Colombia - Magdalena Medio Regional Development Project

Document of The 'World Bank Report No.: 18148 CO PROJECT APPRAISAL DOCUMENT ONA PROPOSED LEARNIG AND INNOVATION LOAN IN THE AMOUNT OF US$5.0 MILLION TO THE REPUBLIC OF COLOMBIA FORA MAGDALENA MEDIO REGIONAL DEVELOPMENT PROJECT June 19, 1998 Environmentally and Socially Sustainable Development Sector Management Unit Colombia, Ecuador and Venezuela Country Management Unit Latin America and the Caribbean Regional Office  CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 1998) Currency Unit = Peso US$1.00 = 1368 Pesos FISCAL YEAR January 1 to December 31 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan CAS Country Assistance Strategy CINEP Center for Research and Popular Education (Centro de Investigaci6n y Educaci6n Popular) CMDR Municipal Council for Rural Development (Consejo Municipal de Desarrollo Rural) CSP Nationally Executed Cost Sharing Project DNP National Planning Departnent (Departamento Nacional de Planeaci6n) ECOPETROL National Oil Company (Empresa Colombiana de Petr6leo) EDI Economic Development Institute EU European Union GDP Gross Domestic Product ICR Implementation Completion Report IDB Inter-American Development Bank LIL Learning and Innovation Loan M&E Monitoring and Evaluation NGO Non-Governmental Organization OED Operations Evaluation Department PDPMM Program for Development and Peace of the Magdalena Medio Region (Programa de Desarrollo y Paz para el Magdalena Medio) PHRD Project and Human Resources Development Grant (Japanese Grant) PLANTE National Plan for Altemative Development (Plan de Desarrollo Alternativo) PNR National Rehabilitation Program (Programa Nacional de Rehabilitaci6n) SEAP Economic Society of Friends of the Country (Sociedad Econ6mica de Amigos del Pais) SOE Statement of Expenses TA Technical Assistance UNDP United Nations Development Program USAID United States Agency of International Development Vice President Shahid Javed Burki Director, Country Management Unit Andres Solimano Director, Sector Management Unit Maritta Koch-Weser Sector Leader Jonathan Parker Task Team Leader/Task Manager Elsie Garfield  Colombia Magdalena Medio Regional Development Project CONTENTS A. Project Development Objective 1. Project development objective and key performance indicators B. Strategic Context I. Sector-related CAS goal supported by the project 2. Main sector issues and Goverrament strategy 3. Sector issues to be addressed by the project and strategic choices C. Project Description Summary 1. Project components 2. Key policy and institutional reionns supported by the project 3. Benefits and target population 4. Institutional and implementation arrangements D. Project Rationale 1. Project altematives considered and reasons for rejection 2. Major related projects financed. by the Bank and/or other development agencies 3. Lessons leamed and reflected in proposed project design 4. Indications of borrower commitment and ownership 5. Value added of Bank support in this project E. Summary Project Analyses 1. Economic 2. Financial 3. Technical 4. Institutional 5. Social 6. Environmental assessment 7. Participatory approach F. Sustainability and Risks 1. Sustainability 2. Critical risks 3. Possible controversial aspects  G. Main Loan Conditions 1. Effectiveness conditions 2. Other H. Readiness for Implementation I. Compliance with Bank Policies Annexes Annex 1. Project Design Summary Annex 2. Detailed Project Description Annex 3. Estimated Project Costs Annex 4. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table B. Thresholds for Procurement Methods and Prior Review Table C. Allocation of Loan Proceeds Annex 5. Social Assessment Annex 6. Project Monitoring, Evaluation and Learning System Annex 7. Project Processing Budget and Schedule Annex 8. Documents in Project File Annex 9. Statement of Loans and Credits Annex 10. Country at a Glance Map  Colombia Magdalena Medio Regional Development Project Project Appraisal Document Latin America and the Caribbean Regional Office Enviromnentally and Socially Sustainable Development Sector Management Unit Date: June 19, 1998 Task Team Leaderifask Manager: Elsie Garfield Country Manager/Director: Andres Solimano Sector Manager/Director: Maritta Koch-Weser Project ID: CO- Sector: Multi-sector Program Objective Category: Poverty Reduction PA46031 Lending Instrument: LIL Program of Targeted Intervention: [x] Yes [ No Project Financing Data [xl Loan [I Credit [I] Guarantee [] Other [Specify] For Loans/Credits/Others: Amount: US$5.0 million Proposed terms: [] Multicurrency [x ] Single currency, specify: US dollar Grace period (years): 3 [ Standard Variable [xl Fixed [ LIBOR-based Years to maturity: 12 Commitrnent fee: 0.75% Service charge: 0.0% Financing plan (US$m): Source Governnent & ECOPETROL 1.25 Cofinanciers IBRD 5.00 Total 6.25 Borrower: Republic of Colombia Guarantor: N/A Responsible agency(ies): National Planning Department Estimated disbursements (Bank FY/US$M): 1999 2000 2001 Annual 1.75 2.50 0.75 Cumulative 1.75 4.25 5.00 For Guarantees: NA [ ] Partial credit [] Partial risk Project implementation period: 2 years Expected effectiveness date: July 30, 1998 Expected closing date: December 31, 2000 OSD PAD Form: July 30,1997  Page 2 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1): This project is a follow-up to the diagnostic and participatory planning, first phase of the Program for Development and Peace of the Magdalena Medio Region (PDPMM) which has been underway for two years under the leadership of the Consortium for PDPMM, with financing from the national oil company (ECOPETROL) and, during the last year, a Japanese Grant and PPF from the Bank. The project development objective of this Learning and Innovation Loan (LIL) is to develop the operational capacity of the Consortium, the citizens network and other partners to work together towards collectively defined objectives to reduce poverty and increase peaceful coexistence in the Magdalena Medio Region (see Annex 1-B) which includes 29 municipalities located in 4 departments. The two-year LIL would thus establish a solid basis for the detailed design and implementation of an ambitious ten year community-led, multi-sectoral development program which could be supported by the Bank through an Adaptable Program Loan (APL, see Annex 1-A). It would be part of a phased approach with the LIL supporting the second phase of building operational capacity and testing approaches, followed by an APL to support two to three subsequent phases in which the scope and size of investments and emphasis on economic activities would increase in line with the growing implementation capacity of communities and local authorities, and the improving security situation which would improve the investment climate. A monitoring and evaluation system is being established as an integral part of the program and its management to support the process of learning by doing. Key output indicators for the project would include: budget implementation rate vs. planned; perception of Consortium staff and donors; size and composition of citizen's network; number of nucleos regularly operating with a nucleo plan; documented lessons on how to strengthen community capacity in a context of intense conflict; % of sub-projects implemented with positive results. Key impact/outcome indicators for the project would include: perception of beneficiaries and stakeholders that the program (of which the LIL is second phase) is operating satisfactorily and that benefits are being realized; number of partnerships and resources contributed; financial and human resources contributed by municipalities and others to support sub-projects (as a proxy for commitment to the program); social organization increased and strengthened in at least 5 of the 29 municipalities. B: Strategic Context 1. Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 17107-CO Date of latest CAS discussion: November 6, 1997 The proposed project will contribute to the CAS objective of promoting peace and development which was identified by government authorities and civil society representatives as Colombia's number one development priority. The project is one of the first lending operations in this new area of Bank assistance to Colombia. Due to the multi-sectoral nature of the ten year Program for which the LIL is paving the way, it will also contribute to the five other areas of strategic importance supported by the CAS: rural development, developing human capital, attaining public sector responsiveness and efficiency, improving infrastructure services, and ensuring sustainable development (excluding the macro-economic dimension). The Magdalena Medio Region has a number of attributes which mean that a successful program there will have enormous significance and impact on the whole country, including: (i) its reputation as one of the most violent areas of the country and the fact that it presents a microcosm of the complex dynamics of violence and armed conflict in Colombia; (ii) its strategic location in the heart of the country, serving  Page 3 as a key transportation corridor to the Atlantic coast (river, road and rail); and (iii) its economic importance as the oil company's industrial headquarters with the largest industrial complex in Colombia located in Barrancabermeja. A successful program in the Magdalena Medio Region would contribute to the formulation of a national peace and development strategy, and generate useful lessons for programs in other parts of the country. 2. Main issues and Government strategy: Issues: The main issues addressed by the Program, for which the LIL is the second phase, are as follows. Violence is exacting an increasing economic and social toll: While Colombia is a country with a long history of political violence, since the late 1980s the problem appears to have become more widespread, particularly in rural areas, and t:o be exacting an increasing economic and social toll. The homicide rate doubled in ten years from 36 per 100,000 inhabitants in 1981 to 80 in 1990 which is triple the rate in Brazil and Mexico. Insecurity in rural areas increased substantially from 1987 to 1994: with an increase from 24% to 32% of the rural population in areas under pressure from insurgent/guerrilla movements, and guerrilla presence increased. from 17% to 56% of the municipalities. Certain areas of the country, such as Magdalena Medio, are subject to active dispute between guerrilla and right-wing armed groups (referred to as paramilitaries), with very limited presence of the State. This has resulted in a growing number of internally displaced persons, estimated to be around a million. Studies by Colombian experts estimate that the previous decade of violence resulted in a 2 percent reduction in the average annual growth rate of the economy. Poverty is increasingly a rural phenomenon: Colombia has a good record of economic growth, including growth of the agriculture sector, over the last 20-30 years and has made important strides in reducing poverty (from 50% of the population in 1964 to 19% in 1992) and improving social indicators. Yet there is still a considerable unfinished agenda. Sharp disparities in income, wealth and living standards between urban and rural areas and between regions of the country remain. Poverty is increasingly a rural phenomenon: 70% of the, people with incomes below subsistence live in rural areas and 31 percent of the rural population are defined as extremely poor. There is more poverty in rural areas than would be expected in a country of Colombia's level of development. The incidence of rural poverty exceeds the incidence of urban poverty by a ifactor of 3.6, much higher than for most other countries in Latin America and the Caribbean. Links between poverty and violence in rural areas: Poverty (particularly high levels of inequality) and violence in rural areas are related, but there is no simple causal relationship between the two, historical and social factors are important. Limited access to land and employment raises the propensity for violence, and violence has a negative feedback on investment and employment. Rural insecurity reduces the incentive to invest in agriculture and, more importantly causes a skew in the pattern of investment towards activities that are relatively nonintensive in the use of labor which may encourage landowners in arable areas to invest in livestock rather than crops. With the growth of the paramilitary movement and. increased buying up of land in rural areas by drug traffickers, the problem has become increasingly complex. Rural families account for the majority of displaced persons. Armed conflict in Colombia has very important local dimensions related to the structure of land tenure and social relations which, according to experts, are partially concealed by the focus of attention at the national level on the conflict between guerrilla movements and the State. Decentralization and citizen participation: While an important process of decentralization and citizen participation was mandated by the 1991 Constitution, there is still much resistance by central government agencies and politicians, and much capacity-building needed to help local governments and citizens assume their new rights and responsibilities. Major reformns in most of the sectors have moved the locus of responsibility to departmental and municipal governments and created mechanisms for citizen  Page 4 participation and oversight. However, in much of Colombia, these reforms have not been translated into reality. Progress has been particularly limited in places like Magdalena Medio where local govermnents are weak and often controlled by a dominant group (guerrilla movement, paramilitary, drug traffickers, traditional landholding elites) which is usually not interested in the welfare of the population as a whole. Citizens are often uninformed about their rights and may fear exercising them. The seriousness of these problems became evident last year when armed groups disrupted local government elections in about 16 percent of Colombia's municipalities and in several departments. Government Strategy: Colombia is in the process of developing a strategy for reducing violence/promoting peace which is a tall order given the magnitude and complexity of the problem. Over the last decade, the Government's strategy has vacillated between two opposing approaches: a military solution and peace negotiations. The rise in the drug trade has made the identification of a viable solution more difficult. Over the last year, civil society has become increasingly vocal and active in pursuing solutions, and the need for international support has for the first time become part of the debate. The current Government has undertaken, with IDB assistance, important analytical work under the banner La Paz es Rentable to provide a better understanding of the characteristics and impact of violence with the objective of handing this work over to the next administration (assuming office in August 1998) which could use it to develop a peace and development strategy. It has also supported initiatives and programs which address the socio-economic determinants of violence (land reform, peasant enterprise zones, youth development), while in parallel trying to make progress at the national level to initiate peace negotiations and explore alternative solutions to political violence. Over the last few years, a number of local governments, most notably the Department of Antioquia and administrations in Cali and Bogota, have undertaken successful initiatives to promote peaceful conflict resolution and have achieved a substantial reduction in the homicide rate. The Government's strategy for reducing rural poverty is reasonably well formulated and a number of programs are underway. As in many of the other sectors, an adequate policy framework and some innovative programs have been defined, translating them into action remains the key issue. Over the last two years, Government's thinking about poverty reduction in rural areas has evolved and the reduction of the urban-rural gap in living standards has been defined as a key strategic objective. A consultation process led in June 1996 to the signing of a "social pact" between the Government and farmers which emphasizes an integrated approach to rural development including the social aspects, identifies violence as a central problem, and land reform as the centerpiece of the rural development program. In order to give greater prominence and visibility to rural sector issues, the Government has appointed a "Rural Mission" to look at the sector's needs from a long-term perspective and, on this basis, refine the Government's strategy. The decentralization process is currently subject to much internal debate in Colombia, particularly in light of the fiscal situation and impact of armed groups on local elections. The Government continues to push forward the reform process in the various sectors and introduce measures to promote greater financial transparency and accountability. However, the central government has not developed very effective ways of supporting increased citizen participation and good government in municipalities dominated by particular interest groups, in part due to the sensitive and difficult nature of the issue. 