Colombia - Sierra Nevada Sustainable Development Project

Document of The World Bank Report No.: 20388 CO PROJECT APPRAISAL DOCUMENT ONA PROPOSED LEARNING AND INNOVATION LOAN IN THE AMOUNT OF US$5.0 MILLION TO THE REPUBLIC OF COLOMBIA FOR THE SIERRA NEVADA SUSTAINABLE DEVELOPMENT PROJECT April 25, 2000 Environmentally and Socially Sustainable Development Sector Management Unit Colombia, Ecuador and Venezuela Country Management Unit Latin America and Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective March 2000) Currency Unit = Colombian Peso 1.0 Colombian peso= US$ 0.0005 US$ 1.00 = 1957 Colombian pesos FISCAL YEAR Government of Colombia: January I to December 31 World Bank: July I to June 30 ABBREVIATIONS AND ACRONYMS CAR Regional Autonomous Corporation CAS Country Assistance Strategy CORPOICA Colombian Agricultural Research Corporation (Corporacion Colombiano de Investigacion Agropecuario) DNP National Planning Department (Departemento de Planeacion Nacional) FPSN Fundacion Pro Sierra Nevada de Santa Marta (Foundation) GEF Global Environmental Facility ICA Colombian Agricultural Institute (Instituto Colombiano Agropecuario) INAT National Institute for lIrigation and Drainage (Instituto Nacional de Adecuacion de Tierras) INCORA Colombian Institute for Agrarian Reform (Instituto Colombiano de Reforma Agraria) LIL Learning and Innovation Loan M&E Monitoring and Evaluation NDP National Development Plan NGF Non Govemmental Fund (Fund) NGO Non Governmental Organization PIP Project Implementation Plan PMR Project Management Reports PNR National Rehabilitation Program (Programa Nacional de Rehabilitacion) UBN Unsatisfied Basic Needs UNESCO United Nations Educational, Scientific and Cultural Organization SDP Sustainable Development Plan for the Sierra Nevada de Santa Marta SENA National Apprenticeship Service (Servicio Nacional de Aprendizaje) TNC The Nature Conservancy Vice President: David de Ferranti Country Manager/Director: Andres Solimano Sector Manager/Director: John Redwood Task Team Leader/Task Manager: Elsie Garfield  COLOMBIA SIERRA NEVADA SUSTAINABLE DEVELOPMENT PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 3 3. Learnng and development issues to be addressed by the project 5 4. Learning and innovation expectations 6 C. Project Description Summary 1. Project components 8 2. Institutional and implementation arrangements 9 3. Monitoring and evaluation arrangements 13 D. Project Rationale (This section is not to be completed in a LIL PAD) E. Summary Project Analysis 1. Economic 13 2. Financial 13 3. Technical 14 4. Institutional 14 5. Environment 14 6. Social 15 7. Safeguard Policies 19 F. Sustainability and Risks 1. Sustainability 20 2. Critical risks 20 3. Possible controversial aspects 20 G. Main Loan Conditions 1. Effectiveness Condition 21 2. Other 21 1  H. Readiness for Inplementation 21 I. Compliance with Bank Policies 22 Annexes Annex 1: Project Design Summary 23 Annex 2: Project Description 29 Annex 3: Estimated Project Costs 31 Annex 4: Not applicable 32 Annex 5: Not applicable 33 Annex 6: Procurement and Disbursement Arrangements 34 Annex 7: Project Processing Schedule 40 Annex 8: Documents in the Project File 41 Annex 9: Statement of Loans and Credits 42 Annex 10: Country at a Glance 44 Annex 11: Social Assessment 46 Annex 12: Indigenous Peoples Strategy 67 MAP(S) Map 1: Topography and Principal Rivers of the Sierra Nevada Eco-Region Map 2: Pilot Regions, Sierra Nevada Sustainable Development Region Map 3: Cultural Landscapes of the Sierra Nevada Eco-Region Map 4: Colonization of the Sierra Nevada de Santa Marta in the XXth Century Map 5: National Parks and Indigenous Reserves of the Sierra Nevada Map 6: Key Pre-Hispanic Population Centers in the Sierra Nevada Map 7: "Black Line" and Indigenous Reserves  COLOMBIA SIERRA NEVADA SUSTAINABLE DEVELOPMENT PROJECT Project Appraisal Document Latin America and Caribbean Region LCSER Date: April 25, 2000 Team Leader: Elsie B. Garfield Country ManagerlDirector: Andres Solimano Sector ManagerlDirector: John Redwood Project ID: P057326 Sector(s): AY - Other Agriculture, VM - Natural Resources Management Lending Instrument: Learning and lnnovation Loan (LIL) Theme(s): Environment; Rural Development Poverty Targeted Intervention: N Project Financing Data Z Loan G] Credit O Grant El Guarantee El Other (Specify) For LoanslCreditslOthers: Amount (US$m): 5.0 Proposed Terms: Fixed-Spread Loan (FSL) Grace period (years): 5 Years to maturity: 17 Commitment fee: 0.85% during first 4 Service charge: 0.00% years; 0.75% p.a. thereafter Front end fee on Bank loan: 1.00% F:nancig PEa: & e --t Foregn T-ta.w - _. . . GOVERNMENT 0.50 0.00 0.50 IBRD 5.00 0.00 5.00 IDA AGENCE FRANCAISE DE DEVELOPPEMENT 0.28 0.00 0.28 GOVERNMENT OF THE NETHERLANDS 0.24 0.00 0.24 LOCAL CONTRIBUTION 0.22 0.00 0.22 Total: 6.25 0.00 6.25 Borrower: REPUBLIC OF COLOMBIA Responsible agency: NATIONAL PLANNING DEPARTMENT-FUNDACION PRO SIERRA NEVADA Estimated disbursements ( Bank FYIUS$M): Annual 0.1 0.8 1.2 1.2 1.1 0.5 0.1 Cumulative 0.1 0.9 2.1 3.3 4.4 4.9 5.0 Project implementation period: 2000-2005 Expected effectiveness date: 05/31/2000 Expected closing date: 12/15/2005 OXPADFonn - MR. c 20J  A. Project Development Objective 1. Project development objective: (see Annex 1) Program development objective: This project will contribute to the development objective of the Foundation's six-year program: better informed and organized stakeholders implementing jointly agreed actions to conserve the biological and cultural diversity of the Sierra Nevada and to use its natural resources in a sustainable manner. Project development objective: The project's specific development objective is to develop and test in at least three regions a participatory methodology and operational mechanisms for promoting sustainable management of production and natural systems which can then be used in other regions of the Sierra Nevada. 2. Key performance indicators: (see Annex 1) The following is a preliminary list of key performance indicators which may be revised and the indicators made more specific during the detailed design of the M&E system during the first four months of the project. In addition, more specific measures of the project's goals, particularly the progress indicators, will be incorporated into the Annual Operating Plans and the Project Management Reports. Impact: # of sustainable development projects funded in pilot regions and % successfully completed by the end of project; # of requests for participation/support and project proposals received by the Foundation from organzations and communities outside the pilot regions; # and type of agreements reached between key stakeholders in 3 pilot regions per year and % implemented; # farm plans including sustainable production systems being implemented by farmers in each pilot region per year. Progress: strategies and operational mechanisms designed and testing initiated in one region by end of project year 1; M&E and leaning system operating and systematically documenting learning process and best practice by end of project year 1; at least 12 community organizations in each pilot region trained in negotiation techniques, leadership and project management through 3 workshops/year; # of sustainable development projects in pilot regions submitted (identify % receiving technical support under project) and % approved for NGF funding; # and type of agreements between critical stakeholders being prepared and being negotiated in 3 pilot regions each year; at least 3 critical activities in collaborative management plan for the indigenous reserves/Sierra Nevada park have been implemented during year 3. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 17107 CO, R99-201 Date of latest CAS discussion: 11/18/99 Both the Foundation's program and the project fit well with the overarching CAS objective: to attain sustainable development with continuous reduction of poverty and improvement of social conditions in an environment of peace. As indicated in the CAS Progress Report discussed by the Board, peace and development are central to Colombia's development agenda, and have become a more growing area of Bank assistance. Due to its multidimensional approach to development in a conflictive and environmentally important eco-region, the project will contribute to several of the CAS's sectoral objectives. These include: sustainable development (improve natural resource management and conservation of strategic eco-systems, taking into account the needs of the inhabitants); peace and development (develop effective strategies for addressing the socio-economic determinants of violence and conflict); and rural development (improve capacity to generate, transfer and adopt technologies that increase the productivity and sustainability of small farmer agriculture). -2 -  2. Main sector issues and Government strategy: Main Sector Issues: Colombia is recognized to be one of the "megadiverse" nations in the world. Despite the fact that it accounts for only 1% of the world's land area, nearly all the world's ecosystems are represented in Colombia with a correspondingly high diversity of species (10% of global biodiversity). However, Colombia's strategic eco-regions are experiencing rapid deterioration which is a major threat to their biodiversity. Where national parks were established (71% of the legally protected areas and 9% of Colombia's land area), they were created under a centralized regime, generally without regard for the social and economic conditions that prevailed in and around the parks. An enforcement/policing approach combined with a shortage of financial and human resources, the remote location and difficult access to many of the areas, and the presence of armed groups in and around some of the