2, Mainstreaming Biodiversity Conservation in Productive Landscapes. Approximately 18% of GEF funding responds directly to SP 1 and another 50% finances activities directly relatedto SP 2. Nicaragua's 2002-2005 Country Assistance Strategy focused on the four pillars of the Poverty Reduction Strategy Paper: (a) broad-based economic growth with an emphasis on productive employment generation and rural development, (b) greater and better investment in the human capital of the poor, (c) better protection for vulnerable populations, and (d) strengthening of institutions and good governance. These four pillars are intertwined with three cross-cutting themes: (a) reduction in environmental degradation and ecological vulnerability, (b) increased social equity, and (c) further decentralization. The proposed project specifically addresses rural development, protection of vulnerable populations, and reduction in environmental degradation and ecological vulnerability. The 2005 Interim Strategy Note focuses on a draft of a second- generation Poverty Reduction Strategy Paper, and on the National Development Plan 2005- 2009, which emphasizes environmentally sustainable growth for poverty reduction. The proposed operation's focus on sustainable productive activities, which foster local economic development, will contribute directly to these goals. Similarly, the Honduran Country Assistance Strategy reflects the six pillars of that country's Poverty Reduction Strategy Paper: (a) accelerating equitable and sustainable growth to levels consistent with the income poverty reduction targets, (b) reducing rural poverty, (c) reducing urbanpoverty, (d) enhancinginvestment inhuman capital, (e) strengthening social protection for specific vulnerable groups, and (0ensuring the sustainability of the strategy through governance and institutional reforms and enhanced environmental sustainability. The proposed project contributes to many of these objectives, including reducing rural poverty, strengthening protection for vulnerable groups, andenhancing environmental sustainability. The proposed project will also contribute to a broader effort by the Nicaraguan government to strengthen its National Protected Areas System (SINAP). Nicaragua i s currently preparing with the United Nations Development Programme (UNDP) a national GEF-financed project to strengthen its SINAP. The proposed Coraz6n Project has been designed to lay the groundwork for this effort through strategic investments to further decentralize protected areas management to local and traditional authorities, and to increasefinancial sustainability. Spanning a national border, an important higher-level objective of the proposed Coraz6n Project i s the improvement of binational coordination between Honduras and Nicaragua. Such coordination would not only be essential for the proposed transboundary reserve, but would contribute to bilateral and regional cooperation efforts, and especially to the operationalization and adoption of protocols for conservation, sustainable use, and sustainable economic development. 4 B. PROJECTDESCRIPTION 1. LendingInstrument The proposed project six-year project will be financed by a $12 million grant from the Global Environment Facility (GEF), partially blended with two World Bank operations: the $20 million Forests and Rural Productivity Project (PBPR) in Honduras and the $12 million Second Agricultural Technology Project (ATP-11) in Nicaragua. Approximately $16 million of the associated financing directly complements and leverages the GEF resources through closely coordinated planning and activities, and thus constitutes the main cofinancing of the proposed project. Government counterpart funding of $6.04 million, and Central American Commission on Environment and Development (Cornisidn Centroarnericana de Arnbiente y Desarrollo, CCAD) counterpart funding of $0.32 million will also be provided, for a total project cost of $34.36 million. 2. ProgramObjectiveand Phases The proposedoperation is not part of aphasedprogram. 3. ProjectDevelopmentObjectiveand Key Indicators The project development objective (PDO) i s to improve the national and binational management of the area of the proposed Coraz6n Transboundary Biosphere Reserve (CTBR), respecting the rights of traditional populations. This will contribute to a global objective of ensuring the long- term conservation of the heart of the Mesoamerican Biological Corridor, the largest contiguous area of natural habitat remaining in Mesoamerica, andperhaps the best hope for the maintenance of ecological dynamics and processesat a large ecoregional scale. The PDO will be achieved by: (i)improving binational coordination mechanisms and strengthening indigenous land rights; (ii) strengthening national protected areas systems, (iii) facilitating and updating protected areas management plans, and (iv) increasing local capacity through community-based natural resource management activities. These objectives will be achieved through five technical components focusing on: (a) improving binational coordination mechanisms and strengthening indigenous land rights; (b) strengthening the National Protected Areas Systems (SINAPs) and legal frameworks; (c) facilitating the updating and implementation of protected area management plans; (d) promoting community- basedmanagement of natural resources, mainstreaming biodiversityconservation into productive activities, and strengtheninglocal and indigenous governance structures; and (e) increasing inter- sectoral informationexchange. Annex 3 presents detailed information on results indicators and intermediate outcome indicators of the PDO. The three key indicators include: 0 The management effectiveness rating of the CTBR area improves from an estimated baselinerating of Poor (1) to Regular (2) using the ratings of the Regional Environmental Program (PROARCA) scorecard systeminuse in Central America. The baseline value i s 5 to be confirmed at a workshop within two months of project start-up. The GEF Protected Areas Tracking Tool values would also be revalidatedduring the same workshop. The % of indigenous residents inthe CTBR which participate fully inthe implementation of management plans for their respective protected areas increases to at least 75% by EOP (based on viewpoints of organizations representing local indigenous populations). 0 Deforestation rate o f core areas of the Reserve declines by at least 25% from the baseline value to be determined at project start-up (biannual measures to be made by the National Environmental Information Systems of each country). 4. Project Components The proposed project consists of six components which are detailed inAnnex 4. Each component i s financed by GEF grant resources, together with CCAD or government cofinancing; total component costs take into account GEF, government, and CCAD resources. See Annex 4 for an explanation of the project area, which varies by component activity. The project components are: 1. Consolidation of the Coraz6n Transboundary Biosphere Reserve (GEF US$0.79 million, Total US$0.72 million): Activities under this component will support the creation, consolidation, and strengthening o f binational coordination mechanisms for the Reserve area, permitting the involvement of all stakeholders inthe management of the area. This component include activities to advance the process o f landregularization in the Reserve area (though not to title or register lands), which is key to improving management of the protected areas. It also includes the establishment o f an independent conflict resolution mechanism for project-related disputes, and the formulation o f a final proposal to UNESCO for creation of the new transboundary reserve. Althoughdesirable, formal acceptance by UNESCO of the area's biosphere reserve status is not a prerequisite to implementing any part of the project. 2. Strengthening of the National Protected Areas Systems (GEF US$2.12 million, Total US$5.57 million): More than half' of the geographic area of the Honduran and Nicaraguan National Protected Areas Systems (SistemasNucionul de Areus Protegidas, SINAPs) i s included within the proposed Coraz6n Reserve, making the proposed project an appropriate vehicle for focusing on their national systems. In Honduras, an ambitious rethinking and restructuring i s underway o f the institutional structure for the effective day-to-day management of individual protected areas. This i s to fall under the responsibility o f the Honduran Protected Areas Fund (Fondo HondureAo de Areas Protegidus, FHAP), which the project will support. In Nicaragua, the project will similarly support a protected areas fund for the SINAP, as well as the creation o f compatible long-term financing mechanisms. The activities carried out under the Coraz6n Project are expected to lay the groundwork for a future UNDP/GEFproject, to further improve the SINAP of Nicaragua. These activities will help ensure the financial sustainability of the protected areas systems o f Nicaragua and Honduras, and therefore the sustainability o f the CTBR. 3. Implementation of Protected Area Management Plans (GEF US$2.73 million, Total US$3.61 million): This component will finance activities to help the protected area Nicaragua's SINAP covers 22,422 km2,or 17 percent of the national territory, in 75 protected areas. Honduras's SINAP covers 33,000 h2, or 27 percent of the territory, in98 protected areas. 6 administrations of Nicaragua and Honduras implement individual protected areas management plans, through a community-based co-management structure. Investments will include equipment and infrastructure, additional demarcation where necessary, strengthening of stakeholder groups, and updating and implementation support of management plans. Community participation supported through capacity-building and related subprojects to pilot stronger community participation in protected area co-management. Subprojects will be designed by the communities in order to facilitate their effective participation in the implementation of the management plan for their area. It i s not expected that the CTBR will have its own distinct management plan, but rather that it will benefit from coordinated management plans of its four constituent protected areas. 4. Community-Based Natural Resource Management (GEF US$3.56 million, Total US$4.23 million): This component focuses on community-level management of natural resources to mainstream biodiversity conservation into productive activities. This component will be jointly implementedwith financing from the partially blended World Bank projects which have similar goals. Communities will identify priority activities and design training programs to implement their own subprojects, with the support, as needed, of the subproject implementing agencies. Subproject proposals will be screenedby a national evaluation committee for compatibility with project objectives and priorities, contribution to the conservation of globally significant biodiversity, location in critical areas, complementarity with ongoing initiatives, capacity for implementation, and social and economic sustainability, among other criteria. The focus of these demand-driven, community-based subprojects will be the connection between natural resource management and local socio-economic development. Examples of potential financing lines include farm diversification with economic and nutritional goals; community ecotourism; community productive infrastructures; support to rural micro-enterprises for transformation, transport and marketing of agricultural products; agroforestry; reestablishment of production and commercialization of cocoa; establishment of native fauna farms and of controlled hunting areas; sustainable livestock raising and silvopastoral systems; support to the sustainable production, cultivation and marketing of medicinal plants; restoration of degraded areas and small watersheds; sustainable forest products extraction; development of ecological products and initiatives for socio-environmental certification; support to workshops of craftsmanship, goldsmith art, cabinet-making, and mechanics; support to craftmanship workshops; marketing of environmental services; and production of sustainable andrenewable energy sources. Indigenous groups living in and around the project area will be major beneficiaries of this component, as will traditional ladino communities. Inaddition to technical assistance focused on natural resources management, special emphasis will be placed on the institutional strengthening of local management structures. As the subproject proposals will be designed by the communities themselves, they will respond to the different profiles, priorities, and needs of each community and seek to address the issues ina manner which i s appropriate to that community. 5. Monitoring and InformationManagement (GEF US$0.99 million, Total US $1.09 million): This component will strengthenbiological monitoring programs for the entire project area. It will build on existing capacities at national levels (for example, the Nicaraguan National Environmental Information System [SINIA]), and at regional levels (for example, the Mesoamerican Environmental Information System [SIAM] and the Inter-American Biological 7 Information Network [IABIN]). This component will also support research programs, in particular traditional uses of biodiversity inproductive landscapes, and investments for informal and formal environmental education. 6. Project Administration (GEF US$1.80 million. Total US$3.03 million): This component will support the administration and operation of the proposed project. Activities will include project coordination; production of manuals, audits, financial management; design of a communications strategy for the program; a midterm review; and activities related to project closing. Other activities include publications, systematization of project information, project monitoring and evaluation (M&E),and sharingof good practices. Project M&E will be a primary responsibility of the national governments (and the Central American Commission on Environment and Development [CCAD] where binational activities are involved). Project-specific data (e.g. number of families benefiting from subprojects) will be managed by the project itself. Indicators specific to protected area management effectiveness will be managedby the protected area divisions of the respective environment ministries. Other indicators requiring landscape-level measurements(e.g. deforestation rates), will be measuredby the national S I N U S (or by the regional SIAM) using existing systems or taking advantage of project-financed support to the SINIAs. Fulldetails on the monitoring system will be included in the Operational Manual. 5. LessonsLearnedand Reflected inthe Project Design The proposed project builds on two previous World BanWGEF projects: the Biodiversity in Priority Areas Project in Honduras and the Atlantic Biological Corridor Project in Nicaragua. The former project closed in June 2005, and the latter in September 2005. Comprehensive reviews, closing reports, and compilations of lessons learned have been prepared and are available in the project files (see Annex 12). The main lessons of these projects have been incorporated into the project design. Key lessons include: In both countries, the importance of supporting legitimate indigenous land rights issues through projects became clear. It i s important to support not only indigenous organizations themselves, but also national governments as they tackle these difficult agendas. Although the proposed Coraz6n Project is not a land titling project, it would provide land regularization support to governments and indigenous peoples, as a complement to the Bank-financed land administration projects in Honduras and Nicaragua. 0 InNicaragua, a key lesson learned of particular pertinence to the proposed Coraz6n Project was the importance of decentralizing technical control of the project to local actors (in that case, those on the Atlantic Coast). The proposed project addresses this by giving the principal managementrole to the Technical Secretariat of Bosawas (Secretaria Tkcnica de Bosawas, SETAB) in coordination with the Bosawas National Commission (representinglocal stakeholders). 8 0 The situation is more complex in Honduras, with three protected areas and more institutional and ethnic heterogeneity, but the majority of project management will also be carried out from the Secretariat of Natural Resourcesand the Environment (Secretaria de Recursos Naturales y Ambiente, SERNA) and/or the Honduran Corporation for Forest Development (Administracio'n Forestal del Estado-Corporacidn Hondurefia de Desarrollo Forestal (AFE-COHDEFOR) offices in the Reserve area. Moving project managementand control to the most local levelpossible, while laying the groundwork for clarifying and strengthening the institutional arrangements at the national levels, is clearly incorporated into the project design. Other key lessons learned in Nicaragua relate to the importance of participatory processes, inter-institutional collaboration, and the importance of moderation indefiningproject objectives. Particularly with regards to Component 4, the project builds on the successful experiences of the Honduras Rural Land Management Project (Proyecto de Administracidn de Areas Rurales, PAAR). The PAAR Project was instrumental in piloting approaches for forest managementincorporating the rights of forest dwellers and communities, and implementation of forest management plans through community participation and outsourcing of technical and operational activities to community groups and the private sector. Subproject activities in the proposed Coraz6n Project will be co- executed with the ongoing Forestry and Rural Productivity Project (Proyecto de Bosques y Productividad Rural, PBPR) to ensure lessons learned are incorporated into this new project. In addition to lessons learned from previous GEF and World Bank initiatives, experiences from projects financed by other key donors such as German Technical Cooperation (GTZ), the Danish Ministry of Foreign Affairs (DANIDA),the UnitedStates Agency for International Development (USAID), and the European Union (EU) within the Coraz6n Reserve areahave helpedshape the design of the project. Further efforts will be needed in project implementation to continue sharing best experiences under the various donor-financed projects. 6. Alternatives Considered and Reasons for Rejection One option considered during project preparation was to design two separate national projects, one for Honduras and one for Nicaragua. However, it was decided that a binational project was preferable for several reasons. The Coraz6n Reserve area lies along the boundary between the two countries, andthere i s continuity inecosystemsand populations across the border. Creating a binational project supports a higher degree of coordination of policies and activities within the proposed binational biosphere reserve. A binationalproject also allows for the harmonization of management plans for the four protected areas, ensuring a more rational management of cross- boundary natural resources, more effective conservation of ecosystems, easier sharing of information, economies of scale, and learning opportunities. This integrated management structure does not imply a single plan for the reserve, but rather that it will benefit from a binational coordination and synchronization encompassing existing plans and activities. Strengthening the role of indigenous organizations in the cross-border management of these areas, traditionally under their management, i s also critical element possible under a binational project. 9 Another option considered during project preparation was to fully blend the proposed Coraz6n Project with the PBPR in Honduras and ATP-I1in Nicaragua. Fully-blended projects, as defined by the GEF, have combined budgets and project implementation teams; partially-blended projects have closely coordinated and possibly co-implemented activities in the field. The additional time required to prepare a GEF-financed project made partial blending a more attractive option because these other projects were ready to proceed, and could easily accommodate future partial-blending arrangements. A third option was to create a second phase of previous World BanWGEF projects in Nicaragua and Honduras rather than creating a new project. However, while the conceptual overlap of both the Atlantic Biological Corridor Project in Nicaragua and the Biodiversity in Priority Areas Project with the proposed Corazdn operation i s significant, there i s less geographical overlap. The Coraz6n Reserve, and the associatedproject activities, will include about 60 percent overlap with the previous project area in Honduras and 25 percent with the previous area in Nicaragua. Preparing a new project has also permitted the incorporation of a more innovative binational project design that would not have been possible if the proposed Coraz6n Project had been conceptualized as a secondphaseof existing projects. C. IMPLEMENTATION 1. PartnershipArrangements As its name suggests, the Coraz6n Reserve area lies at the heart of the Mesoamerican Biological Corridor (MBC), and much of the work of previous World BanWGEF projects in Honduras and Nicaragua has been done within the MBC framework. The partnership between the Coraz6n Project and the MBC initiative of the Central American Commission on Environment and Development (CCAD) will help ensure that the MBC principles of ensuring sustainable landuse and conservation in Mesoamerica are promoted. This project will also help sustain the initiatives supported under the recently-closed GEF-financed MBC projects in Nicaragua and Honduras (the Atlantic Biological Corridor and Biodiversity in Priority Areas Projects, respectively). Both projects were considered successful in building community and government support for the MBC concept and for the conservation of biodiversity in critical areas. The Coraz6n project will help strengthenand expandthis support. A second important relationship is that between the proposed Coraz6n Project and the existing binational initiative to create a Transboundary Biosphere Reserve. The proposal to establish this Biosphere Reserve was submittedjointly by the two countries to UNESCO in August 2004 and i s currently being revised for resubmission, and cross-border coordination mechanisms have been established. The proposed project will support this process, without being dependent on its outcome. The proposed project will be closely coordinated with GTZ and EU projects in Honduras. In Nicaragua, GTZ cofinancing i s also significant, as i s DanishEinnish support through their Programu de Apoyo Sectorial al Medio Ambiente (Environmental Support Project in Nicaragua), which includes support to Bosawas and to the National Protected Areas System (SINAP). To ensure coordination with other key partners that implement or may be implementing GEF- 10 financed projects in the future and with other key bilateral organizations, CCAD, with the support of the BinationalCommission, will play a critical coordinating role. 2. InstitutionalandImplementationArrangements The Recipient of the GEF grant for the proposed Coraz6n Project will be CCAD, representing the Ministries of Environment of Honduras and Nicaragua. CCAD has been specifically tasked inCentral America with the responsibility of fostering binational partnerships inprotected areas. The overall responsibility for project coordination and management, technical responsibility for binational activities, and fund management for binational activities will fall to the project administration and financial management units of CCAD, which have successfully executed the project preparation grant from the GEF. CCAD will manage nine percent of project funds for these binational and coordination activities. A Steering Committee will be formed to provide high-level guidance to the project. Composed of Ministers of Agriculture and Environment from each country, two members from the Binational Forum (see below; one from each country). Coordinated by CCAD, the Steering Committee will approve annual operational plans. The Presidents of Nicaragua and Honduras have announced the creation of a high-level Binational Commission for the long-term coordination of the Corazdn Transboundary Biosphere Reserve (CTBR) at a broader political level. Its creation i s pending and i s expected to take place in the first year of project implementation. It i s expected to act in an advisory function to this project. Provisionally, it i s expected to include three ministers from both Honduras and Nicaragua, together with representativesfrom civil society. The Binational Forum of "Indigenous Peoples, Ethnic Communities, Native Ladino Communities, Regional Authorities, and Municipal Authorities from the Honduras-Nicaragua Corazdn Reserve Area" has led the process over the last several years to have the Coraz6n area declared a reserve. The Binational Forum represents a wide range of civil sector interests, particularly including indigenous groups. Its role i s to represent their interests in issues related to the management of the Corazdn area. In this project funds are available to strengthen the Binational Forum through capacity building, support for meetings and communications, and insertion indecision-making structures, inorder to ensure that the Forumplays a strong role both inthe BinationalCommission and the Steering Committee, and as an independent advisory body to the project, Ninety-one percent of the grant funds will be managed nationally (45.5 percent in each country) by national financial administration units. InHonduras, grant resources will be administered by the project implementation unit of the ongoing, Bank-financed Forests and Rural Productivity Project (PBPR) under the Secretariat of Agriculture and Livestock (SAG), the project with which the proposed Coraz6n project i s partially blended. In Nicaragua, grant resources will be administered by the Financial Management Unit.of the Ministry of the Environment and Natural Resources(Ministerio del Ambiente y de RecursosNaturales, MARENA). InNicaragua, technical and administrative capacity will be providedby the Technical Secretariat for Bosawas (Secretaria Thu"ca de Bosawas, SETAB), which has been in operation for many 11 years as a mechanism for managing the diverse projects and initiatives underway in Bosawas. It i s institutionally a part of MARENA and chaired by the Minister, but includes all important stakeholders from the Bosawas Reserve. Technical project staff will be placed in two local SETAB offices in Bosawas. The Presidential Secretariat for Atlantic Coast Affairs (SEPCA, Secretaria Presidencial para Asuntos de la Costa Atldntica) and the Property Intendancy will sign an inter-institutional agreement with MARENA for the implementation of activities in Nicaragua under Component 1. SEPCA i s charged with coordinating the Government's role in titling of indigenousterritories inthe Atlantic and the Property Intendancy has responsibility for title registration, the only step that i s missing for the Bosawastitles. InHonduras, administrative and technical capacity will be providedby Catacamas, Palestina, and Wampusirpe field offices of the Secretariat of Natural Resources and the Environment (Secretaria de Recursos Naturales y Ambiente, SERNA) in coordination with the Honduran Corporation for Forest Development (Administracidn Forestal del Estado-Corporacidn HondureAa de Desarrollo Forestal, AFE-COHDEFOR), since the two institutions share responsibility for protected areas in Honduras. The National Agrarian Institute (INA, Instituto Nacional Agrario) and the Property Institute (P,Instituto de la Propiedad), will sign an inter- institutional agreement with the Secretariat of Finance (SEFIN, Secretaria de Finanzas), SERNA, and AFE-COHDEFOR for the implementation of activities in Honduras under Component 1. The Corazdn project i s partially blended with the Forests and Rural Productivity Project (PBPR) in Honduras and the Second Agricultural Technology Project (ATP-11) in Nicaragua. ATP-I1 is financing Bosawas field offices to be shared with Coraz6n Project, technological innovation and sustainable forestry development subprojects in the buffer zone of Bosawas, and government capacity building. This cofinancing i s worth an estimated $4.0 million. PBPR finances natural resourcemanagementsubprojects inthe buffer zones of the CTBR protected areas, support to the national protected area system (including seed funding for the patrimonial fund for protected areas), and promotion of regularization and agroforestry practices, for an estimated cofinancing of $12.0million. Coordination with the associatedATP-I1and PBPR projects will be achieved at several levels: at the political level, the two Ministries of Environment andAgriculture (the latter incharge of the associatedprojects) will be the government representativeson the Project Steering Committee; at a technical level both Ministries (and other institutions as needed) will be on the Binational Technical Committee to advise the project technically; at an operative level in each country the two projects will meet regularly to coordinate activities; and at a legal level, the agricultural ministries will sign the inter-institutional agreements for the project. In Honduras, the project implementation unit of the PBPR will administer the Coraz6n project funds, and will play a ' major role in the SINAPH and subproject components. InNicaragua the projects will be sharing offices inBosawas and coordinating on subproject programs. The Operational Manual spells out the details of these arrangements. Annex 6, including Figure A6.1, provides a more detailed explanation of institutional and implementation arrangements, and Annex 7 includes a detailed explanation of financial 12 managementand disbursement arrangements. The project's Operational Manual outlines inmore detail the responsibility of each actor. 3. MonitoringandEvaluationof Outcomes/Results A distinction is made betweenthe need for: (a) biological and socioeconomic monitoring of the CTBR itself, and (b) project monitoring. Monitoring of the CTBR i s accorded considerable importance in the project design. One of the components of the proposedproject i s MonitoringandInformationManagement. As described in more detail in Annex 4, the project will support the development of an efficient monitoring network, coordinated between the two countries, and will invest in information management through the NationalEnvironmental InformationSystems (SINUS). Monitoring of project-specific indicators of outcomes andresults will be derived inpart from the monitoring programs to be developed under the auspices of the two Ministries of Environment. These will be a responsibility of the project implementation units, under the general coordination of the CCAD project unit. The project will use both the World Bank-WWF Tracking Tool for Management Effectiveness and the Regional Environment Program for Central America (PROARCA, for its acronym in Spanish) system to measure protected area management effectiveness. Further information on indicators and information collection and interpretation will be collected and interpreted i s provided inAnnex 3. 4. SustainabilityandReplicability Nicaragua and Honduras are two of the poorest countries in the Western Hemisphere. Within them, the Coraz6n Reserve area representsa pocket of extreme poverty, populated by indigenous groups and subsistencefarmers. While the proposed project cannot solve all the problems of the area, it aims to improve the management of the reserve area and the national protected areas systems and promote better management of natural resources by local populations. The sustainability of these project outcomes will be assuredinfour ways. First,by strengthening the protected areas systems of Honduras and Nicaragua, the project will help ensure more effective, efficient, and rational management of all protected areas in the two countries in the long run, through the project's strong support to the National Protected Areas Systems (SINAPs). As the Coraz6n Reserve area accounts for more than half of the protected area in each of the two countries, strengthening the management and sustainability of the protected areas system as a whole will have a substantial direct impact on the CTBR. Second, by creating effective binational mechanisms for managing the Coraz6n Reserve, consolidating indigenous land rights, and harmonizing and fully implementing management plans for the Coraz6n Reserve, the project will help create a permanent framework for the conservation of biodiversity and sustainable use of natural resources in the reserve area. Third, the project will empower local populations and create long-termincentives for them to better manage the reserve area by: (a) focusing on the creation of environmentally friendly economic activities for communities within the Corazdn Reserve area, (b) promoting a greater awareness and appreciation of the value of natural resources, and (c) including local communities in the 13 management of the Coraz6n Reserve. Finally, the project will create and/or support mechanisms designedto secure financial sustainability for the protected areas systems of the two countries, including the Honduran Protected Areas Fund (FHAP) and a SINAP protected areas fund in Nicaragua. The proposed Coraz6n Project has substantial potential for replicability throughout the region, and perhaps in other parts of the world. In particular, two areas that are innovative for GEF operations in Latin America may be of interest to a diverse set of countries including: (a) political and institutional complexities inherent to binational conservation projects, and (b) strategies of simultaneously pursuing territorial rights issues of indigenous peoples and biodiversityconservation goals. 