3. Issues to be addressed by the project and strategic choices: For many years, Magdalena Medio has been considered one of the most violent areas of the country. Despite the region's rich natural resource base including US$2 billion/year in oil revenues, the majority of the population live in rural areas and are extremely poor. The project aims to test methods and build capacity in the region to address the main issues cited above.  Page 5 Three strategic choices have been made by the Government and Bank concerning this operation: (i) to start small, with a LIL, in order to build capacity and manage risks (by testing approaches) in order to pave the way for the next, more ambitious phases of the Program; (ii) to support and pursue this development-peace initiative, despite the current, limited progress being made at the national level on peace negotiations and the heightened tensions surrounding the elections; (iii) to support the decision of the initiators of the program (ECOPETROL, oil workers union, and Catholic church) to rely on an independent, non-governmental organization (the Consortium) to design and implement the program; and (iv) to support the Consortium's approach of tackling the objectives of reducing violence and poverty simultaneously because the causes and possible solutions are intertwined in Magdalena Medio (this does rule out a phased approach which gives greal:er emphasis to one or the other objective at a particular point in time). C: Project Description Summary 1. Project components (see Annex 2for a detailed description and Annex 3for a detailed cost breakdown): Component Category Cost Incl. % of Bank- % of Contingencies Total financing Bank- _(US$M) (US$M) financing 1. Capacity Building for Program Proj Man. Management Irnstit. Bld 3.50* 56 3.00* 60 2. Sub-Projects Olher 2.75 44 2.50 40 Total 6.25 100 5.00 100 *Includes 380, 000for refinancing of PPF. Project Component 1. Capacitv Building of Program Management. The objective of this component is to build the capacity of the Consortium and Citizen's Network to implement the Program for Development and Peace. This capacity building is for purposes of carrying out the Program, therefore, if by the end of the LIL a new, regional entity has been established to take the place of the Consortium, the assets and knowledge gained during the LIL will be passed on to the new entity. Sub-Component 1.1 Consortium as Change Agent and Program Manager. The objective of this sub-component is to develop the Consortium's capacity to move from a participatory planning mode to an operational mode characterized by: (i) acting as a catalyst (promoter, intermediary, advisor and financier) among relevant beneficiaries and stakeholders; (ii) translating local initiatives into viable action plans and investments; (iii) promoting the establishment of effective partnerships with other organizations to support development initiatives; and (iv) dealing effectively with the diverse interests of key stakeholders in the region. To achieve this objective, the project would finance the Consortium's activities as change agent (strategy development; mobilization and technical support to citizen's network, communities and municipalities), program manager (design and implementation of new organizational, administrative and financial management systems; annual financial audit) and learning organization (internal monitoring, evaluation, and learning system; external evaluation). Expenditures would be for incremental operating costs of the Consortium (including full-time s taff), consulting services, learning events, and goods.  Page 6 Sub-Component 1.2. Citizen's Network. The objective of this sub-component is to strengthen the Citizen's Network so that it is capable of influencing public affairs and implementing development projects based on local initiatives. The network is a voluntary association of citizens and organizations which has its base in nucleos in each municipality, representatives of nucleos in the nodo at the sub- regional level, and representatives of nodos at the regional level. It has a central role in program implementation and is considered by the Consortium as a vehicle for building social capital in the region The project will fund learning events (workshops, training, study tours and exchanges within and outside the region), communications activities such as newsletters, and small grants for municipal nucleos to cover the costs of carrying out six month work plans (nucleo plans). Project Component 2. Sub-Projects. The objective of this component is to develop, test and document approaches which bring together community processes and resources around specific development initiatives agreed upon by citizens and authorities of selected municipalities or sub-regions of Magdalena Medio. Strategies and sub-projects are at various stages of development in the following areas identified as priorities by communities: education, health, environment, economic development (including road maintenance), peaceful coexistence (including community justice), and institutional development (municipalities, forums for citizen participation). Sub-Component 2.1 Technical Assistance for Sub-Project Preparation. Under this sub- component, technical support will be provided to a community to develop a specific development initiative or sub-project. It will finance activities such as: technical advice, feasibility and design studies (mainly for economic and infrastructure projects), building of management capacity, and establishing links with potential partners and financiers. This would not include technical support by Consortium personnel (included under sub-component 1.1 above), but rather specific support provided by tlird parties which is requested by the nucleo or community proposing the initiative. The aim is to identify workable mechanisms for keeping the community in control of the project design process, while ensuring good technical design and adequate supervision of consultants. Sub-Component 2.2 Sub-Projects. The project will finance a proportion of the costs (services of consultants and NGOs, local operating costs, equipment and minor civil works) of specific sub-projects. The sub-component will have a phased approach (a "LIL within a LIL"): financing would begin in strategic areas such as education, health and environment which are well defined, and new areas would be phased in based on two criteria: the strategy is ready, and the implementation capacity of the Consortium and communities is judged sufficient to expand the component's scope. For each strategic area, a specific set of questions and lessons to be learned will be identified prior to financing any sub-projects, and subsequently will be monitored and evaluated. As a condition for disbursements under this sub- component, basic guidelines for eligibility, cost sharing and accountability for the sub-projects as well as the decision rules for phasing in new strategic areas will be prepared in the forrn of an Operating Manual acceptable to the Bank. The Manual will be adjusted during the project to incorporate the lessons learned. 2. Key policy and institutional reforms supported by the project: The Program would support implementation of the major policy and institutional reforms adopted by the national government since 1991 in the 29 municipalities of the region. The LIL will test strategies for doing so through pilot initiatives in key sectors, such as health, education and road maintenance, in selected municipalities where communities have identified the initiative as a development priority. In support of the decentralization process, the LIL would help municipalities interested in improving core functions such as participatory planning and financial management, and in activating decision-making forums mandated by law but not yet functioning such as the Municipal Councils for Rural Development.  Page 7 3. Benefits and targetpopulation: Project benefits are expected at three levels: Central: Through the experience under the LIL, key partners at the central level--DNP, Ministry of Finance, ECOPETROL, the Bank and UND1P--will have tested and refined institutional arrangements for supporting a regional program managed by a Consortium of NGOs. The experience will contribute to national thinking about how to promote peace and development in a region, as well as to the development of approaches for transforming the various sector reforms and decentralization into a reality at the municipal level. It will also contribute to ECOPETROL's process of redefining its community relations/outreach approach. Regional and Sub-Regional level: A key benefit will be the improved operational capacity of the Consortium and Citizen's Network. By the end of the LIL, the Consortium (or the regional entity which eventually replaces it) will have in place a fully adequate organizational and administrative structure to manage the program as it grows and to meet requirements for use of public funds including loans and grants from international organizations and bilateral donors. The sector-specific strategies and interventions which have been tested and adapted during the LIL will provide the basis for scaling up the Program. A monitoring, evaluation and learning system will be in place which provides feedback to the Consortium on its performance, evaluates the program as a whole and is an integral part of capacity building of comnmunities at the municipal level. As a result, the LIL will have increased the Consortium's capacity to absorb and mobilize new financ:ing, and to establish relationships with new partners. An important benefit of the LIL is the consolidation of the Citizen's Network as part of a long-term process of building social capital in the region. Through support under the LIL, the network will help improve communication and understanding among citizens from diverse communities and backgrounds thus contributing to a sense of conmmon purpose, and give voice to the concerns of citizens and strengthen their capacity to influence policy and action at both the regional and municipal level. An intangible benefit of the LIL will be an increase in the Program's credibility with comrnunities, local authorities and other potential partners. It is critical for the Program to show concrete accomplishments in order to combat pessimism and a feeling of powerlessness in the face of the violence which pervades the region. The central Government's support for the Program would initiate a long-term process of improving the image of the State in the region, by evidencing its commitment to support a program built from the bottom-up. Municipal and Community Level: The program focuses on communities as the driving force for peace and development. An important benefit of the LIL will be behavioral changes at the community and municipal level which emerge from the process of bringing together local authorities, communities and other stakeholders around commonly defined development priorities. Although the process will be supported by the LIL in all 29 municipalities, progress is expected to vary substantially depending on the particular circumstances in each municipalily. One manifestation of this changed behavior will be greater participation of citizens and community orgamizations in municipal forurns such as the CMDR and parents associations, and incorporation of their priorities into the municipal development plan. In the selected municipalities where pilot initiatives and sub-projects are supported by the LIL, citizens will have a better understanding of conditions in their municipality, and their rights and responsibilities under sector reforms adopted since 1991, as well as improved capacity to define priorities, implement projects, resolve conflicts, monitor and evaluate, and influence public policy. There should be concrete benefits and measurable impact of the successful sub-projects, even though the two-year time frame for the LIL is short. These benefits will be specified for each sub-project and at the aggregate level for each  Page 8 strategic area. By the end of the LIL, a process to improve municipal capacity to respond to citizens needs and concerns will be underway. The 29 municipalities should have greater visibility and be better placed to demand and receive attention and resources from departmental and national programs. Target Population. While the Program will have broad benefits for all living in the region, it is specifically targeted to the 70% of the region's population, roughly 500,000 out of an estimated total population of 715,862, whose income falls below the poverty line. It is considered part of the Program for Targeted Interventions since the incidence of poverty in the region is estimated to be high in both absolute and relative terms. Seventy percent of the region's population have incomes below the poverty line (conservative definition-subsistence food needs estimated at US$360 per capita in 1992) and 53% have Unmet Basic Needs, compared to the national average of 19% below the poverty line, and the national averages for rural areas of 31% below the poverty line and 44% with Unmet Basic Needs. 4. Institutional and implementation arrangements: The Program for Development and Peace of the Magdalena Medio Region (PDPMM) is underway and has received support from various sources, primarily ECOPETROL and several ministries. The project which fits within the framework of the Program is to be implemented in two years and will be fully financed by the loan, ECOPETROL and, in the second year, the Government. UNDP is providing and directly managing a US$400,000 grant to support the PDPMM in 1998. The implementation arrangements for the LIL are described below. Roles of National Planning Department, Implementing Agency and UNDP. The National Planning Department (DNP) has been designated by the Government to be responsible for the project. The Consortium' which was established for the specific purpose of preparing and implementing the PDPMM has been designated by the Government as the implementing agency. Two committees have been created to oversee the project. The National Technical Committee (Comite Tecnico Nacional) presided by the Deputy Director of DNP and composed of the President of the Board of Directors of the Consortium, and a representative of ECOPETROL and of UNDP will meet every six months and have functions such as approving the semi-annual plans, and reviewing reports of the Revisor Fiscal and independent auditors. The National Consultative Comnmittee (Comite Consultativo Nacional) which will have a somewhat broader membership will meet quarterly and advise on matters such as the general policies of the PDPMM. The Consortium will act as the Technical Secretariat for the two committees. DNP with the agreement of the Consortium would like to continue arrangements established for the PPF whereby UNDP, under a Nationally Executed Cost Sharing Project (CSP), would handle certain procurement, administrative, and financial management functions for the project. ECOPETROL has made financing of the project conditional on UNDP management of its contribution. Thus, all project funds from the loan, ECOPETROL and, if the case arises, an eventual Govermnent counterpart contribution would be administered by UNDP. However, as is the characteristic of Cost Sharing Projects, the national implementing agency--in this case the Consortium--retains project management authority under the guidance of DNP and the National Technical Committee. UNDP's administrative role (at least in regard to the loan) is considered a transitional arrangement, while the Consortium (or the regional entity which eventually replaces it) strengthens its capacity so that it can take over fully program management after completion of the LIL. ' The Consortium was originally composed of CINEP (Centro de Investigaci6n y Educaci6n Popular) and SEAP (Sociedad Econ6mica de Amigos del Pais). In May 1998 when the Consortium's contract with ECOPETROL expired, SEAP decided to withdraw from the Consortium. CINEP and the Diocese of Barrancabermeja have formed a new Consortium to implement the LIL. This has not disrupted the Program since the same staff and office facilities/systems continue to work on the Program. Furthermore, the Diocese was one of the original initiators of the Program, so its membership in the Consortium provides continuity.  