key parks have been major obstacles to effective conservation and protection of biodiversity in the national parks system. Outside the protected areas, the most important direct sources of loss of biodiversity are colonization of new areas and inappropriate land use, in particular the enormous increase in the area under pasture for extensive livestock production. Many of the most important areas of the country from a biodiversity point of view are those where the State presence is weak, and insecurity and armed conflict are serious problems. Precarious living standards of culturally diverse rural populations inhabiting strategic eco-regions contrast sharply with the rich biodiversity of these places. Despite a decline in the incidence of poverty in the last decades, poverty in Colombia remains a critical problem with strong rural and regional dimensions. Seventy percent of the people with incomes below subsistence live in rural areas. The Caribbean region (composed of 8 of Colombia's 32 departments, and 21% of the population) is one of poorest in Colombia with the highest number of inhabitants living in conditions of misery. Based on 1995 data collected prior to the erosion of some of the national gains in poverty reduction in the later half of the 1990s, the Caribbean region also has poverty indicators above national averages: 63% of the population vs. 55% at the national level have incomes below the poverty line, and 29% vs. 20% nationally live in misery. The situation is dramatically worse in rural areas: 79% of the rural population have incomes below the poverty line, and 42% live in misery. The Unsatisfied Basic Needs (UBN) Indicator shows a similar picture: 52% of the population in the Caribbean region have UBN vs. 37% nationally. Since the mid-1980s the level of armed conflict in the region has been increasing; land distribution is very unequal and conflicts over land have historically been acute. Government Strategy: The Government's development strategy contained in the National Development Plan (NDP) for 1998-2002, el Cambio para construir la Paz is conceived to promote conditions to make a viable peace and guarantee its long-term sustainability. A two track approach to the peace process is being pursued: (i) at the political, national level negotiations for peace with various arned groups; and (ii) at the local and regional level pursuing specific initiatives to build social capital and address the root causes of violence which have long-standing local dimensions. The NDP recognizes that while violence and conflict affect the entire country, certain areas of the country are affected particularly hard. It indicates that one of the principle factors contributing to increased levels of violence is political exclusion, poverty and inequality, and argues that peace needs to be constructed through an integrated economic and social policy. In the presentation of the Plan's agriculture sector strategy, it is acknowledged that the agricultural sector is the principal scenario where armed conflict is carried out, and indicated that in order to advance in a decisive manner towards the achievement of peace the conflicts in this sector must be resolved. The NDP includes the outline of a special plan for economic, social and environmental reconstruction of zones most affected by violence. The active involvement of civil society organizations (particularly grassroots community organizations) and alliances between the public and private sectors, and international - 3 -  organizations is called for. The expectation is that this plan will generate conditions for achieving peace, by promoting a participatory model of management at the regional level which brings together the interests of society and the parties in conflict. According to the NDP, action in five thematic areas will be supported: productive processes, promotion and protection of human capital and humanitarian action, institutional development and strengthening social capital, construction of infrastructure for peace, and promotion of environmental sustainability. The critical need for a flexible approach in carrying out programs in conflictive areas is emphasized. The environmental policy contained in the NDP has the broad objective of: "restoring and conserving priority areas in strategic eco-regions, while fostering sustainable regional and sectoral development in the context of constructing peace." The Plan's three main objectives and seven programs for the environment include: (i) restore and conserve strategic eco-regions (water, biodiversity, forest programs); (ii) promote sustainable regional and urban development (endogenous production systems, and quality of urban life programs); and (iii) seek environmentally sustainable sector development (clean production, "green" markets). Water is treated as an inter-sectoral theme to articulate actions, and improved management of the principal watersheds is a key area for investment. The approach in the Plan is integrated, the locus of action is the region, citizen participation is emphasized, alliances between various actors in the public and private sector are encouraged, and the reconciliation of social and conservation objectives is sought with special attention to the concerns and potential contributions of indigenous and black communities. The decision to involve communities in collaborative management of protected areas in the national parks system is an important policy change signaled in the Plan and endorsed by the National Environmental Council in August 1999. The new policy entitled "Policy for Consolidating the National System of Protected Areas on the Basis of Social Participation in Conservation" marks a significant change from the traditional restrictive and exclusionary approach which is inherent in Colombian laws which predate the 1991 Constitution. The new policy focuses on the social dimensions of conservation and seeks to improve the effectiveness of conservation in protected areas by involving local communities which implies a diversity of methods including collaborative management. The policy explicitly recognizes the conflicts created by the restrictive nature of the laws, arguing for transitional mechanisms which recognize that people are living in and depending on the parks and surrounding areas and that this is not necessarily incompatible with conservation of ecosystems. One of the important objectives of the policy is to contribute to solving conflicts over the occupation and use of protected areas and buffer zones, including those related to the overlapping areas of parks and communally titled lands of indigenous and black communities. The Development Plan's biodiversity program is based on the National Policy on Biodiversity adopted in March 1997 and a Biodiversity Action Plan was published and presented to the Ministry of Enviromment in late 1998 (Colombia biodiversidad siglo XX). Three broad areas for action defined: * Knowledge: characterization of the components of biodiversity; recuperation, protection and dissemination of traditional knowledge. * Conservation: the conformation and consolidation of a national system of protected areas; reduction in processes causing a deterioration in biodiversity; restore ecosystems and recuperation of species; promotion of ex situ conservation. * Sustainable Use: promotion of systems for sustainable management of renewable natural resources; sustainable development of the economic potential of biodiversity; develop systems for establishing the economic value of biodiversity components. The Government has designated the Sierra Nevada de Santa Marta as one of the strategic eco-regions to - 4 -  be supported under the Development Plan (see Map 1). The eco-region includes the Sierra Nevada de Santa Marta, the world's highest coastal peak that is a UNESCO-declared Biosphere Reserve, and the 35 watersheds that originate there which serve a population of between 1.0 to 1.5 million; administratively it includes 15 municipalities located in 3 departments, 2 national parks, as well as 2 major indigenous reserves. The Sierra Nevada eco-region falls under the wing of other Government initiatives: (i) the multi-sectoral program for development of the Caribbean region, Plan Caribe Siglo XXI, initiated by the previous Govermnent to address the region's high level of poverty, low level of public services, and high economic potential due to proximity to export markets; (ii) the initiatives, described in the Development Plan, for conflictive areas of the country; and (iii) the recently developed Strategic Plan for Displaced Persons (Plan Estrategico para el Manejo del Desplazamiento Interno Forzado por el Conflicto Armado) which identifies the Sierra Nevada and the Cesar Department as one of four regions of the country most affected by this problem. The objectives and strategies in the Sustainable Development Plan for the Sierra Nevada de Santa Marta (SDP) published in 1997 and endorsed by key stakeholders, the Foundation's six-year program and the LIL are fully consistent with the Government's strategies described above, though they do not address all dimensions of these strategies. 