IEG Report Number: ICRR14639 ICR Review Independent Evaluation Group 1. Project Data: Date Posted: 06/09/2015 Country: Nicaragua Project ID: P056018 Appraisal Actual Project Name: Land Administration Project Costs (US$M): 48.5 54.2 L/C Number: C3665 Loan/Credit (US$M): 42.6 48.0 Sector Board: Agriculture and Rural Cofinancing (US$M): Development Cofinanciers: Board Approval Date : 06/18/2002 Closing Date: 12/31/2007 04/30/2013 Sector(s): Central government administration (44%); Sub-national government administration (36%); Other social services (15%); General agriculture fishing and forestry sector (3%); Law and justice (2%) Theme(s): Other rural development (25% - P); Personal and property rights (25% - P); Land administration and management (24% - P); Biodiversity (13% - S); Indigenous peoples (13% - S) Prepared by: Reviewed by: ICR Review Group: Coordinator: John R. Heath J. W. Van Holst Christopher David IEGPS1 Pellekaan Nelson 2. Project Objectives and Components: a. Objectives: The two objectives were described in the Development Credit Agreement as: “(a) to develop the legal, institutional, technical and participatory framework for the administration of property rights in the Republic of Nicaragua’s territory; and (b) to demonstrate the feasibility of a systematic land rights regularization program.” b.Were the project objectives/key associated outcome targets revised during implementation? No c. Components: 1. Policy and Legal Reforms ORIGINAL COST (Estimated, US$0.6 million; Actual, US$0.1 million). ADDITIONAL FINANCING: (None). To strengthen the country’s land policy and legal frameworks through: the development of a national land policy framework; the development of laws related to indigenous peoples’ land rights in the Caribbean region; the modernization of cadastre and property registry systems; and the technological integration of cadastre and registry. 2. Institutional Strengthening and Decentralization ORIGINAL FINANCING (Estimated, US$13.8 million; Actual, US$16.5 million). ADDITIONAL FINANCING: (Estimated, US$3.6 million; Actual, US$3.2 million). To improve national institutional capacity by: establishing the National Directorate of Land and Agrarian Reform; implementing a new organizational model for cadastre and regularization; increasing efficiency in land administration services; and promoting coordination between land sector institutions. The additional financing was used to scale up the component's activities. 3. Titling and regularization services ORIGINAL COST: (Estimated, US$16.6 million; Actual, US$18.0 million). ADDITIONAL FINANCING: (Estimated, US$5.3 million; Actual, US$5.9 million). To develop and implement a land regularization methodology that would serve as a foundation for a long-term, comprehensive program. This component would also support processing of land claims and conflict resolution. The additional financing was used to scale up the component's activities. 4. Demarcation and Consolidation of Protected Areas ORIGINAL COST: (Estimated, US$2.2 million; Actual, US$2.5 million). ADDITIONAL FINANCING: (Estimated, US$0.3 million; Actual, US$0.3 million). To physically demarcate selected protected areas, formulate management plans in a participatory manner, and implement a social and environmental communication program in and around these areas. 5. Demarcation of Indigenous Peoples’ Lands ORIGINAL COST: (Estimated, US$2.6 million; Actual, US$2.8 million). ADDITIONAL FINANCING: (None). To support the strengthening of indigenous peoples’ land rights in the Caribbean region through demarcation and titling of selected indigenous territories, including within the Bosawas Reserve for indigenous peoples, and the development of a limited number of territorial management plans. 6. Information Systems ORIGINAL COST: (Estimated, US$2.7 million; Actual, US$4.4 million). ADDITIONAL FINANCING: (Estimated, US$0.9 million; Actual, US$0.4 million). To develop an efficient technological framework that would: modernize cadastre and registry services and land titling and regularization procedures (including through the piloting of an Integrated Cadastre-Registry Information System or SIICAR);and provide for project management and monitoring and evaluation. d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost At appraisal, the estimated project cost was US$48.5 million; at closing, the actual project cost was US$ 54.2 million. Financing The original IDA credit was US$42.6 million. On 02/16/2010, Additional Financing (AF) of US$10 million was approved. The distribution of AF between components is shown in Section 2c above. At closing, total IDA financing was US$48.0 million. The equivalent of US$1.2 million of the Original Credit was canceled at closing and US$13,492 was canceled when the AF closed. Borrower Contribution The expected contribution from government was US$5.8 million; the actual contribution was US$6.1 million. Local communities contributed US$0.1 million (expected and actual). Dates The original closing date was December 31, 2007. There were four extensions to the closing date of the Original Credit (OC): (a) at the January 2007 restructuring, closing was extended to December 31, 2008 to allow for the additional time required to achieve objectives and targets; (b) at the February 2008 restructuring, closing was extended to October 31, 2009 to provide additional time for the completion of key activities; (c) in May 2009, a six-months extension was approved, running to April 30, 2010, to allow for the preparation of the Additional Financing (AF); and (d) when the AF was approved in February 2010, closing of the OC was extended until July 2010 to ensure adequate closing of credit accounts. The Additional Financing closed, as expected, on April 30, 2013. 