Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 52036-NI

PROJECT PAPER

ON AN

ADDITIONAL FINANCING CREDIT

IN THE AMOUNT OF SDR 6.3 MILLION (US$10 MILLION EQUIVALENT)

TO THE

REPUBLIC OF NICARAGUA

FOR A

LAND ADMINISTRATION PROJECT (PRODEP)

January 6, 2010

Sustainable Development Central America Country Management Unit Latin America and Caribbean Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective December 22, 2009)

Currency Unit = Cordoba C. 20.81 = US$1

US$1 = SDR 0.63

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AF Additional Financing CAS Country Assistance Strategy CIP Comité Interinstitucional del Proyecto (Project Inter-Institutional Committee) CPS Country Partnership Strategy CPSPR Country Partnertship Strategy Progress Report CTO Comité Técnico Operativo (Project Operational Technical Committee) CSJ Corte Suprema de Justicia ( Nicaraguan Supreme Justice Court) DIRAC Dirección de Resolución Alternativa de Conflictos (Nicaraguan Directorate for

Alternative Conflict Resolution) EA Environmental Assessment ESU Environmental and Social Unit under SE-PRODEP EMP Environmental Management Plan FM Financial Management ICB International Competitive Bidding IDA International Development Association INIFOM Instituto Nicaraguense de Fomento Municipal (Nicaraguan Institute of

Municipal Development), INETER Instituto Nicaraguense de Estudios Territoriales (Nicaraguan Institute of

Territorial Studies) IP Intendencia de la Propiedad (Nicaraguan Property Intendancy) IPP Indigenous Peoples Plan IPR Independent Procurement Review MAGFOR Ministerio Agropecuario y Forestal (Nicaraguan Minstry of Agriculture and

Forestry) MARENA Ministerio del Ambiente y Recursos Naturales (Nicaraguan Ministry of

Environment and Natural Resources) MCC US Millennium Challenge Corporation MHCP Ministerio de Hacienda y Crédito Público (Nicaraguan Ministry of Finance) NCB National Competitive Bidding NDF Nordic Development Fund OM Operational Manual PCU Project Coordination Unit PDO Project Development Objective POA Plan Operativo Anual (Annual Operational Plan) PRODEP Proyecto de Ordenamiento de la Propiedad (Land Administration Project)

FOR OFFICIAL USE ONLY

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

PGR Procuraduría General de la República (Nicaragua General Attorney’s Office) SE-PRODEP Secretaría Ejecutiva del PRODEP (Project Coordination Unit) SIAFI Sistema Integrado de Administración y Finanzas (Integrated Administrative

and Financial System) SIC Sistema de Información Catastral (Cadaster Information System) SIGFA Sistema Integrado de Gestión Financiera y Auditoría (Nicaraguan Integrated

Financial Management and Auditing System) SIICAR Sistema Integrado de Información de Catastro y Registro (Cadaster Registry

Information System) SIIPRO Sistema Integrado de Información de la Propiedad (Property Information

System) SISCAT Sistema de Registro Catastral (Municipal Cadaster System) SIT Sistema de Información Territorial (Territorial Information System) SMEI Sistema de Monitoreo y Evaluación de Impacto (Monitoring and Impact

Evaluation System) SOE Statement of Expenditures UTO Unidad Técnica Operativa (Technical Operational Unit)

Vice President: Pamela Cox Country Director: Laura Frigenti

Sector Director: Laura Tuck Sector Manager: Ethel Sennhauser

Task Team Leader: Enrique Pantoja

NICARAGUA Land Administration Project (PRODEP) Additional Financing

CONTENTS

Page

A. Introductory Statement............................................................................................ 1 B. Background and Rationale for Additional Financing ............................................. 1 C. Proposed Changes ................................................................................................... 4 D. Consistency with CPS ............................................................................................. 6 E. Appraisal of Scaled-up Project Activities ............................................................... 6 F. Expected Outcomes ................................................................................................ 9 G. Benefits and Risks................................................................................................... 9 H. Financial Terms and Conditions for the Additional Financing ............................ 10

Annexes

Annex 1: Description of the Project ..................................................................... 11 Annex 2: Economic and Financial Analyses for the Additional Financing ......... 21 Annex 3: Project Implementation Arrangements ................................................ 28 Annex 4: Financial Management and Disbursements ......................................... 31 Annex 5: Procurement Arrangements .................................................................. 35 Annex 6: Safeguards ............................................................................................ 39 Annex 7: Revised Results Framework and Monitoring ....................................... 48 Annex 8: Project Risks Matrix ............................................................................. 57 Annex 9: Map IBRD 37449 ................................................................................. 61

