ICRR 10094
                                                           Report Number : ICRR10094
            ICR Review
            Operations Evaluation Department




1. Project Data :
        OEDID :
        OEDID: L2972
      Project ID : P007200
    Project Name : Municipal Development Project
        Country : Guatemala
        Sector : Urban Management
     L/C Number : Loan 2972-GU
 Partners involved : UNICEF
     Prepared by : Kyu Sik Lee, OEDST
    Reviewed by : Alain Barbu
   Group Manager : Roger H. Slade
     Date Posted : 08/14/1998

2. Project Objectives, Financing, Costs and Components :
The objectives were to: (i) improve municipal finance and administration of the Guatemala City
government; and (ii)
provide and rehabilitate basic urban infrastructure and services for low -income and squatter
communities. These
objectives were to be achieved by three components : (a) improving institutional capacity of the
Guatemala City
government by introducing a cadastre system, and better budget management and financial planning; (b)
upgrading
low-income areas by providing urban services and improving road maintenance; and (c) producing a
metropolitan
development plan for a medium-term investment program. The loan amount was US$29.0 million, of
which
US$19.1 million was canceled at the request of the government . The project cost was US$14.0 million
versus an
appraisal estimate of US$44.8 million.

3. Achievement of Relevant Objectives :
Only the second objective was achieved . The first and the third components (a and c above) were
canceled at the
request of the Government due to counterpart financing problems, delays in implementation after a
change of the
municipal government, and the Bank's suspension of disbursements to Guatemala during 1989-1992.
Only the
second component (b above) was satisfactorily completed.

4. Significant Achievements :
The most significant achievement was the intense beneficiary participation at the community level in
planning ,
financing, and executing the upgrading programs on a large scale . Benefits from street paving, water
supply,
sewage collection and treatment, led to a substantially improved urban environment and better living
conditions in
the project areas. At the initiative of the communities, cost recovery mechanisms are in place and actual
collections
already began. This achievement became a good example of demand -driven community participation in
urban
improvements in Guatemala.

5. Significant Shortcomings :
It took 19 months after its approval for the loan to become effective because of the lack of
creditworthiness of the
government during 1986-1988, and the Bank's suspension of disbursements to Guatemala during the
following three
years. Subsequently, the project suffered from uneven government commitment and the lack of
counterpart funds .


6. Ratings :      ICR               OED Review               Reason for Disagreement /Comments
         Outcome : Satisfactory         Marginally Satisfactory The project objectives were partially
                                                achieved as major components
                                                (accounting for 70 percent of original
                                                project cost and loan amount ) were not
                                                implemented due to weak government
                                                commitment and lack of counterpart
                                                funds. Outcome of the one component
                                                that was implemented following de facto
                                             project restructuring was satisfactory .
  Institutional Dev .: Partial      Modest              "Partial" is equivalent to "modest".
     Sustainability : Likely       Likely            Refers only to the part of the original
                                            project that was implemented.
  Bank Performance : Satisfactory         Satisfactory         On balance, satisfactory, albeit marginally
                                            so, largely on account of the Bank's
                                            proactive approach to project
                                            restructuring which more than offset initial
                                            problems in project design.
    Borrower Perf .: Deficient        Unsatisfactory       Table 1 in ICR rated implementation and
                                            covenant compliance as deficient .
    Quality of ICR :              Satisfactory

7. Lessons of Broad Applicability :
Participatory development requires intensive supervision and should be viewed as complementary to the
long -term
pursuit of municipal reform, not as a substitute for local government responsibilities .

8. Audit Recommended?          Yes   No

9. Comments on Quality of ICR :
Generally satisfactory, but the ICR could have discussed how the three project components were
intended to
achieve the broad project objectives .