3. Learning and Development issues to be addressed by the project: The SDP and the work of the Foundation to date embody a pioneering approach which takes into account the complex and multi-dimensional dynamics of eco-regional sustainability, in particular the interaction of people with nature. The project addresses the key development issues cited above and promotes a continuous leaming process in the core areas described below. In order to allow sufficient time for learning in these areas which relate to longer-term processes of social and environmental change, a five-year LIL is required. Based on the LIL experience, the collaborative management approach would be scaled up from the 3 pilot regions to the rest of the eco-region in a follow-up project/program. Core learning area 1: How to promote biodiversity conservation and natural resource management in a conflictive environment in a way which brings stakeholders together around common goals, thus addressing some of the historical roots of conflict in the Sierra Nevada. The process of developing the SDP has been an educational one which has created an increased awareness of the environmental and cultural importance of the Sierra Nevada. It has also contributed to a dialogue and maturing of relationships among various regional actors, many of whom have had long-standing conflicts particularly over land. Building on its experience in several parts of the Sierra Nevada and on some innovative experiences elsewhere in Colombia, the LIL will support the Foundation's efforts to develop and test a participatory methodology for bringing together key stakeholders in particular localities with diverse and at times conflicting objectives and world views to agree on joint actions which address the main sources of damage to ecosystems and of social conflict. Key lessons expected from the LIL are: (i) how to build common ground that brings key stakeholders together; (ii) how to promote an intercultural dialogue and an approach to sustainable development and biodiversity conservation which takes into account different cultural perspectives on conservation and resource management; (iii) identification of win-win alternatives to improve livelihoods and conservation in specific localities and at the regional and eco-regional levels; and (iv) operational mechanisms which are sufficiently flexible to work effectively in an uncertain and rapidly changing environment. Core learning area 2 (a subsidiary of area 1 above): How to make management of protected areas more effective and consistent with social and economic conditions. Much of the area of the eco-region is under protected status: the two national parks established in 1964 account for 20% of the land area in the eco-region and nearly 34% of the highlands. Much of the park area overlaps with indigenous reserves which also have a special legal status; the combined area of parks and reserves accounts for 28% of the - 5 -  area of the region and nearly half the area of the highlands. The Foundation's approach to biodiversity conservation is based on building social consensus and agreemernt between key actors on conservation actions, rather than creating new restricted areas or expanding e- sting ones without social support. In part this is a recognition of the sociopolitical environment prevailing in the Sierra Nevada, but it also reflects a new way of thinking about conservation and natural resource management. The change in protected areas policy concerning communities living in and around the national parks, recently approved by the National Environmental Council, is an important opportunity to resolve issues which have generated considerable conflict in the Sierra Nevada. Thus, a key learning area is how to put these policies into practice. The project will support the process initiated in May 1999 and consolidated in November 1999 between indigenous organizations and the Parks Unit to develop and implement a collaborative management plan for the Sierra Nevada park, as well as consultations and agreements with the farmers living within these territories. A particularly difficult and sensitive issue where development of a new approach is badly needed and where the LIL could make an important contribution is the voluntary resettlement of farmers living within the protected areas (see Annex 1 1, Social Assessment). Core Learning area 3: Identification and promotion of sustainable production systems on existing farns and production areas in the Sierra Nevada. There is no simple defirution of what sustainable systems are, nor how this can be measured. The project supports an approach that views sustainability in relation to specific levels of the eco-region and locations (including specific farms). The reconciliation and trade-offs between conservation and livelihood objectives is also an important area of learning. During project preparation, a general analysis of existing production systems in the eco-region was caried out and criteria for formulating alternative, sustainable production systems which will contribute to biodiversity conservation were defined: (i) soil conservation; (ii) water use rationalization; (iii) biodiversity conservation (reduce fragmentation of habitat, etc.); (iv) productivity (optimization of the material and energy cycles within the productive unit, etc.); and (v) socio-economic factors (cost minimization, optimal use of family labor, etc.). Under the LIL, a methodology for farm-level "environmental planning" which has been developed based on the Foundation's work in several areas of the Sierra Nevada and on successful experiences elsewhere in Colombia will be tested and refined in the pilot regions. 4. Learning and innovation expectations: 21 Economic Z Technical 1 Social 21 Participation El Financial El Institutional 1 Envirommental El Other Using the typology of LILs developed based on a review of the Bank's first year of experience with this new lending instrument, this project involves all three types of learning and innovation (depending on the scale/level at which it is working): - consensus building at the eco-regional and pilot region level: a core group (e.g. Foundation, key actors in pilot regions) progressively draws more stakeholders into the process of establishing common beliefs, positions and behaviors in order to create broad ownership and participation in a follow-on activity; -mutual learning in the context of specific initiatives developed within the zones and areas in the pilot regions and the overlapping area of the Sierra Nevada park/indigenous reserves: a relatively complete and inclusive group of stakeholders, known to each other, establish a process of mutually supportive learning, innovating and negotiation of differences to achieve a common purpose prior to initiating further action; -prototype and capacity building which applies to the role of the project: core stakeholders progressively build the capacity and know-how to move forward with a more ambitious program (in this case, the LIL provides the basis for horizontal expansion to new areas within the eco-region similar to an Adaptable -6 -  Program Loan). The breadth of learning and innovation being addressed by the project is another reason that a five year project is required. Economic: * Develop and test methodologies for assessing the economic value of environmental services and design of incentive mechanisms to promote sustainable use and management of natural resources (such as user fees). Key issues are to establish an empirical basis and social mechanisms. * Identify promising products and markets for non-timber and organic/biodiversity friendly goods. Technical: * Develop indicators and methods for measuring sustainability and trends over time at different levels of the eco-systems and eco-region. Social: * Conflict/peace: the feasibility and impact of addressing issues of ethnic conflict, social exclusion and inequality through dealing with issues related to sustainable natural resource use. * Identification of win-win solutions which promote conservation and improved livelihoods. * Conservation with people-one of first pilots of new protected areas policy. * Build on lessons of Eco-Sierra and concepts/operational mechanisms developed in context of the land reform pilot projects in Colombia to develop pilot voluntary resettlement experience. Environmental: o Promote intercultural dialogue and understanding of different cultural perspectives on conservation, resource management and sustainable development * Linking different levels of analysis and action, and understanding the interaction between them: eco-region, regions, zones, areas, farms. - Identification of key urban environmental issues. Participation: * Test participatory methodology of working in an integrated way (community development approach) with actors in specific geographic areas * Build on Foundation's experience in several areas of the Sierra Nevada (but adopt a more systematic approach) and other experiences in Colombia (CIPASLA in the Rio Cabuyal watershed in the Cauca Department, a documented case of working with communities on watershed management in a complex social environment), to promote collaborative management in pilot regions. -7 -  C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): $etr ot %of frar, cigZ** i. Knowledge Generation and 1.06 17.0 0.77 15.4 Dissemination 2. Participation, Organizational 2.55 40.8 2.10 42.0 Strengthening and Coordination 3. Collaborative Management and 2.64 42.2 2.13 42.6 Subprojects Total Project Costs 6.25 100.0 5.00 100.0 Front-end fee 0.00 0.0 0.00 0.0 Total Financing Required 6.25 100.0 5.00 100.0 The LIL is contributing to the Foundation's six year program (see Annex 2 for full description of the program and LIL activities) by developing and testing approaches in at least three pilot regions which can then be used elsewhere in the eco-region. Project Component 1. Knowledge Generation and Dissemination. The objective of this component of the LIL is to design and put into operation a program for generating and disseminating knowledge about best practices. The LIL will support key activities which serve as the basis for implementation of the other two components, including: (a) during the first year of the LIL, design the methodologies and operational mechanisms (participation strategy including the approach to collaborative