Document of The World Bank Report No: 667C3-HN RESTRUCTURING PAPER ONA PROPOSED PROJECT RESTRUCTURING OF HONDURAS RURAL COMPETITIVENESS PROJECT LOAN {Approved, June 17, 2008) TO THE REPUBLIC OF HONDURAS February 61h, 2012 ABBREVIATIONS AND ACRONYMS GOH · Government of Honduras MIS Management Information System RPO Rural Producer Organization -_______ R Country Director: _e_g-io_n_a_l_V_ic_e_P _ Sector Manager I Director: Task Team Leader: r_e-si- d-en_t_:____ Carlos Felipe Jaramillo __e_l_a_C_o_x P_run Ethel ____________________ Sennhauser Marie-Helene Collion ~ [- 2 HONDURAS HONDURAS RURAL COMPETITIVENESS PROJECT CONTENTS Page A. SUMMARY............................................................................................................................4 B. PROJECT STATUS ..............................................................................................................4 C. PROPOSED CHANGES .......................................................................................................4 3 HONDURAS RURAL COMPETITIVENESS PROJECT RESTRUCTURING PAPER A. SUMMARY The restJucturing aims at modifying two indicators as a result of the cancellation of SDR 4.4 million. Two indicators were already modified with the restructuring dated August 9, that was carried out following the request for cancellation of SDR 4.4 million. The present 1estructuring would modify two additional indicators at the request of the Goverru'lent in its correspondence dated December 15, 2011. The Pr()ject Development Objectives remain the same. B. PROJECT STATUS The Pro~ect was approved on June 17, 2008 but became effective only on May 28,2010 due to 'arious administrative difficulties as well as the political situation in Honduras which prevailed during most of2009 1 with the subsequent change in government in 2010. A first amendment dated July 19, 2011 cancelled the external Payment Agent, the role of which was to disburse the grants to eligible producer organizations and monitoring complian ce with their responsibilities during sub-project cycle. The first function of the Paymem Agent is now assumed by the Ministry of Finance own financial and accounting system, while the latter is assumed by the external auditors. The amendment also introduced commercial practices as an eligible procurement method for the producer organizations which are managing sub-projects. Finally it introduced modifications in the proj~ :ct outcome indicators without modifying project development objectives. Since e::Iectiveness, implementation has been progressing .well, albeit slowly at the beginnir_g due to coordination difficulties between the two implementing agencies: SEFIN, for fiduciary aspects and SAG for technical aspects. The project team launched four calls for proposals for business profiles since March 2011. By December 2011, 76 profiles had been selected to go to the next stage of business plan development, and 8 business plans were been approved for funding. The Project has disbursed 1.7 million USD, representing a disbursement rate of approximately 12%. There i:> no audit report due yet, and the Project has been managed satisfactorily albeit slowly. 4 C. PROPOSED CHANGES Results/indicators Given the partial cancellation of funding, the Government of Honduras envisio:1ed that the Project will be able to finance only 120 productive partnerships instead of the 150 planned initially, reaching 5280 beneficiaries instead of 6700. In addition, o·tly 175 profiles will be selected (instead of 215). As to the amount of funding provided by the private sector, instead of measuring it in absolute terms, it should be measured in :relative terms. The target of US $ 12.05 million co-invested by the private sector which is the original indicator represents 50% of the amount that the public sector would i:w est in productive alliances. The Table of indicators is therefore modified as follows (the result indicators that are modified are in bold and italics) PDO Level Results Indicators Indicator One: 10% increase in the value of gross sales of the rural producer orga:1izations based on implementation of the business plan. Indicator Two: At least 80% of the producers with approved business plans are satisfied with the ProjecL Indicator Three (initial): Private actors invest at least 12.05 million USD as loans to producer organizations. Indicator Three (modified): Private actors' investment as loans to producer organizations represent at least 50% oftlte amount invested as grant by the public sector Indicator Four: Rural producers participating in the Project experience 20% increase in land anc labor productivity Intermediate Result Indicators (Component 1): Support for Productive Alliances Initial indicator: 215 RPOsltave produced a profile that is approved to become a business plan. 17 Modified indicator: 175 RPOs have produced a profile that is approved to become a business p.'an At least 15 technical service providers are approved to provide support to RPOs. ~~~~~~~~~~~~~~~~~~~~--~~~~--~~-----------------------~ Intermediate Result Indicators (Component 2): Productive I nvestments By tlte em/ of tlte Project, at least 120 productive alliances under implementation. By tlte end of tlte Project, at least 5280rural producers have benefited from Project financing. 85% satisfaction among RPOs regarding technical assistance from certified providers. 80% of the investments identified in the business plans are completed on schedule. At least 70% of the business plans in the Project are implemented using good environmental pn ctices, as proposed in the business plan. At least 70% of the business plans in the Project successfully implement measures that target the youth and indigenous communities, when applicable, as identified in the business plan. · Intermediate Result Indicators (Component 3): Project Coordina tion, Monitoring and Evaluation Baseline data in the MIS is available for each approved business plan. Satisfactory financial audits. MIS system functioning. Timely preparation of semi-annual reports. Compliance with Project Operational Manual, including Safeguard and Anti-Corruption policies. 5 6