Mexico - Water Resources Management Project

Document of The World Bank Report No. 15435-ME STAFF APPRAISAL REPORT MEXICO WATER RESOURCES MANAGEMENT PROJECT MAY 31, 1996 Sector Leadership Group Mexico Department Latin America and the Caribbean Region  CURRENCY EQUIVALENTS Currency Unit = Mexican New Peso (N$) US$I = N$7.50 US$133,333.33 = N$1 million (January 1996) FISCAL YEAR January I - December 31 WEIGHTS AND MEASURES Metric System  MEXICO WATER RESOURCES MANAGEMENT PROJECT ABBREVIATIONS ASDSO Association of Dam Safety Officials BCHYDRO British Columbia Hydro International Limited BTEX Benzene, toluene, ethylbenzene, xylene CCA Mexican Center for Atmospheric Sciences (Centro de Ciencias de la Atm6sfera) CFE Federal Power Commaission (Comisi6n Federal de Electricidad) CLICOM Climate Computing Data Management Program of World Meteorological Organization CNA National Water Commission (Comisi6n Nacional del Agua) COE United States Army Corps of Engineers CT Technical Consuhancy (Consultivo Tecnico) DBMS Data Base Management System DCP Data Collection Platform EC Environment Canada EPA United States Environmental Protection Agency ESP Extended Streamflow Prediction FAO Food and Agriculture Organization. United Nations Agency GAS Groundwater Group (Gerencia de Aguas Subterraneas) GASIR Surface Water and River Engineering Group (Gerencia de Aguas Superficiales e Ingenieria de Rios) GF Financing Group (Gerencia de Financiamiento) GIS Geographic Information System GOM Government of Mexico GOES Geostationary Operational Environmental Satellite GPS Geographical Positioning System GSCA Water Quality and Sanitation Group (Gerencia de Saneamiento y Calidad del Agua) GSMN National Meteorological Service (Gerencia del Servicio Nacional de Meteorologia) IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICOLD International Commission on Large Dams IDSP Irrigation and Drainage Sector Project 11 Mexican Engineering Institute (Instituto de Ingenieria) IMTA Mexican Water Technology Institute (Instituto Mexicano de Tecnologia del Agua) INEGI National Institute for Geographic and Informatic Statistics (Intituto Nacional de Estadistica Geografia E Infom-tAica) INM National Meteorological Institute, Spain (Instituto Nacional de Meteorologia, Espatta) LAN National Water Law (Ley de Aguas Nacionales) MET British Meteorological Office NAFIN National Finance Institution, SNC (Nacional Financiera, Sociedad Nacional de Credito) NCB National Competitive Bidding NDSP National Darn Safety Program NP New Pesos NOAA/NWS United States National Oceanic and Atmospheric Administration/National Weather Service NWSRFS National Weather Service River Forecast System OFMIN On-Farm and Minor Irrigation Networks Improvement Project OIE French International Water Office (Office Internationale de l'Eau) PMS Project Management System QC/QA Quality Control/Quality Assurance REPDA National Public Water Rights Registry (Registro Publico de Derechos de Agua) SECODAM Ministry of the Comptroller and Administrative Development (Secretaria de Contraloria y Desarrollo Administrativo) SHCP Ministry of Finance and Public Credit (Secretaria de Hacienda y Cr6dito Publico) SHEF Standard Hydrological Exchange Format SIGA Water Geographic Information System (Sistema Geografico de tnformaci6n del Agua) SGA Administration General Subdirectorate (Subdirecci6n General de Administraci6n) SGAA Water Administration General Subdirectorate (Subdirecci6n General de Administraci6n del Agua) SGP Planning General Subdirectorate (Subdirecci6n General de Programaci6n) SGT Technical General Subdirectorate (Subdirecci6n General Tecnica) SEMARNAP Ministry of the Environment, Natural Resources and Fisheries (Secretaria de Medio Ambiente, Recursos Naturales y Pesca) SOE Staternent of Expenses SOP Standard Operating Procedure SWSSS Second Water Supply and Sanitation Sector Project TOR Terms of Reference UNDP United Nations Development Program USBR United States Bureau of Reclamation USGS United States Geological Survey WMO World Meteorological Organization, United Nations Agency WRMP Water Resources Management Project   MEXICO WATER RESOURCES MANAGEMENT PROJECT TABLE OF CONTENTS Page LOAN AND PROJECT SUMMARY ..............................................i 1. PROJECT AND SECTOR BACKGROUND ..............................................1 I A. Introduction .....................................................1 B. Legal Framework .....................................................2 C. Institutional Setting .....................................................2 D. Challenges for Water Resources Management in Mexico ...............................................4 E. Bank Involvement and Lessons Learned .................................................... 11 F. Water Resources Management World Bank Policy Paper, 1993 ................................... 13 2. THE PROJECT ............................................... 14 A. Origin .................................................... 14 B. Project Objectives and Design Concepts .................................................... 14 C. Summary Description .................................................... 16 D. Rationale for Bank Involvement .................................................... 17 E. Program Objective Categories .................................................... 18 F. Project Description (Detailed Project Features) .................................................... 18 3. PROJECT COSTS AND FINANCING .............................................. 26 A. Costs .................................................... 26 B. Financing .................................................... 26 4. PROJECT IMPLEMENTATION, PROCUREMENT AND DISBURSEMENTS 28 A. Project Organization and Management .................................................... 28 B. Procurement .................................................... 28 C. Disbursements .................................................... 31 D. Accounts and Audits .................................................... 32 E. Monitoring of Project Implementation and Bank Supervision ...................................... 32 5. PROJECT ANALYSIS .............................................. 34 A. Project Benefits .................................................... 34 B. Environmental Effects .................................................... 36 C. Project Sustainability .................................................... 37 D. Poverty Alleviation .................................................... 37 E. Gender Impact .................................................... 38 F. Participation Aspects .................................................... 38 G. Project Risks .................................................... 38 6. AGREEMENTS REACHED AND RECOMMENDATIONS .............................. 39 This report Is based on the findings of a Bank appraisa mission which visited Mexico In February 1996. The mission and prior preparation missions were comprlsed of the following members: Douglas Olson (Mission Leader); Jose Simas, Ventura Bengoechea. Teresa Roncal (LASLG); Mateen Thobani (LATEA); Dieter Kramer, Jose Arimates, Francisco Vlllalpando (World Meteorological Organizatdon); David Smith (British MET OMice); Manuel Bautista (Spanish Meteorological Institute); Jorge Rlnc6n, Stefano Burchl, Wulf lKohn (FAO); Curtis Barrett, Frederick Weldon, Jordon Matejceck (US National Weather Service); Richard Holtway (US Geological Survey); and Ronald Cummins, Nguyen Q. Trac, Edwin Ongley, Wiliam Moler (Consultants). Cari DahLman, Theodore Nkodo, and Carmen Hamann ar, respectively, Acting Mexico Department Director, Sector Leader and Lead Operations Specialist for the operation.  - ii - Page TABLES IN THE MAIN TEXT Table 1: Project Related Budget Requirements ....................................................................... 27 Table 2: Procurement Arrangements ...................................................................................... 29 Table 3: Limits on Types of Procurement and Prior Review Thresholds ................................. 31 ANNEXES Annex A: Legal and Regulatory Framework and Institutional Aspects A-I Organizational Structure A-2 Regional Structure Annex B: Institutional Development, Technological Support and Training Annex C: Water Quantity and Quality Monitoring Improvements and Assessments C-1 Implementat-on Plan for the Meteorological Monitoring Network Subcomponent C-2 Implementation Plan for the Hydrometric, Climatological, Sediment and Reservoir Levels Monitoring Network Subcomponent C-3 Implementation Plan for the Groundwater Monitoring Improvements and Assessments Subcomponent C4 Implementation Plan for the Water Quality Monitoring and Laboratory Subcomponent Annex D: Reservoir Operation, Dam Safety and Aquifer Management Improvements D-1 Implementation Plan for the Reservoir Operation Improvement Subcomponent D-2 Implementation Plan for Improvements in Dam Safety Subcomponent D-3 Implementation Plan for the Aquifer Management Improvement Subcomponent Annex E: Water Rights Administration E-1 Implementation Plan for the Water Rights Administration Component Annex F: Water Resources Planning and Information Systems F-I Implementation Plan for the Water Resources Planning and Information Systems Component Annex G: Economic Aspects, Project Benefits and Environmental Assessment G-1 Projects Involving the Provision of Meteorological/Hydrological Service and Information - Reported Measures of Economic Feasibility  Annex H: Project Supervision, Monitoring and Evaluation H-1 The Relationship of General Objectives and Secondary Objectives with Project Components and Subcomponents H-2 Proposed Solution/Mitigation of Existing Problems and Needs via the Project Components and Actions H-3 Subset of Indicators Related to Project Objectives H-4 Subset of Overall Indicators Annex I: Cost Estimate Tables I-I Components Project Cost Summary I-2 Expenditure Accounts Project Cost Summary 1-3 Project Components by Year -- Base Costs 1-4 Project Components by Year -- Totals Including Contingencies 1-5 Project Components by Year -- Investment/Recurrent Costs 1-6 Expenditure Accounts by Years -- Base Costs 1-7 Expenditure Accounts by Years -- Totals Including Contingencies 1-8 Expenditure Accounts by Financiers I-9 Components by Financiers 1-10 Disbursement Accounts by Financiers I-11 Local/Foreign/Taxes by Financiers 1-12 Procurement Arrangements 1-13 Allocation of Loan Proceeds 1-14 Disbursements by Semesters Annex J: List of Documents in the Project File   MEXICO WATER RESOURCES MANAGEMENT PROJECT LOAN AND PROJECT SUMMARY Borrower: Nacional Financiera, S.N.C. (NAFIN). Guarantor: United Mexican States. Implementing Agency: National Water Commission (Cornision Nacional del Agua - CNA). Beneficiary: Not applicable. Poverty: Not applicable. Loan Amount: US$186.5 million. Terms: Repayment over 15 years, including three years grace, at the Bank's standard interest rate for LIBOR-based US dollar single currency loans. Commitment Fee: 0.75% on undistributed loan balances, beginning 60 days after signing, less any waiver. On-lending Terms: Not applicable. Financing Plan: See para. 3.3. Net Present Value: Risk assessment methodology, see Annex G. Project ID Number: PA7713. Map: Map NO. IBRD 27903: Mexican Hydrographic Regions.   MEXICO WATER RESOURCES MANAGEMENT PROJECT 1. PROJECT AND SECTOR BACKGROUND A. INTRODUCTION 1.1 Most of Mexico is either arid or semiarid and because of this, socioeconomic growth and the well-being of its people have been closely tied to water resources availability and development. Mexico's history of water resources management and development dates from long before the Spanish conquest. Because of its recent rapid population and economic growth and because of increasing difficulties in developing new water resources, Mexico faces major critical challenges in water resources management now and in the future. 1.2 As a part of its ongoing ambitious economic modernization program, the Government of Mexico (GOM) is confronted with problems arising from growing water scarcity and the more general need to conserve and protect the nation's natural and environmental resources. The National Congress approved a new National Water Law (Ley de Aguas Nacionales, LAN) in December 1992 and its regulations in January 1994. The LAN sets out broad based mandates for the development and implementation of plans and policies related to water resources management. The responsibility for responding to these mandates was assigned to Mexico's National Water Commission (Comisi6n Nacional del Agua, CNA). 1.3 CNA (the national water authority) is a relatively young institution created in 1989. It inherited a water system and institutional mechanisms that were in desperate need of modernization. The water infrastructure was in poor repair. Individuals served by the water systems had lost confidence in "top-down" centralized government policies emanating from Mexico City. During its short tenure, CNA has made remarkable strides in ameliorating many of these basic problems. Through its promotion of the creation of Water User Organizations, CNA has decentralized operation and maintenance activities in irrigation districts. At the local and regional levels, it has successfully joined stakeholders (state and local governments, water users and other interested parties) in programs designed to: (a) improve water resources planning and management; (b) modernize water infrastructure; (c) improve and make more responsive operation and maintenance activities; and (d) reduce technical and financial dependence on central authorities. 1.4 Notwithstanding these successes, CNA faces formidable challenges if it is to effectively respond to the mandates of the LAN. CNA's established expertise in the construction and operation of water storage and distribution facilities is not well suited for meeting the challenges of water resources planning and management. CNA has a relatively small group of highly qualified professionals with experience and training related to water resources planning and management which needs to be built upon, expanded and enhanced in order to meet the challenges of the LAN. CNA lacks the equipment and  2 MEXICO - Water Resources Management Project/Staff Appraisal Report technologies for contemporary monitoring programs requisite to activities such as the rational control of water quantity and quality, comprehensive regional water resources planning, improved reservoir operation and aquifer management, and dam safety. B. LEGAL FRAMEWORK 1.5 Article 27 of the Mexican Constitution (adopted in 1917) recognizes the Nation as the owner of all water within the territory and authorizes the government to administer these resources and to grant "concessions" for water use. The LAN and its regulations have established a legal and regulatory framework to tackle the management of scarce water resources. The stated objective of the law is "to regulate the extraction, use, distribution and control of the nation's waters as well as preserve their quantity and quality in order to achieve sustainable integral development". Implementation of the LAN and its relevant regulatory matters is a main CNA task. Refer to Annex A for more details. 1.6 The LAN recognizes the importance of water resources management and authorizes CNA to carry out this function with the objective of achieving sustainable development and use of water resources. Water management is to be carried out with the participation of water users to the maximum extent possible. The LAN specifically authorizes the establishment of river basin councils (Consejos de Cuenca) that would be responsible for coordinating activities and reaching consensus between CNA; other federal, state and municipal agencies; and water user representatives on matters related to water management in the river basins. 1.7 When determined to be necessary by CNA, the LAN provides for the establishment by decree of special administrative and reserve zones in areas where problems of overuse, water quality or the environment necessitate this action. Zones can also be established during drought conditions or during other emergency situations. In these zones, water use can be restricted or curtailed completely as determined to be technically necessary to preserve the environment and the water resources. C. INSTITUTIONAL SETTING 1.8 Mexican water resources policy as presented in the National Water Plan 1995- 2000 (Programa Nacional Hidraulico 1995 - 2000) is oriented toward ensuring the availability of water to satisfy the needs of the population and promote the development of economic activities in a manner that is environmentally compatible and sustainable in each region of the country. In accordance with this policy, avenues must be found for sustainable development which requires establishing control and conditionalities on water usage such that economic development is compatible with environmental protection. The importance that the GOM bestows on the environment and on sustainable use of water resources is manifest in the decision to relocate CNA from the old Agriculture and Water Resources Ministry to the newly created Environment, Natural Resources and Fisheries Ministry, (Secretaria de Medio Ambiente, Recursos Naturales y Pesca - SEMARNAP). This change has strengthened the authority that CNA has in the administration and  MEXICO - Water Resources Management Project/Staff Appraisal Report 3 management of water resources, because it is no longer located within a Ministry responsible for one sector (agriculture). In accordance with the National Water Plan 1995-2000 and the LAN, CNA has set a new agenda to modernize and decentralize the management of the nation's water resources considering all uses and the preservation of the environment. The Water Resources Management Project (WRMP) is the instrument that the GOM has designed to carry out this new agenda. Refer to Annex A for more details. 1.9 CNA was created in 1989 to unite all aspects of water management. CNA has a central office located in Mexico City and 6 regional offices, as follows: Northwest, in Ciudad Obreg6n, Sonora; North, in Torre6n, Coahuila; Northeast, in San Luis Potosi, San Luis Potosi; Southeast, in Merida, Yucatan; Lerma-Balsas, in Queretaro, Queretaro; and Valley of Mexico, in Ciudad de M6xico, Distrito Federal. In addition, CNA has state offices located in each of the 31 state capitals. CNA has functioned in a centralized way, but has recently adopted and is currently implementing a policy whereby: (a) the Central Office functions will include oversight of water management activities and establishment of overall policy, criteria and uniform guidelines and procedures; and (b) the Regional Offices will have principle responsibility for water management, including: (i) the development of hydrographic regional plans; (ii) the promotion and strengthening of basin councils; (iii) the coordination of water resources planning and management activities both by public and private sector participants; (iv) water quantity and quality monitoring activities; (v) reservoir operation; (vi) the registry of water users into the National Public Water Rights Register; and (vii) dam safety. 1.10 At each level (central, regional and state) CNA has a similar organizational structure. There are three subdirectorates within CNA which would have direct responsibilities for the implementation of the Project. They are: (a) the Technical Subdirectorate (Subdirecci6n General Tecnica, SGT), responsible for aspects related to meteorology, surface water, groundwater, water quality and dam safety; (b) the Planning Subdirectorate (Subdirecci6n General de Programaci6n, SGP), responsible for water resources planning and river basin councils; and (c) the Water Administration Subdirectorate (Subdirecci6n General de Administraci6n del Agua, SGAA), responsible for water rights administration. Because these three departments encompass responsibilities for all aspects of water resources management and their being located within one institution with clearly defined legal responsibilities, CNA's organizational structure is very well suited to planning, coordinating and implementing a comprehensive integrated water resource management program. 1.11 Presently the CNA Regional Office boundaries are along State lines. As stated in the National Water Plan 1995-2000, GOM has recently decided to reorganize CNA's regional dependencies into 13 regional offices with their boundaries being located along river basin boundaries. This reorganization will significantly facilitate the regional offices' abilities to carry out their water management responsibilities, because river basins will be located totally within the geographical limits of the Regional Offices.  4 MEXCO - Water Resources Management Project/Staff Appraisal Report 1.12 In accordance with the LAN, CNA is the national water authority with complete responsibility for water rights administration, the management of the nations water resources and dam safety. Other public and private entities, including the Federal Electricity Commission (Comisi6n Federal de Electricidad - CFE), that operate reservoirs must do so with CNA authorization and oversight. CFE operates 64 dams with hydroelectric plants. The Director General of CNA presides over a Technical Committee for the Operation of Hydraulic Works. In addition to CNA authorities and technical personnel, a CFE representative participates on the committee. The committee makes overall decisions relative to the operation of the nation's reservoirs including considerations related to floods, droughts, multiple uses (irrigation, municipal and industrial, hydropower, navigation, recreation, etc.) and environmental protection. 