Page 9 There are substantial benefits of UNDP's role: (i) it has an institutional commitment to the project's objectives and experience supporting development-peace initiatives in Colombia (key donor for the National Rehabilitation Program, PNR in the late 1980s) and in other parts of the world; (ii) it is committed to the PDPMM and is in the process of approving parallel financing of $400,000 for selected activities which support the LIL's objectives; (iii) project funding mechanisms among the key cofinanciers would be harmonized; and (iv) funds should be available on a more timely basis due to a simpler disbursement process (advances made from the Bank loan into UNDP's New York account in accord with the terms of the CSP and with the approval of the Ministry of Finance); the latter is critical given the short implementation period of the LIL and the need for the Program to establish credibility with communities and local authorities. The legal instrument for defining the rights and responsibilities of DNP, the Consortium and UNDP, and a detailed set of operating rules for the LIL would be the CSP Document (a CSP acceptable to the Bank is a condition of loan effectiveness). Based on the Bank's evaluation of the Consortium's capacity and the LIL's objective of strengthening the Consortium's capacity so that it can take over full responsibility for management of the Program as it grows, we recommend that the Consortium be responsible for the key project management functions: preparing and implementing the semi-annual operating plans, monitoring and evaluation, project reports, and financial management functions including the project accounts, financial statements, and hiring the external auditor. ECOPETROL, DNP and UNDP will negotiate a contract compatible with the loan agreement to cover ECOPETROL's funding of the project; during negotiations, ECOPETROL indicated that it preferred to include its contribution under the CSP Document cited above, making it a quartripartite agreement. Citizen's Network, Communities, Municipalities and Other Partners. The Consortium's role is largely that of a facilitator which promotes a process. Inherent in the participatory and partnership approach adopted by the Program is the fact that the citizen's network, communities, and other partners such as municipalities, NGOs, central government agencies are the key actors when it comes to doing things. The citizen's network is a vehicle for the Consortium support to build social capital in the region, but it is also independent of the Consortium. The Consortium's sub-regional delegates are the key intermediaries and promoters of the program at the sub-regional and municipal level. The network at the municipal level (nucleos) has a critical role to play in the de velopment of municipal proposals and sub-projects in consultation with key stakeholders. The LII, will support the process of learning how to work out various arrangements between the multiple partners. Under Component 2, the communities and other partners will be able to propose and implement sub-projects. The municipality is a key partner, and its role and functions will not be usurped by the prograrm; however, direct municipal involvement (including financial contributions) will not be a requirement for all sub-projects. An Operating Manual satisfactory to the Bank will contain the detailed decision-making process and rules for financing sub-projects and nucleo plans. Semi-Annual Plans. In view of the learning nature of the project which requires flexibility and adaptation as it proceeds, semi-annual operating plans will be a key implementation mechanism. The plans will serve as a reference point for agreeing on activities to be undertaken, the budget, disbursement estimates and performance indicators. The plans will serve as a monitoring and evaluation tool, withn a performance evaluation of the previous plan submitted with each new plan. Part of the learning under the LIL will be to define the appropriate level of detail in the plans that suits the learning mode of the LIL and the difficult environment in which the project is being carried out which requires flexibility. It has been agreed that the first plan will cover the period May-December 1998 to coincide with the govenmment's fiscal year. Monitoring, Evaluation and Learning System. The design of the system is discussed in Annex 6. The intemal systern is woven into the Consortium's structure and into the participatory process itself, so that rather than being a separate function carried out by an isolated group, it will be a part of the program's  Page 10 regular operations and will support continuous learning. A specific set of questions and lessons to be learned have been identified (including for each strategic area, such as education) and will be monitored and evaluated during the LIL. Due to the nature of the LIL outputs, the M&E will rely strongly on qualitative methodologies and assessment of the quality of the participatory process. The external evaluation will be to some extent a continuation of the process initiated by ECOPETROL which involves three, highly regarded experts who meet with the Consortium every three months to discuss a report prepared by a sociologist which provides an insight into what has been occurring from the perspective of various actors including Consortium staff and communities. During the course of the LIL, the baseline for the Program as a whole (incorporating quantitative measures of poverty for example) will be established. Accounting, Financial Reporting and Auditing. Under the LIL, the Consortium's accounting, financial management and administrative systems will be strengthened to handle the increasing volume of funds, number of funding agencies, and number and type of activities to be financed. Since hiring an external auditor in early 1997 who found inadequate internal control systems, the Consortium has made good progress in putting in place adequate financial management systems. The computerized accounting and budgeting system produces financial statements which are in accord with generally accepted accounting principles. Currently, Consortium staff manage treasury functions and an external consulting firm does the accounting, prepares the financial and budget reports, and carries out some internal audit functions. The Consortium is in the process of procuring a new management information system to be mounted in Bogota, Barrancabermeja and the 8 sub-regional offices. Currently, most financial functions are concentrated in Bogota, but this will change over the course of the LIL as the new system is put in place and the office in Barrancabermeja takes over as the main office of the Consortium. The Consortium has in place the basic elements for managing the loan funds. The following Plan of Action for the first year of the LIL has been agreed with the Consortium: (i) increase financial staff and ensure there is at least one qualified accountant in each of the two key offices--Bogota and Barrancabermeja; (ii) put in place the new management information system; (iii) extend the contract with the external consulting firm until: (a) the new management systems have been tested and operated in parallel with the existing one for several months, and (b) Consortium staff have shown adequate capacity to carry out the functions without assistance; and (iv) strengthen internal controls through the hiring of a Revisor Fiscal. An external auditor acceptable to the Bank will be hired to carry out the annual audits of the project accounts. These measures will be included in the CSP Document. Procurement. Procurement arrangements take into account the following critical factors: the need for timely procurement in order to implement the project in two years; the Program's underlying approach of working in partnerships which entails identifying partners already working in the region or with a unique experience and set of qualifications; the region's reputation which may discourage interest in working there; and the need for consultants who have sufficient knowledge of the region and experience working in areas of conflict to avoid problems. The Bank and Government agree that the Consortium is uniquely qualified to implement the LIL given its role and acciumulated experience in the region, and its new contract with ECOPETROL which will be providing counterpart funds. The justification for contracting UNDP under a Nationally Executed Cost-Sharing Project is discussed above. The type of procurement to be carried out under the LIL is fairly simple: contracts for goods are expected to be small and only a few, if any, consulting assignments merit formal concursos. The Consortium's Manual de procedimientos includes procedures acceptable to the Bank for making small acquisitions of goods and services, and the Consortium has shown the capacity to carry out this function. In the case of medium-size contracts for goods and services, over US$10,000, they will receive support from UNDP. As the LIL will finance a fair amount of small contracts for consulting services, the Consortium will need to add to its Manual procedures for consulting services and will need to improve its capacity in this area particularly for larger contracts. The provision  Page 1 1 concerning the Manual will be included in the CSP Document. Sub-projects carried out by communities and other partners under Component 2.2 will be small (total sub-project cost of under US$50,000) and procurement arrangements will be simple. D: Project Rationale 1. Project alternatives considered and reasons for rejection: The following alternatives had already been ruled out when the Bank joined as a partner of the program and the reasons for rejection are valid: Direct government management of the program: It is difficult to envision how a program for development and peace in Magdalena Medio could be effectively managed by the government: central govermment presence is weak; the armed conflict has led to mistrust, fear and polarization of the society; the 4 Departments (with the possible exception of Antioquia which covers 3 of the municipalities) involved have a long record of low attention to the municipalities covered by the program; and the municipal governments tend to be weak and controlled by interest groups. Therefore, we strongly support the alternative developed by the program's initiators of relying on an independent, neutral actor (the Consortium) to develop the program in partnership with key stakeholders including the central and local governments. Despite an escalation of violence surrounding the elections late last year, the Consortium has proved so far that it can operate effectively in this complex environment and maintain a dialogue with the various actors. Support for national programs, such as the National Cofinancing System, to reduce poverty vs. an integrated approach in a specific region: A critical question raised within the Bank during early stages of preparation was the rationale for Bank support for a regional project which would reach a relatively limited population versus an approach of making national programs work better (e.g. Colombia's cofinancing system) which could have a broader impact in terms of the population served. The major rationale for an integrated approach in a specific region grew out of dissatisfaction with the poverty impact of the Bank's usual approach of relying on central government agencies and national programs. The Bank's experience supporting the Cofinancing Fund for Integrated Rural Development (one of the better performing projects, Ln. 3250) provided the following lessons: (i) the program was not well grounded in the realities of the people it was to serve, nor sufficiently flexible to respond to the enormous diversity of regional and local conditions in Colombia; (ii) efforts to "fix" the cofinancing system--one of the Government's central vehicles for implernenting its poverty agenda--had improved performance, but there appeared to be insurmountable political obstacles to making it work adequately; and (iii) there was growing evidence that the cofinancing systern which relies on implementation by municipal and departmental governments does not reach poor communities in areas like Magdalena Medio where the political-social system is still clientelistic and civil society is weak. The approach adopted in the PDPMM is to strengthen communities and municipalities in order to improve their access to investment resources through the regular national programs which currently do not reach the region, and through direct support of the program. This approach complements the Bank's on-going support to national programs. The following alternative was considered during preparation, but rejected: Bank support in the form of an Adaptable Program Loan/Traditional Investment Loan: The option of moving directly into a APL or traditional loan was rejected, because it was agreed that operational capacity needed to be built and the program's many innovative features needed to be tested and fine-tuned before embarking on a large scale investment program.  Page 12 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Sector issue Project Latest Supervision (Form 590) Ratings (Bank-finance projects only) Implementation Development Progress (IP) Objective (DO) Bank-financed Rural Development Rural Dev. Investment S (3250, ICR) Agricultural Technology S S (3871) Land Reform FY99 Sustainable Development Natural Resource Mgt. S S (Environment) (3692) Urban Environment S S (3973) Human Capital Antioquia Education S S Pasto Education S S Secondaxy Education U S Education Sector (3010) S S Municipal Health (3615) U S Peace and Development Youth Development FY98 (LIL) Peasant Enterprise Zones FY98 (LIL) Rural Infrastructure Second Rural Roads Sector (3157, ICR) S Other development aWencies Poverty-Safety Net Social Solidarity Network underway (IDB) Partnerships for Poverty Reduction (EDI, UNDP, underway Inter-American Found.) Alternative Development (Rural) PLANTE (IDB) underway Regional Development Pacific Coast Sustainable underway Development Prog. (IDB) Peace and Development Support for Peaceful just approved Coexistence and Security of Citizens (IDB) International Cooperation just approved Uraba (UNDP, USAID, EU, IDB, Netherlands) IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: Lessons from international experience Conflict situations: The underlying design of this Program, to be tested under the LIL, is consistent with the Bank's evolving approach for integrating concern for conflict into development operations: (i) undertake a social assessment which includes explicit recognition and analysis of conflict; (ii) engage civil society and emphasize building social capital; (iii) increased focus on governance; and (iv) evaluate the socio-economic costs of violence. The project embodies a pro-active stance which supports the Colombian government's initiative "to promote activities which ameliorate conditions which may lead  Page 13 to conflict" which is cited as an area for Bank assistance in the framework. (Task Group Report on Social Development and Results on the Ground; and A Frameworkfor World Bank Involvement in Situations of Conflict, R97-14). The central role of cormnunities (including implementation) in this project has proved to be a critical factor for success in recent reconstruction efforts in other countries such as Guatemala. Integrated rural development programs. The failures of many of the Bank supported integrated rural development programs of the 1970s and 1980s were in large part attributable to their top-down, centralized design and implementation which proved to be overly complex, difficult to manage, and unresponsive to beneficiary needs. The PDPMM's design, being tested under the LIL, is based on a highly participatory approach and reliance on partnerships rather than creation of a monolithic project unit to manage and finance all aspects of the program. The recent positive experiences promoting rural development in Brazil based on giving communities a central role in the definition of priorities, design and implementation of projects offer support for this approach (Decentralized Rural Development and Enhanced Community Participation: A Case Study from Northeast Brazil, Policy Research Working Paper, 1995). In addition, experience in Northeast Brazil suggests that the Consortium should not be relegated to simply a coordinating role; it needs some resources of its own to move the program forward (Tendler, New Lessons from Old Projects, OED 1993). Lessons from the Bank's work in Colombia: overcoming the implementation gap As indicated in the CAS, a critical problem the Bank has faced in Colombia is the difficulty of translating the Government's written policies and programs (often very innovative) into practice to achieve the intended results. This project supports an alternative to the Bank's usual approach of relying on central government agencies and financing of national programs in each sector. It has the following features which we believe increase the likelihood of success: Participatory approach. Stakeholders, particularly communities, are directly involved in program design and implementation through a bottom-up, participatory process which began with a diagnosis of the region's problems and is being consolidated with the establishment of a citizen's network and preparation of municipal development-peace proposals. The importance of promoting community participation is supported by case studies of successful municipalities which concluded that community participation has been a key contributor to good municipal government in Colombia (Local Government Capacity: Beyond Technical Assistance, Report No. 14085-CO, 1995). Regional and multi-sectoral approach. The Bank has primarily supported sector-specific, national programs which has led to a partial view of development at the local level and parallel interventions in different sectors each with its own rules which at times overburden limited local capacity. In addition, many of the national programs the Bank has supported have not been well-grounded in the realities of the people they are to serve, nor sufficiently flexible to respond to the enormous diversity of regional and local conditions in Colombia. This program is being built from the ground up based on a multidimensional analysis of the dynamics of poverty and violence in the Magdalena Medio region and an integrated, multi-sectoral response. Difficulties and dangers of only wrorking directly through local governments. The Bank's experience working with the national cofinancing system has shown the drawbacks of only working through local governments, particularly where civil society is weak and local authorities represent specific interest groups and often ignore the interests of the majority of the population. In the case of the Magdalena Medio region, the Consortium has more independence and credibility than a government agency, and works impartially with the entire population and local authorities. It is not, however, trying to replace the municipal or departmental authorities, rather it promotes agreement among key stakeholders, including local authorities, about priority development issues and actions including investment.  