management, promotion of sustainable production systems at the farm-level, and institutional strengthening) which will be tested, improved and adapted under components 2 and 3 to varying socio-economic conditions in each pilot region during the remainder of the project; (b) design and implement a communications strategy to enhance awareness and generate support for conservation of biodiversity and sustainable development in the Sierra Nevada, including dissemination of good practices and experiences; (c) study tours and visits, farmer exchanges, and workshops to promote exchange of knowledge and experience between those in the eco-region, with others elsewhere in Colombia, and, as appropriate, outside Colombia; (d) key studies and action-research to develop new information (for example, rapid urban environmental assessment) and methodologies/tools in innovative areas where knowledge and experience are limited (for example, environmental services: assessment of potential, methods for economic valuation, and incentive mechanisms); and (e) the project's monitoring, evaluation and learning system to ensure a permanent mechanism for drawing lessons, analyzing progress and results, and documenting best practices. Project Component 2. Participation, Organizational Strengthening and Coordination. The objective of this component of the LIL is to: put into place and operate effectively a program for strengthening local and regional organizations supporting sustainable development in the Sierra Nevada de Santa Marta. The LIL will support three types of activities: (i) those with a broad outreach and scope; (ii) those focused in the pilot regions where collaborative management is being promoted under component 3; and (iii) those - 8 -  related to the strengthening of the Foundation and project management. Under the first, a self-standing program for capacity building will be implemented which includes activities such as: (i) training and legal support to develop peasant-farmer and indigenous organizations in accord with their self-defined needs and priorities; (ii) technical and operational support to the regional entities, the Regional Environmental Council and Comite Directiva (indigenous organizations), responsible for coordinating the implementation of the SDP; and (iii) outreach efforts to involve groups, such as business-oriented farmers and urban dwellers, in the SDP. The second kind would be specific programs in each of the pilot regions which will provide technical support and training to critical stakeholders such as business-oriented farmers, small farmers, indigneous and local organizations, and municipalities to enable them to effectively participate in collaborative management, reach and implement agreements, adopt sustainable production systems, and create networks for sharing information and experience. The LIL will also finance technical support to communities and local organizations to help them prepare sustainable development project proposals to submit to the non-governmental fund for funding. Finally under the third type, the LIL will finance the design and implementation of a strategic plan for the institutional development of the Foundation, as well as the incremental costs of project management including the annual external financial audit. Project Component 3. Collaborative Management and Subprojects. This is the core investment component of the Foundation's program consisting of three interrelated sub-components: (i) development and implementation of collaborative management plans (sub-component 3.1); (ii) promotion of a stewardship approach to management of protected areas, and constitution of a network of conservation areas (sub-component 3.2); and (iii) establishment and initial operation of a non-governmental fund (NGF) managed by the Foundation which would provide competitive grants to communities and partner agencies for a projects related to conservation and sustainable use of natural resources in the eco-region. Under this component, the LIL will support the testing in at least three pilot regions (and in selected pilot zones and areas within these regions) of the participatory methodology for bringing together key stakeholders to develop collaborative management plans. Based on the experience of preparing the SDP, it is likely that water will be a common concern of many stakeholders. The project will promote mutually beneficial agreements between users in lowlands and urban centers, and rural populations in the Sierra, applying economic incentives to watershed recuperation and protection initiatives. It will also test a participatory methodology for developing sustainable production systems at the farm level which will be a central focus of investment under the LIL. The project will also offer specific support for the implementation of the collaborative management plan for the overlapping territories of the Sierra Nevada park and indigenous reserves being developed by a committee composed of indigenous organizations, park authorities and the representative of indigenous affairs in the government. This may include support for: (i) completion of the management plan; (ii) consultations and agreements with farmers living within these areas to support the plan; (iii) sustainable development alternatives for peasants and indigenous peoples living in these territories; and (iv) a pilot voluntary resettlement project. The LIL will also finance sustainable development sub-projects in the pilot regions with US$1.0 million which will be managed by the NGF being established with support from the GEF. 2. Institutional and implementation arrangements: Implementation Period: The project will be implemented over a period of five years (2000-2005). Selection of Pilot Regions: Recognizing the impossibility of initiating actions throughout the eco-region and the need to focus efforts in key areas of the eco-region in order to test approaches and to generate sufficient impact, a preliminary list of the regions where the Foundation's efforts would be focused was developed by using a cluster of criteria. The criteria clusters include: (i) cultural value, (ii) socio-economic -9-  dimensions (such as existence of conflict over land use rights, potential for improving revenues of the poor through conservation), (iii) operational considerations (including the security situation and complementarity with on-going activities), and (iv) ecological significance. Seven priority regions (large watersheds, or combination of watersheds, areas of between 50,000-100,000 hectares) were identified. Based on the refinement of the ecological criteria as part of the development of the eco-regional conservation strategy, the multi-criteria process was applied and three pilot regions where LIL efforts will be focused under component 3 were selected: (i) Northwestern Sierra-Santa Marta Axis in Magdalena Department; (ii) Northeastern Sierra-Hato Nuevo and Fonseca Axis in La Guajira Department; and (iii) Southwestern Sierra-El Copey Axis in Cesar Department. (see Map 2.) The next step in the process which will be part of the participatory approach being tested will be to identify within each pilot region, an initial set of zones (part of a watershed, roughly 2,000-10,000 hectares) and areas within zones (1,000 to 2,000 hectares). A Portfolio of Potential LIL Interventions (potential projects and activities for project support specifying the participants, activities, and location) will be developed for each pilot region. The Portfolio, built using a participatory approach which takes into account technical and social conditions, provides for flexibility in project implementation, required by the highly uncertain environment in which the project is being carried out, by providing alternatives for project support without locking into a pre-determined, set plan. Project oversight by the central Government and at the regional level: The National Planning Department (DNP) has been designated by the Government to be responsible for the project, and DNP has designated its Plan Caribe Office to exercise project oversight responsibility with support from the technical units for Regional and Urban Planning, Rural Development, and Environmental Policy. The Fundaci6n Pro-Sierra Nevada de Santa Marta (Foundation), a private non-profit organization with thirteen years experience working in the project area, has been designated by the Govemnment as the project implementing agency. Key oversight and coordination mechanisms at the regional level which also include central government participation are described below. The Foundation's 22 member Board of Directors, composed of representatives of key central and regional government agencies, community organizations and prominent individuals, will provide direct oversight and policy guidance for project activities. As stipulated in the Foundation's statutes, it also has three regional boards (juntas regionales), one for each of the eco-region's three departments (the political/administrative level between the local-municipal governments and the national government), which are open to participation of all those interested in the Foundation's work. The regional boards meet quarterly with the Executive Director of the Foundation and have proven to be an effective means of consultation and coordination. The Regional Environmental Council for the Sierra Nevada de Santa Marta, a broadly representative body of key stakeholders which is chaired by the Minister of the Environment, will also provide oversight in its capacity as the coordinating and consultative body for implementation of the SDP. Oversight and guidance by indigenous authorities will be ensured through the Steering Committee (Comite Directiva) created at their request in March 1998, which