1.13 The Mexican Institute for Water Technology (Instituto Mexicano de Tecnologia del Agua - IMTA) is responsible for water related research, technology evaluation and transfer, and for training. It coordinates work being done at universities, research centers and other institutions in Mexico and internationally, and has cooperative relationships with various water related entities throughout the world. LMTA's participation in the training subcomponent as well as in other aspects of the project will be important to its success. D. CHALLENGES FOR WATER RESOURCES MANAGEMENT IN MEXICO 1.14 Mexico has a mean annual rainfall of 780 mm, about 27% of which becomes runoff of about 410 billion m3 per year. Renewable groundwater is estimated at 63 billion m3 per year, 48 billion from natural recharge and another 15 billion from deep percolation associated with irrigation projects. Additionally, there are an estimated 110 billion m3 of non-renewable groundwater that could be available for one-time use. Climatic regions vary greatly from tropical rainforests with over 3000 mm of annual rainfall in the south to arid deserts with less than 100 mm in the north. Runoff variation is even more extreme, from over 2 million rn3 per square kilometer per year in the wettest areas to essentially zero in the driest. 1.15 In the dryer parts of the country, precipitation and runoff are highly erratic with large variations from year to year and extreme seasonal differences. In these areas, rainfall occurs during a 2- to 4-month period and is related to thunderstorm and hurricane activities which can be very intense and cause flash flooding. Runoff is directly associated with the precipitation and most streams and even rivers dry up during periods of no rainfall. 1.16 Mexico is a country of approximately two million square kilometers with about 90 million inhabitants as of the end of 1995. This compares to a population of about 25 million in 1950, an increase of 3.6 times in 45 years. Population growth has occurred in every part of the country, but has been greatest in the northwest, northeast and central regions, precisely the areas with the most severe water scarcity problems. During this same period, the economy as measured by gross domestic product has increased from about US$40 billion to about US$330 billion (in constant 1994 dollars) or an eightfold increase. Both population and the economy (notwithstanding the severe economic  MENiCO - Water Resources Management Project/Staff Appraisal Report 5 dislocation of 1995) are projected to continue to grow at annual rates of 1.5% and 3.C%/o, respectively. 1.17 The location of population and economic activity is inversely related to the availability of water. Less than a third of total runoff occurs within the 75% of the territory where most of the country's largest cities, industrial facilities and irrigated land are located. Consequently, surface runoff and groundwater are increasingly insufficient to support the high growth rates and economic activity, resulting in disputes over surface water usage and the overpumping of aquifers; additionally, water pollution has reduced the potential beneficial use of certain rivers and water bodies. Conflicts among competing and intersectoral users have heightened important political and social side effects. Paradoxically, the abundance of water in some areas also presents severe problems of land drainage and flooding. 1.18 The GOM has concluded that a major effort should be made to improve water management, conservation and intersectoral allocation of water resources. The latter will rely principally on the establishment of a system of tradable water rights (water markets). The historical increases in population and economic output have resulted in increasing demand on the nation's natural resources, which in the case of water has reached the limit of its availability in many regions of the country. Continued growth will depend on making water available to those sectors that require it in sufficient quantity and adequate quality. Constructing new reservoirs is costly and often environmentally questionable. Other alternatives for increasing water supply such as transbasin diversions and desalinization in most cases would be prohibitively expensive. Improved water management, conservation and the establishment of a system of tradable water rights (water markets), if well planned and administered, can make significant amounts of adequate quality water available when and where it is needed without major new construction. 1.19 Population growth and urbanization have increased the demand for water. Conflicts have arisen between urban and rural users, between neighboring cities, and, most frequently, between neighboring states and regions. Increasing gaps between those who have access to water services and those who do not; overpumping and contamination of aquifers; overdiversion and deterioration of water quality in rivers and lakes; severe natural occurrences of flooding and droughts; downgrading of water services due to poor maintenance and weak technical and administrative support; and water wastage or inefficient water use practices are among the pressing problems facing water management in Mexico. The situation can only become more difficult as population and economic growth continue in the future. The GOM urgently needs to address these problems in a comprehensive, and well planned and executed water resources management program which is the purpose of the WRMP. 1.20 Surface Water. Water has played a crucial role in Mexico's national and regional development. For over 60 years, the expanding use of surface water for irrigation, municipal and industrial purposes has been based on the development of hydraulic infrastructure. In the future, the construction of dams and other hydraulic infrastructure  6 MEXICO - Water Resources Management Project/Staff Appraisal Report will be increasingly difficult, because most of the obvious economically justifiable water resources developments have been completed. Environmental concerns and land use and resettlement issues have also reduced the likelihood of new major developments. Nevertheless, underutilization and economic inefficiencies in the use of existing facilities provides far-reaching opportunities for water conservation and equitable reallocation through a comprehensive water management program. 1.21 Hydrology. The country's hydrometric network requires major upgrading, both in quantity and technology. Surface water management should be based on good hydrological assessments and comprehensive technically supported regional water resources planning studies, which in turn require sufficient accurate data. The determination of potential impacts on third parties is required for the adequate administration of water rights and water right transfers. This requires adequate accurate data and good river basin hydrological modeling. Hydrological information for reservoir inflows and outflows and data to improve reservoir management during floods, droughts and normal conditions are needed. 1.22 Groundwater. Two million hectares of irrigated agriculture, 55 million city dwellers and more than half of the industrial production in the country are dependent on groundwater for their water needs. In most cases alternative sources of water are either not available or too costly. 1.23 Overexploitation (withdrawal in excess of recharge) of groundwater resources is a major problem in the arid and semi-arid regions of Mexico where the majority of the people and industrial production are located, and where irrigation is a major consumer of water. This leads to increased pumping costs, to abandonment or reconstruction of wells as water table levels go down, and to degradation of groundwater quality. Because overexploitation is inherently a non-sustainable condition and because important regions of the country are dependent upon groundwater resources for their water supply, well planned and strong management actions are necessary to avoid economic and social disruption. 1.24 CNA has identified and characterized 459 aquifers and performed hydrogeological assessments on many of them. They have determined that 80 of these aquifers are presently overexploited, some having critical problems. Improved groundwater monitoring, aquifer modeling and evaluation are urgently needed to better identify problems and plan cost effective solutions. Major efforts will be required to evaluate aquifers, and develop and implement programs for aquifer stabilization. This requires adequate accurate data and good aquifer modeling. 1.25 Meteorology. Because of its geographic location, Mexico is subject to a variety of meteorological phenomena including thunderstorms, and tropical and subtropical hurricanes which occasion intense rainfall resulting in often severe flooding. These occurrences can cause major economic social and environmental damage and loss of life, and therefore require state-of-the-art meteorological and hydrological forecasting services, excellent coordinated flood warning systems and considerable floodplain planning of both  MEXICO - Water Resources Management Project/Staff Appraisal Report 7 structural and non-structural management measures. In much of the country, these intense rainfall events are the main source of water to fill the storage reservoirs and good water management requires balancing the often conflicting objectives of capturing and storing as much water as possible for future release during dry periods while maintaining a certain storage capacity empty in order to provide for flood protection. 1.26 Droughts. Mexico is also subject to the phenomena of droughts, particularly in the northern part of the country. Droughts may last from 1 to 4 years and during these periods rainfall and runoff may be reduced by as much as 40%. Because in many areas, water utilization nearly equals and even exceeds availability during normal years, droughts require major managed reductions in use and good contingency planning. 1.27 Although some drought contingency planning and management is done in Mexico, it is mostly localized and directed towards dealing with emergencies while they occur. What is needed is the definition of criteria and procedures, the development of detailed drought contingency plans, and the adoption of institutional and coordination mechanisms for implementing the plans prior to, during and after droughts. 1.28 Water Quality. As surface and groundwater exploitation has increased through the years, there has been an accompanying degradation in water quality. This occurs with all consumptive uses of water and is the consequence of the sequence of diversion, use and return flow, the later invariably having a poorer quality than the former. Untreated return flows from industries, municipalities and irrigation are often highly contaminating. In the case of groundwater, there is also the problem of salt water intrusion from saline water bodies or saline aquifers. Water quality deterioration has been especially pronounced in Central and Northcentral regions of the country and major management actions are required in order to achieve sustainable continued development. 1.29 In recent years, CNA has been attempting to address the water quality problem. The process of classifying water bodies, inventorying point discharges, issuing discharge requirements and inspections of compliance with discharge requirements is a huge undertaking which will take many years. Considerable capacity building and numerous water quality assessments will be necessary. CNA has identified 20 critical basins where they are presently directing their efforts. 1.30 To support the CNA!s necessary role, water quality laboratories will have to be upgraded, equipped and certified at the central and regional levels of CNA in order to perform a large number of analyses. The water quality monitoring network and water quality information system will need to be upgraded. 1.31 Dam Safety. Mexico has over 4000 dams (more than 3 meters high and/or with storage capacity greater than .5 million cubic meters). Of these, 640 can be classified as "Large Dams" (more than 15 meters high) in accordance with the International Commission on Large Dams (ICOLD). Many of these dams have population centers downstream as well as valuable property. Additionally, many of the dams were built several decades ago using design and construction standards that would be considered  8 MEXICO - Water Resources Management Project/Staff Appraisal Report inadequate today. In many cases lack of adequate maintenance has created potentially unsafe conditions. 1.32 CNA has recently initiated a dam safety program to address these issues which needs to be strengthened. The current program which is in its initial phase includes: (a) completion of a National Register of Dams; (b) inspection and hazard classification of all dams included in the National Register; and (c) establishing and consolidating institutional mechanisms and technical procedures for an ongoing safety of dams program. In a separate program CNA will carry out necessary repairs as soon as practicable after their need is detected. Part of this program could be financed by the Bank under a separate future loan. 1.33 Water Rights Administration. The establishment of the National Public Water Rights Register (Registro Publico de Derechos de Agua - REPDA) and the development and implementation of institutionaUadministrative mechanisms and procedures for granting water right concessions, approving transfers, authorizing discharges, charging and collecting fees, and establishing and administering special reserve zones are prerequisites to a rational, efficient and equitable reallocation of water between various users and uses which can partially be accomplished through a well established and administered system of tradable water rights. The mechanisms and procedures need to be straightforward, equitable, rapid and not costly. 1.34 CNA is presently in the process of identifying users, assisting them in becoming registered water users or dischargers, and providing the necessary administrative and technical support to the water fee charge/collection process. This is a massive undertaking. As of the end of March 1996, about 43,400 water users have initiated the registration process and about 37,600 have been formally registered. The total number of users to be registered is not known, but is estimated to be on the order of 300,000. This estimate considers irrigation units and modules each as single users, when in fact they can have a number of individual irrigators within their areas. 1.35 The charging and collecting of fees is of major importance for water management in Mexico for three main reasons: (a) when effectively set, applied and administered they can provide major incentives for conservation and economically efficient use of water, and for reducing contamination; (b) they can provide effective inducements for the beneficial use of water and for trading water rights to higher value users; and (c) even though there is no direct relation between fee collection and financing of water management activities, they could provide the possibility in the future of directly financing water management activities depending on the policy of GOM. Additionally, if fee collections could be applied to addressing water management needs directly in the regions (basins, aquifers) where they are collected, this could increase the willingness to pay of the water users, because they would be able to directly observe the benefits in their areas and could benefit directly from the improved management. 1.36 Although the government has made good progress in identifying and registering current water users and discharges since the 1992 publication of the LAN and its 1994 regulations, there are still many issues related to the administration of water rights that  MEXICO - Water Resources Management Project/Staff Appraisal Report 9 need to be tackled to ensure that the water market achieves its desired objectives. Some of these include facilitating the registration of existing water users, implementing a modified fee schedule for extracting and discharging water, training CNA staff so that they can better protect against aquifer depletion and possible negative third-party effects, and volumetric pricing. 1.37 Water Resources Planning. All of the activities discussed in paragraphs 1.20 through 1.36 above need to be carried out within the framework of a comprehensive planning process that integrates the various actions into a coordinated whole. The GOM developed National Water Plans in 1975, 1981 and 1994. The National Water Plan 1995- 2000 (a recently updated version of the 1994 Plan) provides a good understanding of water availability in different regions of the country and of the historical, present and projected future demands for water. The Plan identifies water as a strategic national resource that needs to be managed and preserved in support of growing and changing needs, and lays out strategies and lines of action for meeting the future water demands of the country. The Plan emphasizes: (a) improving the operation, maintenance and use of existing monitoring networks and hydraulic infrastructure; (b) transferring irrigation districts to water users; (c) promoting the participation of water users and other interested parties in water planning and management issues; (d) promoting the participation of the private sector; (e) increasing and improving municipal and domestic water supplies; (f) reducing contamination of surface and groundwater bodies; (g) developing and implementing programs for aquifer stabilization; (h) promoting the establishment and strengthening of river basin councils; (i) decentralizing water planning and management activities; and () providing training to individuals and strengthening to institutions involved in water management. In 1995 the GOM presented a National Development Plan 1995-2000 for which the National Water Plan is a support document. The National Water Plan will play a key role in the success of the National Development Plan particularly in the development of 100 urban centers. 1.38 The LAN identifies the river basin as the appropriate unit for water resources planning and management. At the river basin level, comprehensive plans need to be developed in the context of a broad strategy which considers the responsibilities and activities of all participants in water use and management, while fully taking into account the ecosystems and socioeconomnic structures that exist in the river basin. The planning process should deal with cross-sectoral issues with the goal of ensuring the sustainability of the water environment for multiple uses as an integral part of the country's economic development process. 1.39 River Basin Councils. The river basin councils, provided for in the LAN, have a key role to play in river basin planning and management. They will provide a forum for: (a) identifying and evaluating problems and needs; (b) developing consensus between the various government entities, water users and other interested parties; (c) recommending actions; (d) obtaining comrmitments to carry out the actions; and (e) following up to ensure continued commitment and compliance with agreed upon initiatives. The river basin councils have the overall responsibility of making the planning process dynamic,  10 MEXICO - Water Resources Management Project/Staff Appraisal Report participatory and result oriented, rather than a sterile paper exercise, as is often the case when undertaken by centralized government institutions. 1.40 There is presently one functioning river basin council: Lerma-Chapala which has been operational since 1993. In addition, there are two river basin councils that have recently been formed but have yet to show significant advances in water resources planning and management: (a) Rio Bravo; and (b) Valley of Mexico. During the next few years ten additional river basin councils will be organized. All of these councils will need major support to ensure they achieve their objectives. 1.41 The GOM and CNA have developed a long-term vision (probably at least a 10-to- 20-year time-frame) for water management in Mexico whereby the river basin councils would provide the nucleus for regional organizations that would assume operational and financial responsibilities for water resources management within the hydrographic regions. They would become technically, administratively, financially and operationally independent. CNA would revert to being the national water authority, including water rights administration and ensuring that water management is carried out in accordance with the law and regulations. 1.42 Special Administrative and Reserve Zones. One of the goals of the planning process, as provided for in the LAN, will be the identification and classification of special administrative and reserve zones, and the development of contingency plans for them. The zones may be established in areas where surface water, groundwater or both are overexploited, or where water quality or environmental problems are severe. These zones will be critically important in achieving the sustainable development goals of the GOM. Each zone will have special individual aspects which will require specific actions, but should be established within an overall policy framework. Criteria, mechanisms and enforcement procedures for the zones will need to be designed and implemented and should be equitable, efficient and cost effective. 