Page 14 Rigidity of the budget process and probability of budget cuts. The institutional arrangements and financing mechanisms for the LIL have been designed to minimize the obstacles posed by the cumbersome budget process, so that the Consortium receives funds in a regular and timely manner. This is essential in order to establish the program's credibility in the eyes of the communities and to enable the Consortium to have sufficient flexibility to operate in the region's conflictive environment. 4. Indications of borrower commitment and ownership: The ownership of the program is broad-based reflecting its origins (initiative of the Catholic church, ECOPETROL, and Oil Workers Union) and the participatory process carried out in the first phase which involved individuals, communities, NGOs, universities, municipal and departmental authorities, and the private sector. During the CAS process and subsequent Bank programming mission in late 1997, the central government indicated its strong commitment to this operation which it considers to be a pioneer in the peace and development area. The Planning and Finance ministries quickly obtained delegation of authority from the Congress to approve LILs in October 1997 and, despite tight fiscal constraints, have included necessary funds for this project in the 1998 budget. A number of central government ministries have provided technical and financial support to the program over the last year. 5. Value added of Bank support in this project: The Bank and central Government have joined the PDPMM as partners. The leader of the program is the Consortium and the major partner, up to now, is ECOPETROL. The Consortium and Government have indicated that the Bank's value added is both technical and financial. The members of the Consortium have a good track record in promoting community self-help through participatory processes and the Consortium has good technical staff, but it has less experience translating the priorities of communities into technically feasible and financially viable projects and programs. The Bank's multi-sectoral knowledge and operational experience, both in Colombia and internationally, is contributing to the technical quality and practicality of the program. The Bank's funding of the Consortium's core activities is critical and will be a catalyst for other entities, such as local governments and bilateral donors, to fund the program's investment activities. The Bank's involvement has brought additional credibility and visibility to the program at both the national and international level. Given the long-term nature of the Program, the current government expects the Bank's involvement to provide continuity through changes in Colombian administrations. E: Summary Project Analysis 1. Economic: There are compelling economic arguments for investing public resources in promoting development and peace in Magdalena Medio. The direct and indirect economic cost of violence in Colombia are enormous. A recent report prepared for DNP calculated the economic cost of violence (kidnapping, extortion, attacks on oil pipelines, and foregone earnings of those murdered) over the five year period 1990-94 to be US$ 13.5 billion (about 4% of GDP), of which about 25% was government security expenditures. The petroleum industry, increasingly central to Colombia's development prospects, has been struck particularly hard. Magdalena Medio is one of the areas of the country suffering most from violence and, as indicated earlier, is a region of enormous economic and strategic importance for the oil industry (refinery, pipeline, gas production) and as a national transportation corridor. A reduction of violence there will certainty be an enormous economic gain for the country as a whole that should far surpass the cost of the ten-year Program which is also contributing to poverty reduction.  Page 15 2. Financial: Not applicable; Fiscal impact: The LIL will have a limited fiscal impact and will initiate a process which improves transparency and accountability of resource use at the municipal level, thus improving the use of existing resources. In addition, an eventual reduction of violence would significantly reduce central and local government expenditures on security, replacement of assets, support for displaced persons, etc. 3. Technical: During preparation and as part of the LIL, technical analysis is being done to develop intervention strategies for priority sectors. By the end of the LIL, the Consortium will have evaluated the suitability of the strategies from a technical, cost effectiveness and social perspective. The technical feasibility of the sub-projects (component .2 of the LIL) will be analyzed as part of the decision-making process for awarding funds. 4. Institutional: The main objective of the LIL is to build the capacity of the Consortium, citizen's network, communities and local governments. a. Executing agencies (see below for more on Consortium): Communities (including the citizen's network) and municipalities have a central role in project implementation particularly for the sub-projects. Capacity is quite varied among municipalities and sub-regions in Magdalena Medio. The departure point for the LIL is that capacity building will be most effective if it is learning by doing through concrete experiences which produce tangible results (i.e. process of preparing municipal proposals, initiatives, development-peace sub-projects). The LII, will test ways of keeping communities in the drivers seat and will work out the appropriate role of the Consortium, citizens network, and communities at the municipal and neighborhood level. Through concrete experience, it will also provide lessons on how to build partnerships and other methods of working with NGOs, universities, and the private sector. Prominent Colombian organizations (Fundaci6n Social, Fundaci6n Carvajal, FES, ACTUAR, etc.) have already demonstrated enormous good-will and interest in supporting the program, and there are also interesting examples of working with the private sector (Westinghouse). b. Project management: The Consortium's capacity has been evaluated as: high for participatory processes and mobilization of support for the program both inside and outside region, high for the technical qualifications and commitment oi the staff (though an improved skills mix toward staff with operational experience is needed), medium for strategy formulation, and medium for administrative and financial management. It is experiencing growing pains as the program's size and complexity increases and as the Consortium team expands. An organizational structure and decision-making mechanisms for implementing the LIL have been agreed; their appropriateness and effectiveness will be monitored, and adjustments made during the course of the LIL. The M&E and learning mechanisms will provide important feedback, including staff and beneficiaries' assessment of the Consortium's performance. 5. Social (see annex 5): The PDPMM has put social issues at the heart of its approach and an explicit objective of the program is to build social capital. The program has been built using a participatory methodology which is a continuous process of social analysis with communities playing a central role. No negative social consequences of the project are foreseen. The social assessment has involved a three step approach. First, a technical diagnosis to assess the overall situation of the region was done using six areas of interrelated analysis: the economy, the oil industry, peace and coexistence, culture and social networks, the region and human development. The methods used were secondary data analysis and qualitative methodologies, including focus groups, individual and group interviews, panel discussions. Second, a series of local, subregional and regional events with about 1500 participants were held to assess needs, define priorities and identify opportunities. The participants in the  Page 16 events represented a wide range of community organizations, men and women of different age groups, local and regional NGO's, academic groups, local authorities, staff of public entities, and representatives of the groups in conflict. The findings of these steps of the social assessment process are summarized in Annex 5. The third step will be carried out as part of the process of putting in place the monitoring, evaluation and learning system and will involve establishment of a baseline at two levels: (i) information (demographic, socio-economic, service coverage, incidence of violence, poverty index and the like) for each municipality which is available in public and private data sets, both in the region and at the national level, as well as information collected during project preparation on living conditions in rural areas of four municipalities; and (ii) qualitative data on levels of community organization and participation, capacity and influence of the existing organizations, perception of the program, the status of the core group (nucleos). The participatory M&E and learning system (see Annex 6) is designed to ensure the involvement of nucleos and sub-project participants, and the communities at large in data gathering, analysis and dissemination of findings. Thus, the highly participatory nature of this project as well as its learning dimension should guarantee that the interests and concerns of citizens, particularly the most disadvantaged, will be taken into consideration. 6. Environmental assessment: Environmental Category [] A [x] B []C No adverse environmental impact is expected. Under component 2, positive environmental initiatives (which may be financed partially by UNDP) are to be undertaken such as: introduction of cleaner methods of gold processing which reduce mercury pollution of water, and integrated approaches to micro- watershed management. National norms concerning environmental licensing will be respected and the Consortium will define a screening mechanism for component 2 sub-projects. As part of the LIL, the Consortium will develop an adequate environmental assessment-review process for the Program's next phase of increased investment activity. It will draw on the work done by the Bank's Latin America Region on approaches to environmental management for social investment funds which includes valuable lessons from the Colombia Rural Development Investment Prograrn (Ln. 3250). 7. Participatory approach (see Annex 5): The project and PDPMM involve a highly participatory, inclusive approach which is empowering of local people; the approach will be tested and adapted during the LIL. Broad based participation of stakeholders is an essential feature of this operation. The starting point is the formation of the core groups (nucleos) to mobilize the community, and to identify needs, priorities and initiatives following the methodology described in detail in Annex 5. The six month nucleo plans are an instrument that will contribute to creating social capital and enhancing community self-management. The initiatives and sub-projects emerging from the process described in the methodology should reflect a consensus among citizens and local authorities, and their successful implementation is expected to contribute to overcoming poverty and increasing peaceful coexistence in the region. The technical assistance and advice provided by the Consortium and partner organizations will be client-centered. By the end of the LIL, it is expected that a strong citizen's network will have been established and will be influencing public affairs and implementing sub-projects based on local initiatives.  Page 17 Primary Beneficiaries and Other Key Stakeholders The table below summarizes the key beneficiaries and stakeholders of the project and the level of participation achieved or expected, using four critical dimensions: information sharing (IS), consultation (CO), joint decision-making (DM), and self-management (SM). Preparation Implementation IS CO DM SM IS CO DM SM Primary Beneficiaries Citizens X X X X X Community Organizations X X X* X X X X and Sector Associations Municipal Governments X X X X X X X Staff of Consortium X X X X X X X X Other Stakeholders ECOPETROL X X X X X X X X Local/ Regional NGO's X X X X X Program Partners X X X* X X X Business organizations X X X X X Churches+ X X X X X X Groups in Conflict X X * Partly, i.e. some organizations in some activities. + Particularly the Catholic Church. F: Sustainability and Risks 1. Sustainability: If the LIL successfully achieves its objectives then it should be sustainable and allow the Program to move to the next phase which will have a much heavier emphasis on investment. The factors affecting sustainability are those described under point 2 below (critical risks) with the risk concerning the armed groups being the most important. Regarding financial sustainability, this is not a major concern given the concentration on development activities of high priority within a municipality and the low level of investment in assets which require recurrent cost financing. Arrangements for cost recovery, and norms concerning community and municipal contributions to financing of investments is an area being explored under the LIL in order to design the next phase of the program.  Page 18 2. Critical Risks (reflecting assumptions in the fourth column ofAnnex 1): Risk Risk Rating Risk Minimization Measure Annex 1, cell "from Objective to Goal" The armed groups do not respect the process. S Consortium maintains a low-key but continuous dialogue with them. It will regularly monitor the socio-political dynamics in each participating municipality, and adjust and modulate its approach in accord with evolving conditions. The systematic involvement of citizens is another important means of reducing this risk. Annex 1, cell "from Outputs to Objective" The approach is not acceptable to the citizens and M Financing of some sub-projects authorities. considered a priority by citizens and authorities should increase the program's credibility and the acceptability of the approach. Partnerships are not viable due to lack of trust and The Consortium is carefully selecting adverse and/or deteriorating working conditions in M its partners in order to ensure that they the region. are fully aware of the conditions in the region and committed to work in a manner consistent with the program's philosophy. The Consortium takes on too many new The review of the semi-annual work commitments (number of activities, donors) relative S plans and the quarterly M&E reports to its operational capacity, thus endangering the will give early warning signals if the successful implementation of the LIL. Consortium is over-stretching its capacity. ECOPETROL's financial support to the program Continued strong central Government (counterpart funds) declines due to recent financial M support for the program is likely to strains and/or a re-examination of its role in the affect ECOPETROL's decisions; program. likewise, the program continues to have strong support within ECOPETROL. Concrete accomplishments under the LIL and improved coordination among cofinanciers may -reinforce support. Annex 1, cell "from Components to Outputs" Funds not available when needed. S Involvement of UNDP should speed-up disbursements. Municipalities and communities do not commit M The high priority attached to the sub- needed resources to cofinance sub-projects projects should ensure willingness to contribute. Overall Risk Rating S I Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) In addition to the risks noted above, another factor which must be taken into account is the electoral process and change in presidential administration in August 1998. Due to the broad-based support for the prograrn, the likelihood of a significant decline in support under the new administration is low.  Page 1 9 3. Possible Controversial Aspects: The project is being carried out in a situation of on-going conflict which is very unpredictable. It has raised expectations at the local, regional and national level, and is highly visible particularly as the national debate on peace in Colombia increases in anticipation of the change of administration in August. While we believe that the Consortium's role as a neutral actor and its dialogue with all actors is a solid approach, nonetheless the project may be criticized by those who believe that these matters should not be dealt with at the local level and/or by those who favor a "hard-line" approach. G: Main Loan Conditions 1. Effectiveness Conditions: * Nationally Executed Cost-Sharing Project Document acceptable to the Bank which includes provisions concerning the respective roles and responsibilities of DNP, UNDP and the Consortium (including Plan of Action for financial management, and updating of Manual de procedimientos) * Arrangement for counterpart funds from ECOPETROL in place * Submission of first Semi-Annual Plan I'May-December 1998) acceptable to the Bank 2. Other [classify according to covenant types used in the Legal Agreements.]: Conditions for Approval by Regional Vice.