The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) REPORT NO.: RES40389 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF GRAIN STORAGE AND INFORMATION FOR AGRICULTURAL COMPETITIVENESS APPROVED ON MARCH 24, 2017 TO UNITED MEXICAN STATES AGRICULTURE AND FOOD LATIN AMERICA AND CARIBBEAN Regional Vice President: J. Humberto Lopez Country Director: Pablo Saavedra Regional Director: Anna Wellenstein Practice Manager/Manager: Preeti S. Ahuja Task Team Leader(s): Svetlana Edmeades The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) I. BASIC DATA Product Information Project ID Financing Instrument P160570 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 24-Mar-2017 24-Mar-2022 Organizations Borrower Responsible Agency Secretaria de Agricultura y Desarrollo Rural United Mexican States (SADER),Agencia de Servicios a la Comercialización y Desarrollo de Mercados Agropecuarios (ASERCA) Project Development Objective (PDO) Original PDO Improve access to grain storage and information for agricultural producers in Mexico Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-87290 24-Mar-2017 13-Nov-2017 13-Dec-2017 24-Mar-2022 120.00 4.36 115.64 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) 1. The proposed Level Two Restructuring advances the Project closing date from March 24, 2022 to January 31, 2020 to reflect the request made by the Government of Mexico on January 8, 2020. 2. The Grain Storage and Information for Agricultural Competitiveness Project (ALGRANO for its acronym in Spanish) was approved by the Board on March 24, 2017 with an International Bank for Reconstruction and Development (IBRD) loan in the amount of US$120 million (Ln. 8729-MX) and became effective on December 13, 2017. This is the first Project restructuring. 3. The ratings for both Project Development Objective (PDO) and Implementation Progress (IP) were downgraded to Moderately Unsatisfactory in the final Implementation Status & Results Report (ISR) (January 29, 2020), given that the Project could not be fully implemented, and outcome indicators were not achieved during the first two years of implementation. Due to the insufficient resources allocated by the Government, the ability of the Project to deliver timely and robust results was affected significantly. 4. Under Component 1, Grain Storage Infrastructure and Operations, only seven sub-projects received financial support and were successfully completed and inspected for compliance, reaching a total of 1,520 beneficiaries (652 direct plus 868 indirect) in two states (Guanajuato and Michoacán). Through the seven implemented sub-projects, however, the Project demonstrated how public resources can trigger other sources of financing and stimulate private investment (with 50 percent of the total cost of sub-project investments being covered by public resources, 10 percent by beneficiaries’ own capital, and 40 percent with banks’ financing). Under Component 2, Information for Grain Management, Markets, and Monitoring, several oversight and implementation mechanisms were established by the Project (e.g., agro-climatic information, storage certification system, capacity building strategy for storage management, quality norms, monitoring plan for social and environmental safeguards, information system for the storage facilities, methodology and pilots for capturing spot prices and inventory registration). These mechanisms targeted the public goods side of the Project (consolidation of data and information for decision making) and will remain useful to the Ministry of Agriculture and its stakeholders. The Project achievements can be used as pilot results for future interventions in Mexico. 5. Fiduciary and safeguards. Project audits were found satisfactory and no procurement problems were identified during project implementation. The final financial audit will cover a period of 13 months – from January 1, 2019, to January 31, 2020. The rating for Safeguards is Satisfactory. 6. Disbursements. The Project has disbursed US$4.36 million (3.6 percent of total loan amount). One more disbursement is expected for close to $6 million pesos (around US$300,000), bringing the total project disbursement up to the new closing date to around US$5 million. The change in the loan closing date does not eliminate the disbursement grace period (four additional months). Withdrawal applications can be submitted until May 31, 2020 to report and document expenditures incurred by the new closing date. 7. Rationale for the Restructuring. Project implementation was delayed since effectiveness due to the Presidential elections in June 2018 and continued a slow pace during the Government transition in 2019. With the new Government beginning its activities in December 2018, a process of reform focused on fiscal austerity was adopted. Budget limitations affected all sectors in the economy in 2019, including agriculture. With the loan being nonadditional to national budget and the limited fiscal space for operation within the Ministry of Agriculture, the flow of resources for implementation of project activities was significantly affected. The novel implementation model of the Project (a combination of public support, private capital, and bank loans to producer associations/organizations) The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) also took time to set-up and become operational. Added to this was the proposed change in the structure of the Ministry of Agriculture, which included the closure of the Agency for Services toward the Commercialization and Development of Agricultural Markets (ASERCA for its acronym in Spanish), the Project implementing entity within the Ministry of Agriculture. As a result of all these factors, on July 17, 2019, the World Bank received a letter from the Ministry of Finance informing of the willingness of the Ministry of Agriculture to close the current operation, citing budget limitations and changes in Government priorities as key factors. On January 8, 2020, a letter from the Ministry of Finance to the World Bank confirmed the request for project closure. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-87290 Effective 24-Mar-2022 31-Jan-2020 31-May-2020