5. Critical RisksandPossible Controversial Aspects See the table below for the main risks which have been identified for the project. Only a few, considered inthe texts below, have beenidentifiedas a High risk. Some indigenous organizations seek reforms and advances in land ownership that may exceed what is likely to be achieved in the project area during the six-year project. There may thus be a risk of "underachieving" inthe eyes of some groups with unrealistic expectations of what canbe achieved in a single project or in a relatively short time. Extensive consultations with local communities during the preparation phase, and work in areas such as the process of land tenure regularization and income-generating activities, have addressed these concerns and led to more realistic expectations.This process will continue duringimplementation. The Coraz6n project will not exercise any direct control over the process of registration of titles in Bosawas. There is a High risk however of this process being slowed because of legal and institutional problems and this could undermine the support of indigenous peoples for the project. The World Bank, through PRODEP, is assisting the government to resolve outstanding problems. There i s a High risk that insufficient progress will be made on the creation of a protected area fund in Nicaragua. Although the government is committed to this end and it is being supported by the international community, slow progress in fund creation and pledging of a seed fund amount at least equivalent to the GEF contribution could make it difficult to disbursethese funds underthe Coraz6n project. Finally, the arrangements for the administrative management of the funds are complex and require the creation or consolidation of administrative capacity in three different units in three different countries. Each of the units has had its capacity assessed by the Bank and it has been determined that sufficient capacity exists, albeit in need of strengthening under the project. CCAD has extensive experience managing complex, multinational projects, including a Bank- financed multi-country project, and i s considered to represent a Medium risk. The PIU of the PBPR in Honduras i s also implementing Bank projects, but i s undergoing institutional changes and i s also judged to present a High risk overall. In Nicaragua, where the government has a policy of reducing dependence on PIUs, the administration of the project from MARENA's 14 Financial Administration Department (DAF, Departumento de Administrucidn Financiera) represents a High risk, as their financial and procurement capacity has been evaluated as low. However, the Bank supports MARENA's initiative to internalize project administration. To mitigate these risks, a high proportion of project funds (15 percent) are allocated to administrative costs (including capacity building), and it i s intended that these aspects will be closely supervised by the Bank during supervision. Summary of Risks Risk I Rating MitigationMeasures There are no terrestrial border disputes between the two countries although there are unresolved marine territorial disputes outside the project area. AssociatedProjects Ineffective Coordination with I M resDonsible for Coraz6n Droiect administration. INatural Resource I Management Subprojects Subprojects will not generate I L Global biodiversity benefits accrue from the long-term and global biodiversity benefits cumulative impact of the entire project within a complex legal, economic, and ethnic mosaic. NFW subprojects to benefit local communities are required for the overall project success. Conservation of biodiversity is one of the key criteria for selecting subprojects; another i s ensuring the locationi s not in environmentally sensitive areas. Insufficient differentiation and M Subprojects (Components 3 and 4) and capacity-building targeting for different activities (Component 1) will be designed by beneficiary beneficiary groups communities to address their own particular needs. Communication strategies will take into account different beneficiary characteristics. Indigenous & Land Issues Limited scope of project H Project scope has been amply consulted, clarified and agreed interventions may be upon with indigenous representatives. A communication strategy misunderstood in future leading for the project will be designed and implemented. to perceptions of "underachieving" Registration of titles for H Under the Bank`s PRSC and Land Project these issues could be indigenous territories in resolved in the short-term; inthe worst case scenario, registration Bosawas (Nicaragua) does not of titles i s not a precondition for any activity under Coraz6n take place Project . Land agencies in both countries M Such agencies will be signatories of the project's inter- are involved in and committed institutional agreements but effort will be needed to maintain this to actions undertaken under coordination. this project 15 Management of Protected Areas Unclear responsibilities in M Progress i s expected as PA funding shifts to the PA Fundand as Honduras between SERNA and the new government moves forward with pledges to resolve these AFE-COHDEFOR issues. The inter-institutional agreement outlines the roles of SERNA and AFE-COHDEFOR. The Operational Manualdetails training as necessary. Low administrative capacity in H PBPR unit has previously managed Bank projects but a capacity Honduras assessmenthas indicated weaknesses; an action plan will be agreed on by effectiveness. Low administrative capacity inIM 11The unit is currently managing Bank projects and has CCAD demonstrated capacity. However the procurement capacity of CCAD has been rated as low and an action plan will be agreed on by effectiveness. The overall riskfor the project has beendeterminedto be High. One controversial aspect of the project i s its binational nature. However, this i s also one of the most innovative and promising aspects of the project, and if the risks are indeed higher, the potential benefits of improved binational relationships are correspondingly high. The Binational Forum, Steering Committee and Binational Commission are designed to function in a complementary manner and will help ensure that the project i s implemented in a consistent, harmonious fashion. The second controversial aspect i s indigenous landownership. B y its nature, this topic is sensitive and controversial in both countries, but in extensive consultations the limited contribution of the proposed project has been clearly delineated and understood by indigenous organizations. In addition, both land projects of the World Bank in Honduras and Nicaragua are continuing to address at a larger scale issuesrelatedto indigenous land rights. 16 6. Grant Conditionsand Covenants Conditions of eflectiveness: Signature of the Tripartite Agreement between CCAD, Honduras, and Nicaragua and the linked inter-institutional agreements among the implementing and cooperating agencies inNicaragua and Honduras. Conditions of disbursement: i)disbursement of seed capital to the protected areas funds in Honduras and Nicaragua i s conditioned to the funds being established in form and substance satisfactory to the Bank. A protected area fund satisfactory to the Bank would have to be consistent with international standards in terms of the constitution of its governing board (including a requirement that the government does not exercise a control of the votes), intended use of the funds, minimal cofinancing, experience of its asset manager, choice of a financial institution in which to place funds, quality of operational manual or other operational instruments, and measures to ensure transparent operations; and ii)approval by the Bank of detailed guidelines for subproject and grant execution would be a condition o f disbursements for Community Co-management Subprojects, Natural Resource Management Subprojects, Research Grants,and Scholarship Grants. D. APPRAISAL SUMMARY 1. EconomicandFinancialAnalyses For a complete Incremental Cost Analysis, see Annex 15. 2. Technical See the detailed project description in Annex 4 and the Operational Manual for a full technical description o f all project activities. N o particular technical issues stand out as being problematic with this project. 3. Fiduciary CCAD maintains and manages an integrated management information system. Their project accounting system meets the Bank's fiduciary requirements and produces the financial statements required for achieving satisfactory project management. SAG, through the administrative unit for the Forestry and Rural Productivity Project (PBPR) and MARENA through their internal administrative unit will be responsible for financial management and procurement nationally. Both have adequate systems in place, and will hire additional financial management personnel based on the terms of reference included inthe draft Operational Manual. Their capacity i s considered to be adequate, although in need of strengthening under the project, particularly inNicaragua. The overall project risk for procurement and financial management i s consideredHigh. 17 4. Social Annex 10presents additional information on relevant Safeguard Policy issues. A full analysis of the social context of the Corazdn Reserve can be found in the Spanish language Social Assessment and the Indigenous Peoples Development Plan (IPDP) of the Recipient; an English- language executive summary of both documents may be found inAnnex 10. See also the detailed appendix on the preparation consultation process in the Operational Manual annex on Social and Indigenous Assessment. The proposed Coraz6n Reserve i s home to five indigenous or ethnic groups: Garifuna (approx. 6,000; Rio PlSrtano Biosphere Reserve); Miskito (approx. 54,000; Rio PlSrtano and Bosawas Biosphere Reserves); Pech (approx. 2,000; Rio PlAtano Biosphere Reserve); SumuMayangna (approx. 8,400; Bosawas Biosphere Reserve); and Tawahka (approx. 4,800; Tawahka Asagni Indigenous Reserve). There are thus about 70,000 indigenous or ethnic minority groups living within the Reserve area. Approximately the same number of mestizo settlers also live in the Reserve, with some families having lived inthe area for several generations and while others are recent arrivals. The total population of the municipalities that include some part of the reserve area i s approximately 250,000. While there are significant cultural differences among the groups living inthe proposed Coraz6n Reserve, the traditional inhabitants share many commonalities. Most still depend for survival on subsistence agriculture, hunting, and fishing. Agriculture i s often a family activity carried out on communally owned lands. Forests are typically managed for the perpetual use of the community. Levels of commercial activity are low and may include ecotourism and the production of coffee, cacao, latex, lumber, handicrafts, and gold. Low population densities, combined with traditional resource use practices and values that do not promote material accumulation, creates a relatively small likelihood of natural resources degradation. Among the greatest threats to these traditional communities are poverty, low socioeconomic indicators, a growing focus on material accumulation, rapid population growth, immigration pressures from surrounding areas, and a lack of legal land title. Under the proposed Coraz6n Project, special attention will be paid to the strengthening o f local binational and indigenous groups in order to allow them to take full advantage o f the benefits of the proposed project. Activities will be tailored specifically to the characteristics of each community by allowing them to lead the design of activities at a local level. There i s also a strong focus on facilitating the process o f land regularization-something critical to ensuring rational management of natural resources and reduced socioeconomic vulnerability. The project will support an independent conflict resolution mechanism, described indetail in the Operational Manual, including if needed the convening of a conflict resolution committee to resolve disputes stemming from project-related activities which the Binational Forum and Steering Committee have proven unable to resolve in a manner satisfactory to all parties. The committee would be composed of representatives o f third-party organizations acceptable to both the governmental and civil society representatives of the Steering Committee. Should potential areas of conflict be detected early, the committee could also be called on to suggest mitigatory measures. 18 Participation of local communities has been important at all stages of project design. Over 800 persons representing civil society, indigenous peoples, and other stakeholders participated in consultation meetings on project design from August 2004 to January 2006. An important development and a lesson learned during project preparation was the need to develop consensus among the disparate views of different indigenous groups. Over 45 representatives of all major indigenous and ladino stakeholder groups in both countries, as well as from CCAD, national governments, and the World Bank, met in Ocotal, Nicaragua in January 2006 to discuss the proposed Coraz6n project. At the end of this meeting, representatives of all stakeholder groups signed the "Ocotal Declaration" in support of the project. This document i s included in Annex 10. The lessons learned from this process, including the need to integrate stakeholders completely into the project, hold frequent consultations with all actors, and involve local actors in the decision-making structure, have been incorporated into the project design, making the project much stronger. Local actors, and especially indigenous groups, will continue to be an integral part of the project through implementation. Local stakeholders are represented by the Binational Forum. They will be particularly involved in the drafting and implementation of management plans and during selection and implementation of productive activities. Communities will also be instrumental incarrying out social and biological monitoring. 5. Environment Additional information can be found in Annex 10 on safeguard polices. The Recipient has prepared a stand-alone Environmental Assessment (EA), which includes an annexed Pest Management Plan. Though the affect of the project on the environment i s expected to be overwhelmingly positive, some minor negative impacts are possible, and include local impacts associated with natural resources management subprojects and perhaps associated with implementation o f some activities in the protected areas management plans. The project's environmental management plan in the Recipient's EA defines mitigating measures, with budget and institutional responsibilities for implementation and monitoring of the plan. 6. Safeguard Policies Safeguard PoliciesTriggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [ I Natural Habitats (OPBP 4.04) [XI [ I Pest Management (OP 4.09) [XI [ I Cultural Property (OPN 11.03, being revised as OP 4.11) [XI 11 Involuntary Resettlement (OPBP 4.12) [XI [ I Indigenous Peoples (OD 4.20, revised as OP 4.10)" [XI [ I Forests (OPBP 4.36) [XI [ I Safety o f Dams (OPBP 4.37) [ I [XI 19 Projects inDisputed Areas (OP/BP/GP 7-60)"" [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI OP = OperationalPolicy, BP = BestPractice, GP =GoodPractice,OPN= Operational Policy Note,OD = OperationalDirective. *This projecti s subject to OD 4.20 becauseit was underpreparationbeforethe approvalof OP 4.10. **By supportingthe proposedproject,the Bank does not intendto prejudicethe final determinationof the parties' claims on the disputed areas. The safeguard screening category of the project i s "S2". The project is classified as Category "B", requiring an Environmental Analysis but not a full-scale Environmental Assessment study. Inaccordance with OP 4.01, an EnvironmentalAnalysis has been carried out. Important findings and useful recommendations from the EA have been integrated into project design (see Annex 10). 7. Policy ExceptionsandReadiness The project meets the regional criteria for readiness for implementation. The fiduciary arrangements are in place as are adequate monitoring and evaluation capacity. The Environmental Analysis and all other Safeguard Policy Documents have been disclosed in the countries and are available at the Bank's InfoShop and on the CCAD website. 20 Annex 1:Countryand Sector Background CENTRAL AMERICA: Coraz6nTransboundaryBiosphereReserveProject Honduras and Nicaragua share more than a common border. Though the challenges each faces are unique, the socioeconomic situation and development challenges of these Central American neighbors are quite similar. Some of these pressing issues, like environmental protection, do not recognize political borders, makingjoint action even more important. Honduras After several decades of civilian and military authoritarian governments ended in the mid-l980s, Honduras has shown clear signs of becoming a mature and consolidated democracy. Despite definite advances in the political field, socioeconomic indicators lag far behind. With a gross national income per capita of just $1,020 per year in 2004, Honduras remains extremely poor. The Gini coefficient, showing income inequality, is a very high 0.6. The country has a population of 7,100,000 and a density of approximately 56 people per square kilometer (km2). Nearly two-thirds of the population i s considered poor; nearly half are identified as extremely poor. In rural areas, the situation i s even worse: over 70 percent of the population i s poor, and nearly 63 percent extremely poor. The precarious economic growth and development progress were interruptedin October 1998 by Hurricane Mitch, which extracted a heavy toll not only in terms of lives lost, but also an estimated $3.8 billion in direct and indirect economic losses, These losses were heaviest in rural areas. Though much of the infrastructure has been rebuilt, the economy has still not fully recovered. Nicaragua Nicaragua i s one of the hemisphere's poorest countries, with a low per capita income, flagging socioeconomic indicators, and huge external debt. It is also the largest and least-densely populated country in Central America, with a population of 5,600,000 and a density o f nearly 45/km2. The country suffered from decades of civil wars and social strife, with a succession of authoritarian governments in a sharply divided country. Since 1990, transitions of power have been peaceful, but years of conflict left their mark on the country's economy; gross national income per capita was estimated at just $790 in 2004, makingit the second-poorest nation in the Americas after Haiti. GNP per capita in the Atlantic Coast region i s under $450. It i s therefore not surprising that the Gini Index of the country, which measures inequality, is 55.9, one of the highest in the region. However, extreme poverty has been declining, from 19.4 percent in 1993 to 15.1 percent in 2001. Like in Honduras, rural extreme poverty i s higher, but has been decreasing more quickly than urban poverty, largely due to strong growth in the agricultural sector inrecent years. Nicaragua's economy has historically been based on the export of cash crops such as bananas, coffee, tobacco, and beef, and rum. Because o f this dependence on the agricultural sector, exacerbated by inadequate natural resources management and population pressures, Nicaragua i s extremely vulnerable to natural disasters. In addition to Hurricane Mitch, in the last decade the 21 country has suffered volcanic eruptions, earthquakes, a tsunami, and droughts. Despite relatively quick physical recoveries, these disasters, combined with trade shocks, have made economic growth and stabilization difficult. Environment,NaturalResources,andRuralDevelopment Honduras and Nicaragua both contain a wealth of biodiversity and natural resources, with ecosystems stretching from coral reefs off the Caribbean coast to mountainous tropical forests further inland. Included within this rich and diverse zone i s the largest and most important remaining area of tropical forest north of Colombia, which i s also home to five indigenous and ethnic groups: Tawahka, SumuMayangna, Pech, Miskito, and Garifuna. This area, which spans the HondurasNicaragua border, i s critical to protecting highly threatened habitats, important watersheds, and preserving biodiversity. Geographically and conceptually, it is the heart of the Mesoamerican Biological Corridor, a concept of conservation and rural development spanning the isthmusfrom southernMexico to Panama. The Coraz6n area is critical for species and ecosystem processes that are dependent on large areas of habitat. With natural areas increasingly fragmented in Mesoamerica, the Coraz6n Reserve i s already, or soon will be, the last refuge for many species in the region dependent on large areas. The global biodiversity importance of the region has also been recognized by institutions such as Conservation International and the World Wide Fundfor Nature. The proposed project area of 34,000 km2(3.4 million ha) along the HondurasNcaragua border contains four established protected areas: the Bosawas Biosphere Reserve in Nicaragua (20,000 km2or 2.0 millionha), the Tawahka Asagni Indigenous Reserve, PatucaNational Park, andthe Rio Pl6tano Biosphere Reserve in Honduras (with a combined total of 14,000 km2or 1.4 million ha), However, the existence of these protected areas has not been sufficient to protect the ecosystems and populations they contain from encroaching threats. Honduras has 98 protected areas, of which only 35 have a firm legal basis. The rest are protected through Presidential Agreement 1118-92. Almost all are severely understaffed and lack resources; many do not have basic information on size and limits. Currently, responsibility for managing protected areas in Honduras lies with the Honduran Corporation for Forest Development (Administracidn Forestal del Estado-Corporacidn Hondurefia de Desarrollo Forestal, AFE-COHDEFOR). Within COHDEFOR, specific responsibility lies with the Protected Areas and Wildlife Department (Departamento de Areas Protegidas y de Vida Silvestre, DAPVS). However, the Secretariat of Natural Resources and the Environment (Secretaria de Recursos Naturales y Ambiente, SERNA) i s responsible for natural resources and the environment, and for policies related to protected areas. In some cases, nonprofit, nongovernmental organizations (NGOs) manageindividual protected areas. InNicaragua, theMinistry of the Environment andNaturalResources(MARENA)is responsible for protected areas, and for environmental policy and natural resources. There are currently 76 protected areas in the country, most of which have adequate informationon size and boundaries. 22 As in Honduras, MARENA lacks the technical and financial resources to provide adequate management and protection to all protected areas. Inrecognition of these limitations, MARENA has expressed an interest in delegating some responsibility for the management and administration of specific protected areas to local governments and NGOs, while maintaining its regulatory role for environmental management. In the Atlantic region protected area (Bosawas, Reserva Indio Maiz, Cayos Miskitos, Wawashan, and Cerro Silva), international organizations play an important role inproviding financial and technical support. Other issues compound the problems caused by weak protected areas systems and a lack of capacity. The population of the Coraz6n Reserve i s extremely poor, mostly composed of marginalized indigenous groups and subsistence peasants.For ruralpopulations, issues related to access to basic resources such as land and forests, and to factors supporting production and marketing, have been identified as being amongthe principal determinants of poverty and social inequality. Migration has been an important phenomenoninthe Coraz6n Reserve area, and has significantly increased the challenges faced by residents. Settlers move from overcrowded lands in western Nicaragua and southern Honduras seeking more opportunities along an agricultural frontier, which i s leading to the destruction of remaining stretches of intact natural habitat inthe area. The agricultural practices of these settlers are not adequately adapted to the humidforests they settle in, resulting in high rates of land degradation. The conversion of the degraded lands into cattle pastures and small-scale mining operations further contributes to the transformation of forest ecosystems. This, when addedto increasing demographic pressures and a shift from traditionally sustainable land and resource use practices among native (indigenous and non-indigenous) populations, has placed ever-growing pressureson thesebiologically rich environments. Land Legalizing rights to land and natural resources are among the main priorities for indigenous peoples and ethnic groups living in the Coraz6n area in Honduras and Nicaragua. The International Labor Organization's (LO) Convention 169, drafted in 1989, states that the term "indigenous lands" should be conceived as the total environment of the areas that indigenous peoples occupy and use. It also calls for the participation of indigenous peoples in the use, administration, and conservation of natural resources contained in such lands. Honduras has made a high-level commitment through the ratification of L O Convention 169, but it does not have an adequate regulatory framework to recognize indigenous land rights. Nicaragua has created a regulatory framework to recognize indigenous rights and has embarked on concrete actions to ensure those rights in the six territories of the Bosawas Reserve. Nevertheless, an efficient mechanism to allow titling i s still missinginbothcountries. In Honduras, this proposed project is an opportunity for indigenous peoples and ethnic communities to analyze the existing regulatory framework, develop instruments for its implementation, and draft proposals for its improvement. In Nicaragua, this project can contribute to implementation of regularization processesinindigenous territories. 23 Honduras The Constitution of 1982recognizes the responsibility of the State to "establish measuresfor the protection of the rights and interests of the indigenous communities that exist inthe country and especially of the lands and forests in which they live."2 The Agricultural Sector Modernization and Development Law (Decree 31-92), passed in 1992, promised to title community land to indigenous communities for free, but this provision has been rarely applied. The new Property Law, passed in 2004, recognizes the right of indigenous peoples and ethnic groups to receive communal titles over the lands traditionally possessed by them, without eliminating the ownership rights of third parties that hold legal titles. The law has however not yet been regulated. In the past, land adjudication to indigenous communities has been done under the general agrarian reform laws. Nevertheless, there are contradictions between the agrarian reform laws and other regulations, especially those governing forest and environmental issues. The new Territorial Planning Law (Decree) passed in 2003, and the Forestry Law, currently being discussed in Congress, could provide a better policy framework toward the recognition of indigenous territorialrights. The Bank is supporting land regularization in Honduras through the $25 million Land Administration Project (PATH). This project was developed based on the experiences of the Bank's Rural Land Management Project. Among the main activities of the PATH Project i s the establishment of a National Property Administration System through legal, regulatory, and institutionalmeans. This system will include a NationalTerritorial Information System (SINIT), a Registry of Norms (RENOT), and the UnifiedRegistries System (SURE) and will be operated by public and private entities. The project finances preparation of policies and norms for the system, technological development, and institutional strengthening. A second focus is the incorporation of land parcels in the project area into the National Property Administration System. The project i s financing aerial photography, field surveying of macro boundaries such as intermunicipal boundaries, parcel-level surveying and validation, conflict resolution, regularization, titling, and mass registration into SINIT. PATH aims to cover different types of rural and urban land and a diverse cross-section of Honduran society including the rich and the poor; men and women; ladino, indigenous, and Afro-Honduran. As such, it i s financing the regularization of eight Miskito and eight Garifuna communities in the departments of Atltintida, Col6n, and Gracias a Dios. Miskito and Garifuna commissions (mesas de regularizacidn) have been created to socialize the project among the communities, adjust and validate the methodology for regularization, and provide social monitoring. None of the communities selected are included in the area covered by the proposed Coraz6n project. Nevertheless, the lessons learned from PATHin this area will contribute to the landregularization process for indigenous lands inthe Coraz6n area. The Corazdn project i s complementing the work done under PATH and extending its geographic reach into the area of the proposed Coraz6n Reserve. Specifically, Subcomponent 1.1 will complement the work being done under PATH by supporting the drafting of a governmental policy note outlining the strategy for the regularization of land in Rio Pltitano, Patuca, and Tawahka protected areas, as well as the participatory development of procedures to implement Chapter 111,Agrarian Reform, article 346. 24 this strategy and training to local communities in the legal and procedural aspects of the regularization process. Both the National Agrarian Institute (INA) and the Property Institute (IP), which share competency over land titling and registry issues, will jointly implement this subcomponent with SERNA andAFE-COHDEFOR. Nicaragua Nicaragua has made progress in formal recognition of indigenous land rights on the Atlantic Coast with the passage of the Autonomy Law (Law 28) and the Demarcation and Titling Law (Law 445), passed in 1987 and 2002, respectively. Although the Autonomy Law defines indigenous lands as inalienable, untransferable,unmortgageable, andimprescriptible, it has never been regulated and the recognition of indigenous lands has thus far taken place only under the normal agrarian laws, without any special regimen that integrates traditional usage and norms. Law 445 defines more clearly the rights of indigenous peoples over their land and natural resources, includingjoint management systems by the indigenous communities and the State for the administration of protected areas on communal lands. Law 445 mandated the creation o f (a) the National Commission for Demarcation and Titling (CONADETI) to lead the demarcation process and coordinate with government the issuing of titles; and (b) three Inter-sectoral Commissions for Demarcation and Titling (CIDTs) to receive and follow up the request for communal titling. The PresidentialSecretariat for Atlantic Coast Affairs (SEPCA) was createdin March 2004 by the Executive to coordinate all government activities in the Atlantic Coast, with special emphasis on the demarcation and titling of indigenous lands, and the strengthening of regional autonomous institutions and the entities establishedby Law 445. The Bank i s supporting the regularization of the six territories in the Bosawas Reserve through the $32.6 million Land Administration Project (PRODEP).3 The titling and registration of these territories i s also one of the requirements of the Bank's Poverty Reduction Strategy Credit. Among the activities supported by PRODEP are dialogue between government and civil society to establish a better and more sustainable foundation for policy, legal and institutional reforms; alternative conflict resolution mechanisms; an integrated Information System (SUCAR) at a departmental level; systematic parcel-based legal cadastral process in the three priority departments of Esteli, Madriz and Chinandega; demarcation and consolidation of existing protected areas in these three priority areas; (iii) an appropriately designed demarcation, titling and registration of 15 indigenous communities in the RAAN and RAAS; (iv) the processing of the backlog of titling requests in the reform sector and in the peri-urbanareas outside the three priority areas. Perhapsmost importantly, PRODEP has significantly improvedthe access to land administration services and land tenure security of the indigenous communities in the Bosawas reserve by providing financing and technical assistance to the entities created by Law 445, thus enabling them to complete the demarcation and titling of the indigenous territories. Five territories have been demarcated and received communal titles in May 2005, benefiting a total of 87 communities. Registration of the five titles in the Registry i s expected in 2006, once legal The six indigenous territories in Bosawas are: Miskitu Indian Tasbaika Kum (69,055 ha), Mayagna Sauni Bu (102,452 ha), Kiplu Sait Tasbaika (113,632 ha), LiLamni Tasbaika (103,632 ha), Mayagna Sauni As (166,800 ha), and MayagnaSauni Bas Sikilta (42,069 ha). 25 impediments to the registrationhave been solved. The sixth territory in Bosawas (Sikilta) i s still inthe phase of identifying third parties, given the complexity caused by overlapping landrights inthis territory. Although demarcation activities in Bosawas are completed, effective mechanisms to resolve conflicts with third parties need to be developed and implemented. The proposed Coraz6n Project will assist in this task. The precedent established by Bosawas will contribute to the improvement o f the legal framework established for this purpose and the definition o f a more effective mechanism to continue with regularization activities inthe rest of the Atlantic Coast. More specifically, Subcomponent 1.1will complement the PRODEP project in strengthening the technical capacity of local communities to advance the titling and registration o f the six indigenous territories in Bosawas. It will support regular meetings between local indigenous leaders and government officials responsible for the process of titling and registering the six indigenous territories inBosawas, provide training for local communities on legal and procedural issues related to the titling process, and facilitate negotiations with "third parties" through logistical support, conflict resolution aid, and legal aid. SEPCA, which coordinates land issues on the Atlantic Coast, and CONADETI, which i s responsible for demarcation and shares responsibility for titling, will be responsible for the implementation of this subcomponent in coordination with MARENA. For complete information on the ethnic, social, and environmental characteristics of the Reserve area, as well on the legal framework and status of indigenous territories within the CTBR, please see the Environmental Assessment and Social and Indigenous Assessment prepared for the project. Country Assistance Strategies(CASs) The Nicaragua and Honduras CASs reflect in greater detail the development priorities and strategies of the national governments and their World Bank counterparts. Nicaragua's 2002-05 CAS focuses on the four pillars outlined inthe country's Poverty Reduction Strategy Paper: 0 Broad-based economic growth with an emphasis on productive employment generation and ruraldevelopment 0 Greater and better investment inthe humancapital of the poor 0 Better protection of vulnerable populations 0 The strengthening of institutions and good governance. These four pillars are intertwined with three cross-cutting themes: 0 A reduction inenvironmental degradation and ecological vulnerability 0 An increase insocial equity 0 Further decentralization. The 2005 Interim Strategy Paper summarizes four strategic areas included in the draft National Development Plan 2005-2009: 26 0 Economic growth for poverty reduction (including environmentally sustainable growth) 0 Humancapital development and social protection 0 Productive and social capital infrastructure 0 Governance and state reforms. The Honduras CAS focuses on the six pillars of that country's Poverty Reduction Strategy Paper: Accelerating equitable and sustainable growth to levels consistent with the income poverty reduction targets 0 Reducing rural poverty 0 Reducing urban poverty 0 Enhancing investment inhuman capital Strengthening social protectionfor specific vulnerable groups Ensuring the sustainability of the strategy through governance and institutional reforms and enhanced environmental sustainability. The proposed Coraz6n project addresses many of these development pillars and their associated objectives. Stimulating rural development and reducing rural poverty, both objectives of the proposed Coraz6n Project, are primary focuses of the two CASs. Improving property rights, a primary focus of the proposed project's work in indigenous areas, i s an objective of Pillars I, 11, and IV of Nicaragua, and Pillar I1of Honduras. Reduced ecological vulnerability and enhanced environmental sustainability are also primary objectives of the Nicaragua and Honduras CASs. Through the consolidation of protected areas systems, better management of natural resources, facilitation of access to environmental information, and promotion of sustainable income- generating activities, the Coraz6n Project will contribute to these objectives. Addressingthe Issues This project seeks to address many of the challenges faced by Honduras and Nicaragua through an innovative binational initiative with global implications. Its primary objective i s to improve the local and binational management capacity of the Coraz6n Transboundary Biosphere Reserve (CTBR) by strengthening the protected areas systems of Honduras and Nicaragua; establishing operations, management, and monitoring strategies for the protected areas included in the reserve; and working with local communities to ensure that these populations participate in, and benefit from, the creation of the reserve. At the same time, it will help promote sustainable development options for poor populations (including indigenous, Afro-Caribbean, and mestizo groups) through the identification o f alternative income-generating activities, community- managed sustainable forestry, and improved agricultural practices. 