Mexico - Community Forestry Project (Formerly listed as National Forestry and Conservation Project)

Report No. PIC858 Project Name Mexico-Community Forestry Region Latin America and the Caribbean Sector Forestry Project ID MXPA7700 Borrower United Mexican States - Nacional Financiera S.A. Implementing Agency Secretary of Environment, Natural Resources and Fisheries (SEMARNAP) Lateral del Anillo Periferio Sur No 4209 Fracc. Jardines en la Montana CP 14210 Mexico DF MEXICO Telephone: 628-0605 Date PID Prepared December 21, 1995 Projected Appraisal Date July 1996 Projected Board Date February 18, 1997 Country and Sector Background 1. Forests and wildlands cover 72 percent of Mexico, and have broad national and global significance. Through successive land reform laws, the 1942 Forestry Law, and the 1986 Forestry Law, forested areas in Mexico have been transferred to ejidos and indigenous communities. These rights are upheld in the 1992 Forestry Law. 2. At present between 70 and 80 percent of Mexico+s 50 million hectares of forest are owned by 8,000 forest ejidos and indigenous communities. The unusually extensive communal ownership of Mexico+s forests results in difficult management options, yet forests have an important present and potential role to play for these social actors: (a) commercially as a source of timber and non-timber products for domestic consumption or export; (b) as the source of a range of subsistence and informally-marketed products; (c) as religious and cultural sacred sites of the different indigenous, ethnic groups in forested areas; and (d) as a resource base for tourism and recreational enterprises benefiting these communities and ejidos. 3. Historically, agriculture and ejido development policies had created disincentives for forest resource management. Crop and agricultural input subsidies and land titling policies encouraged the conversion of forests to other uses, especially in the tropics. Recently these policies have been changed. Communities and ejidos are now positively inclined to manage their forest resources for local income and the environmental values generated by these resources. Past support to communities and ejidos was too focused on timber enterprises rather than on the generation of multiple products and benefits, including environmental services. The government until recently limited the number of private providers legally qualified to prepare management plans. Nor was adequate support available to develop the business  skills of these social groups, who need technical assistance and training on financial and environmental management of their resources. Assistance to communities and ejidos to manage and diversify the use of their resource base, and support to private providers of technical assistance, is necessary. Some communities and ejidos have developed extremely efficient forest management systems, proving that it is possible to substantially expand the conservation of community-held forest resources - and thereby remove the costly and difficult burden of management from government institutions - without sacrificing the productive potential of these resources. 4. The Government is committed to assisting in the sustainable management by communities and ejidos of their forestry resources and can draw on recent analysis and experience for important lessons (see attached note on Lessons Learned). The Government has just completed a comprehensive forestry sector review with the Bank, the Mexico Resource Conservation and Forest Sector Review (Grey Cover Report No. 13114-ME). In addition, the Implementation Completion Report for the Mexico Forestry Development Project (Loan 3115-ME) has been written, highlighting the implementation bottlenecks that need to be overcome for successful project execution. Ejidos such as San Juan Nuevo in Michoacan provide lessons on efficient forest management systems. Project Objectives 5. The overall objective of the project is to support the implementation of the Government+s redefined natural resource management strategy. Specific objectives of the project are to: (a) improve natural resource management and reduce deforestation; and (b) improve the welfare of communities and ejidos dependent on forest resources. To this end, the project would (a) strengthen the capacity of indigenous and non-indigenous groups to manage their forest resource base; (b) strengthen the capacity of the private sector to provide forestry services to communities and ejidos; (c) design strategies to promote timber, non-timber, and non-traditional products from community and ejido forests; and (d) strengthen the federal and state institutions working in forestry conservation and development. Project Description 6. The project would have the following components: (a) Community and Ejido Forestry Component (about 75 percent of loan amount). This component would assist communities and ejidos to manage their timber resources, and develop and manage their non-timber resources. This component would have three sub-components. The first two sub-components would be implemented at the state level. The third sub-component would be national in scope. (i) Assistance to Communities and Ejidos: This component would finance promotional activities, private technical assistance and training, and ejido-to-ejido training for : (i) establishing natural resource databases, including geographic information systems; (ii) preparing management plans for timber extraction based on regenerative capacity, making - 2-  appropriate tradeoffs between processing and marketing, improving reforestation practices, and undertaking resource conservation; (iii) preparing conservation plans for forested areas; (iv) integrated resource management issues; (v) if necessary, undertaking boundary demarcation of community and ejido lands so as to enable communities and ejidos to implement their management plans and productive activities without conflict over boundaries; (vi) accessing credit, markets, and technologies; (vii) increasing the efficiency of forestry activities and enterprises; and (viii) financial management of the resource base by communities and ejidos. The establishment of a voucher system would be explored during project preparation. (ii) Strengthening of the Capacity of Private Service Providers: This component would finance the training of private sector providers of services to communities and ejidos in sustainable integrated forest management practices, multiple-use forestry, reforestation technologies, silviculture, innovative environmentally sound technologies, forest protection, and nursery practices. It would also finance consultants and equipment needed to review and strengthen the Government+s certification and evaluation program for private sector providers. (iii) Promotion of Non-Timber Forest Products: This component would finance: (i) pre-investment studies, equipment, small civil works (such as sheds, fencing), and technical assistance for sustained resource harvesting and propagation; and (ii) materials and other expenditures for the initial marketing, product development, and commercialization of promising non- traditional timber and non-timber forest products. The establishment of a Fund to carry out this subcomponent would be explored during project preparation. Eligible ejidos would be granted proposal preparation funds to enable them to procure assistance in preparing full proposals. (b) Institutional Strengthening Component (about percent of loan amount). This component would strengthen SEMARNAP and other federal agencies, and the state environmental agencies. Studies, training, technical assistance, equipment, management supervision, monitoring and evaluation, would be financed under this component. The experience of this pilot project would be carefully monitored, and if positive, studies would be undertaken to replicate the experience in the other five priority states with temperate forests. 