1.43 Capacity Building. Water resources management activities need to be improved and intensified at the central and regional levels. Both levels will require considerable capacity building and restructuring in order for them to be able to assume their myriad water resources management responsibilities in an integrated, efficient and competent manner. 1.44 The capacity building will be geared towards meeting the needs of the different levels. The Central office needs to direct its capacity building towards the development of policy, guidelines and manuals and towards coordination of water management activities at the national level. Regional office capacity building should be geared towards regional planning and management, participatory initiatives, coordination of regional entities and water users, consensus building, developing institutional mechanisms for implementing and maintaining the REPDA, reservoir operation, flood warning, dam safety, and data collection and processing.  MEXICO - Water Resources Management Project/Staff Appraisal Report 11 E. BANK INVOLVEMENT AND LESSONS LEARNED 1.45 Past Bank Involvement. The Bank has extensive experience in financing water projects in Mexico for over 25 years. The water-resources-management-type project is somewhat new in the Bank and similar projects just began in Asia during the past three years. In fact, the Mexican Water Resources Management Project would the first to address all significant aspects of water resources management on a nationwide multi- sectoral basis. Project preparation is ongoing on a similar project for Morocco and Brazil. Lessons applicable to the proposed project can be drawn from related Bank financed water projects in general and from the irrigation and water supply and sanitation projects in Mexico in particular. 1.46 In 1972 the Bank entered into a tripartite agreement with UNDP and GOM to prepare the 1975 National Water Plan. The resultant Plan provided a basis for water development and management during the ensuing years and has proved to be extremely valuable in outlining the general direction for these activities. Although the plan was integral and considered most aspects, it emphasized water development and the construction of infrastructure. The major portion of the hydraulic infrastructure and irrigation projects built since 1975 were discussed in the Plan. 1.47 The proposed project, without any duplication of actions, would be a sequence and follow-up of actions initiated in 1991 with Bank support to CNA through three main on- going operations, the Irrigation and Drainage Sector Project, Loan 3419-ME (IDSP) (1991), the On-Farm and Minor Irrigation Networks Improvement Project, Loan 3704- ME (OFMIN) (1994) and Second Water Supply and Sanitation Sector Project, Loan 3751-ME (SWSSS) (1994). The focus ofthe first two projects, geographically located in the Irrigation Districts, is: limited public role, decentralization, efficient budget allocation, shared private investment and economically efficient use of water resources. The third project is directed toward supporting the decentralization and self-sustainability of local water and sanitation utilities (Organismos Operativos). The new proposed project would complement the previous ones, including applying the provisions of the LAN and its regulations under a broader watershed and intersectoral scope to improve integrated, economically efficient and environmentally sustainable water use through better management. 1.48 Irrigation and Drainage Projects in Mexico. During the past 25 years, Mexico has received 20 Bank loans for the irrigation and drainage subsector, amounting to about US$1.4 billion. These projects, excluding the IDSP, contributed to the creation of about 500,000 ha of irrigated land and to rehabilitation of an additional 900,000 ha in northern Mexico. Relevant lessons learned from the last five operations, including preparation of the on-going IDSP and OFNIN have been reflected in recommendations and incorporated in the design of this project. Decentralization and privatization of the operation and maintenance functions in the irrigation sector have been very positive and must be encouraged in other areas of water resources use and-management.  12 MEXICO - Water Resources Management Project/Staff Appraisal Report 1.49 The IDSP project results so far have been rated "satisfactory." The key project implementing indicators related to policy like the transfer of irrigation districts to water user organizations and operation and maintenance self-sufficiency are ahead of schedule. The major current problems are related to a lack of Government counterpart funds. 1.50 Water Supply and Sanitation Projects in Mexico. Bank involvement in the water supply and sanitation sector started in 1973 with the approval of the first water supply loan. To date, six loans totaling about US$675 million have been made. The first loan was to build bulk water supply facilities for Mexico City. The next three loans were to finance physical improvements in various medium-sized cities. The fifth loan, aimed at supporting water and sanitation facilities and productive opportunities for women, never became effective and was canceled. The sixth loan is the on-going SWSSS. The first four projects achieved their physical targets but, the institutional and financial objectives were not attained. However, under the ongoing sector loan, better progress has been made in attaining those objectives. The project aimed correctly at formulating and implementing policies of decentralization that are now in effect. It reduced Government participation in the financing of the sector. For the first time, beneficiaries are participating to a partial degree in the design and decision mechanisms for the formulation of subprojects. Financial self-sufficiency is being more closely achieved by increasing the amount of collection and the cost effectiveness of actions. 1.51 Water Resources Operations in Asia. Four similar water projects in Asia provide good preparation experience for the proposed project. They are: (a) National Hydrology Project in India (SAR, July 14, 1995); (b) the Irrigation and Water Resources Management Project in Indonesia (currently in the initial stages of implementation); (c) National drainage Program in Pakistan; and (d) two Dam Safety Projects, one in Indonesia and the other in India (both currently in implementation). 1.52 Lessons Learned. Summary of Recommendations. The main lessons learned from other Bank financed projects are: (a) CNA staff participation should be ensured from the early stages of project preparation, through appraisal and into implementation; (b) implementation schedules should be realistic and achievable; (c) improvements to field monitoring networks should include establishing and implementing adequate operation and maintenance procedures; (d) relevant manuals and guidelines should be developed in the early stages of project implementation; and (e) budget allocation for project related activities should be closely monitored. 1.53 Other recommendations applicable to the proposed project based on lessons learned reflect the need for: (a) capacity building in water management at the central and regional levels; (b) training staff at all levels in modem water management methods and technologies; (c) ensuring coordination and integration of the various parts of the project into an integrated comprehensive whole through river basin planning and management and regional office/river basin council participation in project implementation; (d) ensuring substantial stakeholder participation through improved communications; (e) decentralizing water management activities; (f) improving field monitoring technologies and the operation and maintenance of monitoring networks; (g) improving attention to safety and  MEXICO - Water Resources Management Project/Staff Appraisal Report 13 maintenance of existing dams; and (h) developing conditions for real-time management of water resources. F. WATER RESOURCES MANAGEMENT WORLD BANK POLICY PAPER, 1993 1.54 Mexico's national water policy and water management objectives are in close accord with Bank policy as enunciated in the Water Resources Management: A World Bank Policy Paper, Washington DC, September 1993. The Policy Paper and the Mexican water resources management program (as reflected in the National Water Plan 1995- 2000) and in the LAN recognize that water is an economic good and therefore should be managed in an efficient manner. In order to do this, governments should develop and implement comprehensive policy frameworks including institutional reforms leading to sustainable water resources development and management. The framework and reforms should be directed towards: (a) harnessing the efficiency of market forces; (b) strengthening the capacity of governments to carry out their essential roles; (c) decentralizing water management activities; and (d) promoting stakeholder participation. Water resources planning and management should be carried out considering the interrelationships between water, land and human resources with the objective of enhancing economic growth and development in an environmentally sustainable manner. 1.55 The Policy Paper and the Mexican water resources management program identify the river basin as the appropriate unit for water resources planning and management. At the river basin level, comprehensive plans should be developed in the context of a broad strategy which considers the responsibilities and activities of all participants in water use and management, while fully taking into account the ecosystems and socioeconomic structures that exist in the river basin. The planning process should deal with cross- sectoral issues with the goal of ensuring the sustainabiity of the water environment for multiple uses as an integral part of the country's economic development process. 1.56 The Policy Paper and the Mexican water resources management program emphasize the need for reliable data, in many cases real-time, for good water resources management. Necessary steps in defining adequate information systems should include: identifying users of data, defining information needs, selecting appropriate data collection technologies, and establishing national data banks. 1.57 The need for institution and human resources capacity building are identified in the Policy Paper and in the Mexican water resources management program as important elements in an overall water resources management strategy. Also, insuring adequate financing is essential to developing, implementing and sustaining a water resources management program.  14 MEXICO - Water Resources Management Project/Staff Appraisal Report 2. THE PROJECT A. ORIGIN 2.1 The project evolved out of a long-term strategy of lending to the Mexican water sector as discussed in paras. 1.46 through 1.50. The project was conceived in order to assist the GOM in meeting the objectives of the LAN and its regulations. An initial identification mission went to Mexico in September, 1994 when the overall project objectives, components and preparation report requirements were defined. Because of the change of administration and the financial/economic crisis that began in December, 1994, project preparation was curtailed until July, 1995 when another identification mission was carried out. Between then and the appraisal mission in February, 1996, preparation activities were continuous and intense. 2.2 To support project preparation, the government of Japan approved a Policy and Human Resources Development (PHRD) Fund in the amount of 72 million yen (US$680,000). This grant has been used to finance various project preparation activities including technical consultants and study tours which have helped to focus on the definition of numerous technical aspects of project preparation. B. PROJECT OBJECTIVES AND DESIGN CONCEPTS 2.3 The WRMP objectives are directly in line with the National Water Plan 1995-2000 and are within the legal framework provided by the LAN. The general objectives are to: (a) promote conditions for environmentally sustainable, economically efficient and equitably allocated use of water resources in Mexico; (b) support the integrated comprehensive management of water resources; and (c) increase the benefits and reduce the risk related to existing hydraulic infrastructure. 2.4 Secondary project objectives are to: (a) support groundwater conservation by reducing overexploitation and contamination; (b) promote the restoration of surface water quality; (c) improve meteorological services for improved water management and for the society and economy as a whole; (d) reduce flood damages downstream of reservoirs; (e) improve dam safety; (f) improve allocation of water as an economic good; (g) promote decentralization of water resources management through the establishment and strengthening of river basin councils; (h) improve water resources planning through the development of the hydrographic region plans with river basin council participation; and (i) improve water rights administration through registry of water rights users and improved fee collection. 2.5 The proposed project buttresses GOM water sector policies by supporting the establishment of streamlined and efficient water rights administration in accordance with the LAN, and thus creating the main tools and conditions for an operational tradable water rights system (water markets). These are required to: (a) facilitate the reallocation of water to more economically efficient uses in a voluntary manner; (b) facilitate the transfer  MENICO - Water Resources Management Project/Staff Appraisal Report 15 of O&M to water users and encourage private investment; and (c) ensure equitable compensation for water right transactions through market mechanisms. 2.6 The thrust of the project objectives involves the Bank's assistance in the process of formulating basin water plans, the development of decentralized and market-based policies designed to provide incentives for the conservation and efficient use of water resources, and assisting CNA in the adoption of appropriate technologies, the monitoring of water quantity and quality, reservoir operation and aquifer management, and dam safety programs. (See Annex H, Tables H-I and H-2 for correlations between project objectives and components and subcomponents.) 2.7 Historically water planning and management has been highly centralized in Mexico. With the gradual establishment of River Basin Councils and the corresponding decentralization of water resources planning and management, the role of CNA will undergo considerable change. At the central level, CNA will coordinate the development of water policy and strategy in the context of government objectives in the areas of economic development, social well being, environmental protection, public health, rural and urban planning, decentralization and international treaty obligations. At the regional levels, CNA will support the River Basin Councils by providing them with technical support in the areas of water resources monitoring, planning, assessments and management. Regionally, CNA will also function as the Water Authority, registering water rights and transfers, and monitoring compliance with the LAN. The project would support major decentralization activities within CNA whereby the regional offices will undergo significant change to assume the principle role of water resources planning and management, all within the context of the river basin. These offices will be responsible for regional water resources planning and management, for promoting the establishment of river basin councils, for coordinating activities within the hydrographic regions basins of the various stakeholders and for water rights administration. The implementation of the project components and subcomponents will be within the framework of the river basin planning and management activities and will complement and enhance those efforts. The regional offices will play a key role in defining the actions to be taken within their area of influence. Thirteen regional project implementation plans will be prepared to detail implementation activities in each of the thirteen new regional offices that are in the process of being organized. 2.8 Regional offices will also be strengthened in their roles of providing the direct contact with water users for water rights administration, data collection and processing, data bank maintenance, operation and maintenance of data collection networks, and operation and maintenance of hydraulic infrastructure. 2.9 In order to adequately implement the project, CNA will require an estimated 543 new professionals to be recruited from the outside to enable the different project areas to implement the project. An additional approximate 79 permanent professionals, 235 temporary professionals (for 2 years to assist in the one-time program for the registration of water rights) and 102 technicians would be brought into the project related units from other parts of CNA. The total 724 (543 + 79 + 102) that would be brought into the  16 MEXICO - Water Resources Management Project/Staff Appraisal Report project related units on a permanent basis would be offset by an equal number of present employees which would leave during the 6-year period, mostly by attrition. 2.10 Project Design. The project is designed to assist the GOM improve its water resources policies and management capabilities to: (a) provide the key public goods function necessary for the sustainable use and improved intersectoral allocation of the water resources; and (b) aid water users in general through an improved policy environment. The project would not include direct investment activities such as: (a) construction of hydraulic infrastructure; (b) implementation of water quality improvement plans; (c) implementation of groundwater stabilization plans; (d) implementation of regional water resources plans; and (e) remedial action on existing dams with safety problems. To maximize the effectiveness of the project, follow-on projects in these areas will be needed. Technical assistance and consultant support activities have been included in the project to support preparation activities for follow-on projects. 2.11 The project would be implemented such that the various components and subcomponents are necessary parts of an integrated whole. This would be achieved by establishing three full-time professional staff positions in CNA's General Subdirectorate for Planning (Subdirecci6n General de Programaci6n - SGP) which would be responsible for coordinating and focusing activities throughout CNA, with other government entities and private stakeholders (see para. 6.1 (a)). The SGP would ensure that the pace and focus of implementation will serve the project objectives. C. SUMMARY DESCRIPTION 2.12 Institutional Development, Technological Support and Training. Goods, services, training, and consultants to support water resources related activities of: (a) decentralization of water management; (b) adoption of new technologies; and (c) training of CNA technical personnel. 2.13 Water Quantity and Quality Monitoring Improvement and Assessment. Small works, goods, studies, engineering services, and consultants and technical assistance to support the improvement of water monitoring and assessments in all aspects of the hydrologic cycle, including meteorology, surface water, ground water and water quality. Data collection networks would be upgraded and extended. Data processing, storage, retrieval and dissemination would be upgraded. Methodologies and procedures for evaluations and modeling would be improved. 2.14 Reservoir Operation, Dam Safety and Aquifer Management Improvement. Goods, engineering services, studies and consultants to: (a) improve the operation of reservoirs and other hydraulic infrastructure during normal, drought and flood conditions; (b) improve the safety of existing dams; and (c) improve the management of aquifers both in terms of quantity of exploitations and groundwater quality.  MEXICO - Water Resources Management Project/Staff Appraisal Report 17 2.15 Water Rights Administration. Goods, engineering services, studies and consultants to support improvement in the administration of water rights for both diversions and discharges. The improved water rights administration will facilitate the establishment of dynamic tradable water right systems (water markets). 2.16 Water Resources Planning and River Basin Council Support. Goods, engineering services, studies and consultants to support improvements in water resources planning and management at the river basin and aquifer levels. River basin councils would be established and strengthened to improve the participatory aspects of planning and management. CNA wide telecommunications and computer networks/systems would be installed to improve information technologies. D. RATIONALE FOR BANK INVOLVEMENT 2.17 The Bank's past involvement in the irrigation and water sector puts it in an unique position to support strongly the on-going decentralization process in Mexico. The proposed project is also an obvious extension of GOM/Bank work initiated in the irrigation and water and sanitation subsectors and provides a basic institutional and technical framework to improve and continue the reforms in the water sector. 