27 Annex 2: Major Related ProjectsFinanced by the Bank and/or other Agencies CENTRALAMERICA: Coraz6n Transboundary BiosphereReserveProject This proposed Global Environment Facility (GEF) project is partially-blended with two projects for which Honduras and Nicaragua are borrowing funds from the World Bank: the $20 million Forestry and Rural Productivity Project (PBPR) in Honduras and the $12 million Second Agricultural Technology Project (ATP-11) in Nicaragua, which falls under the umbrella of PRORURAL, a government Sector-wide Assistance Program (SWAP) supported by many donors. The Coraz6n Project will closely coordinate investments with these projects in community-level managementof naturalresources, particularly forestry resources. The opportunity to prepare a partially-blended operation with the ATP-I1 and PBPR projects represents a significant mainstreaming opportunity for the GEF. The previous GEF operations in both countries were complemented by World Bank operations focusing on root causes of biodiversity loss, which were effective to some degree, but reduced GEF leverage because the projects were for the most part implemented in different areas of the country (on the Pacific Slope in Nicaragua and in Olancho in Honduras). The current proposal involves much more direct collaboration and cofinancing. Already project preparation workshops in both countries have resulted in significant mainstreaming of biodiversity and conservation concerns into the World Bank operations, representing important progress in incorporating biodiversity concerns into the forestry and agricultural sectors in Honduras and Nicaragua. For more information on the partially-blended projects, see Annex 4. Although not formally linked to this GEF proposal, Nicaragua and Honduras are also both implementing land administration projects with the World Bank, which in both cases include components focused on indigenous land rights. Both Honduras and Nicaragua have agreed with the World Bank on Poverty Reduction Strategy Papers and are preparing associated Poverty Reduction Support Credits to target their poorest areas, including those included in the Coraz6n Project. Withinthe overall framework of the MesoamericanBiological Corridor, Honduras completed the implementation of the GEF Biodiversity in Priority Areas Project in June 2005 and Nicaragua closed the Atlantic Biological Corridor Project in September 2005. These World Bank- implemented (co-implemented by UNDP in Honduras) GEF-financed projects have been important in establishing the MBC conceptually, in working with indigenous peoples, and in consolidating the protection of key protected areas. This proposed new World BanWGEF project builds on the advances of these projects and geographically overlaps to some degree. Approximately 60 percent of the Coraz6n Project area was included in the previous project area inHonduras; overlap inNicaragua is about 25 percent. Inboth countries, the new project builds on major advances inworking with the indigenous populations of the Coraz6n area. The World Bank and the IDB have prepared the Regional Integrated Ecosystem Management in Indigenous Communities Project. Duringpreparation, discussions were held to ensure that they will be well-coordinated initiatives. Becausethe regionalindigenous project will be implemented over the entire Central American region, it will have few resources available for any given area. 28 However, the Regional project will contribute in a very important way to development of institutionalandmethodological aspects of the Coraz6n Project. As was mentioned earlier, the Corazdn project is coordinating closely with the PATH project in Honduras and the^ PRODEP project in Nicaragua on the implementation of subcomponent 1.1, which focuses on support to the regularization of land rights. For more information on these projects and the coordination with the Coraz6n project, please see Annex 1. Coordination has been ensured with GEF-financed projects implemented by other agencies. In Honduras, the government i s working with UNDP and the International Fund for Agricultural Development (FAD) toward implementation of a project, which in part will be implemented in the areas adjacent to the Plitano Reserve. The World Bank works closely with UNDP in Honduras (the two institutions co-implemented the previous Honduras MBC project, the Biodiversity in Priority Areas Project) and they have coordinated the development of these two projects. The FAD project does not propose to work on protected area issues or on forestry issues, but in some thematic areas there will be opportunities for joint initiatives. UNDP i s also the GEF implementingagency for an ongoing regional M B C Project, executed by and with political support of the Central American Commission on Environment and Development (CCAD), based in Managua, which provides an institutionalbasis and framework for many of the innovative investments planned under the Coraz6n Project. The Regional MBC project focuses on transboundary areas, and the support of this regional UNDP/GEFproject has beenimportant to bothHonduras andNicaragua inthe development over the last few years of the concept of the Coraz6n Reserve. The proposed Coraz6n Project will be able to build on the UNDP project's advances and experience inthe area of fostering binational cooperation. The Ministry of the Environment and NaturalResources (MARENA)inNicaragua i s preparing a proposal to the GEF to support the strengthening of the National Protected Areas System (SINAP). It is envisioned that under the Coraz6n Project, initial support will be provided to a restructuring of the SINAP, with a particular focus on decentralization and deconcentration mechanisms. A UNDP/GEF operation will focus a larger amount of funds and more specific attention on the sustainability of the overall SINAP. Finally, Tables A2.1 and A2.2 mention only a few of the many projects inthe huge area of the Coraz6n that are being financed by NGOs and bilateral donors. Some of these projects are large and represent many years of experience inthe region. The Corazdn Project will have to coordinate closely with many of these projects if it i s to achieve its objectives. This i s particularly true of the investments of German Technical CooperatiordGerman Cooperation Bank (GTZ/KfW) inthe Rio Platan0 Biosphere Reserve (RPBR) inHonduras and of the DanisWinnishEnvironmental Support Project (PASMA) inNicaragua. It i s proposed that during implementation, efforts be made to carry outjoint planning of operational plans for each year, at the very least, with these two large interrelated projects, but also with many other important projects. 29 + of T B a n i i ProjectsUnder Prepara ionor Implem ntation Amount Financer Project I Country Latest IP Latest DO z ID Rating Rating Million) I Forests and Rural World Bank PO64914 Honduras Moderately Productivity SatisfactoryI Satisfactory (PBPR) Second World Bank PO87046 Nicaragua Satisfactory Satisfactory Agricultural Technology 7 Project + Regional PO75219 Central Satisfactory Satisfactory Integrated America Ecosystem Management in Indigenous Communities Land 38.47 World Bank PO56018 I Nicaragua Moderately Administration Satisfactory Satisfactory Project (PRODEP) Land PO55991 Honduras Highly Administration Satisfactory Project (PATH) Second Rural 31.08 World Bank Satisfactory Satisfactory Municipal Development Project Buildingthe 6.0 GEF Satisfactory Inter-American Biodiversity Information Network (IABIN) Project IP = ImplementationProgress, DO = Development Objective. 30 Table A2.2. Other Major RelatedProjectsinthe Coraz6nReserve Area Name Amount Financier Years Start Country (US$ Date Million) Environmental Support Program 2.5 DANIDA/FINNIDA 5 2006 Nicaragua (PASMA) Proyecto Zona Norte 14.0 EU 5 2001 Nicaragua PRRAC FOSED 6.0 EU 5 2002 Nicaragua Manejo Sostenible de Recursos 6.0 GTZ 5 2005 Nicaragua Naturales y Foment0 de Salvador, Nicaragua, Costa Rica, y Panama 31 Annex 3: ResultsFramework and Monitoring CENTRAL AMERICA: Corazdn Transboundary BiosphereReserveProject ResultsFramework PDO ut Ind Use of Outcome Information [mproved national and binational - Management effectiveness To varying degrees, the measured management of the proposed rating for the area of the indicators are subject to influence Coraz6n Transboundary combined protected areas of the from the proposed project or from Biosphere Reserve area, CTBR improves from an the suite of related WB respecting the rights of traditional estimated baseline of 1(Poor) (to investments. Less-than-expected populations. be measured during the first 2 improvements inthe management months of the project) to 2 of the CTBR will trigger (Regular) (using Central interventions in policy and will American PROARCA system) by require changes in the end of project (EOP). management regime. If overall - The % of indigenous residents deforestation of core habitats is inthe CTBR which participate not beingslowed, the project's fully in the implementation of overall orientation would need to management plans for their be reviewed at the midterm respective protected areas review. increases to at least 75% by EOP (based on viewpoints of organizations representing local -indigenous populations). Deforestation rate of core areas o f the Reserve declines by at least 25% from the baseline value to be determined at project start-up. Results Indicators for Each Component 1: Component 1: Component 1: CTBR consolidated, and - Percentage of the management Failure to meet targets o f inter- strengthened with binational activities (as measured by $ cost) institutional coordination and institutional mechanisms that inthe four protectedareas of the binational coordination would guarantee adequate coordination. CTBR that i s coordinated through indicate systemic coordination joint Annual Operating Plan issuesthat would need exercises or other effective strengthening under the project coordination mechanisms and strengthened commitments increases from an estimated from governments and local baseline of about 10% (to be actors. measured at first harmonization , workshop) to 80% at EOP. Component2: 2: Component 2: National Protected Areas Systems -Component Overall effectiveness rating of The overall strength and strengthened politically, management of the two SINAPs effectiveness o f the National financially, technically, and based on the annual country Protected Areas Systems will to a administratively. reports to CCAD's Central large degree be beyond the American PROARCA system sphere o f influence of the project, improves by EOP. butfailure to at least improve in this area would trigger a reassessmentof government and international donor priorities. 32 ResultsIndicatorsfor Each Use of ResultsMonitoring Component Component3: Zomponent3: lans for the CTBR . Effectiveness rating of Less-than-expected nanagement of each individual improvements in any given effectively implemented with rea (excluding the RPBR) using protected area will trigger a local participation. 2entral America's PROARCA reassessmentof the allocation of xotected areas scorecard project resources and an .ncreasesfrom an Ineffective evaluation of area-specific aatingto a Moderately Effective problems that are perhaps not :ating. being adequately addressed through management plans and project activities. Since the project will not be prioritizing the Rio Platan0 Reserve in Honduras for on-the-ground investments, it i s not included in this indicator, but will be targete under harmonization investments. Component4: Component4: Component4: Local communities mbre - In communities targeted by Any unexpected delays in sustainably managing natural subproject components, number reaching goals of sustainable use resources. of families benefiting from own- o f natural resources and how managedexternal investments in subprojects are managed would sustainable naturalresources require analysis to determine the management increasesby 3,000 cause (land titling problems, by EOP. marketing, organization, etc.) an' would allow for fine-tuning of project investments and perhaps those of related projects. Component5: Component5: Component5: Monitoring and information - Percent of field data from The effectiveness of Corazdn management capacity of National biological and socioeconomic monitoring programs will be a Environmental Information monitoring programs that are measure not only of local Systems strengthened and integrated into coordinated and monitoring programs but also of benefiting management needs of accessible databaseincreases the level of integration, national: the CTBR. from 5% (estimated baseline and binationally, of the SINIAs. value) to 75% by EOP. Component6: 6: Component6: Project administered efficiently. -Component Project management system Any failures inproject working efficiently, according to administration would require World Bank rules and national coordinated corrective measures and CCAD requirements. To be taken between CCAD, the World measured by output indicators Bank, and the national such as audits, disbursement governments. reports, reports, etc. 33 s n 0 b" s e, e, s e, > n0 9 m 0 P 0 m m %0 Bm 4 4 9 9 9 h c % 3 -l + c h B 3 3 5+ iD --I-- 2 x $3 E 3 I- 9 i -s0 2 d m PROARCAMonitoringSystem At a 1997workshop of CentralAmerican experts, the RegionalEnvironmental Programfor CentralAmerica (PROARCA, for its acronym in Spanish) developed a comprehensive methodology for measuring the management effectiveness of protected areas. Honduras developed its national version of this system in2000; Nicaraguafollowed suit in 2001. The seven Central American countries have maintained common indicators and standards which allow them to contribute comparable data to the Central American Protected Areas System (SICAP, also for its acronym in Spanish). The PROARCA methodology involves the identification of objects to be conserved. Information i s then compiled for indicators that measure how well each object i s conserved, and a final score category i s assigned. Categories range from Poor to Very good. I Indicator values I Cateeorv I >=3.75 Each evaluated protected area i s then assigned a value from 1to 5, based on a system that weights the different indicators. Value indicated for protectedarea Description 5 The ecological integrity of the protected area i s ina desirable ecological state, requiring little human intervention for the maintenance of natural ecosystems. 4 The ecological integrity of the protected area i s within an acceptable range of variability, although some human intervention may be required for maintenance. 3 The ecological integrity of the protected area (and therefore some of the conservation objects and their key ecological attributes) is outside the acceptable range of variability and requires human intervention for maintenance. Ifno follow-up is performed, the object of conservation will be iulnerable to severe degradation. 2 Ifthe ecological integrity is allowed to stay inthis category, in-thelongtermit will make the restoration or prevention of the disappearance of this object of conservation practically impossible (e.g., complicated, costly, and with little certainty of reversing the alteration process). 1 The evaluation has not been carried out, so it i s possible that the objects of conservation, and therefore the protectedarea, are in a critical state. 35 A full description of the PROARCA methodology and rating systemcan be found at http://www.proarca.org/p-apmlO.html. While a decision was made by the countries to measure management effectiveness usingtheir own PROARCA system, inorder to be consistent with existing monitoring initiatives and agreements inHonduras, Nicaragua, and the rest of Central America, the World Bank-WWF Tracking Tool for Management Effectiveness will also be measured annually and reported to the GEF. 36 Annex 4: Detailed Project Description CENTRALAMERICA: CorazdnTransboundary BiosphereReserveProject Global Objective The global objective to which the project contributes i s the conservation of the globally important biodiversity of the Coraz6n Reserve through more effective protection and through improved and more sustainable use of natural resources in the project area. As a higher-level objective, the Project also modestly contributes to poverty alleviation in these extremely poor areas of Honduras and Nicaragua. Project Development Objective The Project Development Objective (PDO) o f the Coraz6n Transboundary Biosphere Reserve (CTBR) Project i s to improve the national and binational management of the CTBR area, respecting the rights of traditional occupants. The future Coraz6n Reserve extends in Honduras from the Rio Platan0 Biosphere Reserve through the Tawahka Asagni Indigenous Reserve and Patuca National Park, to the Bosawas Biosphere Reserve in Nicaragua. Honduras and Nicaragua jointly submitted a proposalto UNESCO inAugust 2004 to form the CTBR. Biosphere reserves are mosaics of ecosystems that are nominated by national governments and recognized by UNESCO. They have core, buffer, and transition zones, allowing them to fulfill conservation, development, and logistic functions. Productive, educational, research, and recreational activities are permitted in the buffer and transitional areas, while only research, monitoring, and traditional extractive activities are allowed in the core zones. The superimposition of a UNESCO transboundary biosphere reserve on existing UNESCO biosphere reserves (Rio Platan0 and Bosawas Reserves) does not change the status or importance of existing reserves, but serves to further consolidate their recognition as globally important areas, and serves as a tool to strengthen management of all included areas. The improved management of the Coraz6n Reserve will c6ntribute to a strengthening of the protected areas systems of the two countries, enhancement of biodiversity conservation within the Reserve, improvement of the community management of natural resources, and improved management o f environmental information. From a biological perspective, this Reserve i s the largest and most important remaining area of natural habitat in Central America. It i s also home to important indigenous and ethnic groups, notably the Tawahka, Pech, SumuMayangna, Miskito, and Garifuna, some of the most vulnerable populations in Honduras and Nicaragua, and the project aims to consolidate their traditional rights on these territories. Furthermore, as an area spanning a national border, the Coraz6n Reserve represents an important opportunity to support binational cooperation and integration. It is likely that the improved conservation of biodiversity in the Coraz6n Reserve, along with stronger and more efficient Natural Protected Areas Systems and UNESCO recognition, will attract additional national, international donor, and private funds to Honduras andNicaragua, and especially to the reserve itself. This increased willingness to pay for conservation i s an important additional benefit of this project. 37 I Project Components The Coraz6n Project is composed of six components, each of which i s divided into subcomponents and lines of action. Each line of action i s divided into specific activities. The following sections contain details to the level of lines of action. Detailed information at the activity level can be found in the implementing agency's Operational Manual. The total component cost includes GEF, government, and CCAD funding. For details on the contribution of non-Global Environment Facility (GEF) financing to the total component costs, as well as the cofinancing providedby the partially-blended IDA projects, see Annex 5, Table A5.2. 1. Consolidation of the Corazdn Transboundary BiosphereReserve (GEFUS$0.79 million, Total US$0.82 million) The bulk of the future CTBR i s in areas traditionally occupied by indigenous peoples, and their support of the reserve concept is a necessary condition for its establishment. In both Nicaragua and Honduras, legal recognition of ancestral land rights needs to be strengthened, a process that will be supported in this Project. This component also supports the process of proposing a UNESCO-recognized CTBR, and improved management and coordination of the reserve area. A first subcomponent will supportprogressinNicaraguaandHonduras towardthe recognition of ancestral land rights of indigenous peoples (see also a background text in the Social and Indigenous Assessment, annexed to the Operational Manual). In Honduras, this subcomponent will support the drafting of a governmental policy note outlining the strategy for the regularization of land in Rio PlAtano, Patuca, and Tawahka protected areas, as well as the participatory development of proceduresto implement this strategy. The subcomponent will also provide training to local communities in the legal and procedural aspects of this regularization process, so that they can be full participants. INA and IP, in coordination with SERNA, will be responsible for developing governmental policy andprocedures to regularize indigenous lands in protected areas in coordination with local populations. These activities will complement and expand the geographical reach of work beingdone underthe Bank-financed PATHproject. InNicaragua, the subcomponent will support regular meetings to exchange views between local indigenous leaders and government officials responsible for the process of titling and registering the six indigenous territories in Bosawas. It will also provide training for local communities on legal and procedural issues related to the titling process, and facilitate negotiations with "third parties" through logistical support, conflict resolution, and legal support. Community proposals for support will be approved by a committee composed of technical staff from MARENA, SEPCA and CONADETI to ensure that the proposals are coordinated with other initiatives inthe area and consistent with the overall titling process. This work will complement the work of the Bank-financed PRODEP project in titling the five territories andin seeking registration for those titles. The second subcomponent will finance the creation and/or consolidation of binational coordination mechanisms for the reserve area at the political, technical, and civil society levels, promote strong public participation in the management of the reserve area, and strengthen the 38 legal framework for the binational area. During project preparation, major stakeholders recognized the need to create an independent conflict resolution mechanism to resolve potential conflicts created by project activities. As such, the project will support an independent conflict resolution committee to be composed of representatives of third-party organizations acceptable to both the governmental and civil society representatives of the Steering Committee. The conflict resolution committee will be established to resolve disputes stemming from project- related activities which the Binational Forum and Steering Committee have proven unable to resolve ina manner satisfactory to all parties. Should potential areas of conflict be detected early, the committee will also be called on to suggest manners for mitigating disputes. The final subcomponent will support further needed actions to complete the establishment of the Reserve, which is expected to happen by the first year of the Project. An initial petition to create the Biosphere Reserve was submitted to UNESCO by Nicaragua and Honduras in August 2004, and further actions are now taking place as part of the creation process. The official acceptance by UNESCO of the Reserve proposali s considered strategically important, but any unanticipated delay in officially recognizing this status for the project area in no way precludes carrying out any of the activities anticipated under the Project or planned by the two countries. Thus the formal establishment of the CTBR i s not considered a necessary prerequisite for any project activity, or of project output. Subcomponents and lines of action for this component include: 1.1.Support to the Regularization of LandTenure: 0 Participatory development of procedures for the regularization of land tenure in the CTBRprotectedareas (Honduras) 0 Development of local capacity in indigenous territories for the regularization process (Nicaragua) 1.2. Efficient Binational Coordination Mechanisms for the CTBR: 0 Binational Commission and Steering Committee 0 Binational Forum and other civil society organizations 0 Binational Technical Committee 1.3. Recognition of the Coraz6n Transboundary Biosphere Reserve by UNESCO: 0 Interactionwith UNESCO and other international organizations 0 Binational dissemination andpromotion of the Reserve declaration In addition to the GEF funding, CCAD will contribute $34,000 towards the binational management of the area. This cofinancing will be largely in the form of staff time provided by the Executive Secretary of CCAD, andtechnical staff. 2. Strengthening of the National Protected Areas Systems (GEF US$2.12 million, Total US$5.57 million) The Coraz6n Reserve constitutes an extensive area, representing well over half the total area of the two countries' protected areas systems. A project focused on the Coraz6n Reserve i s thus an 39 appropriate vehicle for addressing systemic issues in the sustainability of the protected areas systems of both countries. This component aims to promote the establishment of financial and administrative mechanisms, policies, and legal frameworks, and to ensure the sustainability of the National Protected Areas Systems (Sistema Nacional de Areas Protegidas, SINAPs) of Honduras and Nicaragua. Currently, the budgetary and personnel allocations of the national governments are insufficient for the management of the SINAPs and are being reduced, provoking deterioration in the protected areas and limiting their conservation and development potential. In Honduras, the previous World Bank/GEF project and the Rural Land Administration Project have supported a proposal for a Protected Areas Fund (Fondo HondureHo de Areas Protegidas, FHAP).The Fundwas officially created inFebruary 2005, but the decree creating it needs to be reformed, which this project will help to achieve. Project funds will be contributed to the patrimonial fund of the FHAP (jointly with the Forestry and Rural Productive Project, from which the government of Honduras has designated additional seed funds to be directed to the patrimonial fund). They will also support the strengthening of the Fund itself, the consolidation of fund management and operational procedures and structures, and contributions to proposed reforms for the SINAP and the transition to this new framework. InNicaragua, much remains to be done in addressing issues of financial sustainability, private sector participation, and co-management. The activities carried out under the Coraz6n Project are expected to lay the groundwork for a future UNDP/GEF project, to further improve the SINAP of Nicaragua. InNicaragua, work under the Coraz6n Project will focus primarily on supporting the decentralization of the SINAP and the strengthening of long-term financial instruments. The proposed Coraz6n Project will support the strengthening and capitalization of a protected areas fund for the SINAP, assuming at least an equal contribution from another source, and annual meetings between indigenous groups and fund management. Government cofinancing will stimulate the creation of complementary long-term financing mechanisms. Subcomponents and lines of action for this component include: 2.1. Modernization of the Nicaraguan SINAP through Support to Management and Policy Instruments: 0 Natural resources management instruments 0 Sectoral planning instruments 0 Decentralization instruments at the regional, municipal, and local levels. 2.2. Establishmentof Financial Sustainability Mechanisms for the Nicaraguan SINAP: 0 Strengthening and capitalization o f a SINAP protected areas fund and associated financial sustainability mechanisms, to complement the investments of the DanisWinnish Environmental Support Project in Nicaragua (Prograrna de Apoyo Sectorial a1Medio Ambiente, PASMA) 40 2.3. Modernization of the Honduran SINAP: 0 Improved management of the SINAP 2.4. Support to financial sustainability mechanisms for the Honduran SINAP: 0 Strengthening, consolidation, and capitalization of the Honduran Protected Areas Fund (FHAP) In addition to the GEF funds, $3.3 million of cofinancing from the government of Honduras is included under this component. These are the funds the government i s investing in the FHAP in close coordination with the Corazdn Project, and were deposited in February 2005 in the patrimonial fund of the FHAP (the government allocated resources from the World Bank's Poverty Reduction Strategy Credit). The government of Nicaragua will also be contributing approximately $418,000 to the modernization and decentralization of their SINAP. The total component financing also includes an estimated $4 million PBPR will spend on strengthening the S N A P inHonduras and on contributions to the FHAP. 3. Implementation of CBTR Protected Areas Management Plans (GEF US$2.73 million, Total US$3.61million) The objective of this component i s to harmonize and implement management plans within the four constituent protected areas of the Corazdn Reserve. These plans are the operational tools for the participatory management of the Reserve. The recently closed GEF Nicaragua Atlantic Biological Corridor financed management plans for areas in the Mosquitia adjacent to Bosawas Reserve, and GTZ and USAID have financed management plans in the Bosawas Biosphere Reserve. In Honduras, the recently closed World BanWGEF Biodiversity in Priority Areas Project has financed management plans in the Tawahka Indigenous Reserve and the Patuca National Park, and GTZ has done likewise inthe Rio Pliitano Biosphere Reserve. However, in the absence of this project, the plans would be implemented in isolation, and in most cases would not have sufficient funding to permit the execution of all but the most basic activities. B y harmonizing these plans, the project will help ensure a more rational management of cross-boundary natural resources, more effective conservation of ecosystems, easier sharingof information, economies of scale, and learning opportunities. This component will also help the respective protected area administrations of Nicaragua and Honduras to implement the plans, through a community-based co-management structure. This integrated management structure does not imply a single plan for the reserve, but rather that it will benefit from a binational coordination and synchronization encompassing existing plans and activities. Strengthening the role of indigenous organizations in the management of these areas, traditionally under their management, i s a critical part o f the Project. Of the four protected areas, the Rio Pliitano Biosphere Reserve (RPBR) benefits from the most funding support from non-GEF sources. German Cooperation (GTZ and KfW) is in the process of beginning its next phase of support to the RPBR, which i s expected to provide an amount of financing about equivalent to the entire funding of the Corazdn Project. Therefore, under the 41 GEF Coraz6n Project, the highest priority in Honduras for the actual implementation of management plans will be accorded to the Tawahka and Patuca areas, and this Project will not directly support the RPBRunder this component, if being financed by other sources. Subcomponents andlines of action for this component include: 3.1. Harmonization, Updating, and Implementation of Protected Areas Management Plans: 0 Updating of the management plans for the four protectedareas (including indigenous territories) 0 Disseminationof management plans and consensus buildingwith stakeholders 0 Implementation of the management plan programs incoordination with local authorities 0 Strengthening of regional, departmental, and municipal capacity to implement management plans 0 Monitoringof the implementation of the management plans 3.2. Strengthening Community, Indigenous, andCivil Society Participationinthe Implementation of Management Plans: 0 Evaluation of administrative and organizational capacity to participate in co-management activities 0 Promotion of community participation 0 Subprojects to promote co-management activities In addition to GEF funding, the governments of Honduras and Nicaragua will contribute an additional $88,000 to the implementation of the updated protected areas and indigenous territory management plans. The associated PBPR project also includes an estimated $1.5 million for management plan related activities that have been included here as cofinancing. 4. Community-based Natural Resources Management (GEF US$3.56 million, Total US$4.23 million) The goal of Component 4 is to contribute to improving the living conditions of indigenous and mestizo communities in the project areas, through the conservation and sustainable use of natural resources. The specific objectives are: (i) to strengthen local capacities for natural resource management, and (ii) to finance and support community initiatives related to natural resource management in order to enhance local economies, access to markets and the wellbeing of the population. The main beneficiaries are local communities and grassroots organizations that aim at engaging in conservation and sustainable use of natural resources in the Reserve and buffer areas. Other relevant actors will be indigenous federations, municipalities, NGOs, service providers and agencies in charge for management o f protected areas and rural development. The component will be highly participatory, will pay priority attention to gender and generational equality, will aim at generating local environmental leaders and will support productive initiatives at the community level. 