includes the Minister of Environment, Presidential Advisor for the Atlantic Coast, the General Director for Indigenous Affairs in the Ministry of the Interior, and leaders of the 4 indigenous organizations in the eco-region--Organizacion Gonawindua Tayrona, Confederacion Indigena Tayrona, Organizacion Yugumauin Bunkuanarrwa Tairona, Organizacion Indigena Kankuama . The Foundation serves as the Committee's technical secretary. In late 1999, the leaders of the four indigenous organizations decided to form a Council of Cabildos (Consejo Territorial de Cabildos) as their forum for developing and stating to the extemal world a unified position on matters including the development projects in the Sierra; the Council's decisions will determine the specific activities to be supported by the project which will be included in the project's annual plans. - 10 -  To complement the existing oversight mechanisms, DNP has decided to create a small committee, composed primarily of technical units in DNP and chaired by the Plan Caribe Office. The committee will review the project's Annual Operating Plans, Audit Reports, Project Management Reports (when they are introduced), Annual Reports of the Foundation and project, and Monitoring and Evaluation reports. Communities and Partner Agencies: The Foundation will be the project implementing agency, but will continue its long established practice of working in close collaboration with local community groups, NGOs, indigenous authorities, municipal and departmental govemnments, and regional and national institutions including universities, research institutes such as Alexander von Humboldt, Regional Autonomous Corporations (the regional enviromnental authorities), and the National Parks Unit The project's focus is outward to the communities and organizations in the eco-region, therefore a high proportion of the funding is destined to benefit these communities, organizations, regional entities and local governments both through provision of technical support and training, as well as direct funding, in particular through the NGF, of activities and projects proposed and implemented by them. The project aims to promote partnerships between community organizations, local govermments and other entities--both national and regional--present in the eco-region with the Foundation playing the role of facilitator. Project Implementation Plan (PIP), Annual Operating Plans and Project Management Reports: The Foundation has prepared a LIL Project Implementation Plan (PIP) which includes a description of the project's objectives, components, costs and financing plan, pilot regions, implementation arrangements (new organizational structure of the Foundation, allocation of responsibilities for project management, plan of action for financial management, procurement arrangements), and implementation mechanisms and strategies (annual operating plans, participation strategy, indigenous peoples strategy, voluntary resettlement, partnerships, M&E and learning system). In view of the learning nature of the project which requires flexibility and adaptation as it proceeds, Annual Operating Plans, and eventually the Project Management Reports (PMR), will serve as a reference point for agreeing on activities to be undertaken, the budget, procurement plan, disbursement estimates and performance indicators. The plans will serve also as a monitoring and evaluation tool, with a performance evaluation of the previous plan submitted with each new plan. The PIP includes the project's Annual Operating Plan for project year 1 (2000). Subsequent Annual Operating Plans will be presented by November 1 of each year, until such time as the Bank and Govermnent agree that the PMR system is working effectively and can replace the Annual Plans which is estimated to be by April 2001. Non-Governmental Fund: The NGF is being established in the second semester of 2000, with support from the GEF, as an independent account within the administrative and legal structure of the Foundation. The NGF's Operating Regulations (Reglamento Operativo), the basic framework for its establishment and operation, have been reviewed and found satisfactory by the Bank and were approved by the Foundation's Board of Directors in March 2000. The basic operating framework provides for a general coordinator of the NGF to handle overall management and coordination functions under the Foundation's Executive Director. A technical committee of seven independent experts and the Executive Director, Financial director, and general coordinator of the fund (the later three without a vote) will provide strategic direction, review the annual budget and decide which sub-projects should be financed. A more detailed Operating Manual for the NGF is being prepared during project year I which includes provisions concerning enviromental screening of sub-projects, procurement and fnancial management. -11-  US$1.0 million of project funds is being provided under disbursement category 5 to finance sustainable development subprojects located in the pilot regions and proposed by communities on a competitive basis. The amount of individual subprojects will not exceed US$75,000. No loan funds will be disbursed for subprojects until arrangements satisfactory to the Bank for the operation of the Fund, and for financing of LIL subprojects have been put in place, including establishment of the Fund, adoption of an Operating Manual satisfactory to the Bank, and appointment of a qualified NGF coordinator and members of the technical committee. These arrangements are expected to be in place by no later than the end of project year 1 (2000). Since the project has a relatively small budget allocation in 2000 due to the severe fiscal adjustment process underway, no LIL funding for subprojects is foreseen until early 2001. Financial Management: Accounting, financial reporting and auditing arrangements: The financial management assessment concluded that the financial management of the Foundation is adequate to proceed with the project. The accounting and budgeting systems function well, supporting documentation is well maintained, financial and budget reports are produced in a regular and timely fashion, internal controls are sound and properly applied, and the staff of the financial unit are competent and function effectively. However, the following aspects of this system need to be strengthened in order to deal with the increased financial planning and reporting requirements under the project in particular the presentation of satisfactory Project Management Reports: recruit a procurement specialist; develop and put in place the procurement reporting system; recruit a financial analyst; put into operation the budget module of the integrated management and administrative accounting system; and revise and update the organization and procedures manual. Additional measures have been agreed which will further strengthen the Foundation's project management capacity as it expands its scope of action under the new projects, and will enhance its long-term financial viability: establish a cost accounting and cost allocation system to assure that all the costs of carrying out projects are recovered from donor agencies; and extend the on-line accounting system to the two regional offices to improve information flow and accounting. These measures which should all be completed no later than December 31, 2000 are detailed in a Plan of Action agreed with the Foundation and included in the PIP. The audit arrangements are acceptable and the independent auditor will be appointed by effectiveness on terms and conditions acceptable to the Bank. The project funds will flow directly to the Foundation, under terms of its contract with DNP (Subsidiary Agreement), as follows: (i) the Government (DNP and the Ministry of Finance) will authorize direct disbursements by the Bank of proceeds of the loan to a project account in US dollars; and (ii) DNP will authorize disbursements of the counterpart funds into the Foundation's local currency project account. Procurement. The type of procurement to be carried out under the LIL is expected to be simple and follow Bank Guidelines only (see Annex 6). An assessment of the Foundation's capacity to implement procurement actions for the project has found it to be satisfactory, and overall project risk for procurement is judged to be low (assessment was approved by Regional Procurement Advisor on December 20, 1999). However, the Foundation's Manual de Politicas y Procedimientos needs to be revised to define more formal procedures, organization and responsibilities for the procurement/contracting function, as well as model contracts and standard internal forms. The Loan Agreement includes as a condition of loan effectiveness the submission of the procurement chapter of the Manual which is satisfactory to the Bank. The Operating Manual of the NGF will stipulate that procurement under subprojects would be done through comparison of three price quotations to the extent possible; direct procurement and sole-source contracting is expected due to the remoteness of most of the communities involved. The Foundation will be responsible for seeing that the agreed procedures are being followed. During the first year of the project, the Foundation will hire a procurement specialist and will develop a contract/procurement reporting system which will enable it to provide the procurement information required for the Project Management Reports. The Plan of Action referred to above includes both of these commitments. - 12 -  3. Monitoring and evaluation arrangements: The detailed design of the Monitoring, Evaluation and Learning system for the project will be completed during the first four months of project year 1, in parallel