7. The primary beneficiaries would be participating communities and ejidos, chosen on the basis of the forestry resources under their control, their size and level of organization, and the quality of their proposal for technical assistance or funding. Other beneficiaries would include: the private providers of services to the communities and ejidos, who would receive training and who would be certified; academics, NGOs, and research organizations who could apply for research funds; other ejidos who would benefit from the resolution of boundary demarcation issues; and state and federal institutions. - 3 -  Project Financing 8. The estimated project cost is US$ 50 million, of which US$ 35 million would be financed by an IBRD loan, and the remainder by the Government. Retroactive financing would be recommended up to a total of 10 percent of the IBRD loan, for eligible expenditures incurred after March 1, 1996, which is twelve months before the expected date of loan signing. 9. The project would undertake cost recovery during its implementation. With the privatization of the Government+s forestry extension service, communities and ejidos are currently paying for the services of private sector providers of technical assistance. Under the project, communities and ejidos would be able to use project resources on a declining basis to hire private providers, after which the ejido would pay for the services of the private provider. Private providers would have to pay fees for the training they would receive, and possibly for the certification process. Criteria would be established for cost recovery from profitable non-timber products developed with the assistance of project funds. Project Implementation 10. Federal environmental agencies and organizations have been reorganized into the Secretariat of Environment, Natural Resources and Fisheries (SEMARNAP). The Forestry Department is part of the new Sub- Secretariat of Natural Resources, and centralizes previously dispersed functions. This Sub-Secretariat would have overall responsibility for implementing the project, and would monitor, evaluate, and report on project implementation using staff in line positions. Other federal institutions would also be involved, such as the National Forestry Council (CONAF), the National Biodiversity Commission (CONABIO), and the Tropical Forestry Action Program (PROAFT). At the state level in Oaxaca, the Secretariat of Agricultural and Forestry Development (SEDAF) cooperates closely with SEMARNAP+s state delegation on forestry activities. Other state agencies, such as the state planning commission, COPLADE, will also be involved. NAFIN would serve as the financial agent. 11. Implementation of project components would be decentralized to the extent possible, with monitoring and supervision taking place at appropriate levels in the Government. Communities and ejidos would procure their own technical assistance, with the funds flowing either from the local financial agent to the ejidos for payment to the private provider, or from the local financial agent to the private provider directly. The SEMARNAP delegation and state government would be responsible for supervising the program and certifying the private providers according to criteria established by the Forestry Department at SEMARNAP. Most training for ejidos, communities and private providers would be managed by the SEMARNAP delegation and contracted to private trainers. In addition, training resources would be used to allow ejido-to-ejido training, and would be administered by an ejido consortium. Demarcation of community and ejido lands would be undertaken by the ejidos themselves, with technical assistance from private providers. An independent panel would be established to give - 4 -  grants for the pre-investment expenditures necessary for the promotion of non-timber forest products. Preference would be given to ejido, academic, NGO, or public organizations working on non-timber forest products from Oaxaca. Project Sustainability 12. This project would finance activities that are expected to be sustainable in the medium term. In addition, better management of timber resources would result in longer, sustainable extraction of the resource. Commercially viable non-timber activities, and non- traditional timber activities would generate income for their continuation. With better training and an improved ability to generate resources for the communities and ejidos, private providers of technical assistance would be financially viable. Environmental and Social Aspects 13. This project has been assigned to Environmental Assessment Category B. All three project components are designed to improve the environmental management of forests and priority conservation areas. The Environmental Data Sheet (attached) discusses the possible positive and negative impact of the project on the environment, and the mitigating actions that would be taken during project preparation and implementation. 14. The project is targeted to communities composed of indigenous populations, and ejidos which contain indigenous populations to varying degrees, therefore a separate Indigenous Peoples Development Plan will not be prepared. A process of participatory planning will complement the participatory social assessment carried out during the Bank+s joint Sector Review to make recommendations on the involvement of communities and ejidos in project planning, implementation, and evaluation. Poverty and Program Objective Categories 15. The proportion of the poor among project beneficiaries is expected to be significantly larger than their proportion in the overall population, therefore this project fits the criteria for inclusion in the Program of Targeted Interventions. The project belongs primarily to the Environmentally Sustainable Development and Poverty Reduction and Human Resource Development program objective categories. Given its focus on communities and ejidos, and on private sector service providers, the project also belongs to the Private Sector Development program objective category. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components - 5 -  may not necessarily be included in the final project. Processed by the Public Information Center week ending March 21, 1997 - 6 -