42 This component will give local organizations and communities control to create initiatives that fulfill the needs of local people while benefiting the global environment. Through the design of subprojects and of complementary capacity-building modules, the proposed project will assist local organizations in filling gaps in capacity they have identified as critical for improved management of natural resources, and will support community-designed and implemented subprojects that will strengthenthe managementof natural resourcesinthe reserve area. The subprojects will include a diverse array of themes designed to meet the needs of target communities; initial lines of financing are listed below. These activities will focus on the integration of sustainable technologies into production techniques, provision of technical assistance and training to community groups so that they can comply with relevant protected areas management norms and regulations, extension of technical assistance, and assistance with marketing. All activities will be in accordance with usage permittedunder relevant management plans; any forest activities will be carried out only inthe buffer zones of the Reserve. Subprojects proposals will be assessed by a national evaluation committee composed of representatives from both government and civil society. Subproject proposals will be screened for compatibility with project objectives and priorities, contribution to the conservation of globally significant biodiversity, location in critical areas, complementarity with ongoing initiatives, capacity for implementation, and social and economic sustainability, among other criteria. The project will exclude activities that have negative ecological impacts and risks, projects that do not contain at least 30% of women among the direct beneficiaries (except when sufficientlyjustified) and the financing of activities and works with religious, political, military or security purposes. Subprojects will be assigned a score based on the established criteria, and rankedaccordingto this score. Subproject programs will be implemented by organizations with proven experience in executing similar subproject or small grants programs, and will be closely monitored by project staff. This monitoring will inform the adjustment of selection criteria, implementing mechanisms, and so forth, as necessary. The subcomponent will also finance activities for awareness of the subprojects scheme, evaluation of subproject proposals and monitoringof the Component. This component will be closely linkedandjointly implemented with major cofinancingfrom the two associatedWorld Bank projects with similar natural resource management goals. The focus will be on the management of natural resources, training, and provision of assistance through subprojects, and on environmental education efforts promotingbiodiversity conservation and the sustainable use of biodiversity. Subcomponentsand lines of action for this component: Subcomponent 4.1. Local Governancefor NaturalResourcesManagement: 0 Training of local organizations in natural resource management, such as municipalities, women groups, community committees and cooperatives 43 Scholarships, of two types: (i) technical training on environmental sciences or rural development for the community youth, in nearby centers and universities, for a limited period; and (ii) participation of community members in technical and organizational trainingcourses Contracting technical staff in each country to support the implementation of the Component Subcomponent 4.2. Community Subprojects This subcomponent will finance community-based subprojects that promote natural resource management through local socio-economic development. Examples of potential financing lines Farmdiversification with economic and nutritional goals Community ecotourism Community productive infrastructures (e.g. granaries, marketplaces, village docks) Support to rural micro-enterprises for transformation, transport and marketing of agricultural products (seed capital +technical assistance) Agroforestry Reestablishment of production and commercialization of cocoa Establishment of native fauna farms andof controlled huntingareas Sustainable livestock raising and silvopastoral systems (inbuffer zones) Support to the sustainable production, cultivation and marketing of medicinal plants Restorationof degraded areas and small watersheds Sustainable forest products extraction Development o f ecological products and initiatives for socio-environmental certification Support to workshops of craftsmanship, goldsmith art, cabinet-making, and mechanics Support to initiatives for marketing of environmental services Production o f sustainable and renewable energy sources The total cost for this component includes an estimated $67,000 that will be spent b y the two governments as counterpart for activities related to the management of natural resources. This includes direct costs that will accrue to the governments for the implementation and supervision of the subprojects. The associated PBPR and ATP-I1projects will implement an estimated $10.5 million incomplementary naturalresource management activities inthe project area. 5. Monitoringand Information Management (GEFUS$0.99 million, Total US$1.09 million) Effective management of the Coraz6n Reserve and the protected areas systems of both countries requires effective monitoring and management of environmental information. This component seeks to ensure the continued monitoring of the Coraz6n Reserve through harmonized monitoring systems, to create an information-sharing relationship with national and international 44 environmental systems, and to support scientific research promoting better natural resources management. To ensure socioeconomic and biological monitoring, training and equipment are needed, and systematic and harmonized methodologies must be established and implemented. Information management activities will coordinate with and be based on existing programs at national levels (for example, the Nicaraguan National Environmental Information System [SINIA]), and at regional levels (the Mesoamerican Environmental Information System [SIAM] and the Inter-American Biological Information Network). Research to promote better use of natural resources will also be supported in order to further project objectives. The Nicaraguan SINIA has been supported for several years under the World Bank's Second Rural Municipal Development Project and by other initiatives, including national funds. It i s the best example of a functional environmental information network in Central America, with a strong focus on decentralized nodes, monitoring indicators at national and municipal levels, and information sharing between sectors (http://www.sinia.org.ni). The corresponding SINIA in Honduras i s very weak; the current project will be able to provide only minimal support in launching this network. On a regional scale, the SLAM covers all of Central America and i s managed by CCAD. It i s managed out o f a central node in Panama with different functions decentralized to Central American countries. Benefiting from extensive support of the National Aeronautics and Space Administration (NASA) and the World Bank, there are many remote sensing tools and applications at the Mesoamerican Environmental Information System (Sistema de Infomacidn Ambiental Mesoamericano)/Central America Monitoring and Visualization System (Sistema de Monitoreo y Visualizacidn para Mesoamerica) (SIAMISERVIR) (the geospatial node of SIAM) that will be usedto help monitor landscape-level monitoring data of the Coraz6n Project. Finally, the Inter-American Biodiversity Information Network (IABIN) i s a hemispheric network dedicated to the promulgation of standards for biological information and its effective use. It i s currently being strengthened by a World Bank/GEF project (http://www.iabin.net). Subcomponents and lines of action for this component include: 5.1, Biodiversity and Social Monitoring System Incorporated and Linked to Information Systems: 0 Harmonization of monitoring indicators and criteria among protected areas 0 Creation of human capacity and infrastructure needed for monitoring 0 Information collection 0 Strengthening of national capacity to manage information generated inthe CTBR 5.2. Promotion of Scientific Biodiversity Research inthe CTBR: 0 Establish strategic partnerships with the national and international research centers 0 Design and implementation of small grants program for research 0 Promote exchanges betweenindigenous communities on traditional knowledge 45 5.3. Promotion of Environmentally Friendly Views and Actions: 0 Implementation of environmental education strategy ineach country In addition to GEF funds, $47,500 will be contributed by the governments of Nicaragua and Honduras, and $45,000 by CCAD in the form of technical information and studies, maps, images, staff time, and website space and services. 6. Project Administration (GEFUS$1.80 million; Total US$3.03 million) This component supports the effective and efficient administration and operation of the Coraz6n Project. This includes both administrative functions such as the drafting of manuals and periodic reports, financial and procurement functions, and technical oversight for the project as a whole. Because o f the trilateral nature of the project, this component has been divided into three subcomponents. Subcomponents and lines of action for this component include: 6.1. Project Administration (CCAD): 0 Establishmentand operation of CCAD's coordination unit 0 Promotion of project sustainability and synergies with other projects, including design of a project communication strategy 0 Monitoringand evaluation system 6.2. Project Administration (Nicaragua): 0 Establishment and operation of the Nicaraguan project implementation unit 6.3. Project Administration(Honduras): 0 Establishment and operation of the Honduran project implementationunit InadditiontotheGEFfinancing,the governments ofNicaraguaandHonduraswillcontribute an estimated $986,020, and CCAD an estimated $239,000, inin-kindfinancing o f the project coordination and administration costs (personnel and office and logistical costs). Project Area Each component has a slightly different geographic focus. Table A4.1 summarizes the different areas of activity for each technical component, as well as the institutions responsible for their implementation. On-the-ground investments such as implementing management plans and the natural resource management subprojects do not prioritize the Rio Plitano Biosphere Reserve (RPBR) in order to ensure synergy with existing GTUKfW investments in that area. If the Steering Committee later chooses to prioritize some investments inthe RPBR, this could be done as part of the process of preparingeach year's implementation plan. 46 Table A4.1. Areas of Activity and InstitutionalResponsibilitiesfor TechnicalComponents Subcomponentfocus SUB- RESPONSIBLE Entire CTBR Core Zones Buffer COMPONENT COMP INSTITUTIONS Country Rio Plitano, Patuca, Zones ONENT Patuca, Tawahka, Patuca, Tawahka, Bosawas Tawahka, Bosawas Bosawas 1. Consolidation 1.1 HN: SERNN Minor Major of Reserve COHDEFOFUIP/ INA NI: MARENA-SETAB/ SEPCNOTR 1.2 II CCAD II I Maior - 1.3 I CCAD I HN:SERNA/AFE I I Maior I - I N1:MARENA-SETAB 2. SINAPs 2.1 1I N1:MARENA-DGAP 1I Maior 2.2 NI:MARENA-DGAP Major 2.3 HN: Maior SERNNCOHDEFOR 2.4 II HN: SERNN Maior II COHDEFOR HN:AFEI SERNA Minor Major Minor ~~ 3. Management 3.1 Plans NI: MARENA-SETAB, DGAP 3.2 Binational Forum Major Minor HN: SERNN COHDEFOR NI: MARENA-SETAB, DGAP 4. Community 4.1 BinationalForum Minor Natural Resource HN: SERNN Management COHDEFOR NI: MARENA-SETAB -i 4.2 Binational Forum I I Minor NI.MARENA-SETAB I 5. Monitoring/ 5.1 II CCAD IIMinor I Maior IMinor Information HN: SINIA-SERNN Mgmt. NI. SINIA, MARENA- SETAB,yDGAP. 5.2 IIIHN:SERNNIHAH 1Minor Maior NI: MARENA-SETAB. I II " I 1 DGByRN,DGAP I 5.3 II HN: IMinor I Major SERNNCOHDEFOFU Ministerio de Educacidn 1 NI: MARENA SETABlMunicipalities I 47 Associated Projects The Coraz6n project i s partially blended with two World Bank projects, Forests and Rural Productivity (PBPR) in Honduras and ATP-I1 in Nicaragua. These projects have been designed inparallel, with objectives and strategies that are complementary. The incremental Cost Analysis in Annex 15 explains in detail the financial contributions of the PBPR and ATP-I1projects. As part of an effectiveness condition, a detailed coordination agreement will be signed with the institutions implementing the two associated projects; their project operational manuals will be revised accordingly. The project activities will be cofinanced in Honduras by work done under the PBPR Project. Approximately $4 million from PBPR i s earmarked for coordinated activities aimed at strengthening the National Protected Areas System o f Honduras. This includes support for the decentralization o f protected areas management, implementation of a protected areas fund, development of policies and norms for environmental services payments, strengthening of community co-management and AFE-COHDEFOR's supervision using co-management, technical assistance for changes to legal and institutional frameworks, and the development of economic activities supporting conservation. Technological, methodological, and organizational/administrative training will also be provided to key government promoters working with communities in the Coraz6n Reserve area. Finally, PBPR includes $300,000 to be added to the FHAP's PatrimonialFund. The partially-blended project in Honduras will also promote activities supporting the implementation of management plans in the protected areas incorporated within the Coraz6n Reserve. Approximately $1.5 million will fund implementation activities in the Tawahka Asagni Indigenous Reserve and Patuca National Park. Activities include the rehabilitation and improvement of visitor and research centres and interpretive trails, where appropriate; maintenance of the demarcation of protected areas boundaries; and training to local staff and communities to develop better management structures. In technical terms, their most important contribution is to Component 4, where GEF-financed activities are closely coordinated with other activities financed by PBPR and ATP-11. PBPRAssociatedActivities Approximately $6.5 million from PBPR in Honduras will finance community natural. resources management activities of relevance to project objectives in the Coraz6n Reserve area. This includes technology transfer through private technical service providers and training in new technologies, methodologies, organization, and administration. Other activities include the facilitation of access to alternative funding, and design of other financial mechanisms to fund productive activities; marketing and commercialization assistance, especially for small forest producer groups; forest fire prevention and control; watershed management planning and implementation; and forest pest management and control. The PBPR will also support the regularization of traditional land rights through the delimitation of areas, census o f forest occupants and users, socioeconomic diagnostics and consultations, andregularizationprocesses. 48 ATP-11Associated Activities In Nicaragua, the Coraz6n Project will be associated with the Second Agricultural Technology Project (ATP-11), which will start operations in late 2006. Their cooperation will concentrate on Bosawas Reserve. Although the projects have different technical approaches (ATP-I1 aims at providingcommunities with broader access to natural resource management and innovations and to strengthening agricultural public sector institutions, while the Coraz6n Project works with conservation agencies and supporting community-driven development), they share a common interest incatalyzing rural, agricultural and indigenous economies, as well as in providingtested and adapted technologies to communities that are socio-economically marginalized. In terms of collaboration and synergies, it i s worth noting that the actions under the ATP-I1 Extension subcomponent will be highly valuable inthe training and subproject activities of component 4 of Coraz6n Project, with the main focus of reducing the advance of the agricultural frontier and manage the buffer zones of the Bosawas Reserve, and that the support of ATP-I1 to public extension services in the North Atlantic Autonomous Region (MAN) will blend with Corazdn Project's support to Bosawas ladino and indigenous communities. The operational process of technical assistance competitive funds under ATP-I1 will also harmonize with the subproject cycle under component 4 of Coraz6n Project. In order to accomplish coordination and collaboration, inter-institutional mechanisms between ATP-I1 and Coraz6n Project have been established, including joint work at the field office in Siuna (where both projects will have representatives) and coordination on an institutional level. 49 Annex 5: Project Costs CENTRALAMERICA: Coraz6n Transboundary Biosphere ReserveProject Table A5.1 summarizes the financing for the Coraz6n Project, from all sources. Table A5.2 presents a more detailed summaryof the GEFfinancing. Table A5.1. Project Financingfrom all Sources* US$ Million Project Cost By Component andlor PRO- Total Activity GEF Govt. CCAD PBPR RURAL 1)Consolidation of the Corazdn 0.79 0.03 0.82 Transboundary BiosphereReserve 2) Strengtheningof the SINAPs 2.12 3.45 4.00 9.57 3) Implementation of ProtectedArea 2.73 0.88 1S O 5.11 ManagementPlans 4) Community-Based NaturalResource 3.56 0.67 6.50 4.00 14.73 Management 5) MonitoringandInformationManagement 0.99 0.05 0.05 1.09 6) Project Administration 1.80 0.99 0.24 3.03 Total Project Costs 12.00 6.04 0.32 12.00 4.00 34.36 *Note: all numbers are rounded. For details on the precise sources of the financing and what they will be used for, consult Annex 4 on Detailed Project Description. CCAD cofinancing, and government cofinancing, is in-kindexcept for $0.25 million in counterpart funding inNicaragua and $0.11million in counterpart financing in Honduras. ($3.0 million from the Government of Honduras for the FHAP is also direct funding). Beneficiary cofinancing of subprojects is included under the national cofinancing totals. 50 Table A5.2. Project GEFFinancing (US$ Million) Pro.jectCost By Component and/or Activity Local Foreign Total (1) Consolidationof the Coraz6nBiosphere 0.77 0.02 0.79 Reserve 1.1Support for Land Regularization Process 0.35 0.00 0.35 1.2Binational Coordinationof the CBTR 0.32 0.01 0.33 1.3 Recognition of the CBTR by UNESCO 0.10 0.01 0.11 (2) Strengthening of the SINAPs 2.00 0.12 2.12 2.1 Modernizationof the Nicaragua SINAP 0.51 0.03 0.54 2.2 NicaraguaSINAP Financial Sustainability 0.49 ' 0.03 0.52 Mechanisms 2.3 Modernizationof the HonduranSNAP 0.28 0.03 0.31 2.4 Honduras SINAPFinancial Sustainability 0.72 0.03 0.75 Mechanisms (3) Implementationof ProtectedArea 2.63 0.13 2.73 ManagementPlans 3.1 Management PlansUpdated, Harmonized, Implemented 0.85 0.10 0.95 3.2 Community ParticipationinManagement 1.76 0.03 1.79 Plan Implementation (4) Community-basedNaturalResource 3.54 0.02 3.56 Management 4.1 LocalManagement of Natural Resources 0.68 0.02 0.70 4.2 Community NaturalResource 2.86 0.00 2.86 Management Subprojects (5) MonitoringandInformation 0.84 0.15 0.99 Management 5.1 Biodiversity and Social Monitoring 0.53 0.08 0.61 System 5.2 Promotionof Biodiversity Researchin 0.12 0.06 0.18 CBTR 5.3 Biodiversity-Friendly Practices Promoted 0.19 0.01 0.20 (6) ProjectAdministration 1.72 0.0s 1.80 6.1 CCAD 0.39 0.08 0.47 6.2 Nicaragua 0.65 0.00 0.65 6.3 Honduras 0.68 0.00 0.68 Total ProjectCosts 11.49 0.51 12.00 Note: all figures are rounded. 51 Ninety-one percent of GEFfunds will be managed by Honduras andNicaragua (45.5% in each country) for activities of national scope. For binational and overall coordination activities, CCAD will manage 9% of grant funds. A complete breakdownof project funds at the level of activities has been included inthe project's Operational Manual. 52 Annex 6: ImplementationArrangements CENTRALAMERICA: CorazdnTransboundaryBiosphereReserveProject Several principles guided the design of the institutional and implementation arrangements (illustrated in Figure A6.1), including the need for a balance among binational and national roles and capacities, sustainability objectives, and emphasis on a decentralized implementation, with special attention to strengthening the roles and capacities of the local governments and participatingcommunities. InstitutionalArrangements Although the Comisidn Centroamericana de Ambiente y Desarrollo (CCAD) will be the Recipient of the Grant, the Coraz6n project will be implemented in a tripartite arrangement by: (a) CCAD, which will implement binational activities and be responsible for oversight of the project as a whole; (b) in Nicaragua, national activities will be implemented by the Ministry of the Environment and Natural Resources (MARENA); and (c) in Honduras, the Secretariat of Natural Resources and the Environment (SERNA) will have this responsibility, in coordination with the Honduran Corporation for Forest Development (Administracidn Forestal del Estado- Corporacidn Hondurefia de Desarrollo Forestal, AFE-COHDEFOR). (For clarity, financial flow arrangements are illustrated in a separate figure, Annex 7 Figure 7.1.) In Honduras the administration of project resources will be delegated to SAG, through the project implementation unit of PBPR. Additional information on institutional arrangements, including detailed responsibilities, can be found in the Operational Manual. A tripartite agreement will be signed among CCAD and the governments of Honduras andNicaragua to formalize these arrangements as well as national inter-institutional agreements as needed. Following i s further information on the role ,of each major actor in the implementation of the project. BinationalCommission The concept o f the Binational Commission was announced on June 30,2005 by the governments of Honduras and Nicaragua to facilitate the binational coordination of the Coraz6n Reserve area. The proposed membership of the Binational Commission includes the Ministers of Environment, Agriculture, and Foreign Relations for Nicaragua and Honduras, and civil society representatives from the Binational Forum, and CCAD. The Commission will be responsible for promoting cooperation and coordinating the integration of the CTBR zone in order to assure the conservation and sustainable use of the protected areas that constitute the reserve, and the ecological connectivity between the areas, and seek benefits for the human populations in the zone and contribute to the conservation of cultural and ethnic values. CCAD was asked by the Presidents of Nicaragua and Honduras to take the lead on forming the Binational Commission. 53 ..I \ \ 1L t The Binational Commission i s not expected to be definitively constituted by the start-up of the Project and so has no precise roles defined for this project. Once in existence however, the Commission i s expected to make strategic, policy-level decisions for the Reserve area, and help ensure the consistency of projects and programs active in the Coraz6n Reserve. As such, the Commission i s expected to be important to ensuring that the Coraz6n project i s well placed within the Reserve's broader framework, and to help facilitate the establishment of synergies and partnerships with other initiatives. The Commission i s expected to meet at least twice per year, or as needed. CCAD will provide the Secretariat for this Commission, including the meeting agendas and follow-up actions. SteeringCommittee By not later than three months after signature of the Grant Agreement, and as it will be provided for in the Tripartite Agreement, a project Steering Committee will be formed to provide oversight to the Project. It will be constituted by four members of the Binational Forum representing indigenous peoples and civil society (one indigenous and one civil society representative from each country) and Ministers of Environment and Agriculture (the latter being responsible for the associated project in each country) from each country. CCAD will coordinate the Steering Committee. The Steering Committee will approve an annual strategic work plan, ensuring a strong voice of civil society and indigenous organizations inmajor decisions under the project, and a strong role for the major governmental players. It will also review annual project progress reports. As needed, it will play a policy advisor role on an ad hoc basis throughout the life of the project. The Steering Committee will meet once a year. BinationalForum The Binational Forum i s an independent forum with broad representation among stakeholders in the Coraz6n Reserve area. Translated into English, the full name of the organization is the "Binational Forum o f Indigenous Peoples, Ethnic Communities, Native Ladino Communities, Regional Authorities, and Municipal Authorities from the Honduras-Nicaragua Corazdn del Corredor Bioldgico Mesoarnericano Transboundary Biosphere Reserve". This Forum has been important inensuring a voice for indigenous peoples and other civil society groups in guidingthe process leading to the petition to UNESCO for the nomination of the Biosphere Reserve, and in the preparation of this proposed project. The continued participation of the Binational Foruminthe project, including reviewing proposed activities and work plans, commissioning needed studies, providing technical advice, and monitoring progress, will be vital during project implementation. The project itself will provide substantive support and capacity buildingto the Forum. As the most representative organization of civil society interests in the Coraz6n area, the Forum will play a particularly important role as an interlocutor of the Project. However, this does not preclude coordination mechanisms being created with other groups that, for whatever reason, may not be included in or represented by the Forum. 55 BinationalTechnicalCommittee The Binational Technical Committee will be convened by CCAD at least semi-annually to provide technical advice to the project. It will include representatives of the Binational Forum, the principal governmental institutions with responsibilities for some aspect of project implementation (including the Ministries of Environment and of Agriculture, which are responsible for the associated projects) and others as determined on an ad hoc basis. The Binational Technical Committee will participate in the formulation of the Annual Operating Plans, monitor the execution of these plans, establish synergies with the associated projects, assist in the preparation of project reports, and provide technical inputs to the Steering Committee. CCAD CCAD will be the Grant Recipient and an executing agency for the binationalinvestments of the Coraz6n Project. The technical and supervisory capacity of CCAD has been reinforced by other complementary initiatives, including the GEF Mesoamerican Barrier Reef System Project (World Bank) and the GEF Mesoamerican Biological Corridor Project (UNDP).The Project will provide some strengthening to CCAD. CCAD will be responsible for the overall management and coordination of the project, and for the execution of binational activities. CCAD will receive 9% of the GEF grant funds directly from the World Bank for binational and oversight activities. The CCAD technical team will be responsible for establishing relationships with related projects and organizations, representing the project at,relevant events, monitoring results and impacts, and interacting with civil society. Other responsibilities include fostering cooperation with other partners, promoting the exchange of biodiversity information, and coordinating and recording counterpart financing. In coordination with the national teams and its Financial Administration Unit in Guatemala City, the CCAD technical team will also prepare consolidated annual budgets, annual operating plans and procurement plans, and technical project reports, for submission to the World Bank. The CCAD project team will include a Binational Coordinator, technical assistant, and procurement official, and will also benefit from the services of CCAD's Director of FinancialAdministration. Honduras InHonduras,the project will becoordinated overallby the Secretariatof NaturalResources and the Environment (SERNA). On a day-to-day basis, the project will be technically supported by a technical team based in offices in Catacamas, Palestina, and Wampusirpe. The technical team will include personnel from AFE-COHDEFOR, the Forestry and ProtectedAreas Agency. The technical team will be responsible for the hiring of national personnel and consultants, execution of all national-level activities in the field, monitoring of results and impacts, and preparation of national technical reports to be sent to CCAD for consolidation. The technical team will work closely with CCAD, the national government, national and local civil society, the Steering Committee, the Binational Forum, and all consultants. The technical team will be composed of a national coordinator and administrative assistant, and two technical specialists basedinCatacamasand two technical specialistsbasedinPalestina andWampusirpe. 56 Key to the implementation of the technical aspects of the project will be the relationship between SERNA and AFE-COHDEFOR in Tegucigalpa and in the field. Both institutions have responsibility over protected areas, SERNA for normative issues and AFE-COHDEFOR for management. Both SERNA and AFE-COHDEFOR have a qualified technical staff, and with the hiringof technical staff under the project, are expected to have the needed technical capacity to implement the project. The National Agrarian Institute (INA) and Property Institute (IP) will participate in the development of a policy statement and procedures on land regularization under Subcomponent 1.1. Their relationship with the project will be codified in an inter-institutional agreement with the Secretariat of Finance (SEFIN, Secretaria de Finanzas), SERNA, and AFE-COHDEFOR, as they will be partially responsible for the implementation of activities under Component 1. Project administration, including financial management, procurement and disbursement tasks, will be the responsibility of SAG, through the PBPR PIU which i s implementing the Bank's PBPR project and has extensive experience inBank rules andprocedures. The PIU of PBPR will coordinate closely with the technical staff in SERNA and AFE-COHDEFOR, and will base their actions on the technical design of the project. For more information on the administrative arrangements and structures, see Annexes 7 and 8 and the Operational Manual. Nicaragua InNicaragua, the technical aspects of the project will be coordinated by a technical team based inMARENA's Technical Secretariat for Bosawas (SETAB), with financial management handled by the Department of Financial Administration (DAF) of MARENA (see Annex 7). The responsibilities of the Nicaraguan national team mirror those o f the Honduran team. The project- contracted technical team will be composed of a national coordinator and administrative assistant, and five technical specialists to be based in the SETAB offices in Siuna and Wiwili. They will strengthen in the field a group of six technicians in SETAB plus five more to be hired as counterparts of the project. SETAB has limited experience implementing donor-financed projects. Their small team will be bolstered by technicians from other areas of MARENA, including Protected Areas and SINIA, which also have a responsibility for some parts o f the Coraz6n project. The activities o f these technical staff will be coordinated through an internal MARENA committee. Once additional technical staff are hired under the project, technical capacity i s expected to be sufficient for project implementation. The Presidential Secretariat for Atlantic Coast Affairs (SEPCA) and Property Intendancy will be partially responsible for the implementation of activities under Subcomponent 1.1, as they will jointly form a committee to approve proposals for support o f capacity building and workshops under the subcomponent communities inBosawas. Inthis way, the project will guarantee that the activities implemented are consistent with the overall process o f titling and registration for the five indigenous territories inBosawas that have been titled. SEPCA and the Property Intendancy will sign an interinstitutional agreement with MARENA. The Bosawas National Commission (BNC) i s also a major actor in the area o f the Bosawas Reserve. Intended to provide direction to SETAB, it includes representatives of all indigenous 57 peoples inthe Reserve, municipal authorities, and other stakeholders. The role o f the BNC inthis project will be an advisory one. Project administration, including financial management, procurement and disbursement tasks, will be the responsibility of the Financial Administration Department (DAF) of MARENA.The administrative capacity of the DAF i s considered weak, and will require strengthening and close supervision during the project. For more information on the administrative arrangements and structures, see Annexes 7 and 8. By Effectiveness, the PIU will be staffed to the satisfaction of the Bank. Associated Proiects The Coraz6n Project has been "partially blended" with two associated World Bank-financed Projects described below. The arrangements noted below will be described in a detailed coordination agreement to be signed with each of the associated projects by project effectiveness andtheir operational manuals will be revisedaccordingly. The government of Nicaragua i s moving forward with a multi-donor rural sector Sector-wide Assistance Plan (SWAp) in Nicaragua named PRORURAL. The Bank i s supporting this initiative through the Second Agricultural Technology Project (ATP-11). MARENA, the responsible national agency for the Corazdn Project (Nicaragua portion), i s one of the participating agencies and i s responsible for promoting and mainstreaming environmental sustainability in all of PRORURAL'S six components, and will co-execute portions o f several components that promote various aspects of sustainable and community natural resources management (for example, technological innovation and sustainable forestry development, with special focus on agroforestry in the buffer zones of Corazbn), and will support government capacity building. The Coraz6n project community-based natural resources management activities will be closely coordinated with ATP-I1 operations and related PRORURAL components (especially the natural resource management and capacity-building activities). The proposed project activities will also be coordinated with PRORURAL cofinancing from the International Fundfor Agricultural Development (IFAD), Finland, and Switzerland. Not only do the World Bank and other cofinancing represent a significant leveraging of GEF funds in the project area of community natural resources management, the proposed Coraz6n Project's coordination with ATP-I1has strengthened the role of MARENA and o f environmental issues in the overall SWAp. The government of Nicaragua and several donor agencies are also actively exploring a potential Environmental SWAp. If and when this SWAP i s further developed, the Coraz6n experience will provide a valuable input, and every effort will be made to ensure close coordination with the Coraz6n Project. Finally, the government has a donor coordination system in its infant stages, which includes two "roundtables"-one for rural productive development and one for natural resource management. The Coraz6n Project will benefit fromthe partnerships. In the case of Honduras, the Bank is financing a recently launched Forests and Rural Productivity Project (PBPR), which has a protected areas subcomponent, and which covers some of the same area as the proposed Coraz6n Project. Other components o f the PBPR complement the Coraz6n Project by financing good practices and experiences in promoting effective land regularization and enhanced agroforestry practices, primarily among indigenous peoples, and 58 contributing to an enhanced protected areas system. Policy, institutional, and field-level coordination and collaboration mechanisms have been worked out between the PBPR and the Coraz6n Project. The Coraz6n project will also be administered by the same unit which