Mexico - Forestry Development Project

 Forestry development project Report No: ; Type: Report/Evaluation Memorandum ; Country: Mexico; Region: Latin America And Caribbean; Sector: Forestry; Major Sector: Agriculture; ProjectID: P007640 November 3, 1995 Mexico: Forestry Development Project (Loan 3115-ME) The Implementation Completion Report (ICR) on the Mexico Forestry Development project (Loan 3115-ME, approved in FY90) was prepared by the Latin America and the Caribbean Regional Office. The Government of Mexico contributed to the ICR by commenting on the draft ICR and submitting its own evaluation comments, contained in an appendix. The ICR provides an unvarnished account of a flawed project. This was the first Bank project for the forestry sector in Mexico. The project aimed to improve environmental protection, increase forest productivity and efficiency, create employment for rural and urban communities— including Amerindian communities, and strengthen the management capabilities of federal and state forestry and conservation agencies. The project operated in the states of Durango and Chihuahua. As a pilot project, it was too large, too complex, and located in a remote and inaccessible area. After five years of preparation, the project was approved shortly after a change of government. By the time implementation was due to begin, major restructuring of the implementing agencies had been carried out, lowering significantly the capacity of the project's lead agency and making institutional arrangements more complex overall. Furthermore, the project quickly became the object of criticism by nongovernmental organizations concerned that environmental and indigenous peoples' affairs were inadequately safeguarded. Since the project was approved just prior to the Bank's adoption of new operational directives on both of these issues, the Bank was poorly placed to answer the project's critics. In the absence of effective local advocates for the project, Government commitment to the project fell and the Bank informally suspended disbursements, waiting for covenant compliance to improve. The loan was closed two years early and almost two-thirds of the loan was canceled. The project outcome is rated as unsatisfactory, institutional development as modest, and sustainability as unlikely. The Operations Evaluation Department agrees with these ratings. Bank performance is rated as unsatisfactory because of deficiencies in appraisal, and because the Bank did not reappraise the project when it became apparent that institutional arrangements put in place by the borrower after project approval were insufficient to the task and radically different from those which had been agreed. Borrower performance is also rated as unsatisfactory because the borrower failed to put appropriate institutional arrangements for implementation in place and was deficient in several key elements of covenant compliance. The project did, however, achieve a number of its objectives, including the rehabilitation of roads, revision of forest management plans, and training of forest managers and technicians. It also provided a test case for the incorporation of Mexico's new Environmental Law into forest management practices and regulations. Recognizing the unsatisfactory outcome of the project, the Bank and the borrower have carried out a joint forest sector review to help reformulate sector strategies for the current administration. No audit is planned.