2.18 The objectives of the WRMP are directly in-line vith the Bank's objectives for supporting member government initiatives in water resources management. The Bank is committed "...to focus its efforts on countries where significant problems exist or are emerging involving water scarcity, service efficiency, water allocation, or environmental damage" (Water Resources Management: A World Bank Policy Paper, Washington DC, September 1993 atp. 21). Water scarcity conditions in Mexico effectively mirror those of primary interest for the Bank's policies. In more operational terms, Bank policy makes clear that "its economic sector work, lending, technical assistance, and participation in international initiatives will aim to promote policy and regulatory reforms; institution adaptation and capacity building; environmental protection and restoration..." (at p. 65). Institutional capacity building and adaptation, and regulatory/procedural reform and improvements related to water resources planning, management and use and environmental protection form the core of the ends sought in the WRMP. 2.19 The proposed project is consistent with the Country Assistance Strategy for Mexico presented to the Board on May 22, 1995 (Report No. 14518-ME). The strategy aims at assisting Mexico to manage the ongoing economic/financial crisis while continuing to support longer range programs that contribute to reductions in poverty, environmental improvements and encouraging long term sustainable growth and development, particularly through investments in human resources, infrastructure and natural resource management. The strategy also aims to extend the reform process downward to regional and state levels and support the further devolution of expenditures and responsibilities to these decentralized levels. Working within this strategy, the proposed project is specifically aimed at developing capacities to decentralize and improve water resources management functions, address environmental and water management issues at the river basin level, monitor and manage water quality and quantity, improve intersectoral  18 MEXICO - Water Resources Management Project/Staff Appraisal Report allocation and protect the country's scarce water resources, all while economic growth continues in a sustainable manner. 2.20 The project would support: (a) decentralization by aiding in the formation and strengthening of river basin councils and in the regional planning and water management activities of CNA; (b) economic growth by facilitating the reallocation of water to more efficient uses through the establishment of water markets and thereby ensure water availability in a scarce water environment; (c) environmentally sustainable use and development by: (i) improving water resources planning and management at the regional level in a participatory manner, (ii) improving water quality by better monitoring and regulation of dischargers, and (iii) reduced aquifer overexploitation through improved monitoring and regulation; (d) social well-being by: (i) improved reservoir operation during floods and droughts, (ii) improved dam safety, and (iii) improved water availability; and (e) poverty alleviation by empowering the poor through the legal registry of water rights and improved water management. 2.21 The river basin councils will provide a forum for water users, other stakeholders, state and local governments, federal entities in addition to CNA to express their opinion in water resources planning and management activities in a dynamic iterative manner. Input into decision making on policies, strategies, alternative actions, and investment and management plans will be sought and stimulated through the river basin councils. This process will facilitate the decentralization of decision making and water resources planning and management activities. E. PROGRAM OBJECTIVE CATEGORIES 2.22 As described above, the proposed project has been categorized as belonging to Sustainable Economic Development Category. It is not expected to be included in the Poverty Category: Program of Targeted Intervention. However, improved water management and the provision of legal water rights to small farmers will significantly improve the quality of life of a large number of poor individuals and families F. PROJECT DESCRIPTION (DETAILED PROJECT FEATURES) Institutional Development, Technological Support and Training (US$37.6 million total cost) 2.23 The institutional development, technological support and training component will support development of the institutional and organizational structure and the training of human resources necessary to carry out and oversee the water resources management functions during and after project implementation. This component would finance goods, services, training and consultants to support water resources planning and management activities at all levels of CNA and to improve the technological resources and professional skills of the CNA staff. It would include: (a) strengthening appropriate existing programs and structures; (b) support the decentralization of water resources management at the  MEXICO - Water Resources Management ProjectlStaff Appraisal Report 19 river basin level; (c) promote the establishment and strengthening of river basin councils in the 13 hydrographic regions of the country; (d) improve the technological resources and the professional skills of personnel in central and regional offices; (e) strengthen water rights administration and the collection of water fees; (f) acquisition of training equipment and materials for improvement of central and regional office training facilities, (g) development of key intemational technological cooperation for water resources management; (h) intensive training programs in water resource management issues; and (i) communication programs to promote stakeholder participation, particularly in the river basin councils. Refer to Annex B for details. 2.24 Technical Assistance (US$11.4 million). This subcomponent would include technical assistance from international and national organizations and consultants. The assistance would be provided on-the-job, with experts working directly with CNA technical personnel in the development, introduction and implementation of technology in the day-to-day programs of the various technical areas within CNA. 2.25 Training (US$16.9 million). The training subcomponent would consist of courses, workshops, technical stays in international institutions, and masters and Ph.D. programs. In most cases the training would consist of courses and programs that are presently offered by the institutions, although there would be some customized training provided. IMTA will be involved in various aspects of the training subcomponent and other parts of the project as defined in an agreement with CNA. 2.26 Project Coordination (US$9.3 million). This subcomponent would include the equipment, consulting services and travel expenses necessary for the coordination of the Project at the central and regional levels. Water Quantity and Quality Monitoring Improvement and Assessments (US$150.0 million total cost) 2.27 This component would finance small works, goods, studies, engineering services and consultants to update, improve and upgrade the hydrological and hydrogeological water quality and quantity monitoring and related climatological/meteorological networks, including telemetric networks to provide real-time information in order to improve the quality of information for better and more efficient water resources management. It would improve data collection, processing and dissemination among users. The component would also provide assessments of surface and groundwater bodies and hydrological and hydrogeological studies. Refer to Annex C for details. 2.28 Meteorological Services (US$41.2 million). The subcomponent would support the National Meteorological Services Group (Gerencia del Servicio Meteorologico Nacional - GS ) in the goals of improving the collection, analysis, and synthesis of data related to atmospheric phenomenon to be able to provide meteorological and climatological information and predictions to other parts of CNA, other agencies and to the general public. The improvements in weather forecasting would benefit water management and the Mexican society and economy as a whole.  20 MEXICO - Water Resources Management Project/Staff Appraisal Report 2.29 The subcomponent activities would include upgrading and improving the operation of the: (a) upper air network; (b) radar network; (c) automatic data collection platform monitoring network; (d) manual synoptic stations; (e) satellite ground station network; (f) lightning detection network; and (g) instrumentation laboratory. Forecasting techniques would be improved through the implementation of models and computerized analytical procedures. 2.30 Hydrologic Assessment and Monitoring (US$38.8 million). The subcomponent would support the Surface and River Engineering Group (Gerencia de Aguas Superficiales and Ingenieria de Rios - GASIR) in the goals of: (a) developing and providing adequate data (water level, discharge, rainfall, evaporation, sediment transport and reservoir monitoring) at national, river basin and state levels, using appropriate technology (distributed data base) within the context of a sustainable network; (b) providing near real- time information from at least 50% of the monitoring network, in particular rainfall, streamflow and reservoir data; (c) integrating the information collected into reports and other appropriate instruments for water resources planning and to support decisions; and (d) establishing a team of trained specialists covering all the technologies used in water resources and related monitoring, such as forecasting techniques, hydrological models, estimation of rainfall from satellites and radars, etc., as well as the supporting computer technology. 2.31 The component would include the: (a) design and rehabilitation of the climatological and hydrometric networks; (b) installation of new sediment laboratories; (c) rehabilitation and modernization of existing telemetry networks; (d) improvement of the radio communication network; (e) installation of new telemetry networks in priority catchments; (f) acquisition of a fleet of vehicles for network inspection; (g) establishment of a hydrometeorological data management system; and (h) operation and maintenance of the networks, laboratories, vehicles and systems listed in this paragraph. 2.32 Groundwater Assessment and Monitoring (US$25.6 million). This subcomponent would support the activities of the Groundwater Group (Gerencia de Aguas subterrineas - GAS) and aims to assess quantitatively and qualitatively and to monitor the 144 most important aquifers of Mexico. These include 70 overexploited aquifers, 60 aquifers in fragile equilibrium of exploitation vs. resources, and 14 with high potential for future resource development. All the groundwater management data and information derived from the assessment studies to be carried out and the monitoring system to be implemented by the project will be managed by the Groundwater Information System which will be an integrated part of the subcomponent. 2.33 The quantitative and qualitative assessment of groundwater resources will correspond to hydrogeological studies of the 144 aquifers to be subcontracted to consulting engineers. Each study will include: the compilation, evaluation and synthesis of all historical data; a water table field survey to update the aquifer piezometric map; aquifer modeling and development of a proposal for the quantitative and qualitative monitoring network to be implemented. For overexploited aquifers and those approaching the natural recharge/extraction balance, i.e. a total number of 130 aquifers, there will be 790  MEXICO - Water Resources Management Project/Staff Appraisal Report 21 piezometers installed in order to modernize the monitoring network. Regionalized variables modeling (Krieging techniques) would be applied to optimize aquifer monitoring networks. The implementation and operation of the aquifer networks will be carried out by subcontracts with consulting firms and drilling firms. 2.34 The implementation of the Groundwater Information System will include the design of the groundwater data bank with georeferences and intercommunication links with the CNA Water Geographic Information System (Sistema de Informaci6n Geografica del Agua - SIGA), its implementation with the necessary hardware and software at the central and regional offices of CNA, and the recuperation and processing of historical data. 2.35 Water Quality Monitoring and Laboratories (US$44.4 million). This subcomponent would support the activities of the Water Quality and Sanitation Group (Gerencia de Saneamiento y Calidad de Agua - GSCA) and has the objective of redesigning and implementing a water quality program that will provide only data that meets specific management needs, are cost-effective, and represent the types of modern environmental issues that now face Mexico (e.g. toxicity). The activities will be focused on improvements to the: (a) national water quality monitoring network; (b) national laboratory network; and (c) water quality information systems. 2.36 The water quality monitoring network will consist of a: (a) primary network that will provide general nation-wide long-term information on water quality conditions and trends; (b) a secondary network which will be flexible in time and space, and will be developed to meet specific CNA needs and control programs; and (c) a tertiary network for special water quality studies with specific monitoring stations in water bodies. 2.37 The laboratory network will include: (a) a National Reference Laboratory which will be responsible for direction and control of all analytical services provided by or for CNA, including quality control and quality assurance of CNA labs and of private labs that provide services to CNA, and will be an integrated environmental chemistry and toxicology laboratory, and will have advanced analytical capability; (b) fourteen regional laboratories, six with intermediate analytical capability including common pesticides, and eight labs with the capability of analyzing for basic parameters; (c) fourteen mobile laboratory units, eight with basic analytical capability, and six emergency mobile laboratories to handle emergency situations with a BTEX-equipped mobile facility, including gas chromatography to handle emergencies such as spills. 2.38 The implementation of the Water Quality Information System will include the: (a) integration of the three existing databases into a single database, accessed through software provided by Environment Canada; and (b) integration of this system with SIGA of CNA in its wide area network. Under WRMP, GSCA will be establishing a variety of data products for public use, as well as data integration, visualization and prediction for issues of concern to CNA management.  22 MEXICO - Water Resources Management Project/Staff Appraisal Report Reservoir Operation, Dam Safety and Aquifer Management Improvement (US$41.2 million total cost) 2.39 The component would finance goods, engineering services, studies and consultants to improve reservoir operation functions during flood events; reservoir operation and aquifer management functions during normal and drought conditions; and dam safety related programs. The component objectives would also include improving flood forecasting and warning systems, as well as planning for structural and non-structural flood protection measures. Refer to Annex D for details. 2.40 Reservoir Operation (US$14.2 million). This subcomponent would support the activities of GASIR and has the objective of improving reservoir operation to maximize the benefits derived from the operation of existing hydraulic infrastructure by increasing water availability, reducing the adverse consequences of floods and droughts, and improve hydropower generation, while ensuring environmental protection and where possible enhancement. The subcomponent activities would be supported through a technical assistance program with NOAA/NWS and would include the development and implementation of: (a) precipitation analysis programs; (b) hydrological forecast systems; (c) extended streamflow prediction models; and (d) decision support models. It would also include: (a) hydrological assessment of the major dams/storage reservoirs; (b) updating/preparing inundation maps (using SIGA), river bed conditions and risk analysis; (c) investigating and implementing measures for improving (optimizing economically and environmentally) reservoir operation during normal, flood and drought conditions; and (d) evaluating and improving estimates of reservoir sedimentation and developing and implementing programs for monitoring and controlling sedimentation in selected reservoirs. 2.41 National Dam Safety Program (US$18.6 million). This subcomponent would support the activities of the Technical Consultancy (Consultivo Tecnico - CT) during the first phase of the national dam safety program and will include: (a) decentralization of dam safety responsibilities to regional offices; (b) registry of all dams in the country over 3 meters in height and/or with reservoir capacity in excess of .5 million cubic meters; (c) development of guidelines, criteria and procedures for dam safety; (d) inspection of all dams in the registry; (e) collection and analysis of instrumentation data, and installation of new instruments at selected dams; (f) hydrological analysis (inflow design flood and flood routing studies) for selected dams; (g) development of corrective action plans and designs for selected dams; (h) elaboration of three general manuals for maintenance of different types of dams with specific plans for maintenance of selected dams; (i) elaboration of a general manual for protection of dams and specific protection plans for selected dams; () review design and construction of all new dam and dam rehabilitation projects; (k) development of emergency action plans for high-risk dams; and (1) training of dam safety personnel. 2.42 The project would not include investment costs for any remedial actions (which are the responsibility of functional areas within CNA other than CT). However, in order for the WRMP dam safety activities to have maximum effectiveness, preparation of a dam  MEXICO - Water Resources Management Project/Staff Appraisal Report 23 safety remedial actions project should be initiated as soon as possible after initiation of WRMP implementation. 2.43 Aquifer Management Improvement (US$8.3 million). This subcomponent will support the activities of GAS and will comprise prospective studies of groundwater resources management, aquifer protection, and stabilization of overexploited aquifers, and the implementation of groundwater resource optimization models. 2.44 Prospective studies, to be carried out by contracts with consulting firms, will cover the following themes: the strategic role of groundwater resources in decentralization policy, particularly in the program of 100 new urban centers defined by the National Development Plan 1995-2000; applied methodology of evaluation of groundwater extraction; non-point source contamination of aquifers; aquifer protection against point source pollution; analysis of environmental costs of groundwater overexploitation; demand management for stabilization of overexploited aquifers; and aquifer systems concept for groundwater resources management in Mexico. 2.45 The groundwater resource optimization models will be applied to aquifers of the priority water basins where water basin councils will be established with the project support. The modeling exercise will use the results of simulation models and the results of the prospective studies. The optimization models will provide the river basin councils with the necessary information on socioeconomic and environmental costs and benefits of alternative options of aquifer management in their basins. 2.46 The project would not include investment costs associated with the implementation of any aquifer stabilization plans. However, in order for the WRMP groundwater management activities to have maximum effectiveness, preparation of an aquifer stabilization actions project should be initiated as soon as possible after initiation of WRMP implementation. Water Rights Administration (US$41.4 million total cost) 2.47 This component will finance engineering services, studies, consultants and goods in the area of water rights administration, will support the activities of CNA's General Subdirectorate for Water Administration (Subdirecci6n General de Administraci6n del Agua - SGAA) in the establishment and maintenance of the REPDA and water user assistance, and in water use and discharge fee collection and control. Refer to Annex E for details. 2.48 National Public Water Rights Registry and Water User Support (US$11.2 million). The subcomponent will support the modernization of the REPDA with a series of activities to be carried out by contracts with consulting firms. These activities include: (a) the improvement of the registry operation, including software development for registry data processing; (b) the development of procedures for the processing of all registry data for overall checking of the national water rights; (c) the decentralization of the system at  24 MEXICO - Water Resources Management Project/Staff Appraisal Report the river basin level; and (d) information diffusion and easy access to registry data by the public. 