implements the PBPR project. Several levels of coordination have been establishedto ensure that the policies and activities of the Coraz6n project are complementary to, and benefit from, those of the PBPR and ATP-I1 projects. At a political level, the two Ministries of Environment and Agriculture (the latter in charge of the associated projects) will be the four government representatives on the Project Steering Committee, which gives them a strong obligation to work together on operational and strategic issues. At a technical level, bothMinistries(and other institutions as needed) will be on the Binational Technical Committee to advise the project technically. At an operational level in each country, the two projects will meet regularly to coordinate activities. In Honduras, PBPR will be administering Coraz6n Funds, and plays a major role in the SINAPH and subproject components. In Nicaragua the projects will be sharing offices in Bosawas and coordinating not only on subproject programs, but also meeting in the context of PRORURAL and the potential environmental SWAp. At a legal level, the agricultural ministries will sign the inter-institutional agreementsfor the project. The Operational Manual spells out the details of these arrangements. Related Operations In addition to the partially-blended World Bank operations of the World Bank, the project has developed close coordination with two other projects in Honduras. The Coraz6n Project will be closely coordinated with projects of German Cooperation (KfW and GTZ) and the European Union (EU). Funds will not be pooled, but future operations inthe Coraz6n Project area will, by common agreement, be closely coordinated in day-to-day activities, planning, and likely in project implementation arrangements. German Cooperation has been the principal source of investment funds in the Rio Pliitano Biosphere Reserve over the last 10 years. A new phase of cooperation i s now being planned for 2006-10 and these activities will be closely coordinated with Coraz6n. The GEF Coraz6n Project will have limited activity in the Rio Pliitano area for this reason. The EU is beginningimplementation of a large watershed management project in, among other areas, the Patuca River watershed. Again, this will be coordinated closely with the Coraz6n Project. It was not considered feasible to seek a similar level of cofinancing inNicaragua with a project of international cooperation because existing and planned financing of development needs in Bosawas tend to be fairly small, numerous, and dispersed. It will instead be the coordinating roles of SETAB and the Coraz6n Project that will be critical in Nicaragua. However, a working relationship has been established with the DanisWinnish Environmental Support Project in Nicaragua (Programa de Apoyo Sectorial a1 Medio Ambiente, PASMA), which i s providing strong support to the environmental sector inNicaragua, especially inBosawas, andactivities are being coordinated between the initiatives: 59 Annex 7: FinancialManagementand DisbursementArrangements CENTRAL AMERICA: Coraz6n TransboundaryBiosphereReserve Project Summary of Administrativeand FMArrangements CCAD will execute specific components and activities for the Coraz6n Reserve Project. SERNA (the GEF agency for Honduras) through SAG and MARENA (the GEF agency for Nicaragua) will execute specific components and activities under the project and will also be responsible for managing their own share of project funds. CCAD, through its project administrative unit located in Guatemala, will have the responsibility of managing project funds associated with the components and activities implemented by CCAD (it is expected the CCAD will also have a broader coordinating role inthe implementation of the project). While each country implementing agency will be responsible for its segment of the project (including managing its own special account, preparing interim financial and project reports, and facilitating the audit of its portion of the project expenditures independently o f the other country implementing agencies), CCAD will be responsible to coordinate and consolidate twice-yearly project reporting to the World Bank. The assessment in this annex represents the reviews of the CCAD in Guatemala, the PIU o f PBPR in Honduras, and MARENA in Nicaragua. Based on these assessments, the implementation units for CCAD and SERNA have sufficient capacity to manage the Coraz6n project; the implementation unit for MARENA will be strengthened with additional personnel contracted under the project. CCAD Guatemala - CCAD (created in 1989) i s a legal entity designed to establish a system of regional cooperation for the optimum and rational utilization of natural resources in Central America. CCAD i s headed by a board of Ministers of Natural Resources from each country in Central America, and includes a rotational presidency, an executive secretariat, a technical unit and an administrative unit (UAFP).The UAFPis responsible for financial management under CCAD's responsibilities, and as such, will be the unit responsible for CCAD's financial management in the Coraz6n project. As represented in the organizational chart below, the UAFP is responsible for the financial monitoring of projects implemented by CCAD. The unit includes a Coordinator, an Accountant and two Accountant Assistants. Each position has specific responsibilities and participates in the administrative and financial process of all active projects. The Coordinator i s responsible for assisting the Director General, preparing financial reports, coordinating the preparation of the budget, reviewing the financial statements, and the financial execution o f each project. The Accountant i s responsible for reviewing the supporting documents for each check, reviewing transactions in the accounting system and preparing financial statements. The Accountant Assistant Ii s responsible for maintaining the fixed asset register, preparing the payment vouchers, and maintaining the information regarding checks in the FM system. The Accountant Assistant TI i s responsible for reviewing monitoring cash advances, including for travel expenditures, entering receipt information into the FM system and monitoring petty cash. 60 The unit currently manages nine projects with financing from international organizations, including the World Bank and IDB. The unit has experience managing financial aspects of internationally funded projects, including prior experience with the World Bank. In addition, UAFPhas experience working with nationalcoordinating units, including unitsinNicaragua and Honduras. Overall, the unit i s adequately staffed to manage the existing portfolio and proposed project, and has an adequate separation of duties. I Administration- Finance Coordinator I b 4 Accountant Coordinator Assistant Accountant Assistant I Guard Accountant Assistant II Messenger Information Systems. UAFP utilizes an integrated financial management system, specifically developed for the needs of CCAD (called Soft). The system includes various modules, including accounting, budgeting, contracts, banking and fixed assets. The system i s utilized to manage financial transactions and execute the budget of each of the nine projects. Each project i s monitored separately (identified in the system as a separate company), and the system has the ability to compile and consolidate information for the organization as a whole. Safeguard over assets. UAFP has a financial management and administrative procedures manual (available to staff and last updated in December 2003), which includes the pertinent information regarding the management o f internationally funded projects and the financial transactions pertaining to these projects, including the monitoring of fixed assets. Fixed assets acquired with project funds are monitored through the fixed asset module o f the financial management system. The amounts in the register are reconciled monthly to the amounts in the respective account balance. Additionally, at least one annual physical inspection of the assets i s undertaken by UAFPstaff. Financial reporting. The chart of accounts enables the monitoring of expenditures by component, activity and category, which i s necessary for the production of financial reports. In addition, the system has been upgraded, and can now produce financial reports such as the Financial MonitoringReports (FMRs). Audit. CCAD does not have an internal audit department. As such, greater reliance will be placed on the use of external independent auditors (as described in the section on Audit Arrangements). 61 SERNA Honduras(throughSAG) - In Honduras, the funds of the Coraz6n project will be managed by SAG through the Project Implementation Unit (PIU) that i s currently managing the Forests and Rural Productivity Project (PBPR) financed by the Bank. Accordingly, the PBPR PIU will be responsible for: (i) budget formulation and monitoring; (ii) cash flow management (including submitting loan withdrawal applications to the Bank); (iii)maintenance of accounting records, (iv) preparation of interim and year-end financial reports, (v) administration of underlying information systems, and (vi) arranging for execution of external audits. The fact that the PIU has ongoing experience managing projects financed by donors and the World Bank, for which it has administrative structures and systems inplace, puts it in a good position to manage and administer the required project FMfunctions. The Accounting/Administrative unit of the PIU includes an AdministrativeEinance Officer, a General Accountant, a Procurement Officer, and a Disbursement Officer. Each position has specific responsibilities and participates in the administrative and financial process of active projects financed by the Bank. The AdministrativeEinance Officer is responsible for preparing financial reports, coordinating the preparation of the budget, reviewing the financial statements, and the financial execution o f each project. The General Accountant i s responsible for reviewing the supporting documents for each check, reviewing transactions in the accounting system and preparing financial statements. The Disbursement Officer i s responsible for monitoring projects cash flow, and preparing and following up on disbursement requests. In addition, as mentioned above, the unit i s currently overseeing two projects financed by the World Bank, which gives it experience managing financial aspects of Bank funded projects. Therefore, overall, the PBPR PIU is adequately staffed (with qualified individuals) to manage the existing portfolio and proposed project, and has an adequate separation of duties. The only remaining uncertainty i s whether or not contracts of key staff (the positions mentioned above) have been renewed given the recent Presidential elections and change in administration. The PBPR PIU utilizes an adequate computerized financial management system, which includes various modules, including accounting, budgeting, banking and fixed assets, and i s utilized to monitor financial transaction of each project. Each project i s monitored separately, and the chart of account enables the monitoring of expenditures by component, activity and category, which i s necessary for the production of financial reports (e.g., FMRs). The PIU has a financial management and administrative procedures manual, which includes the pertinent information regarding the management of internationally funded projects and the financial transactions pertaining to these projects, including the monitoring of fixed assets. Fixed assets acquired with project funds are monitored through the fixed asset module of the financial management system. The amounts in the register are reconciled monthly to the amounts in the respective account balance. 62 MARENA Nicaragua - The Department of Financial Administration of the Ministry of Environment and Natural Resources (MARENA) will be the executing agency for the Nicaragua portion of the project and will also be responsible for financial management of the project funds used in Nicaragua. The financial management duties include (i) maintenance of accounting records, (ii) preparation of project financial statements inaccordance with World Bank guidelines, (iii)management of bank accounts, (iv) preparation of quarterly project reports, and (v) preparation and submission of withdrawal applications (disbursement requests). MARENA's Department of Financial Administration (DAF) has limited experience managing World Bank-financed projects. MARENA currently implements Credit 3480 NI and until recently, implemented the now closed PHRD TF Grant 026845 and GEF TF Grant 28631. Despite this experience, MARENA's DAF has limited capacity since project implementation units managed these grants, not the DAF. Therefore, the project assessment has identified key actions designed to strengthen MARENA's DAFFMcapacity that are included in the FM action plan. MARENA's DAF staff include: the Finance Director, the Budget Unit with the Officer and one Assistant; the Accountancy Unit with the officer, 3 Analysts and 2 Assistants, the Treasury Unit with the Officer and 2 Assistants. Their duties and responsibilities are clearly established in a "Functions Manual". It i s important to note that MARENA's DAF i s responsible for managing several types of financing modalities and funding sources (national funds/Treasury, IDB, Denmark, Finland, Spain). However, based on the estimated additional volume of activity resulting from the Coraz6n project, additional human resources may be needed to complement the existing DAF staffing. These positions, to be financed by the grant, include a Disbursement Officer, an Accountant and an Assistant, which would help manage project resources. Aggregate project expenditures are incorporated by the DAF into MARENA's multi-annual budget and further inform the annual budget formulation process. Between August and September of each year, the DAF prepares its tentative investment program for the subsequent year. The investment program should be consistent with the budget policy provided by the Ministry of Finance (MHCP), and should also be incorporated into the national public investment system (SNIP). Once approved, the program i s reflected in MARENA's budget proposal. In turn, this budget i s incorporated by MHCP into the general state budget for its submittal to National Assembly for review and approval by October. On the basis of the approved budget, the DAF adjusts, as needed, its project annual work and procurement plan (POA), which will be reviewed by the project and task team. The principle accounting framework for the DAF relies on: (i) Law 550 of Financial Management and Budget Regime ii)the annual Law of the General State Budget; (iii) MHCP decreeshegulations based upon the cited laws; and (iv) the norms of the integrated financial management system (SIGFA); all of which establish `soundpublic financial management policies and procedures applicable to project transactions. Information Systems. Since June 2003, MARENA's DAF has partially operated the Government's integrated financial management system (SIGFAPRO) to manage project financial transactions. The information system i s generally adequate to produce relevant 63 information for project monitoring. MARENA's DAF i s in discussions with MHCP to implement remaining modules of SIGFAPRO. Safeguard over assets. Assets acquired using project funds will be in the custody of the respective beneficiary entities. Within the DAF's Office of Goods (Ofcina de Bienes), there i s an independent system to register the fixed assets but it i s not connected or reconciled with the financial information of SIGFA. As such, it i s essential that the DAF carry-out at least one annual physical inspection of the assets, preferably with the participation of external auditors. Project Flow of Funds The flow of funds for the Coraz6n project calls for project funds to be channeled through three Special Accounts denominated in USD, one of which will be established and maintained by CCAD in Guatemala, and the other two will be established and maintained in Honduras and Nicaraguarespectively. Direct payments to suppliers can be made from the Special Accounts. CCADSpecialAccount and DisbursementArrangements To facilitate disbursements against eligible expenditures for its components, CCAD in Guatemala will open and maintain a Special Account (SA) inUSD in a commercial bank, under the terms and conditions acceptable to the World Bank. The Special Account will be a dedicated account, separate from other project accounts that CCAD manages to avoid the commingling of project funds - this i s consistent both with CCAD's operating procedures as well as with its experience managing other donor projects. The Special Account will receive disbursements from the World Bank and will be used to cover expenditures eligible under the grant. The World Bank will, upon request, make an advance to the Special Account. Applications for the replenishment of the SA should be submitted on a regular basis in order to maintain liquidity in the account (usually when 20% of the initial deposit has been utilized). The replenishment application will be supported by the necessary documentation, the SA bank statement and a reconciliation of this bank account. The CCAD SA authorized allocation will be USD 100,000. Because o f the experience of CCAD with traditional disbursement method, withdrawals from the grant will be made using transaction-based disbursement procedures (the SOE method). The SOE threshold will be consistent with the procurement prior review thresholds. All supporting documentation for payments using SOE procedures and other payments in general for project activities will be retained by UAFP for audit purposes and made available for the Banks supervision. SERNA SpecialAccount and DisbursementArrangements To facilitate disbursements against eligible expenditures for its components, SAG through the PBPR PIU will open and maintain a Special Account in USD in the Central Bank, under instructions from SERNA. The Special Account will be a dedicated account, separate from other accounts managed by the PIUto avoid the commingling of project funds - that is consistent with the PIU's operating procedures and its experience managing other Bank projects. The Special Account will receive disbursements from the World Bank and be used to cover expenditures eligible under the grant. The World Bank will, upon request, make an advance to the Special Account. Applications for the replenishment o f the SA should be submitted on a regular basis in order to maintain liquidity in the account (usually when 20% of the initial deposit has been utilized). The replenishment application will be supported by the necessary documentation, the SA bank statement and a reconciliation of this bank account. 64 Because of the experience of the PBPR PIU with traditional disbursement method, withdrawals from the grant will be made using SOE procedures. The SOE threshold will be consistent with the procurement prior review thresholds; the SA authorized allocation will be USD 550,000. All supporting documentationfor payments using SOE procedures and other payments ingeneral for project activities will be retained by the PIU for audit purposes and made available for the Banks supervision. MARENA SpecialAccount and DisbursementArrangements Grant proceeds will be disbursedon the basis of SOEs. At any time, the SOE supporting records will be available for review by the external auditors and Bank supervision missions. The National Treasury (in the MHCP) will open and maintain a segregated account in US Dollars in the Central Bank of Nicaragua, to be used exclusively for deposits and withdrawals o f grant proceeds. After the conditions of effectiveness have been met, and the designated account has been established, MARENA will submit its first disbursement request to the WB. For subsequent withdrawals, MARENA will submit the disbursement request along with the mentioned SOEs. At any time, the undocumented advance to the designated account cannot exceed the authorized allocation of USD 550,000. Payments in local currency will be made from a C6rdobas Account to be maintained b y MARENA's DAF in the Central Bank or a commercial bank acceptable to the Bank (this account will be reconciled against the USD Special Account for the purposes of financial reporting and disbursement applications). On a regular basis, preferably once per week, the TGR will transfer funds from the Special Account to the C6rdobas Account, in accordance with official requests from MARENA's DAF (transfers to the C6rdobas Account will only be to cover accrued expenses). Establishmentof ProtectedAreas Funds InHondurasandNicaragua, aportion of grantfinancingwill beusedto support the creation of Protected Areas Funds (see Annex 4 for more details). Neither government has yet created a fund under terms and conditions satisfactory to the Bank. Inboth countries, the management and responsibility of the funds i s still unclear, and as such, it will be necessary to continue to work with both governments inorder to ensure that a transparent and sustainable model i s established - and that the new funds are created in accordance with and i s consistent with both the existing legal public financial management frameworks as well as with on-going fiscal transparency and modernization programs in each country. The results of this particular work will be recorded in the supervision documentation of the project, and will need to be subject to regular supervision of the project. The eventual transfer (disbursement) of grant financing to the newly created Protected Areas Fundsis already conditioned on the basis of an Asset Management Agreement acceptable to the Bank and other conditions as outlined in the Grant Agreement. The disbursement of grant proceeds to these Funds would be based on a direct payment basis - outside the normal procedure of the Special Account disbursements as an additional means through which the Bank can derive assurance that acceptable, sustainable and transparent mechanisms have been in established to manage and operate the Funds. 65 Subproiects(SmallGrantsProgram) The implementing units in Honduras and Nicaragua will be responsible for managing the transfers of grant proceeds to community groups, NGOs, etc. as well as monitoring the implementation of subprojects in the respective countries. Such grants will be for community- based natural resource management subprojects, protected area management plan subprojects, and for research grants under the Monitoring component as well as for scholarship grants. The process to select community proposals i s based on clear criteria - which have been appropriately disclosed in the operational manual. Once community proposals have been approved, the beneficiary will enter into a contract with the country implementing agency. This contract establishes the terms of transfer of resources and the obligations of each community group/NGO or the beneficiary to periodically report on implementation progress. The average subproject i s estimated to be implemented over a period of two years, with a level of financing of approximately USD 25,000. Transfers for the contracts would be considered eligible expenditures and can be includedon SOE applications for disbursements. While the subprojects will be included in the terms of reference (scope) of the annual audit for each country's implementing agency, given the small size of each subproject and the average time allocated for implementation, greater reliance will be placed on supervision and local oversight arrangements. SERNA and MARENA respectively, will be responsible to carry out regular field visits and supervision of the subprojects. While the community groups/NGOs will be required to submit periodic reports to the PBPR PIU andDAF, the aggregate level o f transfers (and list of subprojects) under the component will be reported regularly on the quarterly FMRs; this component represents nearly one-quarter of total grant financing. In addition, the results of supervision and field visits (SERNA and MARENA) will also be included in the quarterly project reporting. One of the key features of this project will be the support for local accountability/oversight arrangements (also captured in the operational manual). At the local or community level, one of the requirements to obtain grant financing for subprojects will be to establish local oversight groups (also called social audit committees). Upon notification that a proposal has been approved, the community group/NGO will be required to publicly disclose the subproject and the community benefits to be derived upon completion. Furthermore, the community group/NGO will be required to periodically (at least every 6 months) report to the community on progress, including a review of expenditures incurred with grant financing. Evidence of this will be required to be presented and/or reviewed during the field visits and supervision carried out b y S E R N M A R E N A as well as by the auditors and the task team. 66 Reportingand Monitoring SERNA/MARENAto CCAD Each national coordinating unit will submit to CCAD financial and technical reports to monitor the use of funds based on the approved annual work plan. These reports will be un-audited interim financial reports for monitoring purposes only, and will consist o f (i) a statement of sources and uses of funds and cash balances (with expenditures classified by subcomponent); (ii) a statement of budget execution per subcomponent (with expenditures classified b y the major budgetary accounts); and (iii) a special account activity statement (including a copy of the bank statement). These reports should be sent to CCAD no later than 30 days after the end of each quarter. CCAD will be responsible for reviewing and consolidating the reports and sending them to the Bank. These reports will only be for project monitoring purposes. The supporting documentation of all financial reporting will be maintained by each country implementing unit and will be made easily accessible to both the task team (for supervision) and to external auditors. CCADto the WorldBank CCAD-UAFP will be responsible for producing the FMRs on a quarterly basis to be submitted to the Bank, .which will be used for monitoring purposes. The FMRs will include a narrative outlining the major project achievements for the quarter, the project's consolidated sources and uses o f funds (expenditures by component and activities in a forrnat consistent with the project's budget and operating plan), uses of funds by disbursement category, and a procurement report (summary sheets of contracts above and below the Prior-review threshold). The FMRs should be submittedto the Bank no later than45 days after the end of the reporting period. The annual financial statements will include the project's sources and uses o f funds, a report presentingexpenditure by component and activity, the schedule of uses of funds by disbursement category and a reconciliation of the Special Account. These reports will be prepared by CCAD- UAFPand made available to the auditors after the end of the fiscal year. Auditing Arrangements (external auditin& The project financial statements audits will be conducted in accordance with International Standards of Auditing (ISA) by independent private auditors and on terms of reference acceptable to the Bank. Currently, CCAD and the projects it administers that are financed b y external donors, are audited by PricewaterhouseCoopers, which produces a consolidated report for CCAD and a report for each project administered by CCAD. SERNAMAREKA Each implementing agency will provide the annual audited project financial statements to the Bank within six months after the end o f each fiscal year and also at the closing o f the project. In addition, CCAD will be required to provide its consolidated annual audited financial statements (which represents a report covering its administration of all projects being implemented b y CCAD) also within six months after the end of its fiscal year. The contract for the audit awarded duringthe first year of project implementation may be extended from year-to-year with the same auditor, subject to satisfactory performance. The cost of the audit will be financed from the project resources. The audit policy of the World Bank, as documented in "Guidelines: Annual Financial Reporting and Auditing for World Bank-financed Projects'' will be applicable to the project. For each of the 67 three project implementing agencies (CCAD, SERNA, and MARENA) this requires a single project audit opinion covering: (i) financial statements, (ii) account statement, and project special (iii) adequacy of supporting documentation maintained in respect of expenditures claimed for reimbursement via SOE procedures and eligibility of such expenditures for financing under the respective Grant Agreement will be required. For SERNA and MARENA, the scope of the audit would also include a sample of community subprojects. In addition to the audit opinions presented above, the auditors will have to present the management letter, covering: (i) weaknesses noted by the auditors in the internal control systems of the project, (ii) cases of application of inappropriate accounting policies and practices, (iii) issues regarding general compliance with broad covenants, and (iv) any other matters that the auditors considers should be brought to the attention of the grant recipient. Praiect FMRisk The level of project financial management risk ranges from moderate to high.While CCAD has limited experience managing Bank-financed projects, its capacity and financial systems are adequate, andthe overall risk assigned to CCAD i s moderate. The PBPR PIU has a strong record and ample experience managing Bank-financed projects, and i t s capacity and systems are adequate as well. However, there i s uncertainty as to the retention of the current personnel, whose contracts have not yet been renewed by the new administration. Additionally, there i s uncertainty as to the final design and the management and governance arrangements for the Protected Areas Fund. As such, the risk assigned to the Honduras component i s high. The DAF inNicaragua has limitedexperience managing Bank projects, but does have acceptable systems to manage the project. As in the case of Honduras, the design, management and governance arrangements for the Protected Areas Fundhave not been finalized; this results in a highriskrating. Lastly, as nearly one-quarter of grant financing will support subprojects, the risk of misuse of funds at the community level i s high. Therefore, it i s critical that the local accountability arrangements as described above be inplace and function as a local oversight mechanism. This is a requirement for each community proposal and will be regularly reviewed during supervision. Proiect FMSuDervision Plan. A Bank FM Specialist should carry out a final mission prior to effectiveness to ensure that all parties have in place the proper administrative arrangements for project implementation. Subsequently, the FM Specialist should perform at least two supervision missions per year for the first year of implementation to ensure that each implementing agencyhnit i s able to maintain these arrangements and i s performing in accordance with the design set forth in this annex. 68 FinancialManagement Action Plan 3 months after Disbursement Officer, an Accountant and an effectiveness Assistant 2. Contract external auditors MARENA 3 months after effectiveness Allocation of Grant Proceeds Expenditure Category Amount of the Grant % of Allocated inUS Expenditures to Dollars be Financed InUS$million Goods, Works and Non-consultant 100% Services, Consultants' Services, and Operating Costs, for: a) CCAD 0.992 100% b) Honduras 2.859 100% c) Nicaragua 2.859 100% Subprojects, Research Grants, and 100% Scholarship Grants, for: a) CCAD (Research Grants only) 0.09 b) Honduras 2.1 c) Nicaragua I2.1 I100% Endowment FundContributions, for: 100% a) Honduras 0.5. 