Peru - El Nino Emergency Assistance Project

Document of The World Bank Report No. T-7194-PE TECHNICAL ANNEX PERU EL NINO EMERGENCY ASSISTANCE PROJECT November 11, 1997 Finance, Private Sector and Infrastructure SMU Environment and Socially Sustainable Development SMU Country Management Unit 6 Latin America and the Caribbean Region  CURRENCY EQUIVALENTS (Oct. 29, 1997) Currency Unit = Nuevo Sol (S/.) US$1.00 = S/. 2.68 FISCAL YEAR January 1 - December 31 ACRONYMS AND ABBREVIATIONS USED CIMMYT - Intemational Center for Improvements in Maize and Wheat Centro Internacional de Mejoramiento de Maiz y Trigo COFOPRI - National Commission for Formalization of Informal Properties CONAE - National Council for Emergency Assistance DHN - Direccion de Hidrografia y Navegaci6n ENSO - El Nino Southem Oscillation' EMP - Environment Management Plans ERFEN - Estudio Regional del Fen6meno del NiPo FAO - Food and Agriculture Organization GDP - Gross Domestic Product IBRD - Intemational Bank for Reconstruction and Development ICB - Intemational Competitive Bidding IDB - Inter-American Development Bank IGP - Instituto Geofisico del Peru IMARPE - Instituto del Mar del Perui IMF - Intemational Monetary Fund INDECI - National Institute of Civil Defence (Instituto Nacional de Defensa Civil) INIA - Instituto Nacional de Investigaci6n Agropecuaria INRENA - Instituto Nacional de Recursos Naturales MEF - Ministry of Economy and Finance MIPRE - Ministry of the Presidency NCB - National Competitive Bidding NOAA - National Oceanic and Atmospheric Agency 01 - Office of Investments, Ministry of Economy and Finance PRASTER - Programa de Aguas Subterr6neas y Tecnificaci6n de Riesgo PRONAMACH- Programa Nacional de Manejo de Cuencas Hidrogrdficas RRT - Reconstruction and Resettlement Team SENAMHI - Servicio Nacional de Metereologia e Hidrologia QCBS - Quality- and Cost-Based Selection UNA - Universidad Nacional Agraria UNDP - United Nations Development Program USAID - United States Agency for International Development The Memorandum and Recommendation of the President and the accompanying technical annex for this operation was prepared based on the findings of two missions that visited Peru during September 22-30 and October 13-27, 1997. The core project preparation team consisted of Eugene McCarthy, LCSFP (Team Leader), Max Pulgar-Vidal (AFTT2), Jyoti Shukla (LCSFP), Matthew McMahon (LCSES), William Partridge (LCSES), Roberto Laver (LEGLA), Efraim Jimenez (LCOPR), Issam Abousleiman (LOAEL), Oswaldo Patiiio (Lima Resident Mission), Carlos Emanuel and Jose Hermosa (consultants). Document production was undertaken by Maria Antonieta Gonzalez (LCSFP) and Mercedes Aleman (LCSFP) provided administrative support. The management team for this operation includes: Regional Vice President: Shahid Javed Burki, CMU Director: Isabel Guerrero, Sector Directors: Sri-Ram Aiyer and Maritta Koch-Weser, Sector Leader: Susan Goldmark and Lead Economist: Ernesto May. Peer reviewers are: Armando Araujo (OCSPR), Jelena Pantelic (SASIN) and Robert Watson (ENVDR); and external peer reviewer: NOAA (J. Michael Hall, Director).  PERU EL NINO EMERGENCY ASSISTANCE PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Peru. Implementing Sectoral ministries, related public sector enterprises, municipal Agencies: authorities, local communities in affected regions. Coordinating Agency: Office of Investments in the Ministry of Economy and Finance. Poverty Category: Not applicable. Program Objective Category: Emergency Assistance Loan. Environment Category: B Loan Amount: US$150 million. Terms: Repayment in 17 years, including 5 years of grace, at the Bank's standard interest rate for LIBOR-based U.S. dollar single currency loans. Commitment Fee: 0.75% on undisbursed loan balances, less any waiver, beginning 60 days after signing. Estimated Costs: Prevention Phase: US$100 million Reconstruction Phase: US$330 million Financing Plan: IBRD IDB GoP Total Prevention Phase US$ 30 m. US$ 30 m. US$ 40 m. US$ 100 m. Reconstruction Phase US$ 120 m. US$ 120 m. US$ 90 m. US$ 330 m. TOTAL US$ 150 m. US$ 150 m. US$130 m. US$ 430 m. Note: If reconstruction costs are higher than $330 million, the Government may seek additional financing from bilateral and multilateral sources. Maps: IBRD-29186 and IBRD-29188. Project Identification Number: PE- PE 54667   PERU EL NINO EMERGENCY ASSISTANCE PROJECT TECHNICAL ANNEX TABLE OF CONTENTS INTRODUCTION ..............................................................1 BACKGROUND TO THE "EL NINO" EVENT ..............................................................1 The El Nino Phenomenon ................................................... 1 The Impact of the 1982/83 El Nio ................................................... 3 The 1997/98 El Nifo ................................................... 3 Reliability of Forecasts ................................................... 4 The Government's Strategy for dealing with the 1997-98 El Niuo ................................... 5 The Bank's Response ................................................... 6 PROJECT DESCRIPTION ..............................................................6 Project Objectives ................................................... 6 Project Design Alternatives Considered ................................................... 6 Description ................................................... 