2.49 Water user support service would be carried out through contracts with consulting firms: (a) a study of the water users population, using available data and statistics from various sources; (b) the revision and updating of the water users statistics by cross- checking with the REPDA, the water fee registry, the water discharge registry; and (c) the identification of all the water users, registered and non registered, including clandestine ones. The subcomponent will also support the improvement of the water user service in view to facilitating and accelerating their registration. 2.50 The implementation of the different information systems for the water user registry, the REPDA, and the water and discharge fee registry will be carried out within the global structure of an information system for water rights administration. This subcomponent will provide for the development of data bases and applications necessary for water rights administration. 2.51 Water Fee and Discharge Fee Collection and Control Service (US$30.2 million). The subcomponent of modernization of this service will include: (a) a study to develop a global assessment of the population of users and polluters; (b) a study of technology development for water withdrawal and pollution discharge measurement for fee collection and control, followed by a pilot project; and (c) a water use and discharge measurement inspection program. Water Resources Planning and Information Systems (US$71.7 million total cost) 2.52 This component will support the activities of SGP and will finance engineering services, studies, consultants and goods for the following: (a) establishment and strengthening of river basin councils, based on the consensus of the councils members on action programs for the improvement of the water resources management and the environmental enhancement in their basin; (b) development of regional water resources planning studies for the 13 hydrographic regions; (c) updating of the Regional Water Plans and the National Water Plan; (d) prospective studies of integrated water resource management; (e) development and implementation of a CNA wide telecommunications and computer network and local networks at the central and regional offices; and (f) development and implementation of geographic information system technology. Refer to Annex F for details. 2.53 Water Resources Planning Studies and River Basin Council Support (US$16.5 million). The subcomponent of regional and national planning will comprise in- house study activities and studies to be carried out by subcontracts with consulting firms. The planning process will include the following stages: (a) diagnostic of present situation; (b) preparation of scenarios for the medium and long term; (c) formulation of objectives and alternative strategies, evaluation and recommendations; and (d) preparation of the Regional and National Water Plans with the participation of the river basin councils and attention to environmental implications as they relate to water resources.  MEXICO - Water Resources Management Project/Staff Appraisal Report 25 2.54 The subcomponent of studies of integrated water resource management will support the planning process by providing prospective analysis of the critical issues in water resources management. This subcomponent will include studies on: participation of the private sector in the water sector, the role of water in the agriculture and food sector, strategy of salinity control in irrigated areas, watershed conservation, continuous monitoring and evaluation of irrigation projects, innovation in irrigation, sanitation options in rural areas. 2.55 The subcomponent will also include specific studies on aquifer management in the 13 hydrographic regions. This will concem essentially studies related to aquifer stabilization plans as groundwater resources are heavily overexploited in these basins. The analyses, using the results of optimization modeling implemented under the subcomponent of aquifer management, will focus on the socioeconomic, financial and regulation aspect of stabilization which could be adopted by the river basin councils. 2.56 The subcomponent will support the establishment and strengthening of river basin councils including a series of activities to be implemented in four stages. The activities and results will be presented to the councils for their opinions. The principal stages of implementation of this subcomponent, in each hydrographic region, comprise: (a) constitution of a technical group in charge of the implementation of the subcomponent activities, and a coordination group in charge of the communication with and the information of the water users and stakeholders; (b) diagnostic study of the present socioeconomic and environmental situation of the hydrographic regions; setting the basis for the implementation of an information and monitoring system; formulation of alternative objectives of water resource improvement in quantity and quality; (c) development of objectives; preparation of alternative action programs and priorities; (d) development of the action program and preparation of the financing plan with application of the polluter- payer principle; and (e) preparation of the hydrographic region master plan incorporating when appropriate the opinions of the council; implementation of the financial and environmental information system for progress monitoring and evaluation. 2.57 The project would not include investment costs associated with the implementation of any hydrographic region master plans. However, in order for the WRMP regional planning and river basin council support activities to have maximum effectiveness, preparation of a project to implement initiatives defined in hydrographic region master plans should be initiated after the completion of the plans. 2.58 Telecommunications and Computer Networks and Geographical Information Systems (US$55.2 million). This subcomponent would support the development and gradual implementation of a telecommunications system and computer network for CNA. Each central office and regional office would have installed a number of personal computers and work stations that would be connected to a local area network with UNIX and DOS servers with adequate computer power for all water resources management applications. The telecommunications network would provide rapid satellite communications links between all CNA offices, which will permit the transfer of data,  26 MEXICO - Water Resources Management Project/Staff Appraisal Report programs, files and electronic mail messages. The system will include INTERNET intemational connections. 159 This subcomponent will strengthen and extend the existing CNA Water Geographical Information System (SIGA) with the goal of responding to the increasing requirements of various technical, regional and administrative sectors of CNA. The subcomponent will include: (a) design update of SIGA, incorporating remote sensing capability; (b) regional extension for decentralized processing and analysis of georeferenced water resources infornation; and (c) the required computer equipment. 3. PROJECT COSTS AND FINANCING. A. COSTS 3.1 Total project costs including contingencies and taxes are estimated at about US$342 million equivalent, (see Annex I, Table 1.1). 3.2 Baseline costs are estimated at US$305.7 million and physical contingencies at US$10.3 million or 3% of total baseline project costs. Price contingencies between negotiations and project completion were estimated at US$25.9 million equivalent, or about 9% of project baseline costs plus physical contingencies. Annual price increases were applied to foreign costs in all categories in US dollar terms at a rate of 2.6%. Annual price increases for local costs were calculated using rates estimated by LAMXC of 28.9% for 1996, 12.4% for 1997, 8.1% for 1998, 5.5% for 1999, 4.7% for 2000 and 4.7% for 2001. Foreign and local price contingencies were expressed in US dollar equivalents, assuming purchasing power parity during the six-year disbursement period. Physical and price contingencies were estimated at 12% of the baseline costs. B. FINANCING 3.3 The proposed Bank loan of US$186.5 million would finance about 54.5% of total costs including taxes and duties. The breakdown by category is 100% for foreign expenditures for equipment and 87% for local expenditures for equipment; consultants 100%; training 100%; incremental operating costs for IMTA at a declining percentage of 85%, 60% and 25%; and 0% of civil works, vehicles and other incremental recurrent costs, all net of taxes (Annex I, Table I.8). The loan will be made to Nacional Financiera, S.N.C. (NAFIN), which will sign an agreement with the Government to permit the transfer of the loan proceeds to the executing agency (CNA) as a condition of Loan effectiveness. (See para. 6.2.) The balance of US$155.5 million (45.5 of costs not covered by the Loan) will be financed by GOM through its annual budgetary process to CNA. 3.4 Foreign exchange accounts for 31.5% of the costs of the project. The Bank will cover an amount equivalent to the total amount of foreign exchange costs (US$107.7 million) plus US$78.8 million of the local costs (excluding taxes), bringing Bank participation in aggregate up to 54.5% of total project costs.  MEXICO - Water Resources Management Project/Staff Appraisal Report 27 3.5 The terms of the loan will be repayment over 15 years, including three years grace, at the Bank's standard interest rate for LIBOR-based US dollar single currency loans. 3.6 The project will support major improvements in ongoing CNA activities. Because of this, the annual budgeted amounts will need to cover, for each of the technical areas, costs of: (a) non-incremental WRMIP related activities; (b) GOM counterpart activities (incremental recurrent activities, civil works, vehicles, taxes); and (c) Bank financed WRMP activities. Table I presents estimates of total budget requirements for each year of project implementation including retroactively financed activities in 1996. Table 1. Project Related Budget Requirements (USS'000) 1996 1997 1998 l NI GOM WB TOTAL NI GOM WE TOTAL NI GOM WB TOTAL SGT GSMN 5,296 680 1,162 7,137 5,296 2,833 4,844 12,973 5,296 4,240 7,249 16,785 GASIR 2,846 1,493 1,421 5,759 2,846 4,424 4,200 11,470 2,846 5,431 5,207 13,483 GAS 503 806 654 1,964 503 2,798 2,023 5,324 503 3,644 3,259 7,406 GSCA 2,033 198 140 2,370 2,033 4,467 3,156 9,655 2,033 7,265 5,132 14,429 CT 0 535 542 1,077 0 1,792 1,817 3,609 0 1,826 1,851 3,677 SGAA 7,306 3,088 1,089 11,483 7,306 6,942 2,228 16,476 7,306 6,883 1,862 16,052 SGP 9,197 459 582 10,238 9,197 988 1,252 11,438 9,197 1,610 2,040 12,847 Telec.& 0 235 1,078 1,313 0 2,125 9,743 11,868 0 2,055 9,419 11,474 Com. Inst. Dev. 0 168 901 1,069 0 862 4,635 5,497 0 1,010 5,435 6,445 Proj. Coord. 0 510 642 1,152 0 711 894 1,605 0 703 885 1,588 Tot 27,180 8,171 8,211 43,562 27,180 27,942 34,792 89,914 27,180 34,667 42,340 104,187 1999 2000 2001 NI GOM WE TOTAL NI GOM wE TOTAL NI GOM WE TOTAL SGT GSMN 5,296 2,978 5,091 13,365 5,296 2,546 4,353 12,195 5,296 1,923 3,287 10,505 GASIR 2,846 6,345 6,079 15,269 2,846 5,512 5,265 13,623 2,846 3,938 3,692 10,475 GAS 503 4,705 3,450 8,659 503 4,662 3,741 8,906 503 2,686 1,554 4,743 GSCA 2,033 4,646 3,282 9,961 2,033 4,691 3,314 10,038 2,033 4,753 3,358 10,144 CT 0 2,242 2,273 4,515 0 1,854 1,880 3,734 0 1,006 1,020 2,026 SGAA 7,306 5,994 1,309 14,609 7,306 5,023 1,092 13,421 7,306 4,834 1,034 13,174 SGP 9,197 1,946 2,466 13,608 9,197 1,342 1,701 12,240 9,197 978 1,239 11,414 Telec. & 0 2,240 10,270 12,510 0 1,914 8,776 10,690 0 1,314 6,022 7,336 Com. Inst. Dev. 0 988 5,316 6,305 0 880 4,736 5,616 0 525 2,826 3,351 Proj. Coord. 0 722 908 1,630 0 740 932 1,672 0 760 956 1,715 ToWt 27,180 32,806 40,445 100,431 27,180 29,165 35,789 92,135 27,180 22,715 24,987 74,882 NI - Non-incremental WRMP related costs (GOM) GOM - Govemment of Mexico counterpart costs WB - World Bank financed costs  28 MEXICO - Water Resources Management Project/Staff Appraisal Report 4. PROJECT IMPLEMENTATION, PROCUREMENT, AND DISBURSEMENTS A. PROJECT ORGANIZATION AND MANAGEMENT Implementing Agencies 4.1 NAFIN will channel project funds from the Bank and governmnent sources. CNA will be the implementing agency for the project as a whole (in cooperation with LMTA with regard to training and studies). 4.2 Three staff positions will be established within CNA (in SGP) to coordinate between the branches of CNA and other involved agencies, and to manage reporting, annual budget plans, supervision of implementation activities, including all procurement of goods and services, auditing, consultant contracting, and Bank-related monitoring and reporting requirements. This staff will include a coordinator, two assistants and necessary support staff (see para. 6.1(a)). Additionally, project coordination would be supported by a consulting firm that would be responsible for monitoring, evaluation and project reporting. As with other Bank financed CNA projects, project procurement would be carried out through the SGA for official review and approval and through the Financing Group (Gerencia de Financiamiento - GF) of SGP for processing with NAFIN. Additionally, an official will be appointed in each regional office to coordinate project activities within the region and with other parts of CNA. Each general subdirectorate (SGP, SGT and SGAA) will have an individual designated to be responsible for coordinating project activities. At negotiations, assurances were provided that the Government agrees to maintain the coordination functions, structure and staff. B. PROCUREMENT 4.3 The Bank will help finance contracts related to the implementation of the selected subprojects provided that: adequate counterpart funds are allocated every year to the project; and the procurement of goods is carried out in accordance with the Bank's Procurement Guidelines (January, 1995). CNA would be responsible for all the procurement of items to be financed by the Bank. Standard bidding documents issued by the Bank will be used for ICB. Standard bidding documents agreed to by the Bank and the GOM wil be used for the procurement of goods under NCB. Procurement plans for 1996 and 1997 have been prepared by CNA and were reviewed and approved by the Bank during project appraisal. 4.4 Works. Civil works will include: (a) installation of hydrologic, meteorological and groundwater monitoring stations and equipment; (b) construction/renovation of water  MEXICO - Water Resources Management Project/Staff Appraisal Report 29 quality laboratories; (c) minor protection works and instrumentation of selected dams; and (d) field surveys and engineering services. The Bank would not finance any civil works. Table 2. Procurement Arrangements (US$'000) Procurement Method International National Competitive Competitive Bidding Bidding Other N.B.F. .c/ Total A. Civil Works - - - 26.1 26.1 B. Goods 75.0 15.0 1.1 a/ 3.3 d/ 94.4 (63.7) (12.8) (0.9) (77.5) C. Consultant Services 100.1 - 100.1 (85.1) (85.1) D. Training - 17.2 b/ - 17.2 (14.7) (14.7) E. Incremental Operating 14.0 e/ 14.0 Costs - IM'TA (9.3) (9.3) F. Recurrent Costs - - - 90.1 90.1 75.0 15.0 132.4 119.5 342.0 __________ (63.7) (12.8) (109.9) - (186.5) a/ Includes national and international shopping (with at least three price quotations). b/ Includes instructors, materials, rent, travel and subsistence. c/ Non-Bank financing. J Vehicles. e/ Financed on a declining percentage basis. Items not subject to procurement or to specific procurement procedures. Note: Figures in parentheses are the respective amounts financed by World Bank. 4.5 Goods. The goods to be procured under the project are split into three major subcategories: (a) monitoring equipment (hydrometric, meteorological, water quality, groundwater, dams instrumentation, etc.); (b) water quality laboratory equipment; and (c) telemetry, telecommunications equipment and computer hardware and software, which would be procured under ICB procedures involving major packages of equipment valued at not less than US$1.0 million equivalent per package to encourage competition. Contracts for goods estimated to cost more than US$350,000 equivalent would be procured through ICB procedures in accordance with Bank Guidelines. The procurement of goods valued below US$350,000 would be through NCB procedures up to an aggregate amount of US$15.0 million equivalent. Contracts valued below US$50,000,  30 MEXICO - Water Resources Management Project/Staff Appraisal Report would be procured using local or intemational shopping, based on price quotations from at least three bidders up to an aggregate amount of to US$1.1 million equivalent. Vehicles will not be financed by the Bank. 4.6 In view of their specialized unique capabilities, technology transfer experience and good results in previous and on-going similar activities worldwide, CNA plans to contract directly (single source) with the World Meteorological Organization (WMO) and the United States National Oceanic and Atmospheric Administration's National Weather Service (NOAA/NWS) for an estimated amount of US$3 million in each case to provide technical assistance in the areas of meteorology, hydrology, water quality and information technology (see paras. 6.1(a) and 6.4(a)). WMO is the only multilateral institutional with broad experience in providing technical assistance in procurement of goods and implementation of technical programs in the areas of meteorology, hydrology, water quality, telecommunications and computer networks. NOAA/NWS would provide technical assistance in the installation and use of NOAA/NWS models for rainfall/runoff, hydrological and rainfall forecasting and decision support systems. They would provide the models free of charge. These models are the best available in the world to meet CNA's particular needs. CNA has long relationships with both WMO and NOAA/NWS and intends to continue these relationships through this technical assistance. Other international institutions with which agreements could be reached and that could provide technical assistance to CNA include UNDP, FAO, USGS, USBR, COE, EPA, BCHYDRO, EC, MET, [NM, OEE, all of which have specialized capabilities in their areas of responsibilities. Additionally, national institutions with which agreements could be reached and that could provide technical assistance to CNA include II, CCA and CFE, which have specialized capabilities in their areas of responsibilities. Bank financing of these activities would be permitted if selection procedures are acceptable to the Bank. Several World Bank member countries have expressed interest in supporting project implementation including partial financing of activities. On a case by case basis, the Bank will consider financing the GOM portion of these activities as defined in bi-lateral agreements that would be reached, if selection procedures are acceptable to the Bank. For these purposes an appropriate provision has been left in the unallocated category of the loan. 4.7 The selection and appointment of consultants for training, studies, designs and supervision of works will follow the August 1981 Bank Guidelines for the Use of Consultants. Small contracts with consulting engineering firms for assignments of a simple nature (e.g., supervision of works) below US$100,000 and for individual consultants below US$50,000, would be exempted from Bank's prior review of selection procedures and contract conditions, but would be subject to ex-post selective review during supervisions. However, all terms of reference for consulting services would require prior review by the Bank. Contracts for consultants are expected to aggregate to about US$100.1 million. This includes engineering services in areas such as installation, upgrading, and start-up operation and maintenance of monitoring networks which are expected to aggregate to about US$45 million.  