100% I ~ a) Nicarama I0.5 Y o t aProject Costs l 12.0 1100% I 69 Annex 8: Procurement Arrangements CENTRALAMERICA: Coraz6n Transboundary BiosphereReserveProject A. General Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: ProcurementUnder IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants b y World Bank Borrowers" dated May 2004, and the provisions stipulated inthe GrantAgreement. The various items underdifferent expenditure categories are described ingeneral 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 time frame are agreed between the Recipient and the Bank inthe Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementationneeds and improvements in institutional capacity. Procurement of Works: Works procuredunder this project could include: remodeling offices and visitors centers, construction of trails and visitor centers as necessary inthe Reserve area, tree planting (other than consulting services), installation of monitoring equipment (other than consulting services), and some small infrastructure, would be procured usingthe Bank's StandardBiddingDocuments (SBD) for all ICB and SBD agreedwith the Bank for NCB and shopping (model Request for Quotations - RfQ). Procurement of Goods: Goods procuredunder this project would include: vehicles, computers, office supplies and equipment, satellite images, publications, seedlings, agricultural and forestry equipment, monitoring equipment, construction materials, and software, will be procured using the Bank's Standard BiddingDocuments (SBD) for all ICB and SBD agreed with the Bankfor NCB and shopping (modelRequest for Quotations -RfQ). Procurement of non-consultingservices: Technical services procured under this project could potentially include services such as printing,will be procuredusingthe Bank's Standard Bidding Documents (SBD) for all ICB and SBD agreed with the Bank for NCB and shopping (model Request for Quotations - RfQ). Selection of Consultants: Consulting services contracted under this project are expected to include: technical assistance, studies and capacity building to develop the capacity of project actors (personnel of governments, executing agencies, municipal governments, communities, private service providers, project and administrative staff). Advertisements requesting expressions of interest will be published in either national or international newspapers and consultants will be selected through a competitive process as per the Bank Consultant Guidelines. Short lists of consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 70 OperatingCosts: The project will cover office and administrativecosts relatedto managinga project. These costs have been reviewed and found acceptable by the Bank, and will follow the procurement guidelines outlined above. SmallGrantsProgram: Small grants would be provided under this project for activities including the adaptation of sustainable production techniques, strengthening of community organizations, and research on the sustainable use of biodiversity. These grants, up to $25,000 each, will be awarded based on the quality of the proposal and the qualification of the proposed grantee, in accordance with the Operational Manual. Procurement rules will not apply to the selection of these grants. Contributionsto TrustFunds:One-time contributions of $500,000 will be made to the Protected Areas FundinHonduras and a similar amount to a similar financial instrument in Nicaragua. There will be no procurement associated with these contributions. The procurement procedures and SBDs to be usedfor each procurement method, as well as model contracts for works, goods and consulting services procured, are presented inthe Project's Operational Manual. Thresholds recommended for the use of each method discussed above are identified in the table below (more flexible thresholds could be used for community procurement). These thresholds will be reviewed annually when the capacity is reassessed during procurement post-review missions. As indicated in paragraph 1 above, the agreed procurement plan will determine which contracts will be subject to Bank prior review. Prior review thresholds apply to each o f the three administrative units; as an example, "first two contracts" would therefore apply to the first two contracts procured ineach of Honduras, Nicaragua, andby CCAD. RecommendedThresholdsfor ProcurementMethodsandPriorReview Contract value Expenditure threshold a category (US$thousands) Procurement method Contracts subject to prior review >1,500 ICB All Works 150to 1,500 NCB Firsttwo contracts < 150 Shopping Firsttwo contracts Regardlessof value Direct Contracting All >150 ICB All 50 to 150 NCB Firsttwo contracts Goods <50 Shopping Firsttwo contracts Regardless of value Direct contracting All >150 ICB All Technical 50 to 150 NCB First two contracts Services <50 Shopping Firsttwo contracts I Regardless of valueI Direct contracting All I Consulting > 200 QCBS/QBS/FBS/LCS/ II ~contracts i i 71 (firms)a <200 QCBS/QBS/FBS/LCS All contractsabove $100,000 andfirst ICQS two contractsindependentlyof value Regardless of value Single Source All Consulting Regardless of value SectionV inthe Guidelines All contracts above $50,000 (individual)a Regardless of value Single Source All Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-Based Selection FBS = Fixed Budget Selection LCS = Least-Cost Selection CQS = Selection Based on Consultants' Qualifications B. Assessmentof the agency's capacity to implementprocurement Procurement activities will be the responsibility of: i)CCAD for binational disbursements (CCAD's financial management unitis inGuatemala); ii)the administrative unit of the PBPR Project in Honduras (under SAG); and iii)MARENA's Division of Financial Management in Nicaragua. CCAD A preliminary assessmentof the capacity of CCAD (through their administrative offices in Guatemala) to implement procurement actions for the project was carried out in a desk review in March 2006. It was concludedthat CCAD, at present, does not have adequate institutional capacity to carry out procurement for the project. To mitigate the HIGHrisk for implementation o f procurement by CCAD, an Action Plan will be agreed with CCAD before project effectiveness. The Action Plan will include, among other actions, the hiringof a Procurement Official as described inthe ImplementationArrangements (Annex 6 above). NICARAGUA A preliminary assessmentof the institutional capacity of MARENAto implement procurement actions for the project was carried out for Nicaragua inJanuary 2006. The assessmentrevealed that the staff at MARENA did not have the capacity to implement Bank-financed procurement for the project at the time of the assessment. Since the assessment, MARENA has hired a Procurement Specialist with experience inBank-financed procurement, The risk for procurement implementationat MARENA i s MEDIUM. HONDURAS A preliminary assessmentof the institutional capacity of the administrative unit of the Forestry andRuralProductivity Project (PBPR)under SAG (to whom SERNA has delegated administrative functions under the Coraz6n Project) to implement procurement actions for the project inHonduras was carried out inoffice, Le., through review o f responses to a questionnaire, inMarch 2006. The assessment revealed that PBPRdid not have adequate institutional capacity to implement procurement for the project at the time of the assessment. A more detailed assessment will be carried out before project effectiveness. The assessmentwill generate an Action Plan aimed at mitigating the implementation risks, to be agreed with SERNA and SAGbefore project effectiveness. 72 The risks concerning procurement for implementation of the entire project have been identified, at present, as HIGH.Action Plans to mitigate identified risks will be prepared and agreed with each implementing institution before project effectiveness. C. Procurement Plan Usinginputs from Nicaraguaand Honduras, CCAD prepared the overall procurement plan for project implementation which provides the basis for the procurement methods. A final version of this planwill be agreed between CCAD andthe Project Teamprior to negotiations. Itwill be available inthe project's database and inthe Bank's external website. The procurement plan will be updated in agreement with CCAD annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. D.Frequency of Procurement Supervision Inadditionto the prior review supervision to be carried out from Bank offices, the preliminary capacity assessments of CCAD, Nicaragua, and Honduras has recommended full supervision mission to visit the field to carry out post review of procurement actions once a year. E.Detailsof the ProcurementArrangements Involving International Competition 1.Goods,Works, andNonConsultingServices 1 2 3 4 5 6 7 8 9 Ref. Contract Estimated Procurement P-Q Domestic Review Expected Comments No. (Description) Cost Method Preference by Bank Bid- (yeslno) (Prior / Post) Opening Date (b) ICB contracts and all direct contracting will be subject to prior review by the Bank. 2. ConsultingServices (a) List of consulting assignments with short-list of international firms. 1 2 3 4 5 6 7 Ref. No. Description of Estimated Selection Review Expected Comments Assignment cost Method by Bank Proposals (Prior / Submission Post) Date I I I I I I NONE. THEREARE N O CONTRACTS ABOVE $200,000 (b) Consultancy services estimated to cost above $100,000 (firms) and $50,000 (individuals) per contract and single source selection of consultants will be subject to prior review by the Bank. 73 (c) Short lists composedentirely of national consultants: Short lists of consultants for services estimated to cost less than $200,000 equivalent per contract, may be composed entirely of national consultants inaccordance with the provisions of paragraph2.7 of the Consultant Guidelines. 74 Annex 9: EconomicandFinancial Analysis CENTRAL AMERICA: Coraz6nTransboundary BiosphereReserve Project For a detailed Incremental Cost Analysis, please see Annex 15. For the $16.0 million of the Alternative Scenario that i s financed by the partially-blended World Bank credits, the World Bank has carried out extensive economic and financial analyses. These are included in the Project Documents for the Forestry and Rural Productivity Project (Honduras) and the Second Agricultural Technology Project inNicaragua. 75 Annex 10: Safeguard Policy Issues CENTRALAMERICA: Coraz6n Transboundary BiosphereReserve Project Summary of Environmental Analysis: Overview The safeguard screening category of the proposed operation i s S2. The project is classified as Category "B", requiring an Environmental Analysis (EA) but not a full-scale Environmental Assessment study. In accordance with the Bank's Information Disclosure Policy (BP 17.50), copies of the Environmental Analysis report in Spanishhave been made available to the public at the Bank's Public Information Centers in both countries and on the website of the Central American Commission on Environment and Development (CCAD). Copies of all final documents have also beenforwarded to the WorldBanks Infoshop. Project Summary The project development objective (PDO) i s to improve the national and binational management of the area of the proposed Coraz6n Transboundary Biosphere Reserve (CTBR), respecting the rights of traditional populations. This will contribute to a global objective of ensuring the long- term conservation of the heart of the Mesoamerican Biological Corridor, the largest contiguous area of natural habitat remaining inMesoamerica, andperhapsthe best hope for the maintenance of ecological dynamics and processes at a large ecoregional scale. The PDO will be achieved by: (i) improving binational coordination mechanisms and strengthening indigenous land rights; (ii) strengthening national protected areas systems, (iii) facilitating and updating protected areas managementplans, and (iv) increasing local capacity through community-based natural resource managementactivities. r Positive Environmental Impacts It is expected that the project will have a highly positive impact, both locally and globally, and that this proposed operation will have an important impact on reducing some of the most important threats to the sustainability of the Coraz6n Reserve area. Among the positive environmental impacts expectedare the following: 0 Reduction inthe deforestation rate; 0 Improve conservation of critical natural habitats; 0 Improvedprotection of watersheds; 0 Improveduse of natural resources to the benefitof local communities; 0 Increased capacity of local communities to manage both protected areas and their own natural resources; 0 Improvedsustainability of the national protected area systems. 76 AdverseEnvironmentalImpacts It is possible however that some activities of the project could have a negative environmental impact, if appropriate mitigating mechanisms are not put in place. Possible impacts which have been identified include the following: Very localizeddeforestation caused by natural resource management projects; , Localized use of pesticides; Possible economic displacement caused by implementation of existing protected area management plans; Local impacts, social and environmental, caused by very small infrastructure constructed under the project (research stations, park management infrastructure, monitoring stations, etc.). Compliancewith SafeguardPolicies This project i s designed to comply fully with the letter and spirit of all applicable World Bank Safeguard Policies, as indicated below. EnvironmentalAssessment(OP4.01) In accordance with World Bank Safeguard Policies, an Environmental Analysis, including an Environmental Management Plan and Integrated Pest Management Plan, was prepared by CCAD, MARENA, and SERNA. Inaddition, a wide variety of actors involvedinthe preparation of the study participated to greater or lesser degrees in evaluating safeguard policy issues. The preparation team has relied heavily on the extensive work carried out in the last two years for a range of similar World Bank projects in Nicaragua and Honduras. The detailed safeguard policy studies are available inproject files and are annexed to the Operational Manual. The analysis found that the project area i s important for both locally and globally important biodiversity and i s under increasing pressure, placing this unique region and its biodiversity at risk. It determined that the Coraz6n project is likely to have overwhelmingly positive impact on the project area. Where potential, limited negative impacts stemming from project activities were identified, a plan to mitigate these impacts was prepared. Below i s a brief summary of the findings of the EA. After summarizing the local context, including zoning, for the four protected areas includedin the CTBR, the evaluation outlines the relevant geography and details the natural resources present in the Reserve. Of special note are the four principal watersheds (PlBtano, Sico, Patuca, and Wans Coco or Segovia rivers) and ten ecosystems covering the Honduran side of the CTBR. On the Nicaraguan,side there are nine principal watersheds and four ecosystems included in Bosawas. A recent biological inventory found 215 species of birds and 25 mammals on the Nicaraguan side of the CTBR, though this list i s incomplete. The Environmental Analysis documented the uses of natural resources inthe CTBR area. Among the principal activities are subsistence agriculture, huntingand gathering, fishing, and small-scale logging and mining. It then outlines major threats to the continued integrity o f the ecosystems, and their sustainable use by inhabitants. Among these are weak institutions, contradictory state policies, migration, extensive cattle ranching, irrational use of biodiversity, illegal trafficking in animals and wood, natural disasters, lack of solid waste treatment, and frontier issues. 77 The evaluation found that the project would likely have the following positive impacts on the environment in the project area: reduction in the deforestation rate, increase in the conservation of critical habitats, protection of important watersheds, reduction in rate of biodiversity loss, increase in the capture of carbon dioxide, better use of natural resources, and involvement of local populations inthe protection of the CTBR and its natural resources. The evaluation noted that the subprojects, research financed with small grants, and monitoring activities has a slight possibility of provoking localized negative impacts if not carefully planned and monitored. Although unlikely, these could include an increase inlocalized deforestation, loss of natural habitats, increase inerosion on steep land, increase inpesticide use (see below), or loss of native species. However, activities with the possibility of provoking highly negative impacts, such as extensive cattle ranching or the conversion of forests to pastures, will not be financed (the Environmental Management Plan includes a negative list of activities which will not be financed). The cumulative impact of activities, especially subprojects, will be carefully monitored. For local impacts, as part of project preparation, a framework for environmental screening and impact mitigation was designed to determine the risks presented b y the activity and a mitigation plan to minimize impacts. This framework i s included in the project's Operational Manual. The Environmental Evaluation, including the Pest Management Plan, i s included as an Annex in the Operational Manual. NaturalHabitats(OP 4.04) The Natural Habitats safeguard policy i s triggered when there i s the potential for a significant conversion or degradation of natural habitats where most original species are still present. The Coraz6n Project will only promote small-scale sustainable productive activities which will not contribute to significant conversion of habitats, and these activities would be carried out only in the buffer areas o f the Reserve. However, as there i s a slight possibility of degradation of natural habitats if appropriate measures are not taken, OP 4.04 i s triggered. Mechanisms for avoiding conversion or degradation caused by project activities have been included in the above- mentioned screening mechanism. PestManagement(OP4.09) According to evaluations carried out during project preparation, there i s a slight possibility that this project will trigger OP 4.09, Pest Management, as the project will work with community forestry and agroforestry activities in the Reserve area. Although only a possibility, small amounts of herbicides or pesticides could be potentially procured and used under the project. The project will not finance the purchase of pesticides prohibited by national legislation, or included incategories IA, IB,or I1on the WHO Recommended Classificationof Pesticides by Hazard and Guidelines to Classification. The project team has therefore developed a short Pest Management Plan, annexed to the EA. It provides guidance to focus on cultural practices and biological controls to control insects and diseases and information on integrated pest management. Should biocide use prove to be considered necessary, the Pest Management Plan lays out guidance to ensure the lowest possible environmental impact, training in safe pesticide use, handling, and disposal. PhysicalCulturalResources(OP4.11) This project is not expected to have any negative impact on movable or immovable objects, sites, structures, groups of structures, natural features or landscapes with archeological, 78 paleontological, historical, architectural, religious, aesthetic, or other cultural significance. The assessment carried out during project preparation indicated it would be unlikely any project activity would have any conceivable impact, positive or negative, on physical cultural resources. Nevertheless, in the unlikely event project activities were to have an impact (for example, if an archeological site were uncovered during biological monitoring activities), it i s prudent to have measures in place. Therefore, the Environmental Analysis includes abbreviated guidelines on what measures should be taken if a physical cultural resource were to be endangered by the management strategies or productive activities of the project, and full details of conservation measures to be taken are included inthe OperationalManual. Social andIndigenousAssessment Inline withWorldBank safeguardpolicies andinparticular the IndigenousPeoples OP4.20, a stand-alone Social Assessment was prepared, including an Indigenous Peoples Development Plan (IPDP) as an appendix (see below). This short text summarizes the main points of the Social Assessment (SA). The full Spanish version i s available inproject files, including an annex on the extended consultation process undertaken duringproject preparation. The Coraz6n Transboundary Biosphere Reserve (CTBR) i s located in the heart of the Mesoamerican Biological Corridor (MBC). A diversity of indigenous peoples i s found in and around the CTBR. The main indigenous peoples inthe CTBR are the Pech, Tawahka, Garifuna, Mayangna and Miskito peoples (the latter i s the largest group). They are approximately 70,000 and account for 40 % of the population; the rest are mestizo (a mix between indigenous peoples and European settlers). Both countries are afflicted b y poverty (approximately 60% in Honduras and 48% inNicaragua) and this i s extreme intheir rural areas. Methodology The SA was based on primary information collected in the field and secondary information from available publications on both countries. It i s also based on extensive consultations with key stakeholders carried out during project preparation between August 2004 and February 2006 (see the Social and Indigenous Assessment in the Operational Manual). Over 800 persons representing civil society, indigenous peoples, and other stakeholders participated inconsultation meetings. Key Stakeholders The indigenous peoples' organizations in the Project area are key stakeholders. Local governments, NGOs, and international organizations are also key players. In August 2004, as a result o f the consultation process on the creation of the Coraz6n Reserve, a Binational Forum was established to promote the active and permanent participation of key stakeholders in activities related to the CTBR, including the proposed BanWGEF funded project. The Binational Forum includes indigenous peoples, ethnic communities, native ladino communities, regional authorities, and municipal authorities from the Honduras-Nicaragua CTBR. The Forum represents a wide range of civil sector interests, particularly including indigenous groups. Its role i s to represent their interests in all issues related to the management of the Coraz6n area. The Forum membership was expanded in January 2006 with the incorporation o f the Binational Indigenous Muihka Group that was established in August 2005 to monitor initiatives in indigenous territories o f Honduras andNicaragua. 79 Results The involvement of indigenous and other groups in project preparation activities was very successful, as detailed in the consultation annex. During the consultations, stakeholders expressed interest in participating in all the phases of the project, supported the use of natural resources in a sustainable manner and gave importance to land tenure, technical assistance, decentralization, and a communication strategy for the project using local languages. One particularly important meeting was a meeting in Ocotal, Nicaragua in January 2006, attended by 45 stakeholders from both countries, including representatives of all key indigenous organizations. Representatives of all stakeholder groups present at this meeting signed the "Ocotal Declaration" in support of the project (see an attached scan of the declaration). The full Social and Indigenous Assessment, with the Indigenous Peoples Development Plan and Process Framework as appendices, has been included as an annex to the Operational Manual. InvoluntaryResettlement (OP 4.12) The protected areas policies of Honduras and Nicaragua do not allow for the involuntary resettlement of established residents within protected areas, and no involuntary resettlement will be carried out under this project. There i s not expected to be a loss of shelter, loss of assets or access to assets, loss o f livelihoods, or designation of new protected areas. Nevertheless, in accordance with the Involuntary Resettlement Policy (OP 4.12), the possibility of economic displacement within a protected area triggers the policy and requires a "process framework". This Process Framework has been prepared and is an Appendix to the Social and Indigenous Assessment, which itself i s an Annex to the Operational Manual. The Process Framework outlines criteria for identifying affected persons, eligibility criteria, and outlines how such impacts would be mitigated. IndigenousPeoples (OD 4.201 The project triggers the Indigenous Peoples Safeguard Policy as it will work directly with the Tawahka, SumuMayangna, Pech, Garifuna, and Miskito peoples in the reserve area. As noted above, a full Indigenous People's Development Plan was prepared in consultation with the indigenous groups of the Coraz6n Reserve area to ensure that the indigenous people of the project area receive the greatest degree o f benefit possible from the project. It i s estimated that 47% of project funding directly benefits indigenous people. The PDP includes a summarized report on social and indigenous issues, noting how the project i s specifically targeting indigenous peoples and the measures that have been taken to maximize positive impacts and minimize negative impacts. The IPDP presents a detailed list of activities and a budget, responding to concerns expressed during the consultations. Responsibility for each activity falls to the institution responsible from implementing the subcomponent, as listed in Annex 4 of this document. As was mentioned earlier, the Coraz6n project i s coordinating closely with the PATH project in Honduras and the PRODEP project in Nicaragua on the implementation of subcomponent 1.1, which focuses on support to the regularization o f land rights, especially for indigenous territories in the Coraz6n project area. For more information on these projects andthe coordination with the Coraz6nproject, please see Annex 1. Of particular interest under this binational Coraz6n Project, a special emphasis has been placed on strengthening local and binational indigenous organizations in order to allow them to maximize benefits gained from this project and other initiatives (see Annex 4). Indigenous groups were consulted throughout project preparation, and implementation o f the project will be 80 highly participatory at all stages, involving both indigenous and ladino groups. Because of this emphasis on indigenous cultures during project design and the special focus placed on strengthening indigenous associations, the overall impact on local indigenous people i s expected to be highly positive. Land and titling issues are viewed as critical elements of the development process by all the indigenous groups in the area of the Coraz6n Reserve. This proposed project does not contemplate direct titling activities or preparation of land titling legal instruments as these are under active development by other World Bank-financed projects in both countries (see below). The proposed Coraz6n Project does include a subcomponent under Component 1 to provide technical assistance to land regularization activities and investments under Component 4 to support indigenous groups in training and organization management to allow them to more fully benefit from ongoing initiatives to support titling of their territories. In addition, the Project will play an active role in ensuring coordination on titling policy and legal issues with other projects and with the two national governments. The IPDP has been included as an Appendix to the Social and IndigenousAssessment, which i s an Annex to the Operational Manual. A summary of the IPDPfollows. IndigenousPeoplesDevelopmentPlan(IPDP) The IPDPi s an appendix of the Social Assessment (which inturn i s an annex of the Operational Manual). This section presents the main issues addressedinthe IPDPthat have been incorporatedinthe design of the proposed Project. The IPDPrecognizes the historic importance of the indigenous communities' presence inthe MesoamericanBiological Corridor (MBC) and hence inthe area of the proposed Coraz6n Reserve. The Plan describes how the project will benefit and contribute to the development of indigenous peoples inthe Reserve area, support their full participation inthe project, and avoid the risk of potential negative impacts. A table summarizing the activities of the Plan of Action of the IPDPi s included at the end of the IPDP document. Objective In summary, the objective of the Plan i s to ensure that indigenous peoples participate inthe Project design and implementation, to ensure they receive benefits from the Project, and to mitigate any potential adverse impact that may affect their traditional way of life. Methodology The preparation of the IPDPincluded the following activities: (a) Analysis of primaryinformation from both countries obtained through workshops, focal points and interviews. (As part of the social assessment exercise, extensive consultations with key stakeholders was carried out duringproject preparation. Over 800 persons representing civil society, indigenous peoples, and other stakeholders participated.) (b)Analysis of secondary information such as social studies andevaluations, previous IPDPs developed for Bank projects inthe same countries, censuses and surveys, anddocuments describingthe conditions of indigenous groups. (c) Consolidation of the information and generation of the IPDP. 81 Land regularization The IPDPincludes a summary of the Bank projects that support land regularizationinHonduras and Nicaragua. Further information on these projects and other active projects inthe area i s included in annexes 1and 2 of the PAD. Action Plan The IPDP includes information on the communities' participation strategy inthe design, preparation and implementation of the project. Specific activities that will benefit indigenous people are: a Support to land regularizationprocesses (review, adjustment andvalidation o f methodologies inHonduras, anddevelopment of localcapacityinNicaragua). Binational institutional coordination inthe Coraz6n Transboundary Biosphere Reserve (CTBR).All the political and technical bodies will include indigenous peoples' representatives. Enhancement o f the management capacity to conserve the CTBR. Modernization of SINAP' s management inNicaragua. Development o f mechanisms for the financial sustainability of the SINAP inNicaragua. Modernization of SINAP's organizational structure inHonduras. Development of mechanisms for the financial sustainability of the SINAP in Honduras. Updating, harmonization and implementationo f management plans. Involvement of indigenous and ladino communities inthe implementation of management plans. Strengthening local governance. Development and implementation of productive subprojects based on the sustainable use of natural resources. Development of a social and biodiversity information andmonitoring system. Promotion o f environmentally-friendly activities. Development activities A comprehensive list of activities where indigenous peoples' participationis expected is included as a summary of the Action Plan. The table includes information by component, subcomponent and activity; a calendar of implementation; institutional responsibility for carrying out the activities recommended; and a detailedbudget at the activity level, totaling US$ 5.6 million. 82 I ' 83 iI 84 J 85 Forestry(OP4.36) The project triggers the Forestry OP 4.36 Operational Policy as it may provide support to community forestry activities through the sustainable harvesting of timber and non-timber forest resources. The policies and forest strategies that the governments of Honduras and Nicaragua wish to support through the project are consistent with OP 4.36. To comply with the OP, the project will: (a) where relevant, strengthen the capacity of local community forestry organizations to use sustainable technologies; (b) contribute to the management and conservation of protected areas through execution of environmentally appropriate management plans with clear definition of roles and responsibilities of public, private and community actors; (c) strengthen private and local community actors in the management and conservation of forest ecosystems; and (d) strengthen national and local capacity for environmental monitoring and protected areas management. The Coraz6n project will not finance commercial logging operations and will only fund community forestry activities where legally permitted in the buffer zones of the protected areas and if they are demanded by communities. The project will provide technical assistance and training to community forestry groups so that they may comply with the relevant management plan of the protected area, and provide technical assistance and small grants to promote more sustainable forestry techniques. These activities will be in full compliance with OP 4.36. Falling under Component 4, they are designed to replace less sustainable techniques and forest management strategies currently in use in the buffer zones of the Reserve, and should therefore lead to a more sustainable use of forest resources. Long-term impacts on the environment in general, and on forests, are expected to be positive. The activities funded by the subproject component will be carefully screened to ensure that they promote the adoption of new, more sustainabletechnologies that will ensure abetter use of resources. ProiectsinDisputedAreas (OP 7.60) Although the border between Honduras andNicaragua has been disputed in the past, it has been determined that there are no active disputesbetween the neighboring countries on their terrestrial boundary in the project area. The marine boundary between Nicaragua and Honduras on the Caribbean side remains a source of discussion between the countries but this i s well outside of the project areas. The project team has therefore determined that OP 7.60 i s not triggered by this project. Incontrast, the binational formulation andimplementationof this project signals awillingness of the two countries to work together along the common boundary. The improvement of bilateral relations is precisely one of the objectives and expectedbenefits of the project. 86 Annex 11:Project Preparation and Supervision CENTRALAMERICA: Coraz6n Transboundary BiosphereReserveProject Planned Actual Project Concept Note (PCN) review 12/15/2003 1/14/2004" Initial PID to PIC 12/19/2003 5/26/2004 Initial ISDS to PIC 12/19/2003 8/10/2005 ** Appraisal 9/6/2005 3/16/2006 Negotiations 9/28/2005 4/18/2006 BoardRVP approval 12/19/2005 Planneddate of effectiveness 1/15/2006 Planneddate of mid-termreview 12/1/2008 Plannedclosing date 12/15/2011 PCN = Project Concept Note, PID =Project Information Document, PIC = Project Information Centre, ISDS = IntegratedSafeguards Data Sheet, RVP = RegionalVice-president. *Two PCN review meetings were held for the Corazdn Project: one with the partially-blended operation in Nicaragua(2November, 2004) and one with the partially-blended operation in Honduras (14 January, 2004). **The InitialISDS was submittedto InfoShop on 3/16/2005.However, due to a systemerror it didnot appear onthe website, and was resubmitted on 8/10/2005. Key institutions responsible for preparation of the project: Central American Commission on Environment and Development (Comisidn Centramericana de Ambiente y Desarrollo, CCAD): CCAD was the executing agency for the Project Preparation Grant (a $400,000 PDF-B from the Global Environment Facility), and was responsible for all coordination, organization, procurement and disbursement under the grant. Secretaria de Recursos Naturales (Secretariat of Natural Resources and the Environment, SERNA): SERNA was the institutional counterpart in Honduras, and provided logistical and technical assistance, as well as staff time, for the preparation of the Coraz6n Project. Administracio'n Forestal del Estado-Corporacibn HondureAa de Desarrollo Forestal (AFE- COHDEFOR): AFE-COHDEFOR is responsible in Honduras for the management of protected areas and was involvedinthe preparation of the project. Ministerio del Ambiente y Recursos Naturales (Ministry of the Environment and Natural Resources, MARENA): MARENA was the institutional counterpart in Nicaragua, and also provided logistical and technical assistance, as well as staff time, for the preparation of the Coraz6n Project. 87 Bank staff, consultants, and key national counterparts who worked on the project included: Name Title BankUnit World Bank Douglas J. Graham Task Team Leader (TTL), LCSEN Sr. Biodiversity Specialist Nelvia Diaz LanguageProgram LCSEN Assistant Christine Dragisic Junior Professional LCSEN Associate IraniEscolano Procurement Specialist LCOPR Josep Gari Consultant, Natural FAO/CP ResourcesSpecialist Armando Guzm6n Environmental & LCSEN Operations Specialist John Kellenberg Sector Leader LCSES Juan Martinez Sr. Social Devt. Specialist LCSEN Abel Mejia Sector Manager LCSEN Marquez Martinez Consultant, Indigenous LCSEN Issues Marta Molares-Halberg Lead Counsel LEGLA Rajeev Swami Financial Management LCOAA Specialist RichardAnson Consultant, Institutional Consultant Issues CCAD Marco GonzBlez Executive Secretary CCAD Patricia Bourdeth Honduran Coordinator CCAD Carlos Espinosa Nicaraguan Coordinator CCAD Dimas L6pez BinationalCoordinator CCAD NicaraguaGovernment Maria MartaAbaunza BinationalTechnical MARENA Committee Bayardo Quintero Director, ProtectedAreas MARENA Jacobo SBnchez BinationalTechnical MARENA Committee HondurasGovernment Conrad0 Gonzilez Director, ProtectedAreas AFE-COHDEFOR Ivonne Oviedo Protected Areas AFE-COHDEFOR Olivia Rend6n Environmental Specialist SERNA Juan Pablo Suazo Director. Biodiversitv SERNA Bank funds expended to date on project preparation: 1. Bank resources: $250,000 2. Trust funds: $400,000GEFPDF-B grant (Recipient-executed) 3. Total: $650,000 Bank-executed Estimated Approval and Supervision costs: 1. Remaining costs to approval: $5,000 2. Estimated annual supervision cost: $100,000 89 Annex 12: Documentsinthe Project File CENTRALAMERICA: Coraz6n Transboundary Biosphere ReserveProject e Atlantic BiologicalCorridor Project LessonsLearned (Informe de Terminacidn del Proyecto, MARENA) Atlantic BiologicalCorridor Project Implementation Completion Report BinationalForum, Minutesof 8/19/04 Meeting BinationalForum, Minutes of 9/21/04 Meeting Convenio parala Conservacionde la Biodiversidad y Proteccion de Areas Silvestres Prioritarias en AmCrica Central Nicaragua Law 217 (Environment) Nicaragua Law 407 (Defining andDeclaring RB Bosawas) Nicaragua Law 445 (Communal Indigenous Property) Nicaragua Law 462 (Forestry) Norms for the ManagementandProtectionof Natural and CulturalResources inthe Rio Pliitano Man andBiosphere Reserve e ParqueNacional PatucaManagementPlan e ParqueNacional PatucaandReservaIndigena Tawahka Asagni Socioeconomic Pre- Diagnostic Biodiversity inPriority Areas Project (Honduras) Summary of LessonsLearned Biodiversity inPriority Areas Project ImplementationCompletion Report Proyecto Bosques y Productividad RuralAnalisis Ambiental Proyecto de Tecnologia Agropecuaria 11.Evaluacidn Ambiental Proyecto de Tecnologia Agropecuaria I1Social Assessment, Indigenous Peoples Development Plan Reservade laBiosfera BosawasManagement Plan ReservaIndigena Tawahka Asagni Management Plan R B T C W B BASEMap R B T C W T CCBM 2 Map Reservade Biosfera Transfronteriza "Corazdn del Corredor Bioldgico Mesoamericano" Honduras-Nicaragua Formulario de Aplicacidn para su nominacidn dentro del Programa MaB-UNESCO (Application submitted to the UNESCOManandthe Biosphere Program) e Regional Strategy for the Conservation and SustainableUse of Biodiversity in Mesoamerica report Rio Pliitano ManandBiosphere ReserveManagement Plan Rio Plfitano ManandBiosphereReserveEnvironmental Diagnostic Status of the Central American ProtectedAreas System report Tawahka Participative Community Diagnostic 90 . Annex 13: Statementof Loansand Credits CENTRAL AMERICA: Coraz6nTransboundaryBiosphereReserve Project ~ ~~ ~~ Difference between expectedandactual Original Amount inUS$Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PO78991 2005 NI (APL2)HEALTH SECTOR I1 - 0.00 11.00 0.00 0.00 0.00 10.61 1.oo 0.00 PO78990 2005 NI EDUCATION - 0.00 15.00 0.00 0.00 0.00 13.68 2.07 0.00 PO82885 2004 NICARAGUA PRSC I 0.00 70.00 0.00 0.00 0.00 35.77 33.97 0.00 PO78891 2004 NIPUBLIC SECTOR TA 0.00 23.50 0.00 0.00 0.00 14.27 1.45 0.00 PO77826 2004 NIBroad-BasedAccess to FinanServices 0.00 7.00 0.00 0.00 0.00 6.56 1.32 0.00 PO75194 2003 NIOff-GridRuralElectrification 0.00 0.00 0.00 4.02 0.00 3.66 2.71 0.39 PO73246 2003 NIOffgridRuralElectrification(PERZA) 0.00 12.00 0.00 0.00 0.00 8.86 5.02 -0.43 PO56018 2002 NILAND ADMINISTRATION PROJECT 0.00 32.60 0.00 0.00 0.00 26.28 5.78 0.00 PO70016 2001 NICompetitivenessLIL 0.00 5.00 0.00 0.00 0.00 1.19 0.50 0.50 PO68673 2001 NIRoadRehab. andMaintenance111 0.00 75.00 0.00 0.00 0.00 0.01 -9.38 0.00 PO64916 2001 NINaturalDisasterVulnerability Reduc 0.00 13.50 0.00 0.00 0.00 5.90 4.35 0.40 PO64906 2001 NIPovertyRed.