-President: * Promulgation of the new Consortium agreement acceptable to the Bank Other: * Disbursement condition for Category 4 Transfers: Adoption of an Operating Manual for sub- components 1.2 and 2.2, acceptable to the Bank H. Readiness for Implementation [ I The engineering design documents for the first year's activities are complete and ready for the start of project implementation. [ x] Not applicable. [x] The procurement documents for the first year's activities are complete and ready for the start of project implementation. [xl The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. [ ] The following items are lacking and are discussed under loan conditions (Section G): I. Compliance with Bank Policies [x ] This project complies with all applicable Bank policies. Task Team Leader: Elsie Garfield Country Manager/Director s Solimano  Annex 1-A Program Design Summary Colombia: Program for Development and Peace in the Magdalena Medio Region Narrative Summary Key Performance Indicators Monitoring and Evaluation Critical Assumptions Sector-related CAS Goal: (Goal to Bank Mission) A successful program in the Promote peace and National and municipal Magdalena Medio Region will development through a focus statistics contribute to the formulation on the socio-economic of a national peace and determinants of violence Joint assessments done by development strategy, and will National Planning Dept and generate useful lessons for the Bank programs in other parts of the country, as well as for the _ Bank's work in other parts of the worrld. Program Development (Objective to Goal) Objective: The Govermnent will pursue -Increase in number of initiatives at the national and Increased social capital and households with an income of Program's M&E system international levels to reduce empowered citizens lead to a at least 2 minimum salaries armed conflict and combat the significant reduction in --Increased coverage and Consortium's annual reports drug trade. poverty and increase in quality of basic education and on the Program peaceful coexistence in the health services Other Bank supported Magdalena Medio Region --Decrease in homicides programs (e.g. land reform, --Climate of good will between rural education) and projects citizens and authorities (e.g. youth development, urban violence) are successful. Outputs: Size and membership of Program's M&E system (Outputs to Objective) citizens network A learning organization A 10 year, community-led Survey of organizations active capable of: (i) mobilizing multisectoral development Satisfaction of citizens and in the region citizens for a participatory program for Magdalena Medio authorities with the Program development process, (ii) based on proposals agreed Municipal Development Plans responding to local initiatives upon by citizens and Increased amount of by acting as a catalyst among authorities at the municipal development resources for the National Planning key stakeholders, and (iii) (29), sub-regional and regional region Department's poverty and promoting development level. human development reports partnerships between the Increased number of public sector, private sector organizations acting in the and civil society. region with their own resources Continued central Government support to a program led by a Poverty index and human Consortium of NGOs. development index (municipal level) The commitment and resource contributions of citizens, organized groups and municipalities are sustained over time. The armed groups respect the _ process  Inputs: (Inputs to Outputs) A scaling up of the Program in Triggers for scaling utp. Program's M&E system two to three phases in which the scope and size of investments and emphasis on economic activities would increase in line with growing implementation capacity of communities and local authorities and the improving security situation which would improve the investment climate.  Annex 1-B Project Design Summary Colombia: Magdalena Medio Regional Development Project Narrative Summary Key Performance Indicators Monitoring and Evaluation Critical Assumptions Sector-related CAS Goal: (Goal to Bank Mission) Promote peace and (see Annex 1-A) (see Annex 1-A) development through a focus on the socio-economic determinants of violence The Government will pursue Program Development --Increase in number of Program's M&E system initiatives at the national and Objective: households with an income of inteCnational levels to reduce Increased social capital and at least 2 minimum salaries Consortium's annual reports armed conflict and combat the empowered citizens lead to a --Increased coverage and on the Program drug trade. significant reduction in quality of basic education and poverty and increase in health services Other Bank supported peaceful coexistence in the --Decrease in homicides programs (e.g. land reform, Magdalena Medio Region --Climate of good will between rural education) and projects citizens and authorities. (e.g. youth development, urban violence) are successful. Project Development (Objective to Goal) Objective: Perception of beneficiaries and M&E system: quarterly The armed groups respect the Develop the operational stakeholders that the program, formative evaluation reports, 3 process. capacity of the Consortium, of which LIL is second phase, external evaluation reports, citizens network and other is operating satisfactorily and and M&E of individual sub- partners to work together that benefits are being realized projects. towards collectively defined objectives to reduce poverty No. of partnerships established Consortium's annual progress and increase peaceful and resources contributed reports coexistence in the Magdalena Medio Region. Financial and human resources contributed by municipalities and others to support sub- projects Social organization increased and strengthened in at least 5 of the 29 municipalities  Outputs: (Outputs to Objective) 1. The Consortium develops Budget implementation Semi-annual plans ECOPETROL's financial its capacity to move from a rate/vs. planned support to the program does participatory planning mode to Consortium's annual progress not decline due to recent an operational mode, Perception of Consorlium staff reports financial problems and/or a re- characterized by: (i) acting as and donors examination of its role in the a catalyst (promoter, program intermediary, adviser and Perception of beneficiaries, financier) among relevant partners (particularly The Consortium limits its beneficiaries and stakeholders; municipal authorities), and commitments (number of (ii) translating local initiatives general public in the region: activities, donors) to a level into viable action plans and knowledge and opinion about which matches its operational investments; (iii) promoting program, program's image, capacity so that it can the establishment of effective and examples of successes successfully implement the partnerships with other and/or failures. LE. organizations to support development initiatives, and (iv) dealing effectively with the diverse interests of key stakeholders in the region. 2. Citizens network * Size/composition of the M&E Reports The approach is acceptable to established, influencing public network the citizens and authorities. affairs and implementing * Representation of network Consortium's annual progress development sub-projects members in formal citizens reports Partnerships are viable despite based on local initiatives. forums (CMDR, etc.) lack of trust and adverse * Nucleos established and and/or deteriorating working functioning in majority of conditions in the region. municipalities (number of nucleos regularly operating with a nucleo plan) * Documented lessons on how to strengthen community capacity in a context of intense conflict 3. Approaches have been Findings concerning developed, tested and effectiveness of strategies and M&E reports, particularly documented of how to bring approaches in various areas extemal evaluation together community processes such as primary health and and resources around specific basic education tested under development initiatives agreed the LIL. upon by citizens and authorities of selected % of sub-projects implemented municipalities or sub-regions with positive results of the Region. .  Project Components/Sub- Inputs: (budget for each (Components to Outputs) components: (see Annex 2 component) for project description) US$3.0 million to fund Semi-annual plans and Timely availability of funds. 1. Capacity Building for Consortium's core staff, implementation reviews prior Program Management incremental operating costs, to plan approval equipment, training, 1.1 Consortium as Change consulting services; and Consortium's annual progress Agent and Program Manager equipment, training and reports technical assistance to 1.2. Citizens Network strengthen the citizen's network including grants to finance the nucleo plans. 2. Sub-Projects Technical support (component US$2.0 million to fund Semi-annual plans and Municipalities and 2. i) and grants (component consulting services to prepare implementation reviews prior communities commit resources 2.2) for the preparation and sub-projects and grants for to plan approval to cofinance sub-projects implementation of specific implementation of sub-projects sub-projects in selected by communities with partners Consortium's annual progress municipalities and subregions such as municipalities and reports ___________________ N GO s.  Annex 2 Magdalena Medio Regional Development Project Project Description Project Component 1: Capacity Building for Program Management - US$2.5 million The objective of the component is to build the capacity of the Consortium and Citizen's Network to implement the Program for Development and Peace. This capacity building is for purposes of carrying out the Program, therefore, if by the end of the LIL, a new regional entity has been established to take the place of the Consortium, the assets and knowledge gained during the LIL will be passed on by the Consortium to the new entity. Sub-Component 1.1: Consortium as Change Agent and Program Manager - US$2.7 million The objective of this sub-component is to develop the Consortium's capacity to move from a participatory planning mode to an operational mode characterized by: (i) acting as a catalyst (promoter, intermediary, advisor and financier) among relevant beneficiaries and stakeholders; (ii) translating local initiatives into viable action plans and investments; (iii) promoting the establishment of effective partnerships with other organizations to support development initiatives; and (iv) dealing effectively with the diverse interests of key stakeholders in the region. In order to achieve this, the sub-component would include the following types of activities: * Consortium's Functions as Change Agent and Manager. The project will support the Consortium's change agent functions of mobilization and technical support to the citizen's network, municipalities and local communities; communications within and outside the region; and outreach to potential partners and financiers of the program. It will also support the definition and putting in place of an intemal organization appropriate for the program's characteristics, and adequate administrative and financial management systems so that the Consortium will be able to gear up its activity for the program's next phase and meet requirements of the Colombian government, B3ank and other potential donors. It is expected that the design of the next phase will evolve out of the experitence of the LIL and not involve a study prepared by external consultants. However, additional preparation activities may be required and will be- identified by the end of the first year of the LIL. Funds will be provided for the incremental costs of the offices inB-ogota, Barrancabermeja, and 8 small sub-regional offices including the costs of essential full-time staff, consultant services (including the annual financial audit and environmental assessment for the next phase) and fees related to partnerships, training, study tours and workshops, equipment, production costs for videos-radio spots-newsletters, and operating costs. * Strategy Development. As part of the Consortium's change agent role and to complement the work of its technical team, the project would finance consulting services for the development of regional strategies to guide the program's approach in key areas. For example, work will done to elaborate a regional strategy for secondary education (grades 10 and 11) for which there is no clearly defined national strategy; the strategy will emphasize preparing students for adult life including remunerative work. * Monitoring, Evaluation and Learning System. A critical project activity is the putting in place of the monitoring, evaluation and leaming system which will include an intemal system integrated into the program's organization and the participatory process, and an external mechanism based on periodic assessments by an independent evaluator. The project will also support the collection of a broader set of baseline data (qualitative and quantitative) than required by the LIL in order to have adequate information to assess the impact of the full, long-term program. To carry out these activities, the project will finance the establishment of a specific working group within the Consortium to support M&E (staffing, equipment and  operating costs) as well as the costs of putting in place the system including training of Consortium staff, nucleo and sub-project participants; learning events; and surveys/data collection. ' It will also finance the extemal evaluation (consultants and workshops) which will be undertaken every 8 months. Sub-Component 1.2: Citizen's Network - US$0.3 million The objective of this sub-component is to strengthen the Citizen's Network so that it is capable of influencing public affairs and implementing development projects based on local initiatives. The network is a voluntary association of citizens and organizations which has its base in nucleos in each municipality, representatives of nucleos in the nodo at the sub-regional level, and representatives of nodos at the regional level. It has a central role in program implementation and is considered by the Consortium as a vehicle for building social capital in the region. The project will support activities to build capacity of the network, particularly at the municipal level, through the participatory process for planning, design and implementation of projects, and monitoring, evaluation and learning. It will also support the network's activities to improve communication within the region in order to develop a regional identity and vision, and to develop an adequate information base for decisionmaking and sub-project design. The project will fund various learning events (workshops, training, study tours and exchanges both within and outside the region); communications activities (radio, newsletters, equipment, supplies, and minor operating costs); and small grants to municipal nucleos to cover the cost of carrying out six month work plans (nucleo plans) which is not expected to exceed US$2,000 per nucleo plan. Project Component 2: Sub-Projects - US$2.0 million The objective of this component is to develop, test and document approaches which bring together community processes and resources around specific development initiatives agreed upon by citizens and authorities of selected municipalities or sub-regions of Magdalena Medio. The project will provide technical assistance to transform initiatives into sub-projects (sub-component 2.1) and grants to finance a proportion of the costs of specific sub-projects (sub-component 2.2). Strategies and sub-projects are at various stages of development in the following areas identified as priorities by communities: education, health, environment, economic development (including road maintenance), peaceful coexistence (including community justice), and institutional development (municipalities, forums for citizen participation). Sub-Component 2.1: Technical Assistance for Sub-Project Preparation (US$0.5 million) Under this sub-component, technical support will be provided to a community to develop a specific development initiative or sub-project. It will finance activities such as: technical advice, feasibility and design studies (mainly for economic and infrastructure projects), building of management capacity, and establishing links with potential partners and financiers. This would not include the technical support by Consortium personnel (included under sub-component 1.1 above), but rather specific support provided by third parties which is requested by the nucleo or community proposing the initiative. Part of the learning and innovation will be to explore mechanisms for providing this assistance under various conditions, for example weak community capacity and sophisticated technical content of the initiative. Different alternatives will be tried such as: the Consortium contracting directly a third party (on behalf of the community) to provide the services; and financing the technical assistance as a sub-project through the 'The cost of ME activities carried out in the municipalities by the citizens network or in the context of a specific sub-project would be incorporated into the cost of the nucleo plan or sub-project. The first would be covered under component 1.2 and the second under sub-component 2.2  grant mechanism (sub-component 2.2) with direct management by the community. The aim is to identify workable mechanisms for keeping the community in control of the project design process, while ensuring good technical design and adequate supervision of consultants. Sub-Component 2.2: Sub-Projects - US$1L.5 million The project will finance a proportion of the costs (services of consultants and NGOs, local operating costs, equipment and minor civil works) of specific sub-projects which are expected to cost less than US$50,000. The sub-component will have a phased approach (a "LIL within a LIL"): financing would begin in strategic areas such as education, health and environment which are well defined, and new areas would be phased in based on two criteria: the strategy is ready, and the implementation capacity of the Consortium and communities is judged sufficient to expand the component's scope. For each strategic area, a specific set of questions and lessons to be learned will be identified prior to financing any sub-projects, and subsequently will be monitored and evaluated. As an initial condition for disbursements for the sub- component, basic guidelines for eligibility, cost sharing and accountability for the sub-projects as well as the decision rules for phasing in new strategic areas will be prepared in the form of an Operating Manual acceptable to the Bank. The Manual will be adjusted during the project to incorporate the lessons learned.  