MEXICO - Water Resources Management ProjectlStaff Appraisal Report 3 1 4.8 Bank's prior review would apply to: (a) all contracts for goods awarded through ICB; (b) the first two contracts each year for goods under NCB regardless of value; and (c) all consultant contracts with firms above US$100,000 and all consultant contracts with individuals above US$50,000. All other contracts would be subject to ex-post review by the Bank during supervision on a selective basis. The proposed review arrangements are expected to result in a prior review coverage level of about 70% of Bank-financed contracts. Table 3. Limits on Type of Procurement and Prior review Thresholds (USS'000) Description Type of Procurement Prior Review Limit Contract Value Civil Works Not Bank financed Not applicable < 350 Goods ICB All > 350 NCB 1st 2 contracts each year 50 to 350 Price quotations from at None < 50 least three local bidders Consulting services by Local and foreign All > 100 firms consulting firms TOR only a' < 100 Consulting services by Local and foreign All > 50 individuals individual consultants TOR only a/ < 50 a/ Exemption from prior review does not apply to consultants contracts below thresholds in cases of single source selection, assignments of critical nature, and amendments to contracts raising original contract value above thresholds. C. DISBURSEMENTS 4.9 Bank financing (about 54.5% of the total project cost) will be for goods and services. The project is expected to be completed by December 31, 2001, and the Loan closing date is June 30, 2002. NAFIN will establish a Special Account in Banco de Mexico, with an authorized allocation of US$10 million, equal to about four months' estimated average disbursements, under established procedures between the Bank and the Government of Mexico. The first advance to the special account would be limited, however, to US$5 million to cover estimated expenditures in the first months of project implementation. The full amount of the authorized allocation would be available once total disbursements reach US$33 million. The special account would be replenished  32 MEXICO - Water Resources Management Project/Staff Appraisal Report monthly in order to assure liquidity and a regular reporting on use of the funds. Disbursements from the Loan account will be made on 100% for foreign expenditures for goods; 87% for local expenditures for goods; 100% for consultants and training; and incremental operating costs for IMTA at a declining percentage of 85%, 60% and 25%. Disbursements against goods contracts below the prior review limits and consultant services with firms below US$100,000 and with individuals below US$50,000 will be made on the basis of SOEs, except for the first two contracts each year for goods under NCB. SOEs may also be used for incremental operating costs and selected training related expenditures. Disbursements against contracts for goods above the respective prior review limits will be made against full documentation submitted to the Bank. In view of the desirability of starting the project without delay, retroactive financing up to US$18.6 million equivalent (10% of Loan funds) is proposed for expenditures incurred after March 8, 1996. Retroactive financing will be used for preparation of studies, training, engineering services, technical assistance and the purchase of some monitoring and computer equipment. D. AccouNTs AND AUDITS 4.10 CNA will maintain project accounts. All accounts will adequately reflect expenditures made in respect of the project, in accordance with sound accounting practices acceptable to the Bank. A certified copy of the project audit, covering CNA and IMTA activities (including the participating Regional Offices) prepared by independent auditors acceptable to the Bank, and in accordance with the March 1982 Bank document "Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank," will be submitted to the Bank not more than six months after the completion of each fiscal year. The audit report will include a separate opinion by the auditor on disbursements against certified statements of expenditure. Statements of expenditure and other audit-related material will be made available to Bank supervision missions. At negotiations, assurances were obtained that the Government will have the project accounts audited using procedures acceptable to the Bank, in line with the Bank/Mexico Audit Agreement of November, 1991 with SECODAM (see para. 6. 1(b)). E. MONITORING OF PROJECT IMPLEMENTATION AND BANK SUPERVISION 4.11 CNA will prepare comprehensive project reports two times a year. These would cover all aspects of physical and financial implementation and indicators related to project objectives (Annex H, Table H-3). Additionally, Table H-4 in Annex H presents a summary of the most important input, output, outcome and impact indicators. These principal indicators were developed to monitor the projects overall progress in progressing through a hierarchy of accomplishments, including the impacts related to the main objectives of the project. 4.12 Monitoring of project implementation should be facilitated by the fact that the CNA is well-established and has effective procedures for project implementation. During the first year, supervision would focus on: progress of training programs; and adequacy of  MEXICO - Water Resources Management Project/Staff Appraisal Report 33 project coordination and the Project Management System (PMS) as described in Annex H. CNA will produce the semiannual reports prepared by the coordination staff. There will be at least two Bank supervision missions annually. Each supervision mission will include field visits to regional offices, and visits to training sites, laboratories, survey areas, etc. Data from the PMS on implementation will be the basis of supervision, reviewing the progress in the semester by reviewing the tables presented in the quarterly reports, complemented by other information as required. At negotiations assurances were obtained that a midterm review will take place no later than May 31, 1999 (combined with the Semi-Annual Mission), after the second year of project implementation (see para. 6. 1 (c)). 4.13 Because results from this type of project become available gradually during implementation, it is not possible to supervise the project initially (during the first year) with all the indicators required to measure impact. Supervision, therefore, concentrates first on budgetary availability, and indicators that the project is being physically implemented. Later, as data become available about project costs and returns, real measures of the impact will be derived from work supported by the operation. 4.14 Indicators related to project objectives. At negotiations, assurances were obtained that the Government agrees on a set of indicators related to project objectives (see Annex H, Table H-3) and on a hierarchical tree of primary indicators (see Annex H, Table H-4) to measure overall project progress in meeting project objectives (see para. 6. 1(d)). 4.15 Annual Cost Estimates, and Work and Procurement Plan. At negotiations, assurances were obtained that the executing agency (CNA) will present to the Bank an annual work and procurement plan including cost estimates no later than November 30 of each year, describing the work to be done in the following project year. (See para. 6. 1(e).) During project appraisal CNA provided an annual work and procurement plan describing the work to be done during the remainder of 1996. During project appraisal, assurances were obtained that the Government will submit to congress the required budget sufficient to implement the project as presented in this SAR. Subsequent annual plans and cost estimates and budgets will be reviewed by Bank missions. 4.16 Annual Budget and Planning Review. At negotiations, assurances were obtained that the annual budget and planning review will take place no later than May 31 of each year (see para. 6.1 (f)). That review would analyze the legislatively-approved budget and proposed legally-binding work and procurement plan for the upcoming year, discuss those plans with respect to the project's implementation indicators, and agree on necessary changes in implementation. The annual budget and planning review would analyze the annual cost estimates and work and procurement plan and data from the PMS. It would analyze the training component and activities with data provided by the supervision. Semiannual reports covering project activities in all components (see para. 6. l(g)) will be presented each semester. The project coordination staff will manage production of the reports in collaboration with the executing technical units. The annual reviews will be based on the November 30 Report which would include the work and  34 MEXICO - Water Resources Management Project/Staff Appraisal Report procurement plan for the upcoming year, including goals for implementation indicators which ifjustified may include adjustments from previously planned goals for that year. If acceptable to the Bank, the work and procurement plan and indicators would be approved at the annual budget and planning review and become legally binding for the subsequent year. 4.17 Project Midterm Review. At negotiations, assurances were obtained that the Government would hold a midterm review no later than May 31, 1999 (see para. 6. 1(c)). The midterm review will also constitute the annual budget and planning review for 1999. The midterm review will examine progress with project implementation in all components, based on the implementation and financial indicators, and will analyze economic results and technical quality of improvements, and project progress in meeting overall objectives (Annex H, Table H-3 and H-4). The review will examine the results of the training, technological support and institutional development program; the strengthening of SGT, SGP, SGAA, regional offices, the establishment and strengthening of river basin councils; the communication program and technical assistance; and experience with project institutional arrangements. The effectiveness of integrated water management initiatives will be a major input for the midterm review. Technical and financial sustainability of water management activities will be a major consideration during the midterm review. Data will include all information about project costs and activities, observed or expected benefits from those activities and financing. All data will be completed for the first 24 months of project implementation. Based on this analysis, the review would recommend adjustments in project implementation and a schedule to implement these adjustments. 4.18 Project Launch Seminar. A Project Launch Seminar would be held within three months of Loan effectiveness to assist with technical, management and institutional orientation. Particular emphasis would be given to: (a) initiating project operational, supervision, coordination and management aspects; (b) reviewing and supervising ongoing technical activities under retroactive financing; and (c) reviewing and approving terms of reference for activities to be carried out during the first year of Project implementation. 5. PROJECT ANALYSIS A. PROJECT BENEFITS 5.1 The project is mainly related to the public goods aspect and is expected to cover all the national territory through its five main components. It would benefit all Mexicans through improved weather forecasts and water management because all are subject to climatological effects and all are water users. To a larger extent it would benefit the 75% of the Mexican population that resides in arid and semi-arid regions and approximately 750,000 irrigation farmers (through a register of relevant tradable water rights), and over  MEXICO - Water Resources Management Project/Staff Appraisal Report 35 500 urban areas and over 25,000 industries (through dependable water resources allocation and improved water quality). 5.2 The project would generate significant benefits by improving water resources management through improved data collection, processing and evaluations; improved reservoir operation and dam safety; establishing institutional mechanisms and technical procedures for water resources planning and management at the river basin level; and improved water rights administration. The project will improve weather forecasting which will not only benefit water management, but also Mexican society and economy as a whole. The project can be expected to generate substantial benefits via the enhancement of meteorological and hydrological information that is used for investment planning in the water resources sector, and for the operation management and planning of both surface and groundwater systems. Moreover, substantial benefits will derive from the implementation of tradable water rights systems, a critical prerequisite for which is the Project-supported completion of the REPDA. A strengthening of monitoring in the areas of water pollution from municipal and industrial discharges, an important activity contemplated in the Project, will contribute greatly to the GOM's efforts to improve water quality in Mexico. The project will significantly contribute to improvements in the environment and to poverty alleviation. 5.3 Projects like the WRMP do not generate benefits of the sort typically included in cost-benefit analyses. It would produce information and technical capabilities, used in decision-making processes. Such processes are in the area of the operation and management of natural resources and environmental systems, and in the design and implementation of public investment programs. This being the case, the economic justification of the Project is explored using a method that draws on the "risk assessment" approach (see Annex G). Thus, inferential responses are developed to the following two related questions that are of obvious relevance for an assessment of the feasibility of the Project: (a) what is the minimum value of benefits required for an acceptable ratio of benefits to costs, and (b) are there compelling reasons for expecting that the Project would yield benefits that are at least as great as these values. 5.4 Ex-post analyses of investment programs designed to improve the reliability of hydrological and meteorological information and analysis in many countries throughout the world suggest that programs like the WRMP yield benefits that greatly exceed costs. Anecdotal evidence of the potential benefits of the project (see Annex G) which highlights specific instances in which real-time access to more reliable information and evaluations would have resulted in obvious benefits to Mexican society, strengthen the case for viewing the Project as economically feasible. For both individual Project components and the overall Project, using data that significantly understate the potential values relevant for Mexico, it is clear that the Project's feasibility requires only the most modest expectations for its success in affecting values of social significance in Mexico. Thus, annualized costs for the overall project are 230 million NP (US$30. I million--using an exchange rate of 7.5 NP = US$1), and measurable values served by the Project (which substantially underestimate the actual range of values served by the Project) total 129,047 million NP (US$17.206 billion). Economic feasibility requires that the Project affect -- increase --  36 MEXICO - Water Resources Management Project/Staff Appraisal Report values served by the Project by only two-tenths of one percent (0.2%); values served are expected to increase many times that amount (see Annex G). 5.5 The project has been designed to minimize investment in new monitoring networks and equipment and to maximize the utilization of existing facilities. Considerable improvements in water resources planning and management will be achieved through improvements in existing facilities and improved technical evaluations and modeling of water systems. Expansion of networks and systems will be limited and gradual. This approach will ensure a process whereby large benefits will be realized for relatively small costs. 5.6 The project would improve the: (a) monitoring, evaluation and management of 144 aquifers; (b) monitoring, evaluation and management of water quality in 435 water bodies; (c) hydrological forecasting and reservoir operation in 19 river basins; (d) 5,000 dam safety inspections; (e) weather forecasting in all parts of the country; (f) regional water resources planning and management and the establishment and strengthening of 13 river basin councils; and (g) the registration of 300,000 water users in the REPDA. See Annex H, Table H-3 for details. 5.7 The project would support the consolidation and enforcement of the LAN, to strengthen the new federalism by securing water rights to all legal water users, to facilitate transaction of water rights, and to improve water fees collection. Additionally, the project would support providing a basis and a means for the allocation of water towards more productive uses (i.e. improving the economic efficiency of water use) in a dynamic setting where water demands are continually changing, while simultaneously protecting against aquifer depletion, protecting the water rights of third parties, and reducing water pollution. This is to be done by supporting the effective functioning of water markets that are developing following the promulgation of the LAN. B. ENVIRONMENTAL EFFECTS 5.8 The project would have a major positive effect on the environment. It would not finance any new development nor any new hydraulic infrastructure facilities; there will not be, therefore, any major adverse environmental impacts. The proposed project has been rated "B" to ensure that sufficient environmental attention and expertise are brought to bear in the river regional water resources planning and management aspects. The project would offer strong environmental benefits and provide the GOM with tools to: (a) detect water contamination and pollution, and establish and enforce discharge standards and thereby significantly improve water quality; (b) identify and characterize areas of over (unsustainable) use of surface and groundwater, and develop stabilization plans and thereby conserve scarce water resources; (c) improve reservoir operation for the benefit of aquatic and riparian ecosystems; (d) improve water resources planning at the river basin level with the participation of environmental specialists and river basin councils to ensure consideration of environmental aspects; and (e) improve allocation of scarce water resources and water use efficiency. Each regional office of CNA will have an individual  MEXCO - Water Resources Management Project/Staff Appraisal Report 37 professional trained in environmental/natural resources sciences to oversee environmental aspects in these areas (see Annex G). C. PROJECT SUSTAINABILITY 5.9 The proposed project is expected to have a positive effect on water environment related issues, sustainable intersectoral use of water in general, and in the consolidation of functions in Mexico. Under the proposed project, the LAN and the new regulatory and administrative reforms related to water use will create a set circumstances that will facilitate efficient water use and allocation, and thus, sustainable development. 5.10 The institutional development, technological support and training component has the purpose of supporting the development of the institutional and organizational structure and the training of human resources necessary to carry out and oversee the water resources management functions during and after project implementation. CNA is a government entity with no legal or financial autonomy. CNA's financing depends directly and only upon annual budget allocations authorized by the Congress and provided through SHCP. Although CNA is administratively and technically responsible for water fee collections, SHCP authorizes and collects the fees which are paid directly to the Federal Treasury. Water fees collected as well as all other monies paid to the Federal Treasury have no specific allocation and are not linked to finance activities related to the source. Hence, the future costs of sustaining the program after project completion will depend upon the budgetary allocation and not on the amount of water fee collection. Because CNA is undergoing a transformation from an entity primarily responsible for construction and operation of hydraulic works to an organization responsible for overseeing the management of the nations water resources, CNA's primary responsibility in the future will be water resources management. In the future, because of reduced construction and operation and maintenance conmmitments, CNA's overall budget will probably decrease significantly, however budget allocations for water resources management should always be sufficient because of the priority of these activities. Although it is difficult to quantify the expected increases in water fee collections, the increases are expected to be in excess of the cost of the project and specifically in excess of the recurrent costs of project related water resources management activities after the completion of the project. D. POVERTY ALLEVIATION 5.11 The proposed project has no direct impact on poverty alleviation but its positive effects on the environment and high public goods content in both the rural and urban contexts will help alleviate poverty indirectly. Sustainable water development and management in rural areas can partially provide the necessary conditions to support populations in rural areas and thereby reduce migration pressures. Conversely, unavailability of water or the deterioration of the quantity or quality of water resources can severely impact public health and quality of life, and can be major factors towards inducing migrations. Additionally, it has been shown in other parts of the world that providing water rights to small irrigators, an aspect that the project will support, provides  38 MEXICO - Water Resources Management Project/Staff Appraisal Report them with legal and economic security, and improves their economic efficiency and their well being. E. GENDER LMPACT 5.12 In Mexico, women are the primary family caretakers and users of domestic water. For female headed households and many conjugal households, women are also responsible for the management of water for farm use. In a 1992 study for the United Nations Development Fund for Women it was observed that 30% of the farmsteads within Mexican irrigation districts are operated by women. Although the project would have no direct investment in irrigation or domestic water delivery or treatment systems, the overall improvements in water management will indirectly benefit commnunities and families both economically and socially (health). Because of their significant status as water users, it would be beneficial for women to have a say in water management activities. The river basin councils will have water user representation and the expected presence of some women representatives would significantly enhance their effectiveness. F. PARTICIPATION ASPECTS 5.13 One of the central goals of the WRMP would be to promote and foster the participation of water users and other stakeholders in the various aspects of water resources planning and management. This would be accomplished through the river basin councils, as has been initiated positively in the existing Lerma-Chapala River Basin Council. G. PROJECT RISKS 5.14 The following four principal risks were identified for the project: a) New CNA reforms, project management and coordination. CNA is presently embarking on a series of reforms that will involve changes in structure, priorities, policies and decentralization programs. Although the WRMP is in direct accord with these changes, these reforns, which will take place at the same time as project implementation, could impact the project. To mitigate the effects of the reforms on project implementation, the project would include supervision, coordination and monitoring by the various technical units complemented through a project coordination staff in SGP. b) Uncertainty regarding budgetary allocations. Project implementation depends on adequate budget allocations. In Mexico budgetary allocations have faced uncertainty because of economic and financial conditions. During appraisal, CNA and SHCP provided assurances that the project was a GOM priority and that considerable effort would be exerted in the future to ensure that sufficient budgets would be available. In addition, this risk will be addressed through monitoring and analyzing CNA annual budget reviews.  