with the design of the participatory strategy and operational mechanisms to be tested. It will be part of the overall system for the Foundation's six-year program, and build on the Foundation's existing work and experience in this area which include: (i) an established M&E unit with two experts, (ii) a conceptual framework for monitoring and evaluation of sustainable development at the eco-regional level which has not yet been operationalized (Participatory and Reflective Analytical Mapping for Sustainability, IUCN, 1997), and (iii) M&E of specific community managed sustainable development projects which is underway in the context of a Dutch financed project. The internal system for M&E will be woven into the Foundation's structure and the participatory process itself, so that rather than being a separate function carried out by a isolated group, it is part of the Foundation's regular operations and will support continuous learning. It will rely on a combination of qualitative and quantitative methodologies, and utilize the excellent resources already in place (GIS mapping and data base, documentation center, etc.). A baseline of quantitative and qualitative indicators and maps will be developed for each pilot region as part of the process for initiating work there; for regions where the Foundation has been working for some time, past efforts and achievements will be documented and analysed. The internal M&E system will be complemented by two external evaluations (at the end of the second year and at the end of the fourth year) carried out by an independent group of experts. The scope and focus will be broader than the on-going internal M&E, and will include an examination of issues such as: whether the LIL is generating lessons, whether the activities and methodology used by the Foundation will have sufficient long-term impact, and whether the monitoring and evaluation system is contributing to continuous learning and adequate adjustments in the project as it unfolds. D. Project Rationale [This section is not to be completed in a LIL PAD. Rabonale should be implicit in paragraph B: 3.] E. Summary Project Analysis (Detailed assessments are in the project file, see Anmex 8) 1. Economic (see Annex 4): [For LIL, to the extent applicablel O Cost benefit NPV=US$ million; ERR = % (see Annex 4) O Cost effectiveness * Other (specify) While an economic analysis of the LIL itself has not been undertaken, the project will take into account economic considerations in the following manner: (i) as appropriate, carry out the economic analysis of sustainable development subprojects as specified in the Operating Manual of the NGF, (ii) include economic factors such as cost minimization as criteria for formulating alternative, sustainable production systems, and (iii) carry out studies and action research in order to establish a methodological and empirical basis for the economic valuation of environmental services in the Sierra Nevada. 2. Financial (see Annex 5): NPV=US$ million, FRR= % (see Annex 4) [For LIL, to the extent applicable] The LIL, a loan to the Colombian government, is helping leverage and will complement grant funding -13 -  obtained by the Foundation, including funds for the establishment of the NGF which will serve as a long-term, sustainable funding source for conservation and sustainable development of the Sierra Nevada. Therefore, due to the small size of the loan and the mobilization of non-public funds, the fiscal impact is expected to be minor. 3. Technical: [For LIL, enter data if applicable or 'Not Applicable'] Not Applicable 4. Institutional: 4.1 Executing agencies: The NGO, Fundacion Pro-Sierra Nevada des Santa Marta, with thirteen years experience working in the project area and managing projects financed by international and national sources (including private foundations) has been designated by the Govermnent as the project implementing agency. It has proven technical and managerial capacity, and ability to work in the complex social conditions of the Sierra. Subprojects financed by the NGF, being set up as an independent account within the administrative and legal structure of the Foundation, will be implemented by third parties including comnmunity organizations and NGOs in accord with norms established in the NGF's Operating Manual. The Foundation will be responsible for ensuring that these norms are respected and has the capacity to do so. 4.2 Project management: The Foundation has demonstrated the technical and managerial capacity, and characteristics of a learning orgranization which are ndeded for managing this project. In view of the evolving role of the Foundation during the project, the increased level of resources to be managed, and the increased level of formality required, it has been agreed that under the LIL a strategic plan for institutional development of the Foundation will be designed and implemented. In addition, specific measures for improving financial management and procurement will be carried out within the first year of project implementation. The Foundation's current capacity to ensure that environmental norms are respected is considered excellent. 4.3 Procurement issues: Addressed in Section C.2 above. 4.4 Financial management issues: Addressed in Section C.2 above. 5. Environmental: Environmental Category: B 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. The Sustainable Development Plan for the Sierra Nevada (SDP), published in February 1997, documents the eco-region's environmental and social situation and proposes a strategy for addressing key issues. This project is part of the Foundation's program which has the objective of promoting conservation of the environment and biodiversity as proposed in the SDP; as part of this program, an eco-regional conservation strategy was defined in February 2000. The net envirommental impact is positive, with no major adverse environmental impacts expected as a result of the project. Procedures for environmental impact assessments of subprojects financed by the NGF will be incorporated into the NGFs Operating Manual which must be found satisfactory to the Bank prior to disbursements under category 5; no sub-projects will be financed until project year 2. The SDP and project were prepared in a highly - 14 -  participatory manner as documented in the project file and Section 6 below. 5.2 What are the main features of the EMP and are they adequate? Not applicable. 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: No separate EA undertaken. 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? Not applicable. Process of consultation concerning project described in Section 6 below. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? To be defined in detail in project year 1, as part of the project's M&E system, and of the companion GEF project to be appraised later this year which will include monitoring of the implementation of the eco-regional conservation strategy. 6. Social: 6.1 Sunmnarize key social issues relevant to the project objectives, and specify the project's social development outcomes. A summary of the social assessment is provided in Annex 11. It shows the complex situation in the Sierra Nevada, but also the positive impact that the process of preparing the SDP has had in bringing diverse actors together to recognize the perspective of others and shape common goals. The Sierra Nevada is characterized by cultural diversity. (See Map 3.) The population can be described as three broad groups: indigenous peoples, small farmers who migrated to the Sierra from the Andean region at various times, and the coastal peoples who are a very diverse group; in addition, there is a large urban population. The underlying philosophy of this project and the work of the Foundation is to continue the process of bringing together stakeholders and to move them towards agreements to carry out concrete actions considered critical for biodiversity conservation and sustainable use of natural resources. Deep seated social conflicts around land are part of the region's history and are being taken into account in the project design. Particular problems are faced by peasant farmers who are living within the boundaries of the national parks and indigenous reserves; a specific study by a prominent Colombian sociologist was prepared on this issue. The study shows the historical roots of social conflicts over land, starting with the arrival of the Spaniards in the 1500s which profoundly affected the indigenous peoples, to the colonization by people from other areas of Colombia beginning in the 1900s of which the period of the marihuana boom of the 1970s was particularly traumatic, resulting in a major influx of settlers and devastation of 70% of the forested area. With a downturn in the demand for this crop in the 1980s, it virtually disappeared from the Sierra, but the ecological and social damage remained. Attracted perhaps by the isolated location and social conflicts in the Sierra Nevada, over the last fifteen years various armed groups, both guerrilla and paramilitary, have established a presence in different areas of the Sierra Nevada. While violence is episodic, the presence of these groups is an important risk factor which must be taken into account, particularly as the national process of peace negotiations unfolds. So far, the Foundation has been able to work effectively in the midst of this complex situation. The social strategy of the project, described more fully in Annex 11, addresses the main social issues and provides mechanisms for collaboration of all stakeholders. This approach will help to reduce tensions in the -15-  region by giving all actors an opportunity to work together to carry out sustainable development activities, building the basis for common