3. Relevance of Objectives & Design: a. Relevance of Objectives: The relevance of objectives is rated high. When the project was appraised over one-third of rural land was held without a clear title. The share of land with no or inadequate documents was particularly high among small producers. Land conflicts due to overlapping claims were numerous. The land claims of indigenous peoples remained mostly unaddressed. There was also an urgent need to promote gender equity in land ownership because past agrarian reform programs and inheritance laws had favored males. Institutions needed consolidating: there were 25 agencies dealing with land allocation and land rights. The procedures for land regularization were cumbersome and centralized, and the land agencies lacked capacity to handle the volume of cases. Cadastral and property registry information was outdated or missing in many places, while the existing cadastral and property registry records were not systematically linked. The project development objectives were consistent with the government’s 2008 National Plan for Human Development (NPHD) and the World Bank’s Country Partnership Strategy FY13-17 (CPS), which was current at project closing. The NPHD described the regularization of land tenure, cadastre, land titling and territorial development as fundamental to development. The CPS also gives priority to land administration. NPHD and CPS cite reduced poverty and improved agricultural productivity as overarching goals. Although typically these goals cannot be directly achieved through improved land administration, a project of this nature may be expected to contribute to rural development by helping to remove some of the impediments to the functioning of land markets and to investments in and diversification of the rural economy. b. Relevance of Design: The relevance of design is rated substantial. The project was designed as a five-year pilot and yet realization of its objectives was predicated on various actions that were more consistent with a national program. Thus, startup of the pilot assumed that the Cadastre Law would be passed by November 2003; passage was delayed until 2005. Nevertheless, the components and activities were substantially relevant to achievement of project objectives. The project focused on codifying land rights that were not formally defined. The design allowed for this by: addressing the land rights of indigenous communities; mainstreaming alternative conflict resolution mechanisms; helping agrarian reform beneficiaries to substantiate their property claims; and strengthening the role of Regional Councils and the National Commission for Demarcation and Titling of Indigenous Territories. The provision for monitoring and evaluation was intended to accommodate the political and social sensitivity of land issues and the potential impact of proposed legal and institutional changes; but the details were not spelled out and not enough priority was given to collecting baseline data. 4. Achievement of Objectives (Efficacy): To develop the legal, institutional, technical and participatory framework for the administration of property rights in the Republic of Nicaragua’s territory (Achievement: Substantial). Project outputs comprised: regularization of 26 percent of the untitled land in the pilot area (the target was 40 percent); delivery of 44,019 land titles in rural areas, of which 37,416 (85 percent) went to “very small producers” (the target was for 70 percent of titles to go to this group); 51 percent of titles were delivered either to women or jointly to women and their partners (the target was 40 percent). The primary outcome of the project was the technical support that it gave to facilitate passage of three important pieces of legislation: the 2003 Law for the Collective Land Rights of Indigenous Peoples; the 2005 Cadastre Law; and the 2009 Public Registry Law. This legislation provided the foundation for a national program of land administration that would provide a durable legacy once the project closed. Highlights of this legislation are as follows.  The 2003 law allowed poor and marginalized indigenous communities in the Caribbean Region to receive collective titles to 15 of their ancestral territories, comprising over 22,000 square kilometers – or close to 19 percent of the national territory.  The 2009 law made possible the integration of cadastral and registry information. It also brought together under a national system all the 17 regional property registries of the country and set up a Special Commission of Property Registries and the National Directorate of Property Registries. To demonstrate the feasibility of a systematic land rights regularization program (Achievement: Substantial). The pilot showed that the proposed land administration method was feasible. Over 61,690 rural and urban households (mostly poor) were given title to their land. The area surveyed equaled almost 20 percent of the national territory. Fourteen protected areas were demarcated (the target was 11). The data from 30 municipalities was incorporated in the National Cadastre Database, allowing for expansion of the property tax base and strengthening of land planning. Owing to the increase in operating efficiency resulting from the project, the Public Registry is financially sustainable. The project also pioneered alternative dispute resolution procedures that can now be applied nationwide. 