MEXICO - Water Resources Management Project/Staff Appraisal Report 39 c) Decentralization, technical skills and capacity building. Decentralization implies that a substantial part of the WRMP will be implemented by the 13 new regional offices as these acquire technical and operational capacity. This process will require considerable support from CNA to the regional offices in capacity building and training. To mitigate this risk the project includes a major component, "Institutional Development, Technological Support and Training", which would be implemented in the training portion with the participation of IMTA. 5.15 Financial Benefits and Risks. The Borrower has selected LIBOR-based US dollar single currency loan terms in order to improve its overall liability management and reduce its risks. It considers US dollars to be an appropriate currency for its debt management strategy, and prefers the standard country repayment terms for LIBOR-based single currency loans compared with the shorter final maturity on fixed-rate single currency loans. This loan constitutes about 12% of the US$1.5 billion loan envelope for FY 1996 for Mexico. 6. AGREEMENTS REACHED AND RECOMMENDATIONS 6.1 Assurances provided by GOM at negotiations: a) The Government agrees to: maintain the project coordination staff in SGP in the regional offices and in each of the technical units with appropriate functions. (See paras. 2.11 and 4.2.) b) The Government will have the project accounts audited using procedures acceptable to the Bank, in line with the Bank/Mexico Audit Agreement of November, 1991 with SECODAM. (See para. 4.10.) c) A midterm review will take place no later than May 31, 1999 (combined with the Semi-Annual Mission), after the second year of project implementation. (See paras. 4.12 and 4.17.) d) The project will be monitored based on agreed indicators. (See para. 4.14.) e) The implementing agency (CNA) will present to the Bank a cost estimate and annual work and procurement plan no later than November 30 of each year, describing the work to be done in the following project year. (See para. 4.15.) f) The annual budget and planning review will take place no later than May 31 of each year. (See para. 4.16.) g) Semi-annual reports will be prepared and submitted to the Bank each semester. (See para. 4.16 and Annex H.)  40 MEXICO - Water Resources Management Project/Staff Appraisal Report 6.2 Conditions of Loan Effectiveness: NAFIN will sign an agreement with the Government for the transfer of the loan proceeds to the executing agency (CNA). (See para. 3.3.) 6.3 Conditions of Disbursement: None 6.4 Recommendation: With these agreements and conditions, the project would be eligible for a Bank loan of US$186.5 million with a term of 15 years, including a three- year grace period.  ANNEXES   Page Annex A: Legal and Regulatory Framework and Institutional Aspects ........... ............ 1 A-I Organizational Structure ........................................................ 5 A-2 Regional Structure ........................................................ 6   MEXICO WATER RESOURCES AND MANAGEMENT PROJECT ANNEX A: LEGAL AND REGULATORY FRAMEWORK, AND INSTITUTIONAL ASPECTS I. Legal and Regulatory Framework 1. The Mexican Constitution initiated modem regulatory jurisdiction of water resources in the country. Since its adoption in 1917, a series of laws and regulations have been promulgated that have relation to water resources use and management in Mexico. The following is a brief description of the various pertinent laws and regulations. 2. Article 27 of the Constitution (adopted in 1917) recognizes the Nation as the owner of all water within the territory and authorizes the government to administer these resources and to grant "concessions" for water use. 3. Article 115 of the Constitution (as modified in 1985) grants to the municipal governments, with the assistance of the state governments as necessary, the responsibility for municipal water delivery systems. 4. The National Water Law (Ley de Aguas Nacionales - LAN) enacted in 1992 provides the legal framework for water administration and for the granting of water right permits to individuals or groups of individuals for periods up to 50 years through the administrative authority of the National Water Commission (Comisi6n Nacional del Agua - CNA). Water right permits are granted for both the use of water and for discharging water into rivers and other water bodies. In the case of discharges, water right permits include water quality parameter requirements. These water right permits are transferable and may be bought and sold as long as it is determined that the transfer is technically feasible and will not adversely impact uncompensated third parties. The LAN establishes a National Public Water Rights Register to be maintained by CNA. All water right permits are to be recorded in the register, as well as their extensions, modifications, suspensions, terminations and transfers. CNA has the authority to fine water users for not having permits or for using or discharging water not in accordance with their permits. 5. The Regulations for the LAN (issued in 1994) provide the procedural and administrative details for the implementation of the law. Specific time periods for administrative actions, and arbitration procedures to resolve conflicts are presented in  2 Annex A: Legal and Regulatory Framework, and Institutional Aspects the Regulations. Because the Regulations were issued by means of a Presidential decree, they can be more easily modified than the LAN, when required. 6. The Federal Rights Law provide the legal framework and mechanisms for the Federal Government to charge for the diversion and use of water, and for the discharge of water into water bodies when the quality of the water discharged exceeds predefined parameters. The use of water for agricultural production is exempted from these water charges. The Federal Tax Law, the Law for Contribution for Improvements in Civil Works and the Federal Fiscal Code complete the legal/fiscal framework for the regulation of water charges. 7. The General Law for Ecological Balance and Environmental Protection establishes the regulatory responsibilities of the Federal, State, and Municipal governments in the protection of the environment and requires environmental assessments for actions that have environmental impact. 8. The International Boundary and Water Treaty between Mexico and the United States of America defines the distribution and conservation of the water resources of the Colorado, Rio Grande and Tijuana Rivers. II. Institutional Aspects Institutional Setting 9. Mexican water resources policy is presented in the National Water Plan 1995-2000 (Programa Nacional Hidraulica 1995 - 2000 - PNH). PNH is oriented toward ensuring the availability of water to satisfy the needs of the population and promote the development of economic activities in a manner that is environmentally compatible and sustainable in each region of the country. In accordance with this policy, avenues must be found for sustainable development which requires establishing control and conditionalities on water usage such that economic development is compatible with environmental protection. The importance that the GOM bestows on the environment and on sustainable use of water resources is manifest in the decision to relocate CNA from the old Agriculture and Water Resources Ministry to the newly created environment ministry, SEMARNAP. This change has strengthened the authority and responsibility that CNA has in the administration and management of water resources, because it is no longer located within a Ministry responsible for one sector (agriculture) and therefore permits an integrated management approach as established in the PNH and the LAN. CNA has set a new agenda to modernize and decentralize the management of the nation's water resources considering the needs of all uses in an environmentally sustainable manner. The WRMP is the instrument that the GOM has designed to carry out this new agenda. 10. CNA was created in 1989 to unite all aspects of water management. CNA has a central office located in Mexico City and 6 regional offices, as follows: Northwest, in Ciudad Obreg6n, Sonora; North, in Torre6n, Coahuila; Northeast, in San Luis Potosf, San Luis Potosf; Southeast, in Merida, Yucatan; Lerma-Balsas, in Quer6taro, Quer6taro; and Valley of Mexico, in Ciudad de Mexico, Distrito Federal. In addition, CNA has state offices located in  Annex A: Legal and Regulatory Framework, and Institutional Aspects 3 each of the 31 state capitals and the Federal District. CNA has functioned in a centralized way, but has recently adopted and is currently implementing a policy whereby: (a) the Central Office functions will include oversight of water management activities and establishment of overall policy, criteria and uniform guidelines and procedures; and (b) the Regional Offices will have principle responsibility for water management, including: (i) the development of river basin plans; (ii) the promotion and strengthening of basin councils; (iii) the coordination of water resources planning and management activities both by public and private sector participants; (iv) water quantity and quality monitoring activities; (v) reservoir operation; (vi) the registry of water users into the National Public Water Rights Register; and (vii) dam safety. 11. At each level (central and regional) CNA has a similar organizational structure. The Director General is responsible for managing the agency and reports directly to the Secretary of SEMARNAP. There are six General Subdirectorates, five are technical and the sixth (General Subdirectorate for Administration) handles administrative functions such as personnel, equipment and supplies and contract administration. (See Chart A-1.) The 2 largest technical General Subdirectorates are Construction and Operations, where presently the majority of personnel and budget are allocated. The three General Subdirectorates in CNA that would have direct responsibilities for the implementation of the Project are: (a) the Technical General Subdirectorate (Subdirecci6n General T&enica, SGT), responsible for aspects related to meteorology (GSMN), surface water (GASIR), groundwater (GAS), water quality (GSCA) and dam safety (CT); (b) the Planning General Subdirectorate (Subdirecci6n General de Programaci6n, SGP), responsible for water resources planning and river basin council establishment and strengthening; and (c) the Water Administration General Subdirectorate (Subdirecci6n General de Administraci6n del Agua, SGAA), responsible for water rights administration. Because these three departments encompass responsibilities for all aspects of water resources management and their being located within one institution with clearly defined legal responsibilities, CNA's organizational structure is very well suited to planning, coordinating and implementing a comprehensive integrated water resource management program. At the regional level the 6 functional areas are maintained in the organizational structure under the direction of a regional manager who depends directly to the Director General. (See Chart A-2) 12. Presently the CNA Regional Office boundaries are along State lines. As stated in the PNH, GOM has recently decided to reorganize CNA's regional dependencies into 13 regional offices with their boundaries being located along river basin boundaries. This reorganization will significantly facilitate the regional offices' abilities to carry out their water management responsibilities in an integrated way, because river basins will be located totally within the geographical limits of the Regional Offices. The new regional offices are shown on the backpiece cover map and are the following: (a) Baja California Peninsula; (b) Upper Northwest; (c) Lower Northwest; (d) Central Pacific; (e) Southern Pacific; (f) Northern Border; (g) Northern Central Basins; (h) Lerma-Santiago; (i) Northern Gulf; (j) Central Gulf; (k) Southern Gulf; (1) Yucatan Peninsula; and (m) Valley of Mexico.  4 Annex A: Legal and Regulatory Framework, and Institutional Aspects 13. In accordance with the LAN, CNA is the national water authority with complete responsibility for water rights administration, the management of the nations water resources and dam safety. Other entities, including the Federal Electricity Commission (Comision Federal de Electricidad - CFE), both public and private that operate reservoirs must do so under CNA authorization and oversight. The Director General of CNA presides over a Technical Committee for the Operation of Hydraulic Works. The committee makes overall decisions relative to the operation of the nation's reservoirs (including the 64 hydropower dams operated by CFE) and considerations related to floods, droughts, multiple uses (irrigation, municipal and industrial, hydropower, navigation, recreation, etc.) and environmental protection. In addition to CNA authorities and technical personnel, a CFE representative participates on the committee. 14. The Mexican Institute for Water Technology (Instituto Mexicano de Tecnologia del Agua, IMTA) is responsible for water related research, technology evaluation and transfer, and for training. It coordinates work being done at universities, research centers and other institutions in Mexico and internationally, and has cooperative relationships with various water related entities throughout the world. IMTA's participation in the area of training subcomponent as well as in other aspects of the project will be important to its success.  Chart A-1 NATIONAL WATER COMMISSION ORGANIZATIONAL STRUCTURE ll GEERALDIRECTORATE ; | Participation Unit 1 | Fiscal Review and Settlement Unit CD | Genoral ComptrollerZI | Legal Affairs Unit |Social Communicotion unit| I I ~~~~~~~~~~~~~~~~~~~~~~0 General Subdirectorate General Subd||rectorae General Subdire GenalGnera Subdictorate Goneral ubdirectorate SWatervces Group Design Group UnItpneral Tchnical Consultancy Studies for Personnel Management O Services toratp clorat Technicnr ated Waetr Group Hydraulic nfrairrigteco. Districts GruarudatrGopDveomndru __________________ Potable Water andcSurface WaterltancStd ie MaeronaelMent Gru a U~Snitainsupr Group river Ing.eGroupManagemen ofoup W Resources j Wet r Fee l q ~~Hydraulic Infra- l_ Tech. Districts Group _GonwtrrupDvovlop ment Group _|Fnni eore |WConterol Group s |tructure ConsGroup -| Potable Water and _ Sundfaco , Water and Management of|Materialma Sroupple 0 PuliecWateriRightsoSanntationDesign peretion Cort of Water Qua Grity an Water Reso REgisutryiGroupnGrou Dams andmi Pumping Pl _CDeveiontro t Group Potable Water aU_ NetiondMetaorolo-d_ Budgstiur rtoun nd Emergency Managemente Waer MaagJ SCoraniation Soupport |roup1 ierE Group W to Municip_h ant St Su and Ptaneng Group Operationg orgafication | - t Quali audeliosp Registry ~CotrcngGru Go Gru Dater and Pupnegy Plant SaGrtoup Gru Gt roura Prrotection and |~~~~~~~ ~Ntoa Meteorolo- Budgtin mentup Coordination of Efficiat Bai|niern n Wter Munipd Energ UStae Gru O peratng Orgarizadon ge llRegional Ofie  Chart A-2 NATIONAL WATER COMMISSION REGIONAL STRUCTURE REGIONAL MANAGER Rural Programs and Social . Participation Unit Regional Comptroler Social Communication Unit iLegal Affairs Unit 00 Department ll| Department ll| Department | Technical llDepartment ll| Departmont t of Water Administration ot Construction of Operations Department iof Panning cof Adminstration | Personnel Management Water Fee ~~~~~~~Mateorology and -|GFoup Colletion Fand structure ru ufc Group Grup _ntagratad Water Control Group _[Organization Support 1 l Resources Planning Gioup ~~~~~~~~~~~Group Fiaca eources _{ Groundwater Group | | Management Group CD Puli Wte RghsWatef Supply and | _Registry t,roup _Sanitation Group I._ Operation and attinGop aorhc MtraiedSpls| Conservation Group Water Quality and .gpoMaeilndSpie Sanitation Group 0-o N Mtta ndSple Information Group F _ Construction | | System II Support Group i Group 2  Page Annex B: Institutional Development, Technological Support and Training .................1   MEXICO WATER RESOURCES MANAGEMENT PROJECT ANNEX B: INSTITUTIONAL DEVELOPMENT, TECHNOLOGICAL SUPPORT, AND TRAINING L Introduction 1. Technology applied to the water sector in Mexico represents a gap when compared to that utilized in developed countries. This fact makes of paramount importance the development and introduction of new alternative technologies to: (a) increase information and understanding about the nations water resources; (b) to improve the planning and management of water resources; and (c) to improve the operation of existing hydraulic infrastructure. This will require a permanent program of education and training, transfer of technology and development of human resources aimed at improving the CNA's capacity for integrated water management and sustainable development. IL Institutional Development 2. The strategy proposed for the project component on Institutional Development, Technological Support and Training, includes the following goals: a) Support the decentralization of water resources management at the river basin level; b) Promote the establishment and strengthening of river basin councils; c) Improve the technological resources and the professional skills of personnel in central and regional offices; d) Strengthen water rights administration and the collection of water fees; e) Acquisition of training equipment and materials for improvement of central and regional office training facilities; f) Development of key international technological cooperation for water resources management; g) Intensive training programs in water resource management issues; and h) Communication programs in the river basin councils. 3. The institutional development, technological support and training component has the purpose of supporting the development of the institutional and organizational structure  2 Annex B: Institutional Development, Technological Support, and Training and the training of human resources necessary to carry out and oversee the water resources management functions during and after project implementation. 4. This project component intends to cover the CNA water management activities at all levels, and will provide support to the central Departments of Planning, Water Administration and Technical, as well as to the Regional Offices and the River Basin Councils. m. Technological Support 5. The Water Resources Management Project will not include investment in new infrastructure, but will be an instrument to assist CNA in modernizing its water management activities and the operation of existing infrastructure. This will require reliable, timely and updated information which will be acquired through upgrading monitoring networks, and improving analytical capabilities to assist in water management decision making. National and international technical assistance programs will be required to provide technology transfer to the various offices of CNA and to the river basin councils. 6. The areas identified in which technological support will be required through national and international assistance include: (a) the development of improved weather forecasting methods to meet the increasing demand for specific meteorological products inside CNA and outside for the diverse user sectors; (b) the establishment of 24 telemetric hydrological networks in river basins affected by severe hydrometeorological events such as floods, tropical storms, hurricanes, etc.; (c) the development of hydrological forecasting systems for the prevention of floods and dam safety management and operation in emergency situations in the main Mexican river basins; (d) the establishment of the telecommunications and computer networks in all offices of CNA; (e) the updating of procedure manuals for the safety of major dams in Mexico; (f) studies on water quality monitoring, classification of national water bodies and on environment impact; (g) modernization of the groundwater monitoring networks, including specific studies in 144 over exploited aquifers; (h) the necessary studies for an effective planning and development of the water resources in Mexico; (i) the studies for integrated river basin master plans and management; (j) the review and adaptation of modem technologies to be applied to the registry and inscription of water users; and (k) the development of information systems (including GIS) for the transmission, exchange and manipulation of data inside and outside CNA. IV. Education and Training 7. The objectives of the education and training program in the WRMP for CNA's personnel include the formation of human resources qualified to fully understand the problems of the water sector and aimed to offer feasible technical and socio-economic solutions that enabling sustainable development of the water sector in Mexico.  