understanding. The project incorporates this approach into its three components and institutional arrangements, as well as the strategies for indigenous peoples and voluntary resettlement The Foundation's program and this project are consistent with Bank policies concerning Indigenous Peoples and Cultural Heritage (see Annex 12 for a full discussion of Indigenous Peoples). The four indigenous groups in the Sierra, though a minority in terms of population, are critical for the project's success because of their positive attitude towards conservation, rooted in their traditions, and because their lands involve areas of rich biodiversity. The project was designed in collaboration with indigenous peoples organizations; it promotes the informed participation of the indigenous groups involved, incorporates their knowledge and preferences, and respects their rights to natural and economic resources which were recognized in the Colombian constitutional reforms of 1991. The project's Indigenous Peoples Strategy responds to the main principles of the Foundation's program: (i) recognition of the cultural plurality of the Sierra; (ii) promotion of inclusion and collaboration among stakeholders; and (iii) reduction of conflict and development of an intercultural dialogue which will support the conservation and sustainable development of the Sierra. The strategy includes four action lines: (i) acknowledgement of indigenous authorities; (ii) recognition of indigenous priorities; (iii) compatible conservation and sustainable development which takes into account indigenous knowledge; and (iv) active and continuous participation. Specific activities identified as priorities by indigenous authorities are included under each of the projects three components, such as support for: (i) dissemination of planes de vida, agreements and other papers contributing to enhancing the cultural plurality of the Sierra; (ii) the development of the Cabildos Territorial Council; (iii) the on-going process of developing with the Parks Unit a collaborative management plan for the overlapping area of the Sierra Nevada Park and indigenous reserves; (iv) legal and fnancial support to gain access to sacred sites outside the reserves according to a priority program defined by the indigenous authorities; and (v) a pilot voluntary resettlement project to support the recovery of indigenous territory while mitigating the impact on farmer families willing to resettle. (See Annex 12 for more details.) The Foundation's experience working with indigenous organizations and peoples during the preparation and consultations concerning the SDP has shown their resistance to conforming to a "western" timetable and notions of a formal written "plan." Therefore, while the project includes a strategy based on priorities determined by indigenous organizations and authorities, it will remain flexible and be developed in an interative process according to the wishes and timetable of the indigenous organizations and authorities. Thus, it has been agreed that the specific activities to be supported each year will be decided by the Cabildos Territorial Council and incorporated into the project's annual operating plans allowing time for the customary consultation with the traditional spiritual authorities and the community. The Foundation's program, of which this project is a part, embodies a conservation strategy which promotes better practices through broad participation and incentives, rather than restrictions. No new restricted areas or expansion of existing ones are foreseen under the project. Nor does the project support any kind of involuntary resettlement. However, the project does envision support, in cases where this would have a positive conservation and social impact, for the recovery of indigenous territory by providing assistance to farmers wishing to resettle outside the reserves. At this time, it is envisioned that this would be restricted to a pilot project to assist a small number of farm families (possibly 7 in 2000) whose lands are being bought by the Gonawindua Tayrona Organization with finding from The Nature Conservancy (TNC). A study undertaken during project preparation found that many families living inside the boundaries of the Sierra Nevada park-reserves are seeking to relocate due to factors unrelated to the Foundation's program, including: (i) the legal limitation on receiving land tides; (ii) the lack of road infrastructure that makes -16 -  market access difficult; (iii) the lack of basic services that keeps living standards low; and (iv) the increasing violence in the Sierra. Though many families are willing to relocate, they are expecting the land reform agency (INCORA) to fulfill its role in providing the compensation and support foreseen under Law 160. In practice, this process stopped in 1998, because of INCORA's lack of resources. However, indigenous peoples have been using their own resources to buy farmer lands within their territories. In both cases, relocation has had several flaws affecting fanners and indigenous peoples alike. There is evidence indicating that relocated farmers face difficulties recovering economically; on the other hand, the re-occupation of indigenous territories by farmers whose land has been purchased is a phenomenon hindering indigenous peoples' efforts to regain control of their territories and has been mentioned by the cabildos as a concern for which they are seeking a solution. Voluntary Resettlement Guidelines. Under these circumstances, the project aims to offer an alternative satisfactory to farmers and indigenous peoples by testing a voluntary resettlement strategy based on the following guidelines: (i) the families involved will recover or improve their living conditions; (ii) no involuntary resettlement will be carried out; and (iii) the resettlement process will be implemented under a participatory approach allowing the families involved to play an active role in decision-making. (Approaches tested under the Bank-supported Pilot Land Reform initiative will be an important experience to draw on in this regard.) The commitment of the Foundation to abide by these guidelines and follow specific operational mechanisms described below is included in the Loan Agreement (Section 3.01 c (iii)), as well as the Government's commitment to ensure that the Foundation does so. In addition, the Loan Agreement contains a protective clause (Section 3.04) whereby the Foundation and Government agree that they will not involuntary resettle any farmers living in the national parks and indigenous reserves during the course of the project. The Foundation, as the executing agency of LIL and manager of the TNC project, will be in charge of this voluntary resettlement pilot. It will be responsible for carrying out the following activities: (i) identification (based on the Indigenous Organization's priorities) and socioeconomic analysis of families willing to relocate; (ii) promotion of community organization to facilitate the resettlement process; (iii) establishment of consultation and participation mechanisms; (iii) providing technical and legal support to buy new land and complementary resources; (iv) providing technical assistance and training to initiate sustainable economic activities; (v) providing investrnent resources from the project to re-establish or improve living conditions; and (vi) promoting agreements with public and private institutions that will contribute to the success of the voluntary resettlement. The monitoring and evaluation system of the Foundation will establish a specific monitoring system to assess compliance with agreements, goals and expected outcomes of this pilot. The following operational mechanisms will apply to the resettlement pilot: (i) each year of the project, the Foundation will prepare a plan for the resettlement pilot comprising the work program and budget; (ii) the Annual Operating Plan and/or the Project Management Reports will incorporate the resources the Foundation needs to undertake the activities under the pilot; (iii) quarterly reports will be prepared to assess progress; and (iv) an annual report will be prepared presenting the main results from the pilot, lessons learned and recommendations for improving the process. (See Annex 11.) 6.2 Participatory Approach: How are key stakeholders participating in the project? The project is another step in a highly participatory approach followed by the Foundation throughout the last decade to develop the Conservation Strategy and the Sustainable Development Plan both involving extensive consultation and collaboration at the local, regional and national level. Once published in 1997, the SDP was presented to and examined together with key stakeholders. Almost one year of discussions led -17 -  to the Forum for the Sustainable Development in the Sierra in March 1998 which gathered more than 600 persons from indigenous and peasant communities, public and private sectors to further analyze and prioritize actions in the Plan. Meanwhile, a project financed by the Netherlands supported 10 participatory local pilot sub-projects to initiate the implementation phase of the SDP based on priorities established by local communities. A participatory approach pervades the entire preparation and design of the Foundation's six-year program and this project including: (i) involving main stakeholders during preparation; (ii) reaching agreements upon priority actions; (iii) developing a social strategy that promotes participation; and (iv) building a partnership with the Foundation and the Colombian Government. During the project's preparation two workshops were carried out to promote stakeholders' participation. In the first one, carried out in December 1998, a draft logical framework for