5. Efficiency: Efficiency is rated substantial. The net benefit estimate is based on econometric modeling of the impact of titling on property values. The ICR acknowledges that property values are influenced by a wide range of factors, such as location, access to public services, size, value of construction, use of the property, each of which interacts with tenure status. The method used controls for these factors, isolating the effect of change in tenure status after regularization. The analysis estimates that actual net benefits were US$ 17.8 million, compared to the US$ 7.5 million that was forecast at appraisal. The economic rate of return was 24 percent, compared to the 19 percent that was estimated at the outset. However, there is an important caveat. The assumptions about benefits were based on ex ante comparisons of the value of titled and untitled land (with separate assumptions for the original credit and additional financing phases). “During the course of implementation there was no systematic monitoring of investments after property titling or of returns to investments. Therefore, assumptions such as the lengthy lag in the internalization of benefits, and the size of land value increments after titling remained unchecked” (ICR, p. 41). Three considerations offset this shortcoming of the ERR analysis. First, contemporaneous research (not cited in the ICR) has demonstrated that the benefits of land titling in Nicaragua amply exceed the costs, using the same measure of increased property values (See Deininger, K. and Chamorro, J.S. 2004. “Investment and equity effects of land regularization: the case of Nicaragua.” Agricultural Economics. 30:101-116). Second, a 2012 survey commissioned by the project examined 2,251 households, comparing households that had benefited from the project with those that had not. Based on the results of this survey, the ICR reports that “Investment in home construction and improvement was greater in the titled Project areas than in the control group, consistent with the theory of the positive effects of land tenure regularization” (ICR, p. 49). Third, the Nordic Development Fund (a development partner) observed that “the fact that municipal revenue from property taxation has increased, and that an increasing number of land conflicts is being resolved, indicated a higher efficiency in the new system” (ICR, p. 24). a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 19% 100% ICR estimate Yes 24% 100% * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome: IEG agrees that the following statement in the ICR fairly represents the outcome of the project: "The Project remains highly relevant, while its Project Development Objectives (PDOs) were achieved and most of its performance indicators were met or exceeded, which likely improved the economic situation of poor households . Building on Project results, the country has already launched a national land program. Although several targets were not fully achieved in the expected time frame under the original Credit, results within the AF period were achieved six months before the expected three-year period. Targets that were not fully achieved were in most cases substantially achieved, and this shortfall was more than compensated by surpassed targets on indicators of equal or greater relative weight. The net economic benefits were significantly higher than those expected at appraisal. The legal and institutional framework is clearer and more consolidated, and SIICAR is fully operational even though its expansion was more limited than originally planned" (italics added by IEG, p. 18). There is one caveat. The PDOs were pitched at the level of intermediate outcomes (that is, outcomes bearing on the effectiveness of land administration), rather than higher-level objectives such as poverty reduction. Evidence from a 2012 survey sponsored by the project in connection with the impact evaluation suggests that the poverty impact may have been limited (calling into question the italicized statement in the paragraph above). The survey compared project beneficiaries with a control group who had not benefited from cadastral surveying and titling under the project. Survey results showed that there was more investment in home construction and improvement by beneficiaries than by control households, and in the beneficiary group a higher proportion of title holders were women. But in other respects there was no significant difference between the two groups: the propensity to use plots for commercial activities was similar, as was perceived security of tenure and access to credit (ICR, p. 19). a. Outcome Rating: Satisfactory 7. Rationale for Risk to Development Outcome Rating: Since credit closing the government has continued to consolidate land administration policies and institutions, including integration of cadastral and property registry information. The necessary laws are now in place and coordination of the various agencies is less of a problem than it was at project startup. There are two sources of risk, both moderate. First, some municipalities lack the technical capacity and commitment to maintain the cadastre and the accuracy of the data may erode over time. However, in order to ensure the overall integrity of the system, the government has a strong incentive to provide the necessary training and technical assistance to these municipalities. Second, some people may be disinclined to register subsequent property transactions. By ensuring that registry officers are accessible, that registry transaction fees are affordable and that public information campaigns are staged, government should be able to contain this risk. a. Risk to Development Outcome Rating : Moderate 8. Assessment of Bank Performance: a. Quality at entry: The design of the project was innovative and relevant to country needs at the time of appraisal. It was well informed by analytic work. The risk associated with adjudicating indigenous land rights was correctly assessed as substantial and sound mitigation measures were proposed. However, the difficulty of coordinating the 25 institutions involved in allocating land rights (ICR, p. 1) was underestimated. Also, there was an overoptimistic assumption that enabling legislation would be swiftly passed (ICR, p. 8). Finally, the provision for monitoring and evaluation was incomplete (ICR, pp. 11-12). Quality-at-Entry Rating: Moderately Satisfactory b. Quality of supervision: The operation was listed as a problem project in 2005, owing to implementation lags. The mid-term review made important adjustments, including reallocation of funds between expenditure categories and improved procurement oversight. Performance picked up thereafter. Trust