Annex B: Institutional Development, Technological Support, and Training 3 8. In defining the needs for education and training of personnel of CNA, several modalities will be considered: (a) updating personnel on the application of new techniques or methodologies for technical, administrative or legal areas of CNA, (b) short-term courses on new technological development (computer software and hardware); (c) courses of specialization in technical areas; (d) professional development, including postgraduates courses (M. Sc. and Ph. D); and (e) exchange of specialists, through stays of international experts in Mexico or having Mexican specialists trained in selected institutions in foreign countries. 9. Training is foreseen to be provided for CNA's staff at the central and regional levels in the following areas: A. Management, Information, Communication and Participation Techniques - Problem analysis and decision making - Productivity workshop, work quality and excellence - Planning and production control techniques - Teamwork and team building - Commercialization B. Surface Water - Surface hydrology - Channel hydraulics - Water availability and water balances - Simulation models for hydraulic systems operation - Flood routing through reservoirs and in river channels - River hydraulics and margin protection - Streamflow gauging - Sediment transport - Surface water control mechanisms and structures - Hydrological forecasting - Estimating rainfall from satellite data - Estimating rainfall from radar data - Hydrological modeling - Evaluation of environmental impacts from surface water contamination and overuse - Operation and maintenance of hydrometric monitoring equipment C. Meteorology and Climatology - Meteorology Classes I, II, m and IV - Operation and maintenance of radiosondes - Numerical Forecasting Models - Commercialization - Meteorology of radars  4 Annex B: Institutional Development, Technological Support, and Training - Hydrometeorology - Climatology - Evaluation of data from GOES 8 and GOES 9 satellites - Operation and maintenance of meteorological monitoring equipment D. Groundwater - Evaluation and use of groundwater - Operation and maintenance of groundwater monitoring equipment - Well hydraulics and design - Aquifer contamination - Hydrogeology - Geophysics - Hydrogeochemistry - Aquifer recuperation - Evaluation of environmental impacts from aquifer contamination and overpumping - Groundwater modeling (Modflow, etc.) - Conjunctive groundwater/surface water modeling E. Water Quality and Laboratories - Analytical physiochemical methods - Reference materials - Management of various laboratory equipment - Microbiology - Toxicology - Laboratory administration - Systems of accreditation and certification of laboratories - Technology of water quality monitoring - Environmental consideration in water quality - Biological monitoring techniques - Environmental toxicology F. Dam Safety - Dam safety workshops - Dam safety - Inflow design flood studies - Dam design - Dam operation and maintenance - Dam instrumentation  Annex B: Institutional Development, Technological Support, and Training 5 G. Water Resources Planning - Water use and allocation models - Conjunctive use groundwater/surface water models - Hydro-socio-economic models - Diagnostics - River simulation models for quantity and quality - River basin management financial sustainability - River basin planning and management - River basin council formation and strengthening - Stakeholder participation in water resources planning and management - Environmental aspects of river basin planning and management - Water quality improvement planning H. Information Systems - Use and maintenance of commercial software - Development of georeferenced data bases - Geographic information systems - Use of remote sensing in water resources management - Use of and applications of global positioning system - Hardware (computer and telecommunications equipment) operation and maintenance - Analysis and design of information systems I. Water Rights Administration - Water law - Water rights administration - Water user support and registry assistance - Water rights regulation and control - Charging and collection of water fees 10. In implementing the training program it is foreseen to make use of all existing education facilities in Mexico, and it is also planned that CNA personnel will attend foreign institutions to cover specific areas or topics of interest to CNA.   Page Annex C: Water Quantity and Quality Monitoring Improvements and Assessments .... 1 C-i Implementation Plan for the Meteorological Monitoring Network Subcomponent .........................................................3 C-2 Implementation Plan for the Hydrometric, Climatological, Sediment and Reservoir Levels Monitoring Network Subcomponent .............. .................. 8 C-3 Implementation Plan for the Groundwater Monitoring Improvements and Assessments Subcomponent ......................................... ............... 12 C-4 Implementation Plan for the Water Quality Monitoring and Laboratory Subcomponent ........................................................ 15   MEXICO WATER RESOURCES MANAGEMENT PROJECT ANNEX C: WATER QUANTITY AND QUALITY MONITORING IMPROVEMENTS AND ASSESSMENTS Introduction I. This annex discusses the WRMP activities related to improvements in the water quantity and quality monitoring networks in Mexico. The annex is presented in a tabular format which provides summary information on the activities of each of the subcomponents. For more detail the Project Implementation Plan prepared by CNA should be referenced. Table C-1: Meteorological Monitoring Network Table C-2: Hydrometric, Climatological, Sediment and Reservoir Levels Monitoring Network Table C-3: Groundwater Monitoring Network Table C-4: Water Quality Monitoring Network and Laboratories 2. In general terns, the monitoring systems presently in use present problems of (a) obsolete equipment often in disrepair; (b) antiquated and inefficient procedures; (c) insufflicient personnel lacking adequate training; (d) inadequate and underfunded operation and maintenance programs; (e) insufficient and obsolete computer and telecommunications systems; and (f) diverse and inefficient data validation, storage and retrieval programs. 3 . The WRMP has the basic strategy of gradually moving towards the modernization of the monitoring systems, learning from initial results and adjusting the programs along the way. Initial activities and methodologies will be closely monitored and will be adapted and extended in subsequent actions with as much flexibility as possible. 4. The WRMP activities are designed to emphasize improving the use and operability of existing data and networks prior to any network expansion. The project gives priority to the following activities: a) the design and installation (in a gradual manner) of computer and telecommunications networks (hardware y software) at the state, regional and central levels of CNA to permit: (i) the development and maintenance of interconnected data banks; (ii) the use of modern computer programs for data manipulation and analysis; (iii) the easy interchange of information, programs and files; and (iv) electronic communication internal and external to CNA, including international b) the rescue and digitalization of historic data and its introduction into well designed interconnected data banks;  2 Annex C: Water Quantity and Quality Monitoring Improvements and Assessments c) the design, upgrading and continuous maintenance of laboratories, monitoring networks and information systems; d) the establishment and implementation of procedures for the continuous maintenance and updating of data banks; and e) the training of personnel and institutional strengthening in modem methods of (i) data collection, processing, storage and retrieval; (ii) analysis, modeling and forecasting; and (iii) use of computer systems and tools such as GIS (see Annex F). 5. These activities will bring large benefits for relatively low costs when compared to the expansion of monitoring networks. As a second phase, the Project will include the design and implementation of expanded monitoring networks based on the then improved knowledge of problems and needs.  Table C-1 Implementation Plan for the Meteorological Monitoring Network Subcomponent Background - Until the late 1 980s, the Mexican Meteorological Service was a classic service relying on analog instruments, manualy observed and with the data noted with pencil and paper. Data was sent to Mexico City via voice telephone, high frequency radio or radio teletype. In 1989, with the creation of the CNA and the inclusion of the GSMN into this organization, a major modernization effort was undertaken. This modernization effort was justified under the LAN which mandated CNA to become a modern regulatory agency for the administration and control of water in a sustainable manner, to promote the participation of the users, and to consolidate the necessary infrastructure for the study of climatologicaL hydrological and hydrometric phenomena, and the application of the knowledge obtained from these studies The modenization plan included the goals of having Mexico meet minimum data colection standards as recommended by the WMO in both surface and upper air observational station densities, and almost complete Doppler radar coverage. The major thrusts of the modenization program were to convert to a fully automated and digitized data collection and processing system, to increase the amount and quality of data collected, to have computers do the most processing possible and to increase both the quality and quantity of forecast products utilizing a fuly modern digital communication system. This modernization program envisioned a major leap forward, bypassing a full technological generation. This change in technology and way of performing the routine tasks in GSMN has put a strain on all resources, personnel, facilities and funding. For example, the requiremrent for field meteorological observers and technicians was significantly reduced, while the requirement for highly trained and skiled computer engineers and meteorologists increased. The newv technology also meant that any voice communication of data was far too slow. Automated observing systems with digital data transmission via satelite replaced many manual analog systems throughout the country. In the Mexico City GSMN headquarters, computers were installed to receive and process this data. The existing 5 analog meteorological radars were upgraded to digitized Doppler capable radars and another 7 new Doppler capable radars were installed. Eleven fully automated upper air sounding systems replaced some of the WWn era upper air systems, leaving 5 of the original 10 old systems as part of the network. Some 650 automated Data Collection Platforms (DCP)s were installed throughout the country. Only some 150 stations were operational in December 1995. During the initial efforts of the modernization program, great and positive strides were taken as the result of imaginative and dedicated leadership in GSMN and CNA The requirement for field meteorological observers and technicians was significantly reduced, while the requirement for highly trained and skiDed computer engineers and programmers was increasing. The new technology also meant that any voice communication of data was far too slow. During the last 5 years GSMN has instaDled many new types of equipment, not just simply by replacing existing equipment, but by replacing old technologies with new ones. During the first phase of this modernization prgram, the following eqtuipment was instaled: (a) seven new digitized Doppler Radars; (b) five analog radars updated to Doppler digitized radars; (c) six hundred automatic climatological stations (DCPs); (d) sixty five automatic synoptic stations; (e) eleven automated radiosonde stations, (f) one ground receiver station for the automated climatological and synoptic stations; and (g) one meteorological satellite ground receiving station (GOES) with dedicated digital satellite telecommunicatinas satelite channel. The 1995 faltering of the Mexican economy right at the peak of this first modernization program contributed to the inability of accomplish some of the godas and to sever equipment outages for long periods of time due to lack of funds for maintenance. Although much progress has been made, the GSMN is still unable to meet the ful requirements of the users, and further actions are required to complete the total objectives. The foDlowing problems remnin (a) maintenance, calibration and logistical support problems seriously reduce the data availability, (b) the problems with historical data retrieval, digitizing and processing and the resulting lack of historical statistical data seriously hamper climatology, (c) lack of human resources, both in number and of necessary skils limit the progress of the mnodanization efforts, and (d) the absence of information handling tools and equipment to integrate and process the available data also limit the development of the service and its products. Overall Objective - TBe objectives ofthis b aompurert a to support GSMN at the centrl and regional levels im (a) mrnxoving the coDlection, analysis, and synthesis data related to atmospheric ph _m;mem and (b) producing and providing meteorological and climatological infomation and forecasts to other parts of CNA, other agencies and to the general public.  Table C-1 Implementation Plan for the Meteorological Monitoring Network Subcomponent Activity Objective Present Status 1996/97 Actions 1998- 2001 Actions Post WRMP 1. Upper Air Network A fully automated network of Eleven automated stations and Replacement of 5 manual FuUy operational An additional 2 18 upper air systems. Each of five manual stations. radiosonde systems with network of 16 stations. automated stations. these stations will have a automatic systems. sateUite data transmission Five stations without Maintaining all system and a hydrogen Hydrogen generators nstaRation of new hydrogen hydrogen generators I generator. generators and heavy fully operational. AU hydrogen generators need maintenance on existing Conversion of all stations maintenance. At least two are generators. Changeover of all from the OMEGA location out of service. systems to the Global system to the Global Positioning System Positioning System (GPS). Prior to 2000, the presently (GPS). used OMEGA positioning system is be shut down. All stations must be converted prior to the complete shut down of the OMEGA System. 2. Rehabilitation and All WMO synoptic stations Many of these stations have Rehabilitation of 79 Manual Continued operation Continued opemtion /0 Continuing Maintenance fully operational and old, defective and broken synoptic stations by replacing and maintenance. and maintenance. of the 79 Conventional providing data at synoptic equipment and are not old, broken and defective Synoptic Meteorological times. providing all required data. instruments. Stalons 0 Establish and maintain a quality maintenance program.. 3. Meteorological Radar A total of 21 installed A total of 12 radars are now Develop calibration Complete installation Continue developing Network meteorological radars installed. AU have Doppler procedures and calibrate all of the 2 new radars. new and more positioned to provide national capability. radars to provide users with accurate radar coverage for forecasting sever calibrated data. Develop and provide products. weather wamings, rainfal Five of these radars were radar products to estimates and assist with early updated for Doppler Begin action on purchasing 2 users. Assure maintenance. flood warnings. capability, the other 7 were additional radars toward the recently instaUed with full final goal. Implement the Installation of the Doppler capability. maintenance remaining 7 radars 6 Implementation of a procedures. This data is now only maintenance and calibration Replacement of the available at the GSMN. system for all radars original S raias.  Table C-1 Implementation Plan for the Meteorological Monitoring Network Subcomponent Activity Objective Present Sttus 1996/97 Actions 1998- 2001 Actions Post WRIM 4. Satellite Ground Station To have real time satellite Only one geostationary Begin actions to obtain one Acquire and install 2 Development of Network imagery available at regional satellite may be received now orbiting satellite receiving additional TnROS more satellite center. at any one time. ground station and one systems at regional imagery products. geostationary satellite ground centers as the centers To have geostationary imagery The present equiprnent cannot receiving station for the become operational. available from both the receive the new down link national center. eastern and western formats. Integration of satellite geostationary satellites. Upgrade the present ground imagery into overall No proposed regional centers station to receive the new meteorological and To upgrade present equipment have any satellite receivers. format. hydrological foreasting. to receive the new, higher resolution data. Limited photo interpretation Begin training on photo Continue trining on capability now exists. interpretations. photo interpretation Have personnel trained and capable in stellite imagery photo interpretation 0 5. Lightenlng Detctor To have a lightening detection No lighting detection systems Write specifications for Complete installation of Evaluation of data o Network system that will: are now part of the CNA installation. network. and requirements for netwvrk (a) Help make rainfall Prepare and issue contract for Begin integration of expansion . cstimates in areas that the installation. lightening data into radars cannot rselL forecast and radar o Begin installation. rainfall estimates etc. i (b) Determine the value of this type of device in both metesorlogical and hydrological forecasting in Mexico. 6. Historical Data Bank To create a Mexican national Present system is limited and Develop specifications for Develop and implement Continuation of digitized climate data bank. not suitable for the amount of data bank. quality control elements. digitizing and data that Mexico has to archiving until all Digitiz all historical clirnate archive. Develop contract Continue on with data historical data has data now on paper. specifications. entry and quality control. been digitized and quality checked. Assure quality of archived Issue contract. data Begin digitizing and archiving  Table C-1 Implementation Plan for the Meteorological Monitoring Networc Subcomponent Activity Objective Present Status 1996197 Actions 1998- 2001 Actions Post WRMP 7. Installation of Provide increased facilities A small, ill-equipped room Perform facilities work to Complete facilities Maintain labotey nstrument Hon for insrumentation repair and now serves as an inadequate prepare laboratory area. work and install and upgrade as Laboratory support with adequate and area, laboratory equipment necessary correct calibration equipment Order laboratory maintenance Calibration equipment not and calibration equipment and adequate or not present. spares. Provide Training for technical personnel. 8. Augmentation of To have adequate professional Very lhmited staff for even the Develop position descriptions Continue to acqire Continued Professional and and technical staff trained present GSMN activities. for the new personnel. new professional staff development of . Technical Staff and capable of performing and while providing professional staff as managing the end results of Begin recruitment both from training to existing need is defined by the modemization program. within and from without CNA staff program of approximately 25 requirements. This is a critical element, professionals each year for 6 years 9. Rehabilitation and To restore the existing Fewer than 150 stations are Write terms of reference and Continuation of Expansion of the Maintenance of network of 665 automatic now reporting out of the contracts to: improving automated suface o Automatic Ground stations to operation. original 665 stations installed maintenance and netwvrk towards Kme Stations Used for duing the past three years. (a) Correct design problems. calibration to assure 2000 stations to meet ColecHon of To correct some original quality of data the geneald WMO Meteorological and design deficiencies. (b) Deternine which stations received. standards for area Hydrologic Data cannot be supporteL data collection. To calibrate the systems to assure accurate data. (c) Restore operation of all Convert existing possible stations. mamal synoptic To provide contimning stations to tic maintenance on these stations (d) Calibrate station data. stations. Perform a survey on station (e) Provide for continued locations that cannot be high quality maintenance suppted to assure data is received at GSMN.  Annex C: Water Quantity and Quality Monitoring Inprovements and Assessmeats 7 I, _________ ___________