Document of The World Bank Report No: 75755-PE RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF DECENTRALIZED RURAL TRANSPORT PROJECT IBRD LOAN 7423-PE December 19, 2006 TO THE REPUBLIC OF PERU March 21, 2013 Regional Vice President: Hasan A. Tuluy Country Director: Susan Goldmark Sector Director: Ede J. Ijjasz-Vasquez Sector Manager: Aurelio Menendez Task Team Leader: Maria Margarita Nunez 2 Extension of the Closing Date and Reallocation of Loan Proceeds PERU — Decentralized Rural Transport Project, P095570 LOAN 7423-PE Restructuring Paper 1. The closing date for the Peru Decentralized Rural Transport Project, P095570, Loan 7423-PE, will be extended from March 31, 2013 until December 31, 2013, and the proceeds will be reallocated as follows: Amount of the Loan Category Allocated (expressed in Percentage of Expenditures to USD) be financed Current Revised (1) Goods, works and consultants’ 38,579,912 43,203,000 85% services for component 1 of the Project (2) Goods and consultants’ services 6,153,000 5,130,000 85% for component 2 of the Project (3) Goods, Works and consultants' 85% services for: 538,000 538,000 (a) Component 3.a. of the Project; and 3,747,896 469,000 (b) Component 3.b of the Project (4) Goods and consultants’ services 981,192 660,000 85% for Component 4.a of the Project (5) Unallocated 0 0 - (6) Front - end Fee 0 0 Amount payable pursuant to Section 2.04 of this Agreement in accordance with Section 2.07 (b) of the General Conditions (7) Premium for Interest Rate Caps 0 0 Amount payable pursuant to and Collars Section 2.08 (c) of this Agreement in accordance with Section 4.04 of the General Conditions TOTAL AMOUNT 50,000,000 50,000,000 - 3 2. The IBRD loan in the amount of US$50 million was approved by the Board on December 19, 2006 and became effective on July 12, 2007. The program, initially of US$150 million, of which US$50 million are financed by the IADB and US$50 million are financed by the counterpart, underwent a restructuring in 2010. As a result, it became a US$160.9 million project, increasing the counterpart’s financing by US$10.9 million. 3. Overall, the project is rated satisfactory, and is well-positioned to achieve its objectives. Disbursements currently stand at US$49 million (98% of the Loan amount of US$50 million). However, an unusually heavy rainy season has prevented completion of the civil works, particularly for periodic maintenance and the improvement of footpaths. In the case of improving touristic footpaths, the Borrower neglected to include Archaeological Monitoring Plans in the terms of references, which delayed that specific component. Furthermore, the removal of previous backlogs on the institutional development activities under the decentralized model in the rural road program has also caused delays in the completion of said undertakings. Under “Monitoring and Evaluation�, the Borrower also has yet to develop the project’s Baseline Expansion and Midterm Assessment, which is essential to the project’s completion. 4. To date, 3,193 km of rural roads have been rehabilitated (95% of the target), while 2,053 km (87%) of footpaths have been improved. In addition, 6,445 km (86%) of rural roads have received periodic maintenance, and 72% of the final designs for touristic footpaths are ready for the 161 km target. 5. With regard to the development of local capacities, significant progress has been made with Provincial Road Institutes (IVPs in Spanish). The percentage of IVPs that have reached level III and IV currently stands at 50, which surpasses the original target of 45%. Meanwhile, 113 Provincial Road Plans have been formulated and 14 provinces have adopted Provincial Economic Infrastructure Plans, constituting 58% and 93% of their respective targets. The Provincial Economic Infrastructure Plans go beyond transport planning to include water supply, sanitation, irrigation, mobile communication, electrification and mines. 6. Local Development Windows have been established in 24 provinces (80% of the target of 30). As a result, 43employment-generating projects worth US$8,120,000 have been financed, in addition to 52 business plans for producers’associations. 7. As of December 2012, 857 microenterprises formed for the purpose of road maintenance are operating in 143 provinces, covering a total of 16,867 km. They employ 5,749 people, 1,587 (28%) of them women. 8. Regarding the project’s Gender Action Plan, a substantial number of activities have been undertaken to bridge gender gaps in employment access and road management decision-making. The Provincial Road Institutes have undertaken gender training workshops, in addition to other technical assistance provided to the Institutes and the Local Development Windows. Future activities include the production of gender materials and a specialized university course that focuses on the issue of gender in road management. 4 9. Moving forward, the extension of the closing date will allow the Borrower to reach the project’s targets by completing the following: rehabilitation of three rural roads, 14 footpath improvement works, four touristic footpath improvement works, and 39 periodic maintenance works. This is in addition to institutional development activities the Borrower plans to carry out. This will be the second extension of the project for a total of 18 months. 10. Likewise, the proposed reallocation of loan proceeds is mostly justified by financial reasons, given the updating of investment costs. 11. In the present proposal, funds will be reallocated among eligible categories. Mainly, the amount of US$1,023,000 from Category (2) Goods and consultant services for component 2, US$ 3,278,896 from Category (3) (b) Goods, Works and consultant services Component 3.b, and US$ 321,192 from Category (4) Goods and consultant services for Component 4.a will be reallocated to Category (1) Goods, works and consultant services for component 1 of the Project. 12. The Borrower has prepared an Action Plan, including enhanced monitoring and scaling up technical assistance to the local governments and Provias Descentralizado (the Implementing Agency), so as to ensure the project is fully implemented during the extension period. 5