PROJECT PAPER DATA SHEET

Date: January 6, 2010 Country: Nicaragua Project Name: Land Administration Project Original Project ID: P056018 AF Project ID: P117836

Team Leader: Enrique Pantoja Sector Director/Manager: Laura Tuck/Ethel Sennhauser Country Director: Laura Frigenti Environmental Category: Partial Assessment (B)

Borrower: Republic of Nicaragua Ministry of Finance and Public Credit Edificio Ministerio de Hacienda y Crédito Público, Managua Tel: (505) 2222-7061 Fax: (505) 2222-3033 Contact: Edward.Jackson@mhcp.gob.ni Responsible Agency: Procuraduría General de la República Km. 3 ½ Carretera Sur, Managua Tel.: (505) 2266-4416 Fax: (505) 2266-4104 Contact: Dr. Hernán Estrada, Procurador General de la República Revised Estimated disbursements (Bank FY/US$m) (Original project +AF)

FY 05 06 07 08 09 10 11 12 13 Annual 2.0 5.0 8.0 8.0 5.0 4.6 3.5 4.0 2.5 Cumulative 2.0 7.0 15.0 23.0 28.0 32.6 36.1 40.1 42.60 Current closing date: April 30, 2010 Revised closing date for original project: July 31, 2010 / Closing date for AF: April 30,2013

Does the project require any exceptions from Bank policies? Have these been approved by Bank management? Is approval for any policy exception sought from the Board?

[ ]Yes [X] No [ ]Yes [ ] No [ ]Yes [ ] No

Revised project development objectives/outcomes (If Applicable): No change Does the project trigger any new safeguard policies? NO

For Additional Financing Data [ ] Loan [ X ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 10.00 Proposed terms: Standard, 40 years maturity

Financing Plan (US$m) (AF) Source Local Foreign Total

BORROWER/RECIPIENT 0.00 0.00 0.00 IDA 9.30 0.70 10.00 Total: 9.30 0.70 10.00

Financing Plan (US$m) (Original Project + AF) Source Local Foreign Total

BORROWER/RECIPIENT 5.83 0.00 5.83 IDA 33.55 9.05 42.60 LOCAL COMMUNITIES 0.07 0.00 0.07 Total: 57.73 9.05 48.50

A. Introductory Statement 1. This Project Paper seeks the approval of the Executive Directors to provide an additional credit in an amount of US$10.0 million equivalent to the Republic of Nicaragua for the Land Administration Project (Proyecto de Ordenamiento de la Propiedad or PRODEP, P056018/Cr. 3665-NI).

2. The additional credit would help finance the costs associated with scaled-up and slightly adjusted activities to enhance Project impact. Implementation of PRODEP is satisfactory and no major changes are proposed to its Project Development Objectives (PDOs), original design or current implementation arrangements. The AF will focus on the central-Pacific area, mainly helping to scale up land regularization activities within the original Project municipalities in Chinandega, Estelí and Madriz, and cadastral and land regularization activities in new municipalities in Madriz and León. The AF would also support the necessary institutional strengthening, info-systems consolidation, Project management, and monitoring and evaluation.

3. In addition to IDA funds, PRODEP has been implemented with parallel support from the Nordic Development Fund (NDF) and the US-Millennium Challenge Corporation (MCC). NDF has provided a credit of EUR5.5 million, currently closing in April 2010, to support institutional strengthening and urban cadastral and regularization activities outside the scope of the Bank-financed project. In addition to institutional strengthening and demarcation of protected areas in León, MCC financed the successful implementation of a new methodology for cadastral surveying and regularization. Moreover, MCC has allowed the administration to the Attorney General’s Office (PGR) – the current Project’s implementing agency – of about US$2.6 million in equipment and vehicles that will help apply this methodology under the AF. MCC also funded the completion of key technical, economic, social and institutional studies that supported the Republic of Nicaragua’s preparation of the AF. Finally, the Government of the Netherlands has expressed interest in providing a grant, potentially in 2010, for the demarcation and titling of additional indigenous peoples’ territories in the Caribbean beyond de scope of the original Project.