funding was secured to finance the hire of international experts. Good use was made of FAO’s land administration expertise. The safeguards bearing on indigenous peoples’ land rights were soundly enforced. The Bank collaborated effectively with, and helped supervise, parallel land operations by the Nordic Development Fund and the Millennium Challenge Corporation. Quality of Supervision Rating : Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9. Assessment of Borrower Performance: a. Government Performance: Government was committed to the project throughout the period of preparation and implementation. Strong commitment was manifest in the early enactment of Law 445, which signaled the government’s intention to recognize indigenous peoples’ land rights. There was a delay in enacting the Cadastre Law but the government redoubled its support after 2007, leading to passage of the Public Registry Bill in 2009. The government also pushed for closer collaboration between the judicial branch (property registry) and the executive (cadastre, regularization), thereby facilitating project implementation. Delays resulting from protracted negotiations in the National Assembly and disruptions caused by two national and several municipal elections during the project span were beyond the control of the executive arm of government. Government Performance Rating Satisfactory b. Implementing Agency Performance: Project implementation was initially placed in the hands of the Finance Ministry (MHCP), subsequently shifting to the Attorney General's Office (PGR). On balance, PGR did a better job. Under MHCP, the pace of implementation was generally good but dropped off at times. Compliance with Credit Agreement conditions was inconsistent leading to some delays. MHCP could have promoted inter-institutional coordination more vigorously. It did not launch the promised Midterm Review evaluation. In the space of twelve months in 2007 there were three Project Coordinators, which temporarily reduced the effectiveness of project management. Under PGR, the impetus behind implementation increased substantially: inter-institutional coordination improved, contract management problems were resolved, and partnership with co-executing agencies was strengthened, gradually leading to better implementation capacity and achievement of key targets. Implementing Agency Performance Rating : Satisfactory Overall Borrower Performance Rating : Satisfactory 10. M&E Design, Implementation, & Utilization: a. M&E Design: The ICR (pp. 11-12) refers to shortcomings in the results matrix that was presented in Annex 1 of the PAD. In general, the PAD makes little reference to the provision for M&E. The PAD Outcome indicators were not well thought out and there was insufficient provision for a baseline survey. b. M&E Implementation: The specialized M&E unit introduced following the midterm review led to more thorough monitoring and completion of the special studies that had been promised. An impact evaluation was carried out in the last year of implementation (some of the findings are summarized in Section 6 above). c. M&E Utilization: Following the midterm review, monitoring results were taken more account of by project management and the improved M&E system made a significant contribution to preparation of the follow-on project. M&E Quality Rating: Modest 11. Other Issues a. Safeguards: The following safeguards applied to this Category B project: Environmental Assessment (OP/BP 4.01), Natural Habitats (OP/BP 4.10), Indigenous Peoples (OP/BP 4.10), Involuntary Resettlement (OP/BP 4.12), Forests (OP/BP 4.36), and Physical Cultural Resources (OP/BP 4.01). Compliance with environmental and social safeguards was satisfactory. There is no evidence that tenure regularization led to deforestation; and the demarcation of protected areas achieved under the project likely improved environmental stewardship, without curtailing access to resources by people near these areas. Indigenous peoples were adequately consulted throughout project implementation and project activities were sensitive to social organization and culture (ICR, p. 13). b. Fiduciary Compliance: Financial management was satisfactory (all audits were unqualified) and procurement was sound, benefiting from adoption of the Electronic Procurement Management System (SEPA), and periodic fiduciary training for government and project staff. c. Unintended Impacts (positive or negative): d. Other: 12. Ratings: ICR IEG Review Reason for Disagreement/Comments Outcome: Satisfactory Satisfactory Risk to Development Moderate Moderate Outcome: Bank Performance: Moderately Moderately Satisfactory Satisfactory Borrower Performance : Satisfactory Satisfactory Quality of ICR: Satisfactory NOTES: - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate. 13. Lessons: The following well-considered lessons are cited in the ICR:  The sustainability of outcomes of land administration interventions requires building broad social and political commitment, as well as maintaining and mainstreaming key competencies across electoral cycles.  The challenge of recognizing the complexity of indigenous people’s land rights requires attention to historical and social particularities and intensive social supervision.  A strong focus on local governments is critical to the sustainability of investments in cadastre and registry modernization.  Alternative conflict resolution mechanisms can effectively facilitate cadastral and regularization processes. In addition, IEG proposes as a lesson that impact evaluations, like that sponsored by this project (see Section 6 above), can usefully help to establish whether changes in economic growth and poverty levels may be attributed to land administration projects. 14. Assessment Recommended? Yes No 15. Comments on Quality of ICR: The ICR is clear, complete and concise and proposes useful lessons of broad relevance to land administration projects. a.Quality of ICR Rating : Satisfactory