Annex 3 Magdalena Medio Regional Development Project Estimated Project Costs (US$ million) Proiect Component Bank Government* Total 1. Capacity Building for Program Management 1.1 Consortium as Change Agent and Program Manager 2.32 0.30 2.62 1.2 Citizen's Network 0.30 0.20 0.50 Sub-Total 3.62 0.50 3.12 2. Sub-Projects 2.1 Technical Assistance for Sub-Project Preparation 0.25 0.25 0.50 2.2 Sub-Projects 1.75 0.75 2.25 Sub-Total 2.00 1.25 2.75 Refinancing of PPF** 0.38 0 0.38 Total Proiect Cost 5.00 1.25 6.25 * Govermment column includes the financing provided by ECOPETROL. ** PPF refinancing included under Component 1.1 in other tables.  Annex 4 Magdalena Medio Regional Development Project Procurement ancl Disbursement Arrangements Procurement GeneraL Procurement of goods, works and consulting services would be carried out in accordance with, respectively, the Guidelines for Procurement under IBRD loans and IDA Credits published by the Bank in January 1995 and revised in January and August 1996 and September 1997, and the Guidelines: Selection and Employment of Consultants by World Bank Borrowers, published in January 1997 and revised in September 1997. The procurement arrangements for the project components are described below and summarized in Tables A and B. An agreement acceptable to the Bank for prov:ision of administrative and procurement services would be negotiated with UNDP. This would be a transitional arrangement while the Consortium strengthens its capacity so that it can take over fully program management after completion of the LIL. The UNDP agreement would be a Nationally Executed Cost Sharing Project that would include the standard annexes indicating that Bank procurement and financial management requirements would be followed. Goods. Contracts for goods are expected to be very small; thus ICB is not an option and NCB unlikely; thus, contracts valued at less than $100,000 would be awarded through national shopping procedures. Consultants' Services. The project would finance consulting services for preparation of studies, technical assistance, design of information campaigns to promote community participation and for provision of training. It would also finance contracts for fixed-term core staff in the Consortium and long-term technical experts. Considering the unique characteristics of the project, the existing constraints related to security conditions in the area and the expertise sought that implies knowledge as well as degree of involvement with the individual communities, the Consortium would seek to form partnerships with and/or hire experienced experts or entities from the private sector, universities, local institutions and NGOs. Operating Costs. These expenditures will be clisbursed on the basis of a semi-annual plan acceptable to the Bank. Goods and services under this category, listed in Table C, will be contracted out or paid by the Agent or the Consortium, as the case may be, on the basis of actual costs using reasonable rates. Transfers. There will be two types of transfers: (a) for Nucleo plans, and (b) for Sub-projects. Unless otherwise agreed with the Bank, the transfers will not exceed $2,000 per Nucleo plan and $50,000 per Sub- project. Inaividual contracts for goods, works and services financed by the transfers are thus expected to be small (below $30,000 in the case of the sub-projects). Transfers would be awarded in accordance with the criteria and procedures outlined in the Operating Manual agreed with the Bank; such procedures would require in each case that acquisitions be made on the basis of comparison of price quotations allowing for sole sourcing when shopping is not feasible. Standard agreements acceptable to the Bank would be used to transfer the funds to implementing community groups under conditions that ensure adequate implementation; the standard text for the agreements would be contained in the Operating Manual. The value of contracts under the transfers has not been included in the aggregate limits indicated in Table B. Prior Review. Table B summarizes the prior EBank review which represents about 30% of the loan amount. The Consortium would be delegated to conduct prior review of all acquisitions made under the Transfers. Supervision missions would conduct post-review on the agreed procedures.  Disbursement A two and one-half year period for loan disbursement is estimated with effectiveness expected in July 1998 and a loan Closing Date of December 31, 2000. However, due to the characteristics of the LIL, it is possible that disbursements will be somewhat faster or slower. The semi-annual plans will be the mechanism for making disbursement estimates and measuring disbursement performance. The allocation of loan proceeds is indicated in Table C of this annex. The Bank loan would 100 percent of all eligible project expenditures not financed by counterpart funds or co-financiers with the exception of Category 1 Goods and Category 3 Operating Costs. A UNDP Cost Sharing Project (CSP) document acceptable to the Bank will include the procedures and respective responsibilities of DNP, the Ministry of Finance, the Consortium for loan disbursements. Disbursements will be made on the basis of UNDP's statements of expenditure; an initial advance of up to 6 months expenditures will be provided to UNDP based on the CSP.  Annex 4, Table A: Project Costs by Procurement Arrangements (in US$thousand equivalent) Expenditure Category Procurement Method Total Cost (including contingencies) ICB NCB Other N.B.F 1. Goods Office Equipment and - - 50.0" - 50.0 Vehicles (50.0) (50.0) 2. Consultancy Services 2.1 Consortium Services - - 975.0' - 975.0 (Core Staff in Bogota, (975.0) (975.0) Barrancabermeja and Sub-Regions) 2.2 Studies and Technical - - 1,745.03' - 1,745.0 Assistance (1,745.0) (1,745.0) 2.3 UNDP Services - - 120.04' - 120.0 (120.0) (120.0) 3. Miscellaneous 3.1 Transfers for Nucleo 200.051 200.0 plans (200.0) . (200.0) 3.2 Transfers for 1,700.0" ~ - 1,700.0 Sub-projects (700.0) (700.0) 3.3 Operating Costs 830.0 830.0 ( recurrent costs, radio ads, - - (830.0) - (830.0) newsletters, information campaigns) 4. PPF Repavment 380.0 Total 5,620.0 6,000.0 (4,620.0) (5,000.0) 1. Shopping procedures 2. Individual consultants according to Section V of Consultants' Guidelines 3. Fixed budget, consultant qualifications, and sole sourcing 4. Sole source 5. Transfers awarded to beneficiaries in accord with procedures in Operating Manual acceptable to the Bank. Note: Figures in parenthesis are amounts to be financed by the Bank loan  Annex 4, Table B: Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review / Estimated Total Value Subject to Prior Review US $ thousands US $ thousands 1. Works >100 NCB all/O <100 National Shopping None 2. Goods >100 NCB allV0 <100 National Shopping None 3. Services (a) Consulting >200 QCBS AlVIO Firrns" 100 to 200 Fixed Budget all/245 <100 Consultant all sole source/300 Qualifications/Sole source (b) Individuals2' >40 According to Section V all/1,000 of Consultants' Guidelines <40 According to Section V Review of TORs only of Consultants' Guidelines 4. Transfers <50,000 Procedures in None3' Operating Manual Total value of contracts subject to prior review: 1,545 "Contracts over US$100,000 are subject to prior review. 21 Contracts for individuals over US$40,000 and those considered of a critical nature are subject to prior review. 3/ Prior review would be carried out by the Consortium.  Annex 4, Table C: Allocation of Loan Proceeds Expenditure Category Amount in Financing Percentage US$thousands 1. Goods 40.0 90 2. Consultancy Services: Consortium 2,000.0 100 Services, Technical Assistance & Studies 3. Operating Costs" 700.0 90 4. Transfers 1,600.0 100 of transfer 5. PPF Repayment 380.0 6. Unallocated 280.0 'rotal 5,000.0 1/ Includes radio ads, newsletters, information campaigns, office and training supplies (including foodstuffs for training sessions), rents, utilities, fuel, communications (including telephone and postal services) , travel expenditures including study tours and training (including transportation and per diem).  Annex 5 Social Assessment Origins of the Program for Development and Peace in Magdalena Medio (PDPMM) The idea for this Program originated from a proposal by the Catholic Diocese of Barrancabermeja and its network of community workers (Pastoral Social) to the national oil company (ECOPETROL) to find solutions to the increasing incidence of violence and poverty in the Magdalena Medio region which the national and local governments had been unable to address. The idea was taken up and supported in mid- 1994 by the Committee on Human Rights of ECOPETROL and the Oil Workers Union (USO) who proposed the involvement of SEAP (Society of Economists Friends of the Country) and CINEP (Center for Research and Popular Education) two well-respected and long-established Colombian non-governmental organizations. Representatives of the four entities worked for six months to formulate the idea and subsequently in February 1995 the Board of Directors of ECOPETROL approved the allocation of US$500,000 for the initial, diagnostic phase of program preparation. The prestige, strong convening powers and technical excellence of the groups that allied themselves to bring about this program convinced the central Government to endorse this initiative as a pilot partnership between the public and private sectors and civil society. The National Planning Department formally requested Bank support for the program in April 1996.1 Characteristics of the Region and Key Stakeholders Magdalena Medio is the birthplace of the petroleum industry in Colombia, a strategic transportation corridor, and is considered the second most violent region of the country. The diagnostic work carried out by the Consortium SEAP-CINEP has identified a number of perverse dynamics explaining the prevailing poverty and violence in this region which has abundant natural resources including oil, gas, gold, and water. The region does not correspond to a single political-administrative unit. It is composed of 29 municipalities located in 4 Departments (Antioquia, Santander, Bolivar and Cesar) which share the following characteristics: proximity to the Magdalena River and its culture, influence of the petroleum industry and importance of ECOPETROL, recent settlement (major influx in 195 Os) from other regions of Colombia, inattention from the Departments in which the municipalities are located, and a high level of armed conflict and violence (homicide rate double that of Colombia). A majority of the population of 715, 862 is considered rural, while 34% of the people live in two cities, Barrancabermeja and Aguachica. Despite the fact that the oil industry generates about US$ 2 billion annually in the region, 70% of the population (400,000) fall below the poverty line and 53% have Unmet Basic Needs (NBI). An extractive economy predominates (oil, gold, livestock) which generates little value added in the region (only 4.5% of the value of petroleum/gas production stays in the region) and which does not generate sufficient employment and adequate incomes for the most of the population. Severe environmental problems have resulted in serious declines in productivity of key economic activities such as fishing and peasant agriculture. ECOPETROL and the national government spend enormous amounts on security, yet violence increases with conflicts over territory between paramilitary groups, guerrillas and the Army. A crucial factor at the root of many of these dynamics is the virtual absence of the state as a regulator and promoter of social and economic processes and guarantor of security and peace for the region's citizens. The main state presence in the region is ECOPETROL which has played mostly a marginal and reactive role in its relations with the communities and maintained an enclave approach to the ' Subsequently, when the Consortium SEAP-CINEP's contract with ECOPETROL ended in May 1998, SEAP withdrew from the Consortium and a new Consortium was formed by CINEP and the Diocese of Barrancabermeja, one of the initiators of the Program.  location and operation of its oil installations. ECOPETROL's main interest in its community relations activities has been the security of its installations with a strong focus on military protection; community relations activities have been limited to the municipalities and communities where its installations are located. Within ECOPETROL, there are different views about the program. Some managers and staff see the Magdalena Medio program as a learning exercise which could reorient the company's community relations and security strategies leading to: savings for the company both in direct security expenditures and losses due to theft and sabotage, an improved image in the region and better community relations, and a broader contribution to the society at large. Another line of thinking in ECOPETROL puts less emphasis on the company's social outreach efforts unless they can be clearly demonstrated to serve business interests. Another relevant public actor, the armed forces, has been mainly immersed in the conflict with the guerrilla movements and has not contributed decisively to improving peace and security in the region. All the major guerrilla movements in Colombia are active in Magdalena Medio; some groups had indicated publicly their support for the program's approach in a meeting of the Commission for Peace Magdalena Medio in September 1996. Paramilitary groups, alleged by human rights organizations to have links to the military, now dominate certain parts of the region. Experts on violence in Colombia have linked the growth of paramilitarism with a process of land accumulation and transformation of cultivated land into extensive livestock operations. The region has weak territorial administrations. The four Departments that have municipalities in Magdalena Medio have by and large treated them as second class constituencies and have invested little in their development. Most of the municipalities including those with extraordinary income derived from oil revenues (regalias) show weak planning and adlministrative capacity, are overstaffed relative to fiscal resources, serve a limited clientele and live in chronic fiscal crisis. Although the 1991 Constitution emphasized participation and citizens rights, few mayors have encouraged citizen participation in decisionmaking so most of the new forums for citizen participation mandated by law are not really operational. The civil society is characterized as weak, with very limited capacity to influence the regional political process and lacking shared values and a vision for the future. However, the diagnosis found that while fragile, there are over 400 civil organizations in the region with a strong presence of women, human rights and production-oriented groups. The participatory process which initiated preparation of the program revealed enormous untapped potential and capacity of the people and organizations in the region. Philosophy and Objectives of the Program The underlying philosophy is to create a program that involves and reflects the concerns of all stakeholders in the region. It is recognized that the problems of Magdalena Medio are complex and that one can not achieve either poverty reduction or peace objectives without addressing both simultaneously. The Church, ECOPETROL, and the Consortium would like to create a window of opportunity to resolve the region's problems through a long-term (10 to 15 year), multi-sectoral program for development and peace. The imperative for embarking on such a program now is reinforced by the recognition that oil exploration and oil