PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: PIDA734 Public Disclosure Copy Project Name Sustainable Land Management Project (P085621) Region LATIN AMERICA AND CARIBBEAN Country Chile Sector(s) General agriculture, fishing and forestry sector (100%) Lending Instrument Specific Investment Loan Project ID P085621 Focal Area Land degradation Borrower(s) DIPRES Implementing Agency AGCI Environmental Category B-Partial Assessment Date PID Prepared/Updated 04-Feb-2013 Date PID Approved/Disclosed 06-Feb-2013 Estimated Date of Appraisal 07-Feb-2013 Completion Estimated Date of Board 14-May-2013 Approval Decision The decision review meeting, held on January 15, 2013, authorized the team to continue with appraisal. Public Disclosure Copy I. Project Context Country Context Chile is one of the most developed countries in the southern hemisphere and relies heavily on its natural resource base for employment and exports. The country has a wide range of ecological zones; including expansive arid desert, remote Pacific islands, a Mediterranean ecosystem, high- altitude grasslands and wetlands, and temperate rainforests, among others. This diverse landscape contributes to Chile’s rich biodiversity, unparalleled natural beauty and highly favorable environmental conditions for its successful resource-based industries; including forestry, fisheries, and agriculture. Yet, despite its natural assets and economic prowess, the country is challenged by land degradation problems including desertification , accelerated soil erosion, and forest degradation. Climate change is exacerbating land degradation through changes in rainfall quantity and regimen, and rising temperatures. Government programs, though numerous, have not been effective in addressing the wider issues of integrating independent sector efforts needed for sustainable land management (SLM) at the landscape or producer level. II. Sectoral and Institutional Context Important areas for conservation and biodiversity which overlap with productive landscapes include the Central Andean Dry Puna, the Chile Matorral, the Winter Rainfall Forest - Valdivian Temperate Page 1 of 5 Rainforest, and the Patagonian Andes Nothofagus forests and steppe. The Chilean Hotspot , which encompasses these ecosystems, is known for its high levels of biodiversity. Of the Hotspot’s 3,893 native vascular plants 1,957 (50%) are endemic . Yet, the Hotspot has lost over 70% of its original Public Disclosure Copy 300,000 km2 of native habitat due mainly to destructive land management practices and only 10.2% is under protection . The most common causes of its deterioration are the use of poor agricultural practices on marginal lands, overgrazing by cattle and sheep, uncontrolled burning, and forest degradation due to over cutting and poor logging practices . About half of Chile’s 15.4 million ha of forests are already degraded, which is advancing at about 77,000 ha per year. Most degradation occurs in the southern natural forests, where fuelwood extraction is a major contributor to the problem. Despite Chile’s internationally-recognized leadership in plantation forestry, an estimated 63% of all native forest management in the country leads to forest degradation . Contributing to land degradation, inappropriate agricultural practices contribute to accelerated soil erosion on cultivated lands (over 60% of Chile’s cultivated lands) as well as desertification (48 million ha, which corresponds to two-thirds of national territory), putting at risk Chile’s important terrestrial and aquatic habitats. These impacts are further exacerbated by climate change, which has already led to a decrease of 1,100mm in average annual rainfall over the last 50 years. By 2040, average temperatures are projected to climb by 2 °C in the north and 3 °C in the Central and Southern Regions of the country , leading to changes in seasonal warming and cooling patterns, including frosts. Of the 1.3 million people inhabiting lands affected by desertification, about 60 percent live in poverty. As desertification expands, it reduces the capacity of the land to support rural livelihoods through agriculture and ranching, jeopardizes resource-based industries, and eliminates or degrades natural habitats. It is thus no surprise that migration rates are high, up to 3% annually, in the areas most affected. Compounding the problem, as natural resources and available arable lands are reduced, human resource use intensifies in the remaining areas, progressively increasing threats to the country’s vulnerable ecosystems. While the Chilean government has a number of programs to promote agriculture and forestry, Public Disclosure Copy including degraded lands, they have not proven sufficiently effective for sustainable land management, nor were they designed to do so. Sector programs are managed in relative isolation and there is presently little incentive for agencies to work together. In addition, many of these programs are not tailored to the needs and constraints of small and medium producers, which often lack the technical capacity and up-front capital needed to participate. Government commitment and complementary government efforts. The government is committed to move toward OECD standards for environmental management. In 2008, the Ministry of Environment (MMA) approved its National Action Plan (NAP) on climate change, with the primary objective of “reducing adverse impacts from climate change, through an integrated approach�. Desertification issues are addressed through the National Forestry Corporation (CONAF) , which coordinates activities with the support of the National Consultative Committee on Desertification and Drought. The Committee brings together other national institutions such as the MMA, with ministries, universities, and civil society to prioritize actions under the country action plan for the UNCCD. For biodiversity and ecosystem protection, Chile is guided by its National Biodiversity Strategy of 2003 under the aegis of the MMA. As part of its national and regional biodiversity strategies, MMA identified over 300 priority areas for conservation throughout the country. Included among these ecosystems are the Valdivian Forests in southern Chile, the Mediterranean Forests of central Chile, Page 2 of 5 and the Central Andean Dry Puna (Atacama region) are considered hotspots , The biodiversity strategies include provisions for assessing the impacts of climate change for the flora and fauna of these areas, mitigation and restoration of degraded areas. The proposed project would target such Public Disclosure Copy areas through sustainable land management at the individual farm level within the context of an overall landscape management strategy. Rationale for Bank involvement. As Chile increases its environmental management standards to meet OECD criteria, it has a unique opportunity and need to develop effective mechanisms for addressing land degradation, biodiversity conservation, and climate change mitigation and adaptation. Working in partnership with the Bank, the lessons learned and capacities of the country in these sectors can be transferred effectively to the region and at a global level. The GEF-funded initiative would complement other Bank and IFC- supported initiatives in the environmental and sustainable development sector while providing a platform for successful development outcomes from other priority areas of engagement. The Bank has a long-standing history of GEF projects with satisfactory outcomes in Chile and the Southern Cone, including the GEF MSP Public Private Mechanisms for Biodiversity Conservation in the Valdivian Forest and the best practice project, the GEF Santiago Foothills Mountain Conservation. A BioCarbon (BioCF) fund project for afforestation and reforestation, the SIF Afforestation and Carbon Sinks Project is now underway with Fundacion Chile, and is now registered with the CDM. In neighboring Argentina, Bank projects include the successfully closed IBRD Forestry Development Project and the Native Forests and Protected Areas Project, and the full size GEF Biodiversity Conservation Project. Underway now in Argentina, are the IBRD Sustainable Natural Resource Management Project and the GEF Biodiversity Conservation in Productive Forestry Landscapes. The Argentina GEF Rural Corridors and Biodiversity Conservation is under preparation. III. Global Environmental Objective(s) Public Disclosure Copy The project’s Global Environment Objective (GEO) is to develop a national framework for sustainable land management to combat land degradation, mainstream biodiversity into national policies, and protect forest carbon assets. IV. Project Description Component Name Component 1. National Sustainable Land Management (SLM) Framework, Component 2. Sustainable Land Management Pilot Projects Component 3. National Monitoring and Evaluation Program for Sustainable Land Management Component 4. Institutional Capacity Building and Lessons Learned Component 5. Project Management V. Financing (in USD Million) For Loans/Credits/Others Amount BORROWER/RECIPIENT 58.00 Global Environment Facility (GEF) 5.86 Total 63.86 Page 3 of 5 VI. Implementation The executing agency will be the National Forestry Corporation (CONAF). The Ministry of External Relations’ Agency for International Cooperation (AGCI) will be responsible for Public Disclosure Copy undertaking the financial management functions of the project comprising budgeting, accounting and financial reporting, internal control and documenting expenditures to the Bank and external auditing arrangements. Procurement will be conducted by CONAF. VII. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✖ Natural Habitats OP/BP 4.04 ✖ Forests OP/BP 4.36 ✖ Pest Management OP 4.09 ✖ Physical Cultural Resources OP/BP 4.11 ✖ Indigenous Peoples OP/BP 4.10 ✖ Involuntary Resettlement OP/BP 4.12 ✖ Safety of Dams OP/BP 4.37 ✖ Projects on International Waterways OP/BP 7.50 ✖ Projects in Disputed Areas OP/BP 7.60 ✖ VIII.Contact point World Bank Contact: Robert Ragland Davis Title: Sr Forestry Spec. Tel: 473-2362 Email: rdavis1@worldbank.org Public Disclosure Copy Borrower/Client/Recipient Name: DIPRES Contact: Clelia Beltran Title: Mgr, Public Sector Credit Tel: 56-2282-62659 Email: Clelia Beltrán cbg@dipres.gob.cl Implementing Agencies Name: AGCI Contact: Melissa Sanchez Title: Intl. Partnerships Mgr. Tel: 56-2-827-5706 Email: msanchez@agci.cl Page 4 of 5 IX. For more information contact: The InfoShop The World Bank Public Disclosure Copy 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Public Disclosure Copy Page 5 of 5