Report No. PID9605 Project Name Mexico-Federal District Urban... Upgrading Project Region Latin America and Caribbean Region Sector Other Urban Development Project ID MXPE70371 Borrower(s) BANOBRAS Implementing Agency Address GOBIERNO DEL DISTRITO FEDERAL Direccion de Equipamiento Urbano y Proyectos, Secretario de Desarrollo Urbano y Vivienda Monterrey No. 206, Colonia Roma Contact Person: Pablo Benlluire Tel: 55-64-11-38 Fax: 52-64-63-74 Email: acteal@prodigy.net.mx Environment Category F Date PID Prepared August 8, 2000 Projected Appraisal Date April 6, 2001 Projected Board Date August 2, 2001 1. Country and Sector Background Sector StructureUrban Planning Instruments. The Federal District's urban planning system consists of a framework of laws and plans which provide normative and strategic guidelines for urban settlements and procedures for optimizing development of the city. Legally, the system relies on the General Law on Human Settlements and the Law on Urban Development for the Federal District. The system's urban plans constitute a basic framework for the execution of public works and the consolidation of private activities through land use regulations. These plans include the Program for the Metropolitan Area of the Valley of Mexico (1998), the General Urban Development Program of the Federal District (1996), Local Urban Development Programs and the Partial Urban Development Programs. City of Mexico Vision. As part of the 1996 planning process, GDF in coordination with a wide range of stakeholders set out a vision for the City. Principal aspects of the vision include stabilizing neighborhoods in central area of the Federal District which have good accessibility, but deteriorating basic infrastructure. Increasing the livability of the center will capitalize on existing infrastructure in this area and reduce some of the pressure for housing in unserviced areas of the periphery (including the State of Mexico) and in environmental protection zones. The City aims to reduce poverty, to improve low-income residential areas, to preserve neighborhood identities, and to conserve and consolidate archaeological, historical and cultural patrimony. Main Sector Issues. Quality of life in many areas of the city is affected by a number of issues, including the following: (i) deterioration of the city center and increasing violence and loss of social networks; (ii) inequitable and inefficient urban growth that forces poor families to settle in the periphery or in ecological protection areas; (iii) lack of low-income housing finance; and (iv) traditionally capital budgeting not closely linked to the urban planning process nor open to community participation. 2. Objectives The project proposes to revitalize poor neighborhoods of Mexico City by establishing an area-based, comprehensive, transparent and participatory planning process as the means of defining investment priorities in target neighborhoods and increasing funds available to carry out identified works. Specific objectives of the project are to: (i) Improve and institutionalize the neighborhood planning and project implementation process, specifically the quality of participation, intra-institutional coordination and capacity to plan and implement urban upgrading from a territorial standpoint; (ii) Rationalize the financing of works identified in the neighborhood plans and increasing the amount of other financing leveraged with public funds; and,(iii) Improve quality and quantity of community level urban infrastructure and in particular the targeting and poverty impact of works. 3. Rationale for Bank's Involvement Sustained Bank participation in the sector will provide an enabling environment, in terms of technical dialogue and financing, for implementing new policy reforms in planning, urban works, and housing. Bank participation facilitates the transfer of experiences from similar projects worldwide. Developing institutional capacity, participatory planning, public-private partnerships, and housing and services investments are all areas where the Bank has considerable experience and can add value to the proposed project. 4. Description This project forms the first phase in a three phase programmatic loan. The first phase will provide support for the following. Component 1 - Participatory Planning and Project Implementation. Technical assistance to improve the methodologies and strengthen the institutional and community capacity to plan and implement neighborhood level works, and development of additional neighborhood plans and studies. Component 2 - Low-income housing. Financing for housing that forms part of the neighborhood plans and will focus on home improvement, and expansion and replacement housing for inner-city tenements. Component 3 - Local Urban Infrastructure. Financing of small urban works emanating from the neighborhood plans, including basic services, community infrastructure, improvement of public spaces, and historic restoration. Component 4 - Project Management and Supervision. 5. Financing Total ( US$m) GOVERNMENT $20 IBRD $40 IDA Total Project Cost $60 6. Implementation Borrower and Executing Agencies. The Banco Nacional de Obras y Servicios Publicos, SNC (BANOBRAS) is the borrower, and the United Mexican States -2 - will provide a guarantee for the loan. BANOBRAS will on-lend the Bank funds to the Government of the Federal District. The GDF Secretary for Housing and Urban Development (SEDUVI) will be responsible for project coordination, specifically its General Direction for Urban Equipment and Projects (DGEUP). Project Coordination, Execution and Flow of Funds. The DGEUP will oversee and coordinate the project. The Secretary of Finance/GDF, will transfer loan funds, among other funds, to the to be created Urban Development Trust for financing of housing and urban infrastructure investments. Delegaciones and line secretaries of the DF will be eligible to apply for Trust financing of urban works and will be responsible for their execution. For low-income housing, the Trust may provide direct up-front consumer subsidies (paid to the mortgage granting institution), and grant funds to project developers for social intermediation and technical support. The Trust will only finance housing and works that have been prioritized in approved neighborhood plans. Implementation Period. APL will be implemented in three overlapping phases of about 8 years overall: APL-1 (October 2001- October 2004), APL-2 (April 2004 - April 2007), APL-3 (October 2006 - October 2009). 7. Sustainability Project sustainability will be strengthen by the high degree of community participation in planning and in financing (cost-recovery) which will creates a strong constituency for implementing and maintaining agreed upon programs and works. 8. Lessons learned from past operations in the country/sector Sector IssuesClear rules for financing investments. Sustainability and impact are increased through development of clear rules of the game for housing and infrastructure investment subsidies for low-income areas. Rules should take into account the beneficiary willingness and capacity to pay, and minimize distortions in the markets, such as private housing financing. Local management. Decentralization of investment responsibility to the lowest level possible increases accountability and typically improves service quality. Decentralization of basic urban services and infrastructure provision poses several important challenges, the most urgent being the need to increase the capacity of local agencies to manage these activities. Cost recovery. In recent years, many projects have demonstrated that the poor have a high willingness to pay and that at least partial cost recovery is possible from investments in low-income communities. Community Participation. Community participation in planning and implementation is one way to ensure that the most appropriate infrastructure and service options are prioritized and sustainable. Community participation facilitates cost recovery and accountability of government agents. Housing Finance. High levels of subsidization, emphasis on finished housing, and subsidized interest rates have limited the overall impact of scarce public funds, crowded-out mortgage supply by market-based lenders, and resulted in a poor targeting of subsidies. Integrated Planning Framework. Investments in urban areas, particularly center city neighborhoods, entail spatial externalities in terms of land use, economic activity, and transportation. As a result, it is important that urban investments are coherent with a larger planning framework. 9. Program of Targeted Intervention (PTI) Y - 3- 10. Environment Aspects (including any public consultation) Issues : Environmental Impacts. It is anticipated that the project will generate substantial benefits to the urban and surrounding natural environment of the DF. Any environmental impacts in the first phase of the project, consisting of urban renewal/revitalization programs in fully urbanized central areas of the city (housing improvement, historic preservation, parks, etc.), are expected to be absent or low, and highly localized due to the small-scale nature of sub-projects. No resettlement is anticipated in the first phase of the project. This phase does not include major civil works, but rather rehabilitation and improvement of existing basic infrastructure and services. 11. Contact Point: Task Manager Anna Wellenstein The World Bank 1818 H Street, NW Washington D.C. 20433 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. This PID was processed by the InfoShop during the week ending October 20, 2000. -4-