resources in Magdalena Medio are declining and that the income (regalias) received by municipalities will decline; alternative revenue sources and sources of economic growth need to be created. The overall objective of the program is to improve the well-being of the population with priority for the poorest. In response to the lack of a base of strong institutions and civil society to carry out the program, the Consortium made a crucial strategic decision: to make the building of civil society the single most important objective of the program and to subordinate all processes related to the formulation and implementation of the program to this objective. The two specific program objectives are: (i) the building-up of civil society, including a citizen's network (red de pobladores) as the main planner, executor and controller of the program activities; opening a dialogue between various armed groups and citizens to find ways of resolving problems without  violence, strengthening of education (defined very broadly), and improvement of municipal administrations; and (ii) the eradication of poverty (improve the region's productive and social capital), including strategies for increasing the region's appropriation of its surplus and promoting "economic circuits" which will generate employment (with particular attention to small farmers), improving infrastructure such as roads to facilitate economic activity and communications within and outside the region, and preserving and restoring the environment (reduce water pollution, restore wetlands reforestation, etc.). The role of the Consortium in the Program is that of a leader and facilitator who works in partnership with communities, local governments, NGOs, the private sector and central governnent agencies. Participatory Methodology The diagnostic phase combined analytical work by a team of experts with a participatory process of consultation with communities and key stakeholders which was carried out using the already well- established network of community workers of the Pastoral Social. During a six month period in late 1995- early 1996, 1500 citizens participated in workshops in each of the 29 municipalities, 5 sub-regional workshops and 3 regional seminars. This group of people represented a range of stakeholders, including leaders of community organizations, men and women, all age groups (particularly youth and adults), staff of local and regional NGOs and academic institutions, local government authorities, and representatives of groups in conflict. The content of the program and specific investments to be financed is being defined through an interactive process between the communities (with the citizen's network constituted from the 1500 people who participated in the diagnostic phase playing a key role) and the Consortium as the program's implementing agency. Municipal proposals, initiatives and sub-projects. The Consortium has designed and is currently applying a methodology for arriving at agreement among key stakeholders in each municipality around long-term development priorities (municipal proposals) and specific activities and investments to begin to address the long-term priorities (initiatives and sub-projects). One of the objectives of the LIL is to test and refine the methodology. The generic steps of the methodology, which is adapted to the specific conditions of each municipality are as follows: * promotion of the program in the communities of each municipality * establishment of a core group (nucleo) of citizens and community organizations to mobilize the community * identification of priority needs and ideas of how to approach those needs (initiatives) * development of the ideas in work groups (mesas de trabajo) for each initiative, with the participation of citizens and technical staff * selection of the most promising initiatives based on two criteria: consensus around them, and strategic value in terms of the program's long-term objectives * technical assistance to determine the technical, financial and political viability of the initiative and to transform it into a sub-project * consensus and commitments around a municipal proposal composed of several sub-projects. The nucleos constitute the base, at the municipal level, of the citizens network. Each nucleo will prepare and manage a six month plan of action for its own development as a group, including learning events on how to participate and promote participation, how to approach and negotiate with local authorities, mechanisms for conflict resolution and initiative-specific work sessions. This plan is expected to contribute to the creation of social capital and to enhance community self-management.  Interaction between citizens and change agents. The technical assistance provided by NGO's, consultants or Consortium staff will follow a client-centered approach, consistent with recommended organizational development methods. These change agents will provide: advice on process, technical assistance to assess the viability of initiatives (can they be transformed into a sustainable sub-project), and problem-solving guidance on specific sub-project matters. However, consistent with the overall participatory approach, their interventions will be made in a way that enhances knowledge and understanding, contributes to project development, and allows the beneficiaries to maintain control of the community development process. How to achieve this balance between participation-community control and specialized technical support is one of the central learnings under the LIL. Participation in Project Design. The participatory process has heavily influenced the design of the project in various ways. First, the establishment of the core groups (nucleos) as the vehicle for community mobilization, needs assessment, identification of initiatives, preparation and implementation of six month plans, determines to a great extent the structure and operation of the project. In effect, these core groups, which form the citizens network, becorne the counterparts for Consortium staff working in the 8 sub-regions. In turn, the rest of the institutiona]l[ structure has to organize itself to support the regional team. Second, the local process to prepare a municipal proposal creates a demand-driven approach to which the Consortium has to respond by designing flexibl[e strategies in key areas to, on the one hand, provide a strategic direction, and on the other, to deal wilh the diversity of needs and concerns throughout the region. Third, the complexity of the political conflict in the region requires the development of a careful communications strategy in the region to keep all the critical stakeholders well informed. This implies, direct communication by the Consortium team with the armed groups in a variety of informal ways to guarantee that they all are equally aware of the program activities, as well as general public information to present the program as a positive yet neutral player in the region. Finally, the participatory process dictates that the pace of implementation will be determined by the degree of consensus and the readiness of citizens and local authorities which will vary a lot amonig the 29 municipalities and over time. Social Viability of the Project Even though the intense conflict in the region represents the major substantial risk for the project, the systematic participation and involvement of citizens represents the best shield against this risk. There is evidence in various regions of Colombia that a concerted, strong and politically neutral citizens movement to promote peace and self-help is usually, over time, respected by the armed groups. The citizens are usually considered the constituency of the various groups in conflict which claim to work for their well- being. If the citizens decide to remain outside of the camps in conflict, those camps have to look for support elsewhere. This has been the clear lesson of La India, one of the small territories participating in the Magdalena Medio program. Thus, the prestige of the Consortium, direct information and consultation with the groups in conflict, the decision of the citizens to remain outside of the conflict and work towards their own development are factors that reduce the interference of the armed political conflict and increase the probability of success of the project.  Annex 6 Project Monitoring, Evaluation and Learning System Monitoring, evaluation and learning are a central aspect of this project and the Learning and Innovation loan. These functions will be woven into the Consortium's structure and into the participatory process itself, so that rather than being a separate activity carried out by an isolated group, it will be a part of the program's regular operations and will generate continuous learning. Due to the nature of the LIL outputs, the M&E will rely strongly on qualitative methodologies. The design of the monitoring, evaluation and learning system itself will also be an object of testing and learning during the course of the LIL. Organizational Structure of the System. The system will include an internal component of formative evaluation carried out by the Consortium and three external assessments carried out at eight- month intervals by an independent evaluator. The system will operate at three levels during the LIL (see diagram 1). At the national level, the coordinator will work in the Consortium's planning unit and will provide overall technical guidance and support. A regional M&E group will be formed in the Consortium's Barrancabermeja office which will be responsible for operationalizing the system including developing the instruments, carrying out key activities such as construction of the baseline and the trimestrial monitoring, and training others in use of the methods. At the local level, communities and nucleos will be carry out the M&E of specific sub-projects. As the system develops, the role of the Consortium's sub-regional delegates and the nucleos will expand as the number of sub-projects and municipalities where sub-projects are being carried out increases. Components of the System. The monitoring, evaluation and learning system under the LIL will consist of three components: * Formative Evaluation will be carried out by the Consortium and is intended to inform the Consortium management about implementation so that adjustments can be made during the course of the project. It will focus on: assessing the state of the project/program and factors which explain it, identifying problems and difficulties, identifying positive and negative experiences which generate information on how to strengthen capacity, and examining how different contexts affect implementation and require adaptations. Initially, formative evaluation will be carried out at three months intervals by the Regional M&E team. * Periodic External Assessments. During the course of LIL, three external assessments by an independent evaluator will be carried out at eight month intervals. The scope will be a bit broader than the formative evaluation, including the examination of factors which could facilitate or impede the Program's impact. The detailed Terms-of-Reference for the assessment will be developed during the first four months of the LIL and would include basic questions such as: is the LIL generating lessons, are the activities and methodology being used by the Consortium adequate to have the impact sought by the long-term program, and is the M&E system adequately contributing to adjustments in the project. * Baseline for Evaluation of Program Impact. The project will also support the collection of a broader set of baseline data (qualitative and quantitative) than required by the LIL in order to have adequate information to later assess the impact of the full, long-term program.  DIAGRAM N" 1 I UNIDAD DE PLANEA CION COORDINADOR F NACIONAL U 7 N || Planeaci6n tecnica y operativa CComunicacion de resultados I ~~~~~~~~GRUPO REGIONAL Desarrollo de herramientas 0 Ajuste del modelo N Capacitacion metodologica Puesta en marcha Asistencia Tecnica- S. Monitoreo y evaluaci6n de SECTORDE LA subproyectos locales SECOMUNIDAD COMUIDA  An important aspect of the first two activities will be the dissemination of findings through learning events. Formative Evaluation. The key question to be answered by the formative evaluation is: how is the program functioning. It focuses on the Consortium's methodology for action, relating the form of intervention and the results in order to learn about the implementation process. This will be looked at from two dimensions (see diagram 2): * the global (see diagram 3): the program is based on a methodology which assumes that through a participatory process it is possible to develop regional and local capacity in the conflictive environment of the Magdalena Medio region. The following aspects will examined: (i) the development of the Consortium as a change agent; (ii) the process of community participation (e.g. what strategies are successful in different contexts); (iii) the dynamic of social organization (e.g. successful strategies for building and strengthening social organization and the citizen's network); and (iv) the application of the Operating Manual. * the specific (see diagram 4) which largely relates to the second LIL component which supports sub- projects in specific strategic areas such as primary education and health where a specific package of interventions are being tested. The following aspects will be examined: (i) common lessons for areas of education, health and environment (areas ready for start-up in the first six months of the LIL) as shown in diagram 4 relating to developing an informed demand by citizens and communities for services, and a response by the service provider which increases the coverage and quality of the service; (ii) the Operating Manual; and (ii) M&E by communities of specific development-peace sub-projects. Indicators. The formative evaluation will look at four aspects of the project/program which remain in a permanent and dynamic relationship and which are tied to different types of variables, as follows: (i) the intervention undertaken (activities and actions of the Consortium and others)--exogenous variables; (ii) the short-term results produced--endogenous variables; (iii) the unexpected results--lateral variables; and (iv) the situations or factors external to the program (socio- political context) which can affect it at a moment in time--exogenous and non-manipulable variables. The detailed indicators fall into the two broad categories and cover the following: * the exogenous or intervention variables include the development of the Consortium (covering its various functions such as change agent, provider of technical assistance), the participatory methodology/strategy; and the Operating Manual; * the endogenous variables or expected results in the short-term/LIL period are community participation, social organization (of which the citizen's network is the highest expression), and the image of the program (degree of ownership for example). See the tables below concerning the indicators to be used. Indicators for specific sub-projects will be developed with the communities involved. Outputs. There will be a phased approach for putting in place the M&E and learning system which would start in 5 municipalities during the first 3 months of the LIL; coverage would be gradually expanded in accord with proposals contained in the Semi-Annual Plans. At a minimum, establishment of the baseline situation for all 29 municipalities would be completed by the end of the second year of the LIL. During the LIL, reports on the formative evaluation will be produced by the Consortium every 3 months, with the first being issued at the end of the fourth month of implementation (estimated to be  DIAGRAM No 2 MONITOREO Y EVALUACION DIMEN STONES EL PROGRAMA LAS AREAS DE ACCION * o GLOBALMENTE Y LOS SUBPROYECTOS A b e JrEvaluador Evaluador e r * ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~e V : ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~r s c l GRUPO } '' 4stencia ' tecnica COUND EL MLJUNICIPIO EP n {EL MUNIIPIO EL2,PROYECTO .........n  DIAGRAM N03 MONITOREO Y EVALUACION GRUPO REGIONAL I DESEMPENO DEL l * PROCESO DE PARTICIPACION COMUNITARIA I | 1| L-| ~~~DINAMICA DE ORGANIZACION SOCIAL| l I I I Io -~~~MNA OPRTV  DIAGRAM N04 MONITOREO Y EVALUACION APRENDIZAJE COMUN SALUD) GRUPO REGIONAL EDUCACION I valuadl aluad INVOLUCRAMIENTO OTRAS AREAS tY SU BROY-ECTOS l APRENDIZAJES ESPECIFICOS t Jr | SEGU~~IMIENTO YEVALUACION | , ,1 ~~~SUBPROYECTOSl 7~MND  August-September 1998). Three reports will be produced by the external evaluator, with the first due by the end of January 1999. 