&LocalDev. FISE 0.00 60.00 0.00 0.00 0.00 2.71 -4.50 -4.50 PO55823 2001 NISECONDRURALMUNICIPALDEV. 0.00 28.70 0.00 0.00 0.00 4.58 2.63 -2.74 PROJECT PO55853 2000 NI-TelecommunicationReform 0.00 15.90 0.00 0.00 0.00 0.12 0.76 0.00 ~ ~ _ _ _ _ _ _ _ _ _ _ _ _ Total: 0.00 369.20 0.00 4.02 0.00 134.20 47.68 - 6.38 NICARAGUA STATEMENTOF IFC's HeldandDisbursedPortfolio InMillions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2004 Confia 4.50 0.00 0.00 0.00 4.50 0.00 0.00 0.00 1998 Frutan 0.31 0.36 0.00 0.00 0.31 0.00 0.00 0.00 1998 LaColonia 0.75 0.00 0.50 0.00 0.75 0.00 0.50 0.00 1999 SEFDicegsa 0.25 0.00 0.00 0.00 0.25 0.00 0.00 0.00 Total portfolio: 5.81 0.36 0.50 0.00 5.81 0.00 0.50 0.00 ApprovalsPendingCommitment FY Approval Company Loan Equity Quasi Partic. Total pendingcommitment: 0.00 0.00 0.00 0.00 91 Differencebetween expected andactual Original Amount inUS$Millions disbursements Project ID FY Purpose BRD IDA SF GEF Cancel. Undisb. Orig. Fm.Rev'd PO81516 2006 HNJUDICIALBRANCH 0.00 15.00 0.00 0.00 0.00 14.51 0.00 0.00 MODERNIZATION PO82242 2006 HNNutritionandSocialProtection 0.00 20.00 0.00 0.00 0.00 19.68 0.00 0.00 PO86775 2006 HN(CRL1)RuralInfrastructureProject 0.00 47.00 0.00 0.00 0.00 46.45 0.00 0.00 PO88319 2006 HN(CRL) Banio-CiudadProject 0.00 15.00 0.00 0.00 0.00 14.51 0.00 0.00 PO83311 2005 HNFirst ProgFin Sec Dev PolCredit 0.00 25.00 0.00 0.00 0.00 23.75 19.29 0.00 PO83851 2004 HNPRSTAC 0.00 8.00 0.00 0.00 0.00 7.43 3.80 0.00 PO83244 2004 HNNuestrasRaicesProgram 0.00 15.00 0.00 0.00 0.00 13.23 4.50 0.00 PO64914 2004 HNFORESTS &RURAL 0.00 20.00 0.00 6.00 0.00 14.84 4.91 0.00 PRODUCTIVITY PO55991 2004 HNLANDADMINISTRATION 0.00 25.00 0.00 0.00 0.00 8.67 -2.50 0.00 PROGRAM PO70038 2004 HNTrade Facilitatio& ProductivityEnha 0.00 28.06 0.00 0.00 0.00 25.04 8.71 3.17 PO81172 2003 HNRegionalDevinthe CopanValley 0.00 12.00 0.00 0.00 0.00 7.22 0.49 0.00 PO40177 2003 HNFinancial Sector TechnicalAssistance 0.00 9.90 0.00 0.00 0.00 8.61 6.24 0.00 PO57859 2002 HNSUSTCOASTALTOURISM 0.00 5.00 0.00 0.00 0.00 0.71 -0.07 -0.07 PROJECT(LIL) PO53575 2002 HN-HEALTHSYSTEMREFORM 0.00 27.10 0.00 0.00 0.00 16.80 7.59 0.00 PROJECT PO73035 2001 HNAccess to LandPilot (PACTA) 0.00 8.00 0.00 0.00 0.00 3.02 2.13 0.57 PO07397 2001 HNCOMMUNITY-BASEDEDUCATION 0.00 41.50 0.00 0.00 0.00 7.62 6.37 0.00 PROJECT PO57538 2001 HNROADRECONSTRUCTIONAND 0.00 66.50 0.00 0.00 0.00 20.76 11.75 0.00 IMPROVEMENT PO60785 2001 HNECONOMIC & FIN.MANAGEMENT 0.00 19.00 0.00 0.00 0.00 4.03 2.96 1.55 PROJECT PO64895 2001 HNFIFTHSOCIAL INVESTMENT 0.00 60.00 0.00 0.00 0.00 1.78 -1.92 0.00 FUNDPROJECT PO64913 2000 HNEMERGDISASTER MGMT(TAL) 0.00 10.82 0.00 0.00 ... 0.00 3.52 2.88 0.00 ~~ Total: 0.00 477.88 0.00 6.00 0.00 262.18 77.13 5.22 HONDURAS STATEMENT OF IFC's HeldandDisbursedPortfolio InMillionsof US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. ~ 1999 GranjasMarinas 2.95 0.00 0.00 0.00 2.95 0.00 0.00 0.00 Totalportfolio: 2.95 0.00 0.00 0.00 2.95 0.00 0.00 0.00 ApprovalsPendingCommitment FY Approval Company Loan Equity Quasi Partic. Totalpendingcommitment: 0.00 0.00 0.00 0.00 92 Annex 14: Country at a Glance CENTRAL AMERICA: CorazdnTransboundaryBiosphereReserve Project Laiin ~- POVERTY and SOCIAL America Lo;; Development diamond' Nicaragua &Carib. income 2004 Population,mid-year(millions) 5 6 541 2,338 Lifeeqectancy GNIpercapita (Atlasmethod, US$) 3,600 GNI(Atlas method, US$billions) 1946 184 Average annual growth, 1998-04 Population (%) 2 5 14 1 Laborforce (%) i: 3 1 0.9 GNI Gross per i priman Moat recent astimate (latest year available, 1998-04) 1 capita "., 1 J enrolimeni Poverty (%ofpopulation belownationalpovertyline) 48 Urbanpopulation ("of totalpopulation) 58 Lifeexpectancyat birth(pars) 69 Infantmortality (per 1000livebirths) 30 Childmalnutntion (%of childrenunder5) a Access to improvedwatersource Access to an improvedwatersource (%ofpopulation) 81 Literacy(%ofpopulationage 5t) 77 Gross primaryenroliment (%of school-agepopulation) a 8 -- Nicaragua Male a 9 Female 0 8 KEY ECONOMIC RATIOS and LONG-TERM TRENDS GDP (US$ billions) 3 1 3 0 4 1 Gross capitalformationIGDP Exports of goods andserviceslGDP 6 4 156 241 219 Trade Gross domestic savingslGDP 9 2 38 0 6 a1 Gross nationalsavings1GDP 3 4 - a 4 210 232 Current account baiancelGDP -220 -305 - 7 7 -155 Interestpayments/GDP 11 3 2 13 Domestic Capital Total debt/GDP 1542 4029 6 7 2 savings formation Total debt seNiCe/expOrts 8 4 399 14.8 Present value of debt1GDP 37.6 Present value of debtleqorts 1119 Indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annualgrowih) GDP 4 1 2 3 3 7 4 2 Nicaragua GDP percapita -46 13 -03 14 2 1 -Lowincome orouo Emorts of ooods andservices 36 9 2 8 1 19 2 2 STRUCTURE of the ECONOMY 1984 1994 2003 2004 (%of GDP) Growth of capital and GDP ( O h ) Agriculture 24.9 8.8 7.7 7.1 45 T I Industry 316 24.3 25.4 24.7 Manufacturing 25.4 15.9 14.3 0.8 Services 43.3 55.9 56.9 58.2 Household finalconsumption expenditure 55.4 86.1 73.6 74.4 89 00 01 02 03 04 Generalgov't finalconsumption expenditure 35.3 0.1 15.6 15.5 Imports of goods andservices 29.5 32.2 50.4 47.5 --.-GCF -GDP 1984-94 1994-04 2003 2004 (averageannualgrowih) IGrowth of exports and imports (Oh) I Agriculture -10 4.2 3.2 0 2 30 Industry -3.2 4.1 2.4 0.5 20 Manufacturing -4.1 4.4 2.1 -0.3 Sewices -2.0 4.0 19 6.5 10 Householdfinalconsumptionexpenditure 3.4 16 0.9 3.4 0 Generalgov't finalconsumption expenditure -d.8 6.6 13 7.6 .IO Gross capitalformation -7.2 0.3 2.4 3.0 imports of goods andservices 0.3 7.1 3.2 2.5 ---..-Exports -Inports Note:2004dataare preliminaryestimates. This tablewas producedfrom the DevelopmentEconomics LDB database. 'The diamondsshow four keyindicators inthe country(inbold)comparedwith its income-group average.Ifdata are missing,the diamondwill 93 Nicaragua PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Domesticprices Inflation(%) 1 (% change) Consumer prices 36.4 7.8 7.3 6.7 ImplicitGDP deflator 39.0 80.1 6.9 7.1 Governmentfinance (% of GDP, includescurrentgrants) Currentrevenue 12.5 16.2 16.7 Currentbudget balance -0.8 0.5 4.3 Overallsurpiusldeficit -6.2 -6.7 -3.7 1 mm*mGDP deflator b C P I TRADE 1984 1994 2003 2004 (US$ millions) Exportand import levels(US$ mill.) Total exports (fob) 413 335 605 631 Coffee 122 73 86 l2.W T Shrimp and lobster 13 42 69 Manufactures 58 117 286 321 Total imports (cif) 825 867 1,608 1,653 Food 107 188 460 Fuelandenergy 145 123 194 I Capitalgoods 238 218 362 288 Exportpriceindex (2000=100) 92 97 93 100 98 99 00 01 02 1u 04 Importprice index (2000=100) 49 84 111 115 W Expolts m Imports Terms of trade (2000=100) 186 115 84 87 BALANCE of PAYMENTS 1984 1994 2003 2004 (US$millions) Currentaccountbalanceto GDP (y I Exportsof goods andservices 462 463 853 907 0 Importsof goods and services 884 949 2,004 2,056 ,--- Resourcebalance -423 -486 -1,151 -1,148 .10 Net income -263 -472 -108 -96 Net currenttransfers 0 50 528 .20 Currentaccount balance -686 -908 -731 -676 -30 Financingitems (net) 601 978 738 696 Changesin net reserves 85 -69 -7 -20 4 Memo: Reservesincludinggold (US$millions) 141 447 524 Conversionrate (DEC,local/US$I 2.89E-9 6.7 15.1 15.9 EXTERNAL DEBTand RESOURCE FLOWS 1984 1994 2003 2004 (US$millions) Compositionof 2003 debt (US$ mill.) Total debt outstandinganddisbursed 4,807 1 1,996 6,915 IBRD 134 76 0 IDA 59 254 998 0:595 B: 998 Totaldebt service 86 207 205 IBRD 15 25 0 IDA 0 3 3 Compositionof net resourceflows Officialgrants 56 181 495 Officialcreditors 344 245 162 Privatecreditors 11 -6 28 Foreigndirect investment(net inflows) 0 47 201 Portfolioequity (net inflows) 0 0 0 WorldBank program Commitments 0 68 27 A IBRD - E - Bilateral Disbursements 22 52 112 B. IDA D. Other multilateral F Private - Principalrepayments 7 19 0 Netflows 15 33 112 Interestpayments 9 9 3 Nettransfers 7 24 109 Note:Thistable was producedfrom the DevelopmentEconomicsLDBdatabase. 8/25/05 HONDURAS:Coraz6nTransboundary BiosphereReserve Project 94 Latin Lower- America middle- Honduras & Carib. income levelopment diamond' 2004 Population, mid-year (millions) 7.1 541 2,430 GNlpercapita (Atlas method, US$) 1030 3,600 1580 Lifeexpectancy GNi(Atlas method, US$ billions) 7.4 46 3,647 Average annual growth, 1998-04 Population 6) 2.6 1.4 1.0 Laborforce @) 2.9 0.9 0.7 GNI Gross per primav Most recent estimate (latest year available, 1998-04) capita enrollment Poverty (%of populationbelownationalpovertyline) Urbanpopulation (%oftotalpopulation) 46 77 49 Life expectancyat birth (years) 66 71 70 1 Infant morlality(per 1000livebirths) 32 28 33 Childmalnutrition (%ofchildren under5) l7 11 Access to improved water source Access to an improved water source (%ofpopulation) 90 89 81 Literacy(%ofpopulation age #+) 80 89 90 Gross pnmaryenrollment (%of school-age population) 106 2 3 114 m- Honduras Male 105 e6 1s Lower-middle-incomegroup Female 107 e 2 It3 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economic ratios* GDP (US$ billions) 3.3 3.4 6.9 7.4 Gross capitalformationlGDP 7.4 37.7 29.4 Exports of goods andServiceslGDP 24.7 35.7 36.7 Trade Gross domestic savingslGDP 10.1 27.0 e.0 Gross nationalsavingslGDP 6.0 23.8 20.5 Current account balancelGDP -114 -0.9 -7.6 InterestpaymentslGDP 2.7 5.2 13 Domestic Capital Total debtlGDP 68.9 t36.8 82.1 savings formation Total debt servicelexports 22.4 32.2 119 Presentvalue of debt/GDP 50.8 Presentvalue of debtlexports .. D0.5 indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annualgrowth) GDP 3 5 3.0 3.5 4.6 -Honduras GDP percapita 0.5 0.3 0.9 2.1 Lower-middle-incomeO~OUD Exportsof goods andservices 14 18 -2.5 STRUCTURE of the ECONOMY 1984 1994 2003 2004 (%of GDP) Growth of capital and GDP ( X ) 1 Agriculture 20.8 24.3 0.6 Industry 25.8 28.8 31.0 Manufacturing 15.4 7.3 20.4 Services 53.3 46.9 55.5 Householdfinal consumption expenditure 76.7 63.3 742 Generalgov't final consumption expenditure t32 9.6 0.8 imports of goods and services 32.0 46.4 54.1 -GCF -GDP 1984-94 1994-04 2003 2004 (averageannualgrowth) Growth of exports and imports (X) Agriculture 3.5 2.1 9.0 Industry 3.8 3.6 4.4 Manufacturing 3.6 4.4 3.8 Services 3.4 3.9 0.4 Household final consumption expenditure 2.9 3.5 3.2 Generalgov't finalconsumptionexpenditure 0.0 7.7 14 Gross capitalformation 10.8 1.6 8.4 Imports of goods and services 3.6 3.3 13 __~ Note:2004 dataarepreliminaryestimates. This tablewas producedfrom the Development Economics LDB database. 'Thediamonds showfour keyindicators inthe country(in bold) comparedwith its income-groupaverage. If data are missing,the diamond will 95 Honduras PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Domesticprices (% change) Consumer prices 21.7 8.4 implicit GDP deflator 3.4 28.9 7.7 7.7 Governmentfinance (% of GDP, includes currentgrants) Current revenue 14.7 15.9 20.1 Current budget balance -1.6 1.3 1.4 Overall surplus/deficit -11.o -4.7 -4.1 TRADE 1984 1994 2003 2004 (US$millions) Expon and import levels (US$ mill.) Total exports (fob) 737 1,017 1,396 4 , m Bananas 232 155 Coffee 169 200 Manufactures Total imports (cif) 960 1,498 2,994 Food 129 189 Fueland energy 180 191 Capital goods 171 345 892 Exportprice index (2000=100) 86 104 98 99 w 01 02 03 04 Importprice index (2000=100) 93 92 Exports imports Terms of trade (2000=lOO) 93 113 BALANCE of PAYMENTS 1984 1994 2003 2004 (US$millions) Current account balancelo GDP (x) Exportsof goods and services 847 1,226 2,550 0 Importsof goods and services 1,066 1,591 3,758 Resourcebalance -219 -365 -1,208 5 Net income -178 -194 -165 Net currenttransfers 19 83 849 Current account balance -377 -477 -524 -10 Financingitems (net) 362 502 524 Changes in net reserves 15 -25 0 Memo: Reserves including gold (US$ millions) 133 205 1,492 Conversion rate (DEC,local/US$) 2.0 8.4 17.5 18.4 EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 (US$millions) 1 Compositionof 2003 debt (US$ mill.) Total debt outstanding and disbursed 2,286 4,695 5,641 IBRD 273 469 85 IDA 81 307 1,143 Total debt service 198 473 414 IBRD 32 90 28 IDA 1 3 17 Compositionof net resourceflows Official grants 98 83 128 Official creditors 214 77 96 Private creditors -28 13 -58 Foreiqndirect investment (net inflows) 21 35 198 Portfolio equity (net inflows) 0 0 0 World Bank program Commitments 20 28 22 A IBRD E. Bilateral Disbursements 62 69 45 B IDA -- D- Other multilateral F Private - Principal repayments 11 53 29 Net flows 50 16 15 Interestpayments 22 40 15 Net transfers 29 -24 0 ~~ Note: This table was producedfrom the DevelopmentEconomics LDB database. 8/25/05 96 Annex 15: Incremental Cost Analysis CENTRALAMERICA: Corazdn Transboundary BiosphereReserve Project Introduction 1. The largest remaining area of humid tropical forest northof Colombia i s found along the eastern border between Honduras and Nicaragua. This 34,000 km2area encompasses much of the remaining habitat of many threatened and endangered species that require large intact areas of pristineforest, such as Harpy Eagles,jaguars, andtapirs, and contains more than 50 percent of the ecosystems of the two countries. It i s also home to approximately 41,000 Tawahka, Mayangna, Pech, Garifuna, and Miskito indigenous peoples. This i s the area proposed for the Corazdn Transboundary Biosphere Reserve (CTBR). The Reserve name reflects its location in the "heart" of the Mesoamerican Biological Corridor (CBM). 2. The proposed Coraz6n Reserve encompasses four existing protected areas: the Bosawas Biosphere Reserve in Nicaragua and the Tawahka Asangni Reserve, Patuca National Park, and Rio Plitano Biosphere Reserve in Honduras. The Coraz6n Project will strengthen the management of this binational area in order to better preservethe globally important biodiversity of the Coraz6n Reserve. In addition, the Project will strengthen the national protected area systems. Baseline Scenario 3. Scooe: Under the Baseline Scenario, the area of the project, the future Coraz6n Transboundary Biosphere Reserve, continues under formal protected area status but, except for isolated patches which have some effective protection (core area of the Rio Plitano Biosphere Reserve and some areas of the Bosawas Biosphere Reserve and Tawahka Asagni Indigenous Reserve conserved by indigenous populations under traditional conservation practices and benefitingfrom GTZ and EUinvestments), there is no effective protection or official presence of the state. Areas that are protected by their remoteness or low population density will remain essentially unchangedinthe near future but the periphery of the entire reserve will continue to be impacted by a fast-moving agricultural frontier. 4. Human populations in and near the Coraz6n Reserve are poor and although dependent on natural resources of the area, their use of the resources i s inefficient, contributing to the erosion of biodiversity and to a cycle of poverty. There are some ongoing investments in Coraz6n communities but these tend to be focused in small areas and most communities, particularly indigenous communities, do not benefit from any external support. 5. Under the Baseline Scenario, the four areas of the Coraz6n Reserve will continue to be managed as independent units with little coordination between them and virtually none across the international boundary. This contributes to inefficiencies in terms of costs and impact but also means that this single ecoregional unit, from a conservation science perspective, does not benefit from a uniform management regime nor does it benefit from a promotion of shared traditions and practices of indigenous peoples. 6. Insummary, the situation is expectedunderthe Baseline Scenarioto changelittle for the next six years. There would be a continuing and ongoing loss of biodiversity attributable 97 principally to few and uncoordinated investments in this huge area of the Mesoamerican Biological Corridor. 7. -($20.6 Costs million): The table later in this section provides the expected baseline investment in the Coraz6n area for the next six years under the Baseline Scenario. This analysis has not quantified every small project or ongoing activity as there are a large number of these but it does include all major sustained sources of financing. In summary, investment levels are expected to be about $4.2 million in total in the next 6 years from governments ($0.7 milliodyear) and $16.4 million from international donor projects ($2.7 milliodyear). The Baseline Scenario includes donor projects of GTZ, the European Union, and USAID which will be very closely coordinated with the Coraz6n Project over the next six years. Although they are not included as part of the proposed project costs because no formal cofinancing agreements have been signed due to the projects being on different timelines, they are part of the Baseline Scenario as they contribute to the conservation efforts inthe project area. 8. The Baseline Scenario more specifically inregard to each of the project's components i s summarized below and inthe table at the end of section: 9. Component 1: Consolidation of the CTBR ($0.1 million): Under the Baseline Scenario, although both countries are committed to the concept of the binational Coraz6n Reserve and would continue to lobby UNESCO, there are only minimal funds available for actions of promoting binational management and coordination. We estimate these as no more than $100,000 over the next 6 years, all being government funds, in the absence of an externally fundedproject. 10. Component2: Strengtheningof SINAPs ($3.6 million): The Baseline Scenario provides for minimal investments in the SINAPs of each country. Current national budgets for the protected area systems range from about $250,00O/year in Honduras to about $400,000 per year in Nicaragua. However, virtually all of these resources are targeted to meeting the minimal investment needs necessary in critical protected areas, and funds are not available for the needed strengthening of the national systems. Various projects supported by other international donors, inparticular by GTZ, the EUand USAID, do provide some funding for strategic considerations and strengthening at the national level. Therefore, under the Baseline Scenario, each country will be benefiting from about $300,000 per year in direct donor investments in strengthening the SINAPs for a total of about $3.6 million over 6 years. 11. Component 3: Implementation of Protected Area Management Plans ($1.6 million): Under the Baseline Scenario, the four individual protected areas making up the Coraz6n area would benefit from investments that would allow their individual management plans to be implemented. Resources available for each area from national budgets are negligible as overall SINAP budgets are so low and are fragmented among the 170 protected areas inboth countries; at best each country can maintain a single director on each side of the border and a handful of park guards. More substantive resources will be invested from various programs of international cooperantsbut this varies substantially from area to area. 12. The best endowed area i s that of the Rio Platan0 Reserve in Honduras. It is, however, the most complex area to manage as it i s the largest and has a large humanpresence in buffer zones, which are a dynamic mix of indigenous and mestizo populations. The KO Plhtano Reserve will 98 continue to benefit from German Cooperation investments of about $1 million over the next 6 years, specifically for the implementation of the management plan. 13. The Tawahka and Patuca protected areas in Honduras do not benefit from any focused project in protected area management, with the expected closing in 2005 of the GEF Protected Areas in Priority Areas Project (PROBAP). PROBAP provided support for the creation of the Tawahka Reserve and also provided minimal but key support to the management of both protected areas. The Baseline Scenario includes the investments in implementing the two existing managementplans for these areas which i s estimated to be about $200,000 over the next 6 years. 14. Finally, the Bosawas Reserve in Nicaragua does receive a large number of scattered investments from the Government of Nicaragua, NGOs, and international donors, in particular GTZ and USAID.The Baseline Scenario includes about $400,000 of these investments over the next 6 years. 15. Thus the total of the Baseline Scenario investments under this component are estimated at $1.6 million of which $1.5 million from externally fundedprojects. 16. Component 4: Community-Based Sustainable Natural Resource Management ($15 million): There are substantial investments under the Baseline Scenario for sustainable natural resources management, inparticular in working with indigenous and non-indigenous populations in and around the four protected areas. Particularly, investments are expected inthe Rio Plfitano (GTZ), the Tawahka and Patucaareas (EU, USAID), and inBosawas (GTZ, USAID, The Nature Conservancy, and many other smaller projects). The total investment for the four areas that have been included in the Baseline Scenario i s $15 million (of which $1million being government's own resources) - $5 million, $5 million, $2 million, and $3 million respectively for the four areas. Although substantial, it is noteworthy that this i s an enormously large area of extremely difficult access with large populations of very poor people. In addition, because the various investments across the four areas are currently moving forward as individual non-coordinated investments, there are great potential drawbacks in sharing the most innovative technologies, ensuring coordination, and providing guarantees that all these investments are indeed moving in the direction of more sustainable natural resource management. 17. Component 5: Monitoring and Information Management ($0.3 million): Under the Baseline Scenario, both countries will make meager investments in biological monitoring in the Coraz6n area. Small investments under scattered projects will be carried out (for example, St. Louis Zoo in Bosawas, GTZ in Bosawas and Rio Pl5tano Reserve) for an estimated $200,000 over the next six years. Nicaragua also has a dynamic and effective SINIA at the national level which i s contributing to better overall management of environmental information. Honduras i s only at the earliest stages of having an effective national environmental information system. Finally, although at a hemispheric level, the GEF-funded IABIN project will be yielding important benefits for each country in terms of providing tools and guidance for more efficient and focused managementof biological information. It would seemextremely difficult to quantify the monetary value of these investments for the Coraz6n areabut with a conservative estimate, it i s about $100,000 for the overall Coraz6n area. Therefore, an overall total of $300,000 i s included inBaseline Scenario underthis component. 99 18. Benefits: While the Baseline Scenario would generate national and limited global benefits, it would have very limitedglobal impacts due to fragmented approaches inconservation efforts and without coordination at the landscape level. It would not be sufficient to address the existing threats to the most critical areas of the highest biodiversity and international conservation importance. Moreover, it would not adequately integrate biodiversity conservation on a broader, landscape-level, which i s necessary for long-term ecosystem management and biodiversity conservation. Total expenditures underthe Baseline are estimated at $20.6 million. 2. GlobalEnvironmental Objectivesof the GEFAlternative 19. The objective of the GEFAlternative is to ensure the long-term conservation of the heart of the Mesoamerican Biological Corridor, the largest contiguous area of natural habitat that remains in Mesoamerica and perhaps the best hope for maintenance in Mesoamerica of ecological dynamics and processesat large ecoregional scales. This objective cannot be achieved only through isolated national actions but requires concerted binational actions for the entire region. 20. Scope: The GEF Alternative will provide the means'(above and beyond the Baseline Scenario) for creating the institutional, technical, and socioeconomic conditions for enabling the sustainable conservation of the globally significant biodiversity resources of the Coraz6n Reserve. Since the area i s huge and the threats are significant, it i s not likely that the GEF Alternative will stabilize the agricultural frontier. However, the proposed GEF Alternative, principally by increasing investments, leveraging training and natural resources management in rural communities, and better coordinating binational management, will substantially improve on the Baseline Scenario and set in place the basis for a long-term investment over the next generations inconserving the biodiversity and culturalrichness of this area. 21. Costs: The GEF Alternative, in addition to the Baseline Scenario described above, includes a proposed $12 million grant from the GEF, $16 million of investments from the partially-blended IDA credits that have been prepared jointly with the Coraz6n Project, $6.04 million from the two national governments, and $0.32 from CCAD. Although the project will also leverage and significantly influence additional donor resources, such costs under the Baseline Scenario have not been presented as cofinancing for the proposed project. This additional financing presentedunder the Baseline Scenario would likely take place in any event, albeit ina less coordinated andless focused environment. 22. The GEF alternative thus includes a wide set of activities organized under six components with the following corresponding costs and focus (see also Annex 4 for a more detailed explanation of the project design and the table below with additional information on the national and global benefits): 23. Component 1: Consolidation of the CTBR ($0.92 million: GEF $0.79 million): This component of the proposed GEF Alternative will be focused on the consolidation of the binational management and coordination of the Coraz6n Reserve. For efficiency and effective management to achieve global environmental objective, it i s important to have a consolidated approach to the management of the whole area that lies in both countries. The component i s almost entirely fundedby GEF resources. 100 24. Component 2: Strengthening of SINAPs ($13.17 million: GEF $2.12 million): A key objective of this component i s strengthening of national protected area systems which i s consistent with the GEF strategies, in addition to investments insmaller targeted areas. It ensures the sustainability of an investment in a specific area such as the Corazdn, but also yields important global benefits as the overall management and financial sustainability o f all protected areas in both countries improves. To avoid duplication of efforts under this component, in the case of Nicaragua, the Corazdn Project will be coordinated with an expected UNDP- implemented GEF project to strengthen the SINAP. The cost o f this potential GEF investment has not been included under this GEFAlternative. 25. Component 3: Implementation of Protected Area Management Plans ($6.71 million: GEF $2.73 million): The objective of this component under the GEF alternative is to ensure the more effective management of each of the four individual protected areas, albeit under the concept of a well-coordinated binational transboundary biosphere reserve. 26. Component 4: Natural Resource Management ($29.73 million: GEF $3.56 million): The objective of this component is to provide support to indigenous and non-indigenous communities in the project area in the more sustainable management of natural resources. Where necessary, this also implies capacity-building investments and better coordination of programs seeking to further clarify indigenous territorial claims. It i s estimated that activities (worth at least $10.5 million) of the two World Bank financed projects will fully complement the Corazdn Project activities. 27. Component 5: Monitoring and Information Management ($1.39 million: GEF $0.99 million): Largely financed by the GEF Project, the GEF Alternative Scenario aims to ensure the global and national benefits of carefully designed and implemented biological monitoring systems across the two countries and coordinated schema of environmental information management. 28. Component 6: Project Administration ($3.03 million: GEF $1.80 million): This component will ensure effective coordination of project activities and information dissemination among ministries, national commissions, stakeholders at all levels and donor groups. 29. Benefits: The GEF Alternative incorporates the benefits of the Baseline Scenario, and will enable further locally and globally beneficial outcomes to be achieved. In addition to the Baseline benefits, incremental benefits to the global community include the ability to conserve and sustain globally significant and representative biodiversity, despite competing economic pressures on the resource base. GEF assistance will enable conservation and protection of a vast area o f globally significant habitats. Global benefits will include enhanced monitoring and information exchange through improved record-keeping at the bi-national level, and the development of significant new effective capacity at both the systemic and site levels to preserve endangered species and habitats. Continued protection of many additional ecological functions, and of option and existence values i s an unquantifiedbut large benefit to the regional and global community. Furthermore, it also provides institutional benefits that remove a number of the barriers to long term biodiversity conservation in this important bi-national transboundary resource. 101 IncrementalCosts 30. The incremental costs are those that would not have existed in the absence of the GEF Alternative and are above and beyond what was estimated under the Baseline Scenario. Some of these costs are financed by the two partially-blended World Bank funded projects as they have both been prepared incorporating the concept o f the Coraz6n Project and as a result o f the latter, are directing resources toward the Alternative Scenario that would not otherwise have happened. Other costs of the Alternative Scenario are being assumed by the two national governments. 