7 A. The Emergency Prevention Component ................................................... 8 B. Emergency Operations ................................................... 11 C. Reconstruction Phase.................................................................................... D. Institutional Support Component ............................................. 16 Environmental Impact ............................................. 19 PROJECT COSTS AND FINANCING .............................................................. 19 INSTITUTIONAL ARRANGEMENTS AND PROJECT IMPLEMENTATION .......................................... 20 Project Implementation Arrangements ................................................... 20 Procurement Arrangements ................................................... 21 Review by the Bank .................................................. 22 Disbursement Arrangements ................................................... 23 Financial Management and Reporting Requirements .................................................. 24 Monitoring .................................................... 24 Supervision Plan .................................................. 25  - ii APPENDICES APPENDIX 1 -FLOOD CONTROL WORKS IN THE NORTHERN REGION WORKS POTENTIALLY ELIGIBLE FOR RETROACTIVE FINANCING FROM THE PREVENTIVE PHASE OF THE PROJECT ............................................................................... 27 APPENDIX 2 - DRAFT TERMS OF REFERENCE FOR CONSULTANTS TO UNDERTAKE INDEPENDENT AUDIT AND VALUATION OF CIVIL WORKS UNDERTAKEN ON FORCE ACCOUNT AND TO BE FINANCED RETROACTIVELY ............................................................................... 30 APPENDIX 3 - DROUGHT COMPONENT SIERRA SUR ............................................................................... 37 APPENDIX 4 - DRAFT TERMS OF REFERENCE FOR A COMPREHENSIVE DISASTER FORECASTING, PREVENTION, RELIEF AND MITIGATION STRATEGY ............................................................................... 47 APPENDIX 5 - INSTITUTIONAL STRENGTHFNING AND CAPACITY BUILDING ..................................... 50 APPENDIX 6 - RESETTLEMENT ............................................................................... 54  PERU EL NINO EMERGENCY ASSISTANCE PROJECT TECHNICAL ANNEX INTRODUCTION I. This Technical Annex accompanies the Memorandum of the President for a proposed El Ninio Emergency Assistance Loan to Peru. The proposed Project will support the Government's on-going efforts to mitigate the potentially severe impact of the 1997-98 El Nifo event. In the event of such an occurrence, the Loan will support reconstruction and other restoration activities. BACKGROUND TO THE "EL NIMO" EVENT 2. The El Niho Phenomenon. Local fishermen along the coasts of Peru and Ecuador have observed for decades the periodic appearance of a warm ocean current that would extend southward along the west coast of South America. As it occurred around Christmas they termed this current "El Nifio", or Spanish for the Christ child. Over the years, the term "El Nifio" has come to be reserved for these exceptionally strong warm intervals that have disrupted the local fishing industry and have brought heavy rains and flooding to this coastal region. It has also been increasingly recognized as a phenomenon which has an impact throughout the world, bringing drought to South-East Asia, Southern Africa and North-Eastern Brazil while bringing heavy rainfall to the normally arid coastline of the Americas. 3. In the scientific community, El Nino is more formally known as the El Niflo-Southern Oscillation (ENSO), as climate scientists now link the advent of these warm ocean currents to a related atmospheric event called the "Southern Oscillation". The ENSO then is described as a disruption of the ocean atmosphere system in the tropical Pacific, during which trade winds relax in the western Pacific, with a resulting rise in sea surface temperature and a drastic decline in the primary productivity of the food chain, which affects commercial fisheries in the region. Rainfall follows the warm water eastward, with associated flooding in Peru and drought in Indonesia and Australia. The eastward displacement of the atmospheric heat source overlaying the warmest water results in large changes in the global atmospheric circulation, which in turn forces changes in weather in regions far removed from the tropical Pacific. There is now a growing body of evidence suggesting that this ENSO phenomenon contributes to, or is responsible for, anomalous weather patterns throughout the world, sometimes of disastrous proportions. 4. The El Nifno phenomenon occurs every few years, though not on a predictable cycle and with varying magnitude and impact. Observations of conditions in the tropical Pacific are considered essential for the prediction of the short term (a few months to one year) climate variations. To provide the necessary data, the U.S. National Oceanic and Atmospheric Agency (NOAA) operates a network of buoys which measure temperatures, currents and winds in the equatorial bands.  5. During the last century more than a dozen El Nifio events have affected the South American Coast (See Table 1). Most of them raised water temperatures not only along the coast but in a belt stretching 5000 miles across the Equatorial Pacific. The weaker events raised sea temperatures only 1-1 1/2