1. EXOGENOUSINTERVENTIONVARIABLES VARIABLES DIMENSION INDICATORS l. Development of Consortium's A. Perception of overall development * Technical assistance: quality and Capacity management * Administrative role Information Sources: a Commitment to program -Consortium personnel * Decision-making capacity -municipal nucleos * Interrelations between the -local population Consortium's internal -members of organizations associated organizational units with sub-projects * Most outstanding aspects of the -other program partners -relations between the internal -local authorities organizational units, the local population and other partners B. Technical development * Level and quality of change agent role: accomplishments vs. change of expectations C. Administrative development * Efficiency in: hiring personnel; ensuring an adequate availability of equipment, resources, disbursements; and in managing administrative matters with external entities * Obstacles and facilitating factors- management of the former. * Adaptations and modifications of the initial processes * Successful experiences  1. EXOGENOUSINTERVENTION VARIA4BLES (continued) VARIABLES DIMENSION INDICATORS D. Financial development * % of implementation of budget vs. planned allocations * % use of funds by source * Execution and timeliness of LIL disbursements * Obstacles and facilitating factors- management of the former * Adaptations and modifications of the initial processes * Successful experiences . . ~~~~~~~~~~~~~~~~* Successful implementation II. Participation Strategy and A. Planned strategies Methodologies srtge Methodologies * Unsuccessful implementation strategies Information Sources:0* Obstacles and facilitating factors- -Consortium personnel management of the former -Consortiu pers * Adaptations and modifications of -local population the initially proposed processes -members of organizations associated with sub-projects -other program partners -local authorities B. Unplaintned * Successful implementation strategies * Unsuccessful implementation strategies * Obstacles and facilitating factors- management of the former IIL Functionality of the Operational A. Quality of the criteria and * Efficiency Manual paranieters * Efficacy * Realism Information Sources (same as described above) B. Degree of compliance with criteria * Adjustment between plans vs. accomplishments * Adaptations made * Criteria not applied * Effects  2. ENDOGENOUS VARIABLES: EXPECTED AND UNEXPECTED (LATERAL) RESULTS VARIABLES DIMENSION INDICATORS I. Social Organization A. Perception of the community's * Perception of the levels of trust, organization solidarity, initiative, willingness to Information Sources: volunteer, willingness to express true -municipal nucleos opinions/points of view, leadership, -local population and equality among the various -members of organizations associated members with sub-projects * Assessment of the level of -other program partners organization within the community -local authorities B. Degree of social organization in * Existing organizations: types, the municipality, level of grassroots longevity, size, etc. participation * Households covered by the local organizations * Frequency and level of attendance in meetings * What the program is able to offer those organizations involved * Motives and incentives to become involved in the organization * Contextual factors which make it difficult to participate and remain involved * Commitment of the organizations to the program C. Individual and collective skills * Ability to work in groups, problem- solve, mobilize resources, resolve conflicts, establish work-related networks with other individuals and groups * Planning and financial management skills * Links and cooperation with other agencies D. Strengthening of social * Characterization of: trust among all organization members and in what they are doing, unity, and initiative * Regular attendance at meetings * Capacity and development of all involved * Relationship with the local authority * Commitment to the organization * Contextual facts that create difficulty and how these have been managed * Successful experiences  2. ENDOGENOUS VARIABLES: EXPECTEDAND UNEXPECTED (LA TERAL) RESULTS (continued) VARIABLES DIMENSION INDICATORS E. Municipalnucleos * Knowledge and importance of the E. Municipal nucleos nucleo in the community * What the municipal nucleo offers the community * Motives and incentives to join the nucleo * Contextual factors which make the role of the nucleos more difficult and how these are managed * Facilitating factors * Community support to the nucleos * Successful experiences with the nucleos II. Community Participation A. General participation * Proposals presented by the A. General participationcommunities: identification of priorities and selection Information Sources: * Sub-projects or actions initiated by -municipal nucleos the community -local population * Sub-projects where the community -members of organizations associated contributes to its implementation: with sub-projects money contribution (% of total cost), -other program partners other contributions including-work, -local authorities materials, services, covering general expenses, control, authority), actors who contribute to the implementation (beneficiaries, NGO's, local administration, etc.) B. Participation per sub-project * Knowledge of the existence of a project organization * Formal membership in the project's organization * Frequency of meeting attendance * Change of size * Number of groups or associations formed * Active member involvement in the meetings * Number of work days contributed by the members * Number of members who also belong to other formal organizations * Increase in group capacity to propose . and consider plans of action * Knowledge and understanding of the governmental policies and laws  2. ENDOGENOUS VARLABLES: EXPECTEDAND UNEXPECTED (LA TERAL) RESULTS (continued) VARIABLES DIMENSION INDICATORS * Changes in the relations among the group members, staff and group facilitator * Group autonomy-independent actions taken by the group C. Participation Dynamics * Group dynamics * Ways the various members take part in group discussions and in group decision-making * Ability to analyze and explain possible solutions * Various ways of participating: motives and objectives pursued * Aspects or events that mobilize a population to demonstrate solidarity and support * Aspects or events which encourage problem-solving * Contextual factors which increased the difficulty and how these were managed. Also, factors which facilitate the situation * Successful experiences  2. ENDOGENOUS VARIABLES: EXPECTELDAND UNEXPECTED (LATERAL) RESULTS (continued) A. Knowledge and opinion of the * Knowledge of the program.- III. Program Imnge Prograni specific aspects identifying it * Knowledge of the municipal nucleos * Knowledge of the Citizen's Network: factors which facilitate its formation Information Sources: and factors which make it more - Consortium personnel difficult/resistance - local population * How the program is affected by - municipal nucleos municipal nucleos, the delegates, the - members of organizations associated Consortium and other agents with sub-projects * Contextual factors which make the - other program partners development of the program more - local authorities difficult * Community support for the program * Successful experiences of the program * Commitment to the program by the community and local authorities B. The Program's image * The significance of the Program * Program's raison d'etre * Motives and incentives to accept it and continue * Importance of the nucleos and of the delegate * What the Program is able to provide to the community * Citizen Network's raison d'dtre and importance * The future of the Program * Possibilities for the network's success-future vision IV. Unexpected Results A. Positive! results * Capacity building * Capacity transfer into other areas * Changes B. Negative results * Any type of negative change C. Other results * Any change which does not seem connected or related to the Program, but which occurred during the same ._____________________________________ ___________________________________ period  3. CONTEXTUAL VARIABLES, THOSE WHICHCOULDNOTBEMANIPULA TEDBY THE PROGRAM VARIABLES DIMENSION INDICATORS I. Contextual Factors A. General Contextual Factors * Cultural, demographic, political and economic aspects which came up * Support level from the community * Characteristics of the population which was directly involved * Turbulent and unstable environment B. Local Factors * Resources * Previous experiences * Existing practical experience * Barriers related to norms and values 4. SPECIFIC INDICATORSAND VARIABLES. This aims to analyze the indicators related to the expected results from the learning hypothesis in the identified action areas--education, health and environment. Specific Monitoring and Evaluation indicators for individual sub-projects will be designed by the community associated with the sub-project. VARIABLES DIMENSION INDICATORS I. Quality and coverage of services for A Demand for service b the * Knowledge of rights to services; health, education and environment community Y level of importance given to this by community ~~~~community Information Sources: a Motives and incentives to become - Sub-project stakeholders part of the user organizations * Contextual factors which make the organization's role difficult-- management of these * Community support of the organization * The organization's successful experiences * Level and quality of implementation: accomplishments vs. expectations * Successful implementation strategies * Characteristics of the service B. Service delivery by entities delivery: actual coverage vs. responsible demand * Quality of the services rendered, timeliness and stability * Problems encountered by the agency in service delivery * Contextual factors which make the agency's role more difficult- management of these * Facilitating factors * Relationship between the agency and the community  Annex 7 Magdalena Medio Regional Development Project Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual (FY98 budget) 105,000 126,000 B. Project Schedule Planned Actual Time taken to prepare the project (months) 9 First Bank mission (identification) 9/5/1997* Appraisal mission departure 3/15/98 3/15/98 Negotiations 4/8/98 6/9/98) Planned Date of Effectiveness 6/15/98 (7/30/98) Prepared by: Consortium SEAP-CINEP (at request of National Planning Department) Preparation assistance: PPF $380,000; P1RW $800,000 Bank staff who worked on the project included: Elsie Garfield Team Leader Jairo Arboleda Deputy Team Leader, Social Analysis Martha Laverde Social Sectors Mauricio Cuellar Infrastructure Natalia Gomez Economic Development Felipe Saez Economic, Legal, Institutional Comelis de Haan Livestock and Production Systems Anders Rudqvist Monitoring and Evaluation Maria Elena Castro Social Analysis Carmen Nielsen Procurement Roberto Cucullu Country Lawyer Steven Holtzman Peer Reviewer Howard Jones Financial Management (Consultant) *The initial Bank identification mission was 8/96 which resulted in PPF and Japanese Grant approval. The LIL option became available in 9/97.  Annex 8 Magdalena Medio Regional Development Project Documents in the Project File* A. Diagnostic Studies prepared by Consortium SEAP-CINEP, May 1996 (ECOPETROL financing) Documento Central de Diagn6stico, Conclusiones y Recomendaciones, Francisco J. de Roux. Aproximacion a la Realidad del Magdalena Medio, Unidad de Convivencia y Paz, Ubencel Duque Rojas. Diagn6stico Agropecuario y Rural del Magdalena Medio, Absal6n Machado y Luis Hemando Briceno. Diagnostico Propositivo: Unidad de Politica y Gesti6n Institucional, Luz Stella Vargas Hemandez. El Petr6leo en el Magdalena Medio, Francisco J. de Roux. El Magdalena Medio: Una Regi6n Que se Construye Por el Rio, Amparo Cadavid Bringe. Factores Determinantes de la Acumulacion de Capital Social en la Regi6n del Magdalena Medio y sus Perspectivas, Gabriel Misas Arango. Unidad de Desarrollo Humano: Diagn6stico, Diego Pena Hoyos. B. Preparation Studies prepared by Consortium SEAP-CINEP (Japanese Grant, ECOPETROL and UNDP financing) Educaci6n Bcisica Integral en el PDPMM, Vicky Colbert de Arboleda, Enero 1998. El Sistema Financiero en el Magdalena Medio, Luis Alberto Zuleta y Lino Jaramillo, Mayo 1998. Estrategia de Desarrollo Econ6mico para el Magdalena Medio, December 1997. Estrategia de Acci6n - Desarrollo Institucional. Estrategia de Salud para el Magdalena Medio, Enero 1998. Informe de Factibilidad, Proyecto de Justicia Comunitaria y Resolucion Alternativa de Conflictos. PDPMM: Documento Final (arreglos institucionales yfinancieros), Martha Lucia Hincapie Rios, Marzo 1998. Proyecto de Evaluaci6n y Resignificaci6n de la Educacion Media, Victor Manuel Gomez, Enero 1998. Proyecto de Fortalecimiento de ASOAGROMISBOL para la oferta de Asistencia T6cnica a los Mineros del Sur de Bolivar, Alberto Galan, December 1997. Proyecto de implantacion de Microempresas de mantenimiento vial rutinario en carreteras de la red terciaria del Magdalena Medio, Enero 1998. Propuesta de Marco de Relaciones Interinstitucionales del PPDMM, Nestor Hemando Parra, Octubre 1997. Sistema de Monitoreo y Evaluaci6n, Patricia Rodriguez, Abril 1998.  C. Project Implementation Plan Programa de Desarrollo y Paz del Magdalena Medio, Etapa de Aprestamiento y Aprendizaje, Consortium, Junio 1998. *Including electronic files.  MOP Schedule D Generated: 06/18/98 Annex 9 Statement of Loans and Credits Status of Bank Group Operations in Colombia IBRD Loans and IDA Credits in the Operations Portfolio Difference Between expected Original Amount in US$ Millions and actual Loan or Fiscal disbursements a/ Project ID Credit Year Borrower Purpose No. IBRD IDA Cancellations Undisbursed Orig Frm Rev'd Number of Closed Loans/credits: 154 Active Loans CO-PE-46112 IBRD42420 1998 GOVERNMENT OF COLOMBIA PASTO EDUCATION 7.20 0.00 0.00 7.20 0.00 0.00 CO-PE-6891 IBRD42430 1998 GOV OF COLOMBIA ANTIOQUIA EDUCATION 40.00 0.00 0.00 40.00 0.00 0.00 CO-PE-40102 IBRD41380 1997 GOVT OF COLOMBIA REG.REF.TA 12.50 0.00 0.00 12.34 1.84 0.00 CO-PE-6884 IBRD41960 1997 GOVERNMENT OF COLOMBIA FIN MRKTS DEV TA 15.00 0.00 0.00 14.65 1.47 0.00 CO-PE-39291 IBRD39730 1996 GOVERNMENT OF COLOMBIA URBAN ENVIRONMENT TA 20.00 0.00 0.00 16.66 8.15 0.00 CO-PE-6872 IBRD4021A 1996 BOGOTA DISTRICT GOVERNMEN URBAN TRNSPRT 59.59 0.00 0.00 57.10 17.61 0.00 CO-PE-6887 IBRD3954A 1996 GOVT OF COLOMBIA POWER MARKET DEVELOP 104.30 0.00 0.00 69.70 23.36 3.77 CO-PE-6887 IBRD39550 1996 GOVT OF COLOMBIA POWER MARKET DEVELOP 145.00 0.00 0.00 136.54 23.36 3.77 CO-PE-6894 IBRD39520 1996 GOVERNMENT SANTAFE I (WTR/SUPPL 58.00 0.00 0.00 48.05 30.96 0.00 CO-PE-6894 IBRD39530 1996 GOVERNMENT SANTAFE I (WTR/SUPPL 87.00 0.00 0.00 73.50 30.96 0.00 CO-PE-6880 IBRD38710 1995 GOVERNMENT OF CLM AGRICULTURE TECHNOLO 51.00 0.00 0.00 45.34 18.35 0.00 CO-PE-6893 IBRD38270 1995 GOVERNMENT OF COLOMBIA ENERGY TA 11.00 0.00 0.00 5.78 2.70 0.00 CO-PE-6866 IBRD36830 1994 GOV. OF COLOMBIA SECONDARY EDUC 90.00 0.00 0.00 66.71 29.49 0.00 CO-PE-6868 IBRD36920 1994 GOV OF COLOMBIA NATURAL RESOURCE MAN 39.00 0.00 0.00 26.39 10.51 7.36 CO-PE-6889 IBRD36690 1994 GOVERMT OF COLOMBIA PUBLIC FINANCIAL MAN 30.00 0.00 0.00 13.59 6.87 0.00 CO-PE-6854 IBRD36150 1993 GOV OF COLOMBIA IA MUNICIPAL HEALTH SER 50.00 0.00 0.00 38.17 25.00 4.21 CO-PE-6852 IBRD33360 1991 GOVT OF COLOMBIA MUNIC DEVT 60.00 0.00 0.00 5.27 5.27 0.00 CO-PE-6865 IBRD33210 1991 BANCO DE LA REPUBLICA IND RESTRUC 200.00 0.00 4.65 11.79 16.45 11.80 CO-PE-6842 IBRD30100 1989 GOVERNMENT ED SCTR 100.00 0.00 0.00 6.29 6.28 0.00 Total 1,179.59 0.00 4.65 695.07 258.63 30.91 Active Loans Closed Loans Total Total Disbursed (IBRD and IDA): 479.86 6,626.23 7,106.09 of which has been repaid: 58.58 5,281.27 5,339.85 Total now held by IBRD and IDA: 1,116.36 1,417.99 2,534.35 Amount sold : 0.00 50.99 50.99 Of which repaid : 0.00 50.99 50.99 Total Undisbursed : 695.07 72.61 767.68 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. b. Rating of 1-4: see OD 13.05. Annex D2. Preparation of Implementation Summary (Form 590). Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system will be used (HS = highly Satisfactory, S = satisfactory, U = unsatisfactory, HU = highly unsatisfactory) : see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994. Note: Disbursement data is updated at the end of the first week of the month. Generated by the Operations Information System (OIS)  MOP Schedule D Colombia STATEMENT OF IFC's Committed and Disbursed Portfolio As of 31-Jan-98 (In US Dollar Millions) Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1963/90 Coltejer 7.22 0.00 0.00 0.00 7.22 0.00 0.00 0.00 1967/70/74/84/86/87/88 Enka .38 0.00 0.00 2.29 .38 0.00 0.00 2.29 1969/85/88/93/95 CFdelValle 16.22 7.43 0.00 31.63 16.22 7.43 0.00 31.63 1977/89/92/94/96 Promigas 15.30 1.13 0.00 49.64 9.50 1.13 0.00 35.15 1981/85/87/89/91/92/94 Leasing Bolivar 5.80 .25 0.00 1.20 5.80 .25 0.00 1.20 1987 PRODESAL 0.00 .59 0.00 0.00 0.00 .59 0.00 0.00 1990/92 ODC 11.55 0.00 0.00 27.11 11.55 0.00 0.00 27.11 1994/95 Corfinansa 4.00 1.43 0.00 0.00 4.00 1.43 0.00 0.00 1995 Corfmsura 13.06 0.00 0.00 0.00 13.06 0.00 0.00 0.00 1995/97 Icollantas 14.00 .46 5.00 0.00 14.00 .46 5.00 0.00 1996 Proyectos 10.00 5.00 0.00 0.00 1.00 2.15 0.00 0.00 1997 Suleasing 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Portfolio: 127.53 16.29 5.00 111.87 82.73 13.44 5.00 97.38 Approvals Pending Commitment Loan Equity Quasi Partic Total Pending Commitment: (.00 0.00 0.00 0.00 Generated by the Operations Information System (OIS) on 06/18/98  Annex 10 Colombia at a glance 8/28/97 Latin Lower- POVERTY and SOCIAL America middle- Colombia & Carib. income Development diamond' Population mid-1996 (milbons) 37.4 485 1,125 GNP per capita 1996 (US$) 2,190 3,710 1750 Life expectancy GNP 1996 (bilrions US$) 81.9 1,799 1,967 Average annual growth, 1990-96 Population (%) 1.8 1.7 1.4 GNP Gross Labor force (X) 2.7 2.3 1.8 per i primary Most recent estimate (latestyearavailable since 1989) capita enrollment Poverty: headcount index (% of population) 19 Urban population (f