31. The incremental cost, the difference in cost between the Baseline Scenario (US$20.6 million) and the GEF Alternative (US$54.96 million), i s US$34.36 million. Inaddition to global biodiversity benefits, the project will generate national and local benefits. O f the incremental expenditures (costs) of $34.36 million, the GEF i s requested to fund only $12.0 million; the balance of US$22.78 million will be funded by the two governments (through the World Bank loans andbudgetary allocations) and by CCAD. IncrementalCost Matrix ~~ Pro.ject cost cost $ DomesticBenefits GlobalBenefits Components Category Millions Component 1: Baseline 0.10 Very limited becauseof Very limited because Consolidation low levels of available of low levels of of the CTBR financing available financing GEF 0.92 More efficient use of More efficient use of Alternative resourcesfor protected international area management; cooperation improved bilateral resources and better relationships protection of this area of globally important biodiversity Incremental 0.82 Incremental 0.79 (GEF) Component2: Baseline 3.60 Current minimal As bothnational Strengthening investments innational systems remain of SINAPs systems are yielding weak, global benefits some benefits in are minimal efficiencies; Protected Area Fundin Honduras i s being established GEF 13.17 Consolidating funds and Strengthened Alternative decentralizing administrative management will yield systems and efficiencies and long- gradually increasing term availability of some availability of funds for recurrent costs operationalfunds will benefit all protectedareas in both countries 102 Project cost cost $ DomesticBenefits GlobalBenefits Category Millions Incremental 9.57 Incremental 2.12 Component3: 1.6 Minimal investments Continuing erosion Implementation will mean the status quo: of key areas of of Protected a continuing and gradual global biodiversity Area loss of the protected importance Management areas to the agricultural Plans frontier GEF 6.7 1 More effective The overall project Alternative implementationof and this component managementplans inparticular provide should allow for for the maintenance stabilization of protected of the integrity of the areas with corresponding Coraz6n Reserve and benefits interms of maintenance of environmental services large-scale andtourism ecological processes inthe largest remaining area of pristine habitat in Central America Incremental 5.11 Incremental 2.73 (GEF) Baseline 15.00 Expectedlevels of No measurable Natural investments will at best global benefits are to Resource maintaincurrent levels be expected under Management of poverty and will the Baseline allow for minimal Scenario advances in more sustainable natural resource management GEF 29.73 Resourcesof the Ensuringprogress in Alternative partially-blended sister more sustainable use projects plusthe GEF of biodiversity inthe investment will allow for area, along with more efficient use of progress inresolving natural resource landtitling issues, management resources yields global benefits with some inincreasing corresponding benefits likelihoodthat the inpoverty alleviation. protected areas will Better coordination of remain protectedand landtitling issues should inthe use of allow for progress in biodiversity, also a settling traditional land global goal claims Incremental 14.73 103 P I- Project cost cost $ DomesticBenefits GlobalBenefits Com onents Category Millions Incremental 3.56 (GEF) Baseline 0.30 Benefits are negligible No discernable Component5: as monitoring global benefits under Monitoringand investments are low- the Baseline Information level, scattered, and have Scenario Mana ement minimal coordination GEF 1.39 Better coordinated and Better monitoring Alternative more effective and knowledge about monitoring programs biodiversity allows allow for better national for better decisions decision-making. More to be made about use I effective SINIAs have a of international similar impact on good resources stewardship decisions F countrywide Incremental 1.09 Incremental 0.99 (GEF) Component 6: Baseline 0.00 NIA NIA LProject GEF 3.03 Efficient use of Good management Alternative resourcesunder the of the project will project as well as more support attaining the efficient resources of overall global partially-blended and benefits of the thematically related project. projects Incremental 3.03 Incremental 1.80 W F ) Totals* Baseline 20.6 Overall, expected The immense global resources allow for at biodiversity value of best the maintenance of the Corazdn Reserve the status quo, i.e., an will not be entirely ongoing erosion of the lost but will suffer biodiversity of the significant erosion Corazdn and andlikely impacts on unsustainable use of the integrity of some natural resource large-scale management by human ecosystemic populations. processes GEF 54.96 Stabilization of existing Stabilization of Alternative protected areas of existing protected national priority and areas through better 104 Project cost cost $ Domestic Benefits Global Benefits Components Category Millions improvements inuse and coordination allocation of poverty- between countries focused investments. and protected areas Long-term benefits in and more efficient terms of environmental use of poverty- services and tourism targeted and potential. investments targeted to naturalresource management leading to measurably more effective conservation of biodiversity (GEF) * Pleasenote that any mathematicaldifferences are caused by rounding 105 Annex 16: STAP Roster Review CENTRALAMERICA: Corazdn Transboundary BiosphereReserve Project The Scientific and Technical Advisory Panel (STAP) External Reviewer was Dr. Sonia Lagos Andino de Witte. She provided these comments on May 11, 2005, based on two earlier versions of this document proposal. Observationshesponses of the Project proponent appear in italics. Second round comments by the reviewer, basedon an earlier version of Team Responses, appear inbold. I.GENERALCOMMENTS: This document provides the World Bank with a Technical Review (Phase 11) of the proposed "Corazbn Transboundary Biosphere Reserve" GEF Project. The importance of the binational approach of this project can not be overemphasized, particularly considering that the principal beneficiaries of the project are the indigenous people of the proposed Corazbn Reserve. As mentioned in the previous comments in March 2005, the review of the Indigenous Peoples Development Plan (IPDP) i s urgently needed. This IPDP is, in my opinion an essential part of the project in order to ensure "that these populations participate in, and benefit from, the creation of the reserve." The success of the project will depend on how active local and indigenous people (including Afro-Caribbean (Garifunas) and mestizo population) will participate in the implementation of the project. Therefore, Istrongly recommend to enclose the IPDP into the Project proposal at this stage, rather than to wait until the operational planning of the project i s developed. The project document presents areal picture of the lackingmanagementcapacity of the protected areas systems in both countries and the need to develop operations management and monitoring strategies. However, an approach to incorporate the local organizations to promote sustainable development options coming from local initiatives should be more explicit in the document. The project would benefit from including into the Binational Forum, Binational Technical Committee and Binational Committee stakeholders like local leaders and local organizations of the proposed locations (the Bosawas Biosphere Reserve in Nicaragua and the Tawahka Asagni Indigenous Reserve, Patuca National Park and Rio Pla`tano Biosphere Reserve in Honduras.). The project appraisal states a commitment to local and indigenous people by supporting the `)participation of local communities as un integral part of theproject through implementation". Itis clearly describedthat Nicaragua and Honduras "have weakprotected areas systems and both countries have shown luck of capacity to manage thefour established protected areas, related to this project". This i s in reality not very promising for the near future, considering the urgent needto protect the proposed Coraz6n Reserve. Therefore, it i s important to emphasis that the key issue of this project i s to develop an innovative way to effectively work at local level and motivate local and indigenous people to active participation in the implementation of the project at all levels and to address a more effective conservation of biodiversity and sustainable use of natural resources also by strengthening the protected areas systems from Nicaragua and Honduras, as described in Annex 1of the project appraisaldocument. 106 TeamResponse: TheIndigenous Peoples Development Plan is being prepared and will be ready by Appraisal, near the end of August 2005. Thefindings will be incorporated into the project design and implementation. We agree that local participation in all stages of the project is key. Local leadersfrom thefour protected areas do in fact form part of the Binational Forum, and have participated in numerous workshops during project preparation. Workshopswere also held with a number of communities in the Reserve area during preparation. The Binational Committee and Binational Technical Committee are incorporated by representatives nominated by the two national governments, representing a diflerent type of stakeholder participation. We also agree that strengthening both the national protected areas system and the capacity of local communities to participate in the management of their own protected areas is extremely important. Community capacity will be strengthened under Components C and D; the National Protected Areas Systems are thefocus of ComponentB. 11.KEYISSUES Scientific and Technical Soundness of the Proiect 1. I s there sufficient ecological and technical information available to give the project a sound scientific base? 0 Annex 1 presents sufficient ecological and technical information about the project regions. However, there i s not sufficient cited literature that can support the information described. A list of references i s still missing inAnnex 1 0 Iagreethat`theprotectedareasof CorazdnReservearepartof theMesoamerican Biological Corridor that constitutes a central development concept for the region, integrating conservation and sustainable use of biodiversity within theframework of sustainable economic development'. There i s a need, however, to share more information about similar projects in other parts of the world, if there i s any information available that could help with lessons learned to develop the Coraz6n Transboundary Biosphere Reserve. Team Response: This information has been added in Annex 1. While there is still rather limited experience in transboundary biosphere reserves, lessons learned in other transboundary parks have been incorporated into the project design, notably through a UNESCO-led workshop and the work of a consulting firm with experience in other transboundary protected areas. 2. I s there a need to develop indicators to achieve the objectives? 0 Itis necessary to introduce indicators referredto social aspects, especially to poverty/ income and basic needs development within the project context; 0 Other important aspects are the institutional cooperation and coordination among local, regional and national levels, degrees of involvement and consolidation of negotiation mechanisms of local stakeholders, especially indigenous groups, local municipalities, and so forth. 107 Team Response: The reviewer received an earlier version of the indicators. The current version addresses these issues. Interinstitutional coordination is measured by the Component A indicator. The Component C indicator specifically measures local participation (through the protected areas scorecard) as does the PDO indicator. We have not included poverty indicators because this has not been stated to be an explicit outcome of theproject. a Idon'thaveadditionalcommentstothispoint. 3. Will appropriate monitoringbe put inplace? The national policy decision makers in Honduras and Nicaragua should be encouraged to integrate GEF, WWF/WB protected area scorecard (or some of its essential elements) as national policy instruments with its respective application mechanisms. The monitoring system of the development objectives in general should be a shared system among national and local stakeholders, so that sustainability through appropriation will be more probable. The monitoring systems for the successful project implementation on an operational level could be based on a shared impact monitoring of each of the so-called "subprojects of change", each one of which requires appropriation and endogenous efforts by the local actors. Team Response: The use of appropriate management eflectiveness techniques will certainly be promoted by the project. Care has been taken to include community participation in the monitoring process. 4. Will the approach taken in the project proposal achieve the objectives of conserving biodiversity? If there is not an essentialfocus onproductive sustainable forest use, localpopulation hardly will see the short or medium term socioeconomic benefit needed for the motivation to protect their natural resources. The project proposal still seems weak on this aspect, which could be presented under the perspective of territorial competitiveness, including local public and private-partially external-stakeholders (for instance inthe area of ecotourism). Team Response: Greater resources have been allocated to Component D, Community-based natural resource management to better achieve this goal of generating local socioeconomic benefits. a Idon'thaveadditionalcommentstothispoint 5. I s there any area weakness, gap inthe project? The conceptualization andoperationalization of the specialbenefit of the binational project character which i s indicated in a general form (chapter B., point 6., p.9), should be more specified. Conflicts between ethnic groups need more attention, particularly in Bosawas where the indigenous people has autonomous territorialregulations Clarificationof benefit sharing 108 The project structure i s lacking control mechanisms to avoid corruption in the implementation of the project Team Response: Theproject has been modijied to explicitly include non-timber forest products as an additional investment area and to betterfocus on conflict resolution. Theproject structure control mechanisms will beput in place prior to Appraisal. IagreewiththeProjectteamregardingthenon-timberforestproducts,butstill recommend improving the control mechanism in the implementation of the project. All the other points remain at this stage as recommended in the first project appraisal review, particularly with reference to the specific special benefitofthe binationalprojectcharacter. TeamResponse: Noted. Theseissues will be addressed at appraisal. 6. Are there any controversial aspects about the project? Concession and permission system for natural resource exploitation: it seems still to be highly centralized and should open up to guaranteeconsideration of local interests and criteria as one of the serious inputsfor the final concession decision. Team Response: Neither area will have commercial forest concessions; decisions on local resource exploitation are best handled through the process of the local protected area managementplans, which theproject will support. 0 No additionalcommentsto thispoint 7. How will the drops inrevenue as a result of conservation measuresbe compensated? 0 This point has not beenmentioned inthe project appraisal andshould be included in2 ways: presenting preliminary ideas of what revenue drops are to be expected, and indicating which potential alternatives may be available. TeamResponse: In no area is it expected that there would be revenue drops because the project is on the contrary attempting to maximize incomefor local stakeholders. However, in the event such were to happen, the project is preparing an involuntary resettlement framework (covering economic displacement) to be ready by Appraisal. The Teamhasclarifiedthis questionandIdon't haveany additionalcomments. 8. How effective will the proposedmodel be inthe local situation? 0 This depends to a high degree on its socioeconomic benefit and on its "structural institutionalization", both of which should be more emphasized. TeamResponse: Weagree with this and have attempted to make it more explicit in the document. No additionalcomments 109 How does the proiect fit within the context of the goals of GEF - 0 The project meets the goals of GEFinthe context of the OP 4. TeamResponse: Weagree that theproject responds to OP3 and OP4, as well as SP-1 and SP-2. 0 IagreewiththeTeamResponse. REGIONAL CONTEXT The regional implication of this project is well understood in the document. The role of the Binational Technical Committee in the implementation of the project activities i s crucial for the coordination of such a complex and extensive area, despite the political changes and new governments of both project countries to be electedinthe next months. TeamResponse: We agree that the Binational Technical Committee will play a key coordinating role. 0 No additionalcommentsto this point Replicabilitv of the proiect Refers to the scope for replication of the intervention. If successful, could the intervention be replicated elsewhere on the basis of experienceand learning? 0 Lessons learned out of this project, specific in the context of direct involvement of indigenous people and reinforcement of Protected Areas System could benefit other regions in Latin America with similar vulnerable ecosystems and ethnic groups, particularly from the perspective of unification of management, coordination and monitoring mechanisms. It i s recommended to network on similar experiences inAsia and Africa. 0 The Coraz6n Reserve Project can be considered an initiative in support of the Global Strategy for Plant Conservation of the Convention on Biological Diversity, and in particular with its Target 13-The decline of plant resources, and associated indigenous and local knowledge, innovations and practices that support sustainable livelihoods, local food security and health care, halted (by 2010)-and with Goal 7 of the MillenniumDevelopment Goals -Ensure environmental sustainability. Team Response: The dissemination of lessons learned will be very important, and has been emphasized by the project. It is very much in keeping with Convention on Biological Diversity Targets and Goals 110 ADDITIONAL ISSUES Linkage to other programmes and action plans at the regional or subregional level Are adequate links established with relevant ongoing regional or subregional programs and action plans? I s there evidence that the GEF intervention will be considered with other ongoing initiatives? 0 According to page 39, at the bottom, and page40, on the top, the Corazdn Project will have limited activities in the Rio Platan0 area, because it i s already attended by GTZ and KfW. The fact that the coordination among both projects will be limited to "day to day activities, planning and likely to project implementation arrangements", presents the risk that both projects could manage a different conceptual approach, which could be rather dangerous and confusing for the local development actors in this area. Team Response: This is an important observation and we will discuss this further with the Government of Honduras and German representatives in the work leading up to Appraisal. Comment from External Reviewer: Please be aware that the GTZ -Cooperation in the Biosphere Reserve of Rio Platan0 will depend on the KfW financial support for the implementation of the activities planned in this region. The GTZ itself is reducing the investment in new activities and cutting budget in the most projects in Latin America. This situation should be considered in the decision to keep the GEF activities limited inthis area. TeamResponse: This is valuable information. Discussions with KJW and GtZ have been ongoing during preparations. Shouldfunding levels change significantly, the geographic focus of project activities will be reexamined. Degree of Involvement of Stakeholders inthe Project 1. Are the participatory schemes adequate? 0 The role and territorial responsibility of local governments for facilitating the local planning processes, as a regulatory instance for land use conflicts and local basic infrastructure procurement should be especially focused to improve the sustainability perspective. If local governments together with local indigenous and other local interest groups do not appropriate themselves of the project and Biosphere protection mechanismson local level and sustain and continue them, then the project impact will finish after its termination. The "integration" of project mechanisms into the local cooperation processes supported by the other projects-not only by IDA, but also by the Social Funds FISE (Nicaragua) and FHIS (Honduras) and other programs active inthe Coraz6n Biosphere Reservewill be essential. 111 On the other hand, the great distances between local communities and municipalities in the very extensive municipio territories, often make the presence of the local government in these communities nearly invisible. But, as there i s no alternative to legitimate public institutionality on local level, the project should try to support the installation of visible municipal presence within its territory (for instance in form of Ofcinas de Enlace Comunitarias). Inthis sense, it is recommended that on the local andpossibly "intermunicipal" level, local actors constitute their own coordination committee under the municipal government as the (legally) territorial lead agency which procures that local implementation of the different local plans integrates the supported local investment and other projects, and that a local development planning process under the guidance of local government will be the basis or reference point for all projects which aim at the local development promotion. Team Response: The above points have been noted. Creating new local coordination instancias has generally failed but the Project will have to make a more concerted efSort during implementation to work within existing local structures. 0 No additionalcomment to thispoint 2. Have conflict issues beingdealt with? 0 Interest conflicts which originate from historically grown domination structures between the ethnic groups mustbe always present inthe project mechanisms. Team Response: This is quite valid. The implementation of conflict resolution mechanisms has been incorporated into ComponentD. No additionalcommentsto thispoint Capacity building;aspects One of the activities GEF i s funding i s supporting capacity building efforts that promote the preservation and maintenance of indigenous and local communities, knowledge, innovation, and practices relevant to conservation o f biodiversity with their prior informed consent and participation. One of the outputs of GEF projects should be stronger institutions and well-trained staff to address these issues. 1)Has adequate attentionbeenpaidto capacity buildingaspects? 0 Training activities are enclosed in Components C,D and E, but indicators for those activities are missing inthe document Team Response: Indicatorsfor local capacity are included in the "umbrella" indicators used at the PDO level and in the protected area scorecard. Additional information specific to capacity will be "extractable" from the indicator reports. 112 No additional comments to this point 2) I s there sufficient humancapacity to tackle the issues addressed inthe project? The Coraz6n Project will be executed through CCAD and this might guarantee that the project staff will have the required capacity and skills to implement the project activities at all levels, despite Government changes in Honduras and Nicaragua during the project period. A review of the qualification of the staff already in place for the project i s not possible at this stage, since this information i s not provided by the project appraisal. Team Response: Project stafs have a high level of capacity and strong experience in implementing similar projects. Some degree of turnover is inevitable; however it is expected that theproject will continue to attract highly-qualified stafs 0 Comment from External Reviewer: There is no doubt on this statement about the qualification of the project staff already in place, but as external reviewer I had no access to this information, therefore, the only reference to this point i s the Team Response. Innovativeness of the proiects Inwhichrespect arethe approachesoftheprojectinnovative? The unification of project approach toward four different, until now independently treated Reserves, i s an important innovation (although its specific benefits on the conceptual and operationallevel should still be stated more clearly). 0 On the other hand, the appraisal should resume the basic relevant results of the other project experiences mentioned (especially previous GEF projects, as well as current GTZ, USAID, IDA projects), and indicate that the approach really takes into account the lessons learned by those projects. Chapter B, point 5 (pp. 7-8) seems to be rather general inthis aspect. Team Response: The section on Lessons Learned in the main text has been expanded to take into account this observation. Note that drajl reviews of lessons learned have been completedfor both the Bank's previous GEF projects and these are available in project files. ExternalReviewer: NO additional comments to this point 113 MAP SECTION IBRD 34787 89°W 88°W 87°W 86°W 85°W 84°W 83°W 82°W BELIZE C a r i b b e a n S e a CENTRAL AMERICA Roatán CORAZÓN TRANSBOUNDARY LA BAHIA Gulf of BIOSPHERE RESERVE PROJECT Honduras 16°N ISLAS DE PROJECT AREA 16°N Trujillo Iriona Puerto Cortés Tela La Ceiba Corocito Balfate M GUATEMALA C O L Ó N o C O R T É S AT L Á N T I D A Sonaguera Esperanza Barra Patuca PROJECT AREA La PROTECTED AREAS EXCLUDING BUFFER ZONES i Lago de Paulaya s q u San Pedro Río Plátano t o BUFFER ZONES Izabal Olanchito Aguan Sula El Progreso C Quimistan La Vega El Carbón o Morazán Siercora Biosphere Reserve Si G R A C I A S a Puerto s Lempira SELECTED CITIES AND TOWNS Ulúa Higuerito Y O R O A D I O S t San Esteban DEPARTMENT CAPITALS Nuevo S A N TA Dulce Nombre Sirsirtara Arcadia NATIONAL CAPITAL B Á R B A R A HONDURAS de Culmí 15°N Sulaco Yoro RIVERS 15°N C O P Á N Santa O L A N C H O Cabo Gracias MAIN ROADS Bárbara Lago de Catacamas PatucaTawahka-AsangniColón Reserve a Dios Copán Salamá RAILROADS Santa Rosa Yojoa San Luis del de Auasbila Wani de Copán Humuy Waspam Lagoon DEPARTMENT BOUNDARIES To Jaitique Guayape Leimus Chiquimula M o n t a ñ a s Patuca Gracias COMAYAG d e Juticalpa INTERNATIONAL BOUNDARIES O C O T E - Cedros Cerro Comayagua U Montañas Guaimaca Montañas Las Minas A C o m a y a g u a Patuca Nueva P E Q U E National (2,870 m) La Park Bosawas Wawa Cayos Miskitos Ocotepeque Esperanza CÁ La Paz O Biosphere Reserve Pahara L E M P I R A Jalán Bocay AT L Á N T I C O Lagoon To N O R T E San Salvador Marcala CISCZANTEGUCIGALPA Guyaambre EL PARAÍSO Coco Cerro Mapulaca INTIBUL A PA Z N A Cola Blanca Danlí Natural Puerto Cabezas 14°N Reserve Camasca Bocay Amaka Bonanza Kukalaya Karata 14°N Yuscarán Lagoon Mogotón b elia La Rosita To FRAM R O Sabana J I N O T E G A EL SALVADOR aCerro Cerro Banacruz San Miguel Grande Las Manos (2,438 m) NUEVA I sNational Saslaya Siuna Natural Reserve Ocotal SEGOVIA Cerro Kilambé Kilambé Bambana Kukalaya Park VALLE Natural Reserve Quilalí a t Wiwilí r Somoto e s To Nacaome San Marcos MADRIZ l San Salvador l a San Lorenzo de Colón San Sebastián r d i Prinzapolka Choluteca Fonseca CHOLUTECA de Yali o Prinzapolka o E S T E L Í C C Macizos de Turna MatagalpLaa Estelí Golfo de Peñas Blancas El Triunfo Somotillo Jinotega Natural Reserve Grande de Cruz de Potosi Río Grande 90° 86° 82° 78° 13°N Punta Matagalpa N I C A R A G U A o 18° 18° Cosigüina CHINANDEGA El Sauce MATAGALPA Rio Blanco t JAMAICA BELIZE Area of map Sébaco MEXICO Muy Muy Kurinwás Nuevo i C a r i b b e a n C a r i b b e a n Source: CCAD Spatial Database L E Ó N Amanecer u GUATEMALA HONDURAS 82°W S e a Chinandega 83°W 0 20 40 60 80 100 Kilometers B O A C O 14° 14° Cordillera AT L Á N T I C O q ELS e a Corinto Siquía Perlas SALVADOR León MANAGUA Boaco Chontaleña S U R s Lagoon NICARAGUA 0 20 40 60 Miles Lake o This map was produced by the Map Design Unit of The World Bank. P A C I F I C Managua San Benito Laguna COSTA RICA The boundaries, colors, denominations and any other information shown M de Perlas 10° 10° O C E A N on this map do not imply, on the part of The World Bank Group, any Puerto CHONTALES Mico P A C I F I C judgment on the legal status of any territory, or any endorsement or Sandino MANAGUA Rama Escondido P A N A M A acceptance of such boundaries. Juigalpa O C E A N MASAYA 89°W 88°W 87°W Lóvago Masaya Granada 85°W 84°W Bluefields 90° 86° 82° COLOMBIA MAY 2006 IBRD 34788 89°W 88°W 87°W 86°W 85°W 84°W 83°W 82°W BELIZE C a r i b b e a n S e a CENTRAL AMERICA Roatán CORAZÓN TRANSBOUNDARY Gulf of BIOSPHERE RESERVE PROJECT Honduras 16°N Trujillo Iriona ECOSYSTEMS Puerto Cortés Tela La Ceiba Corocito Barra Patuca Evergreen and semi-evergreen broad-leaved forests- Balfate 1A 1/2(1) GUATEMALA Sonaguera Evergreen and semi-evergreen mixed forests- 1A 1/2(1/2) Lago de San Pedro Aguan Paulaya Evergreen coniferous forests-1A 1/2(2) Izabal Olanchito Sula El Progreso Semi-deciduous broad-leaved forests-1a3(1) Quimistan La Vega El Carbón Morazán Sico Puerto Mangrove forests-1A5 Lempira Ulúa Higuerito Deciduous broad-leaved forests-1B1 San Esteban Broad-leaved shrublands-IIIA/B(1) Nuevo Dulce Nombre Sirsirtara Arcadia 15°N Sulaco Yoro HONDURAS de Culmí Water bodies-SA Aquatic productive systems-SA2 15°N Santa Agro-productive systems-SPA1 Bárbara Lago de Catacamas Forest plantations-SPA2 Copán Salamá Santa Rosa Yojoa San Luis Wani Urban areas-U1 de Copán Humuy Auasbila Lagoon Jaitique Guayape Patuca Leimus Waspam Freshwater wetlands-V/VIID Gracias Juticalpa Savannas-VA Cedros Comayagua Areas with sparse vegetation-VI Guaimaca Nueva La Wawa Ocotepeque Esperanza La Paz Pahara Jalán Guyaambre Bocay AT L Á N T I C O Lagoon N O R T E C a r i b b e a n Marcala TEGUCIGALPA Coco Mapulaca Danlí Puerto Cabezas S e a 14°N Camasca Coco Bocay Amaka Bonanza Kukalaya Karata 14°N Yuscarán La Rosita Lagoon Sabana J I N O T E G A EL SALVADOR Grande Las Manos NUEVA PROJECT AREA Siuna Ocotal SEGOVIA Bambana Kukalaya SELECTED CITIES AND TOWNS Quilalí DEPARTMENT CAPITALS Wiwilí Nacaome Somoto NATIONAL CAPITAL San Marcos MADRIZ San Lorenzo de Colón RIVERS San Sebastián Prinzapolka Choluteca de Yali Prinzapolka INTERNATIONAL BOUNDARIES E S T E L Í Turna MatagalpLa a 83°W 82°W Estelí Golfo de Fonseca El Triunfo Somotillo Jinotega Grande de Cruz de Potosi Río Grande 90° 86° 82° 78° 13°N Matagalpa N I C A R A G U A 18° 18° CHINANDEGA El Sauce MATAGALPA Rio Blanco JAMAICA BELIZE Area of map Sébaco MEXICO Muy Muy Kurinwás Nuevo C a r i b b e a n Source: CCAD Spatial Database L É O N Amanecer GUATEMALA HONDURAS S e a Chinandega 0 20 40 60 80 100 Kilometers B O A C O AT L Á N T I C O 14° 14° EL Corinto Perlas SALVADOR León MANAGUA Boaco Siquía S U R Lagoon NICARAGUA 0 20 40 60 Miles P A C I F I C Lake This map was produced by the Map Design Unit of The World Bank. Managua San Benito Laguna COSTA RICA The boundaries, colors, denominations and any other information shown de Perlas 10° 10° on this map do not imply, on the part of The World Bank Group, any O C E A N Puerto CHONTALES Mico P A C I F I C judgment on the legal status of any territory, or any endorsement or Sandino MANAGUA Rama Escondido P A N A M A acceptance of such boundaries. Juigalpa O C E A N MASAYA 89°W 88°W 87°W Lóvago Masaya Granada 85°W 84°W Bluefields 90° 86° 82° COLOMBIA MAY 2006 IBRD 34789 89°W 88°W 87°W 86°W 85°W 84°W 83°W 82°W BELIZE CENTRAL AMERICA Roatán LA BAHIA C a r i b b e a n S e a CORAZÓN TRANSBOUNDARY Gulf of BIOSPHERE RESERVE PROJECT Honduras 16°N ISLAS DE Trujillo INTERNAL ZONING 16°N Iriona Puerto Cortés Tela La Ceiba Corocito Balfate M GUATEMALA C O L Ó N o PROJECT AREA C O R T É S AT L Á N T I D A Sonaguera Esperanza Barra Patuca La i CORE ZONE Lago de Paulaya s q u San Pedro t Río Plátano o Izabal Olanchito Aguan PRIMITIVE ZONE Sula El Progreso C Quimistan La Vega El o Morazán Siercora Biosphere Reserve Si Carbón G R A C I A S a Puerto CULTURAL ZONE s Lempira Ulúa Higuerito Y O R O San Esteban A D I O S t CULTURAL AND HISTORICAL ZONE Nuevo S A N TA Sirsirtara CONSERVATION ZONE Arcadia Dulce Nombre B Á R B A R A HONDURAS de Culmí INTENSIVE USE ZONE 15°N Sulaco Yoro 15°N C O P Á N Santa O L A N C H O Cabo Gracias MULTIPLE USE ZONE Bárbara Lago de Catacamas Reserve a Dios Copán Salamá EXTENSIVE USE ZONE Santa Rosa Yojoa San Luis del PatucaTawahka-AsangniColónAuasbila Wani de Copán Humuy M o n t a ñ a s Patuca d e Juticalpa Cedros Comayagua U Montañas de Waspam Lagoon BUFFER ZONE To Jaitique Guayape Leimus Chiquimula Gracias COMAYAG O C O T E - Cerro Montañas Guaimaca Las Minas A C o m a y a g u a Patuca SELECTED CITIES AND TOWNS Nueva P E Q U E (2,870 m) La National Park Wawa Ocotepeque Esperanza CÁ La Paz O Bocay Pahara DEPARTMENT CAPITALS L E M P I R A Jalán Bosawas AT L Á N T I C O Lagoon NATIONAL CAPITAL To Biosphere Reserve N O R T E San Salvador Marcala CISCZANTEGUCIGALPA Guyaambre EL PARAÍSO Coco RIVERS Cerro Mapulaca INTIBUL A PA Z N A Cola Blanca Danlí Natural Puerto MAIN ROADS 14°N Camasca Bocay Amaka Reserve Bonanza Kukalaya Karata Cabezas RAILROADS 14°N Yuscarán Lagoon Mogotón b elia La Rosita DEPARTMENT BOUNDARIES To FRAM R O Sabana J I N O T E G A EL SALVADOR aCerro San Miguel Grande Las Manos (2,438 m) NUEVA I sNational Cerro Banacruz Saslaya Siuna Natural Reserve INTERNATIONAL BOUNDARIES Ocotal SEGOVIA Cerro Kilambé Kilambé Bambana Kukalaya Park VALLE Natural Reserve Quilalí Wiwilí r a t Somoto e s To Nacaome San Marcos MADRIZ l San Salvador l a San Lorenzo de Colón d i San Sebastián r Prinzapolka Choluteca Fonseca CHOLUTECA Prinzapolka o de Yali E S T E L Í C o C MatagalpLa a Estelí Macizos de Turna Peñas Blancas Golfo de El Triunfo Somotillo Jinotega Natural Reserve Grande de Cruz de Potosi Río Grande 90° 86° 82° 78° 13°N Punta Matagalpa N I C A R A G U A o 18° 18° Cosigüina CHINANDEGA El Sauce MATAGALPA Rio Blanco t JAMAICA BELIZE Area of map Sébaco MEXICO Muy Muy Kurinwás Nuevo i C a r i b b e a n C a r i b b e a n Source: CCAD Spatial Database L E Ó N Amanecer u GUATEMALA HONDURAS 82°W S e a Chinandega 83°W 0 20 40 60 80 100 Kilometers S e a 14° B O A C O AT L Á N T I C O q 14° EL Corinto Cordillera Perlas SALVADOR León MANAGUA Boaco Siquía s Chontaleña S U R Lagoon NICARAGUA 0 20 40 60 Miles P A C I F I C Lake o This map was produced by the Map Design Unit of The World Bank. Managua San Benito Laguna COSTA RICA 10° The boundaries, colors, denominations and any other information shown M de Perlas 10° on this map do not imply, on the part of The World Bank Group, any O C E A N Puerto CHONTALES Mico P A C I F I C judgment on the legal status of any territory, or any endorsement or Sandino MANAGUA Rama Escondido P A N A M A acceptance of such boundaries. Juigalpa O C E A N MASAYA 89°W 88°W 87°W Lóvago Masaya Granada 85°W 84°W Bluefields 90° 86° 82° COLOMBIA MAY 2006 IBRD 34832 87°W 86°W 85°W 84°W 83°W 82°W BELIZE CENTRAL AMERICA Mopan Mopan Garifuna Garifuna Roatán C a r i b b e a n CORAZÓN TRANSBOUNDARY Isleño IsleIsleñoño Mopan Mopan S e a BIOSPHERE RESERVE PROJECT MultiMultiétnicotnicoMultiétnico Kekchi Kekchi Kekchi & Mopan Kekchi Mopan Garífuna Garífuna INDIGENOUS PEOPLES Garífuna Garífuna Garífuna Garífuna Trujillo Iriona INDIGENOUS PEOPLES Puerto Cortés Miskito Miskito Q'eqchi'Q'eqchi' Tela La Ceiba Corocito Barra Patuca Balfate Aguan M PROJECT AREA o Sonaguera s Garifuna & Garifuna Dios q u Lago de re de La Esperanzaulaya Tolupan Tolupan Pa MultiMultiétnicotnicoMultiétnico i t Izabal Kekchi Kekchi San Pedro SELECTED CITIES AND TOWNS Sula El Progreso Cordillera NombOlanchito ra El Carbón o C Quimistan La Vega o DEPARTMENT/PROVINCE CAPITALS Morazán Siero GUATEMALA Sic a Puerto Nahoa Nahoa s Lempira NATIONAL CAPITAL Ulúa Higuerito t Tolupan Tolupan San Esteban Pech Pech RIVERS Nuevo Pech Pech Arcadia Sulaco Yoro Sirsirtara MAIN ROADS Dulce Nombre de Culmí RAILROADS Cabo Santa HONDURAS Tolupan Tolupan Miskito Miskito Gracias INTERNATIONAL BOUNDARIES Bárbara Lago de Catacamas Patuca Tawahka Tawahka a Dios Ch'orti' Ch'orti' Chortí Chortí Salamá Copán de Colón Santa Rosa Yojoa Nahoa Nahoa San Luis del Auasbila Wani de Copán Humuy a Waspam Lagoon To Jaitique Guayape Leimus Chiquimula Chortí Chortí Gracias de Montañas Juticalpa Cedros Cerro Montañas Comayagua Guaimaca Montañas Sumu/Mayangna Sumu/Mayangna Las Minas Comayagua Nueva (2,870 m) La Wawa Miskitu Miskitu Cayos Miskitos Ocotepeque Esperanza La Paz Guyaambre Patuca Sumu/ Sumu/ Pahara Bocay Mayangna Mayangna Lagoon To Lenca Lenca Jalán Miskitu Miskitu San Salvador Sumu/Mayangna Sumu/Mayangna Nahua/Pipil Nahua/Pipil Marcala TEGUCIGALPA Coco Mapulaca Danlí Sumu/Mayangna Sumu/Mayangna Puerto Cabezas 14°N Camasca Bocay Karata 14°N Nahua/Pipil Nahua/Pipil Yuscarán Lagoon Mogotón Sources: CCAD Spatial Database; To Sabana La Rosita National Geographic Society - Indigenous Peoples EL SALVADOR Lenca Lenca San MiguelCacaopera Cacaopera Grande Las Manos (2,438 m) MultiMultiétnicotnicoMultiétnico Nahua Nahua Isabelia Amaka Bonanza Kukalaya and Natural Ecosystems Map (2002). Siuna Bambana Kukalaya Ocotal t Lenca Lenca Lenca Lenca Indios de Indios de Quilalí Wiwilí s Nacaome Texihuat Texihuat Somoto San Marcos MiskituMiskitu To San Salvador de Colón a San Lorenzo San Sebastián Prinzapolka 0 20 40 60 80 100 Kilometers Lenca Lenca Choluteca Nahua Nahua de Yali C o r d i l l e ra Prinzapolka o Fonseca Matagalpa Matagalpa C 0 20 40 60 Miles Golfo de El Triunfo Somotillo Estelí Jinotega Turna Grande de Matagalpa Sumu/Mayangna Sumu/Mayangna 90° 86° 82° 78° Potosi 13°N Matagalpa 18° 18° Punta El Sauce Multiétnico MultiMultiétnicotnico o Sumu & Sumu BELIZE Rio Blanco Area of map JAMAICA Cosigüina Nahua Nahua t MiskituMiskitu MEXICO Matagalpa Matagalpa C a r i b b e a n Sébaco Muy Muy Kurinwás Nuevo i C a r i b b e a n GUATEMALA Amanecer HONDURAS S e a u Chinandega Garífuna Garífuna 14° 14° NICARAGUA q S e a EL SALVADOR Cordillera NICARAGUA Corinto Boaco Siquía s Perlas MultiMultiétnicotnicoMultiétnico León Chontaleña MultiMultiétnicotnicoMultiétnico Lagoon This map was produced by Lake o the Map Design Unit of The World Bank. The boundaries, Sutiaba Sutiaba Managua colors, denominations and Laguna any other information shown 10° COSTA 10° San Benito Creole Creole M de Perlas on this map do not imply, on P A C I F I C RICA PACIFIC Puerto Mico Creole Creole the part of The World Bank Sandino MANAGUA Escondido Group, any judgment on the O C E A N P A N A M A Rama legal status of any territory, OCEAN Juigalpa Lóvago Creole Creole & Mestizo Mestizo Miskitu Miskitu & Creole Creole or any endorsement or a c c e p t a n c e o f s u c h 90° 89°W 86° 82° COLOMBIA 87°W Masaya Granada Bluefields boundaries. 83°W JUNE 2006