the project was developed based upon the inputs provided by representatives of the main stakeholders. They indicated that they wanted the SDP, with project support, to grow from its origins which emphasized a conservation strategy and the upper reaches of the Sierra Nevada (the indigenous reserves and national park) to strengthen dimensions related to improving the well-being of peoples living in the eco-region and sustainable use of its resources. The importance of an approach which respected cultural diversity and promoted the active participation of community-based organizations was also emphasized. In April 1999, the second workshop was held with a similar audience in order to: (i) review the results of the previous workshop; and (ii) reach agreement upon the priority aspects to be incorporated into the project's learning process. The workshop confinned the results of the first in terms of main issues and problems to address and provided the necessary information to identify priorities in order to define the project's components. A final round of consultations on the project was held with the key stakeholders in February 2000 to discuss the project as described in the Project Document prior to negotiation of the loan with the Government. The National Planning Department, Ministry of Environment, Parks Unit as well as municipalities and other local institutions were also involved in project preparation. The social strategy which resulted from the workshops and consultations aims at maintaining a participatory approach throughout implementation by establishing different mechanisms, such as: * Knowledge and Learning. An information and communication system will be developed to promote awareness and knowledge about the Sierra. This system will be instrumental to enhancing the advantages of a multicultural society, disseminate successful experiences and support efforts to peacefully address disagreements and help to modify certain negative behaviors. * Strengthening Community Organizations to reduce weaknesses that hamper their participation in decision-making and give them an opportunity to participate under more equitable conditions. * Collaborative Management: The project has been designed to bring all the actors to collaborate in sustainable development programs in selected areas thus building consensus about common objectives. 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? For projects expected to receive authorization to appraise/negotiate (in principle) prior to April 30, 2000, this section may be left blank. The project involves an innovative approach to develop partnerships with civil society by incorporating as its implementation agent the Fundacion Pro Sierra Nevada which has more than iirteen years experience working in the region. The project has been prepared in closed collaboration with the Foundation's staff who have played a a critical role in providing ideas and acting as an efficient intermediary with the local -18 -  actors. This project will heavily involve civil society organizations, particularly at the community level. Only local social/community organizations (if they wish--in partnership with others such as municipalities, NGOs etc.) are eligible for applying for financing of subprojects through the NGF. The consultation process is described above in section 6.2 and in Annex 11. 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? For projects expected to receive authorization to appraise/negotiate (in principle) prior to April 30, 2000, this section may be left blank. The Government's decision to delegate project management to the Foundation is consistent with the realization of the social development outcomes given the complex social situation in the eco-region. See Annex 11. 6.5 How will the project monitor performance in terms of social development outcomes? For projects expected to receive authorization to appraise/negotiate (in principle) prior to April 30, 2000, this section may be left blank. This will be incorporated into the M&E and learning system for which the detailed design will be completed during the first four months of project year 1. 7. Safeguard Policies 7.1 Do any of the following safeguard policies applv to the project? =~~~~~PC . < > = . ApI aifl, Environmental Assessment (OP 4.01, BP 4.01 GP 4.01) W Yes El No El Natural habitats (OP 4.04, BP 4.04 GP 4.04) Z Yes El No El Forestry (OP 4.36, GP 4.36) 0 Yes El No El Pest Management (OP 4.09) El Yes M No El Cultural Property (OPN 11.03 3 Yes El No El Indigenous Peoples (OD 4.20) K] Yes LI No El Involuntary Resettlement (OD 4.30) K] Yes O No El Safety of Dams (OP 4.37, BP 4.37 E Yes O No El Projects in International Waters (OP 7.50, BP 7.50 GP 7.50) E Yes O No El Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) E] Yes K] No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. These provisions are described in the relevant sections of this document. -19-  F. Sustainability and Risks 1. Sustainability: This section is not to be completed in LIL PAD. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): Risk Risk Rat-g :4RiskMinimization Measure From Outputs to Objective Stakeholders are not disposed to share M The criteria for choosing the pilot regions, zones information/experiences and to look for and areas where the project will focus its efforts agreement. takes into account this factor. Armed actors actively discourage S The Government's decision to delegate project participation and do not respect the implementation to the Foundation recognizes its project's objectives successful track-record in working in the complex socio-economic context of the Sierra Nevada. In order to minimize risks, this factor is a criterion for selecting the areas to focus project efforts. The Foundation maintains a low-key but continuous dialogue with all stakeholders, and regularly monitors the local socio-political dynamics. It will adjust and modulate its approach in accord with evolving conditions; the Portfolio of LIL Interventions is a mechanism for doing so. From Components to Outputs Fiscal crisis in public sector and S Design of the DNP-Foundation contract and competing priorities for scarce investment disbursement mechanism aims to reduce these resources result in project funds not being risks. The Foundation's continuous outreach made available in sufficient quantity and efforts to keep key stakeholders at the central, when needed. regional, and local level informed and involved in the project should help maintain political support for the project. Overall Risk Rating S Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: The project is being carried out in a situation of on-going conflict which is very unpredictable. Supervision of small community managed subprojects (including audit of procurement and financial management) must be carried out primarily by the Foundation and consultants, as security considerations may prevent regular field visits by the Bank. The Sierra still suffers from the existence of illegal crops in some areas though it is a marginal producer compared to other parts of Colombia. Farmers have expressed an interest in fmding alternative, legal sources of income. The Foundation's program may contribute to avoiding the expansion of those zones by promoting ecological productive systems that provide a viable alternative return to the rural communities, though it does not contain a prominent and specific focus on this. It is unclear whether the United States -20 -  government's intention to increase aid to Colombia to combat drugs will result in aerial spraying in the project area which could have far-reaching negative consequences for the biodiversity there. However, this is considered to be a low risk as there has been no spraying for ten years, the Government has an agreement with the region to refrain from spraying in the parks and indigenous reserves, and the region is far from the main production areas targeted by the U.S. aid program. G. Main Loan Conditions 1. Effectiveness Condition Signed contract between DNP and the Foundation delegating management of the project and specifying flow of funds Foundation's submission of procurement section of Manual de politicas y procedimientos which is found satisfactory 2. Other [classifv according to covenant types used in the Legal Agreements.] Obligation to carry out Project in accord with the Indigenous Peoples Strategy and Voluntary Resettlement Guidelines No Project funding for subprojects until satisfactory arrangements for management of NGF and for financing of LIL subprojects have been put in place H. Readiness for Implementation [ 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. [Z 1. b) Not applicable. O 2. The procurement documents for the first six months' activities are complete and ready for the start of project implementation; and a framework has been established for agreement on standard bidding documents that will be used for ongoing procurement throughout the life of LIL 1 3. The LIL's Implementation Plan has been appraised and found to be realistic and of satisfactory quality. 1Z 4. The following items are lacking and are discussed under loan conditions (Section G): Contract between DNP-Foundation (draft contract has been reviewed by the Bank and found to be satisfactory) Subprojects: Satisfactory arrangements for management of NGF and for financing of LIL sub-projects need to be put in place (Operating Manual, appointment of NGF coordinator, and technical committee) prior to disbursements under category 5 for subprojects which is planned for project year 2 -21 -  1. Compliance with Bank Policies Z 1. This project complies with all applicable Bank policies. O 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. fA, & ) 8- A A ____ A, Elsie B. Garfield