B. Background and Rationale for Additional Financing 4. Country and Sector Background. Land tenure security is central to Nicaragua’s poverty reduction efforts. It is estimated that about one third of the rural land is held without a clear title. The share of land with no or improper documents is critically high among small and poor producers. Tackling tenure insecurity represents a major challenge, especially given the past inconsistent legal and administrative pattern affecting land, including the agrarian reform of the 1980s and policy decisions during the 1990s. Despite progress, modernization of the land administration system is still in its early stages. Through PRODEP cadastre coverage has increased, but this is still about 20 percent of the country’s total land area. Property registry services have been improved within the Project area. However, in many of the 17 registry offices in the country, poor record-keeping still prevails and property registry files are often outdated. As a result,

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about 35 to 40 percent of all land in Nicaragua is likely to be affected by conflicting claims. 5. Nicaragua is characterized by three regions, Pacific, Central and Caribbean, with distinct characteristics in terms of the underlying origins of land rights, as well as socio-economic and agro-ecological conditions. In the Pacific, which represents the economic and demographic center of the country, land rights stem mainly from títulos reales adjudicated by the Spanish Crown. In the Central Region, land rights have been obtained through possession during colonization and settlement processes reflecting the advance of the agricultural frontier. Most indigenous populations in these regions lost their culture and traditions and have become part of the prevalent “mestizo” culture. The Caribbean region, which was colonized by the British, comprises almost half of the national territory but is sparsely populated by ethnic and indigenous communities which have managed to preserve their culture and institutions. The Caribbean region has obtained relative autonomy and Law 445 provides the indigenous communities in this region with a legal and institutional framework for the formal recognition of their collective land rights. The Constitution of Nicaragua recognizes the collective land rights of indigenous people, but the legal framework in the rest of the country is not as conducive to formalizing these rights. 6. Original Project Overview. PRODEP was designed as a pilot effort mainly focusing on municipalities in three departments in the Pacific and Central regions, Chinandega, Estelí and Madriz. These departments were selected due to their high levels of poverty, land tenure insecurity and land conflicts. The Project also included a small component to demarcate and title selected indigenous peoples’ territories in the Caribbean region; and peri-urban titling in four cities outside the above departments: Managua, Leon, Granada and Rivas.

7. Estimated Project cost at appraisal was US$38.5 million, 85 percent of which was to be financed by IDA. The original IDA Credit (SDR26.2 million or US$32.6 million equivalent) was approved on June 18, 2002 and became effective on February 25, 2003. Its current closing date is April 30, 2010, after three extensions of the original closing date of December 31, 2007. The Credit Development Agreement (DCA) has been amended twice, reflecting restructurings approved in January 2007 and February 2008. These restructurings did not change the PDOs, its related outcome indicators or Project design. As of December 2009, over 90 percent of Credit funds have been disbursed and remaining funds have been committed. The original credit will be extended for three months until July 31, 2010. The closing date for the additional financing will be April 30, 2013. 8. In line with the pilot nature of the Project, as stated in the DCA, PDOs are (a) to develop the legal, institutional, technical and participatory framework for the administration of property rights in the Republic of Nicaragua’s territory; and (b) to demonstrate the feasibility of a systematic land rights regularization program. PDOs are being achieved through six components: (a) Policy and Legal Reforms; (b) Institutional Strengthening and Decentralization; (c) Titling and Regularization Services; (d)

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Demarcation and Consolidation of Protected Areas; (e) Demarcation of Indigenous Lands; and (f) Information Systems. 9. Implementation Status. The implementation performance of the original project, including compliance with applicable safeguard policies and legal covenants, is satisfactory. Since taking over as Project implementing agency in early 2008, PGR has demonstrated its commitment to achieving sustainable results. As a result, both Implementation Progress and PDO achievement have been rated moderately satisfactory and satisfactory for more than 12 months. The Project has no unresolved fiduciary issues.

10. Achievement of PDOs. The Project is on track to meeting its development objectives. With regard to PDO (a), as a result of the Project, the overall framework for land administration has been strengthened and inter-institutional coordination improved. In the Project area, property registry time and transaction costs have decreased. More specifically, the policy and legal framework for land administration has been strengthened through the preparation of a National Land Policy Framework and the passing of several laws, including the Law for Collective Land Rights of Indigenous Peoples in the Caribbean (2003), the Cadastre Law (2005) and the Public Registry Law (2009). Approval of the latter law formalizes major administrative and technological changes that will facilitate modernization of property registration, including the implementation of the Integrated Cadastre-Registry Information System (SIICAR). Overall, as confirmed by the legal analysis prepared for AF preparation, the key legal and procedural changes needed to implement systematic land rights regularization in the country have been carried out.

11. With regard to PDO (b), a systematic land rights regularization program has been developed and tested in the pilot departments and consolidated in León. Some aspects of the Project are already being replicated in other parts of the country. Cadastral activities have been completed in Chinandega and Estelí and 70 percent of Madriz, benefitting over 150,000 families, most of which are poor. More importantly, improvements in the regularization process have been institutionalized, and despite challenges, progress has been made in accelerating land titling and registry activities. Targets have been exceeded regarding demarcation of protected areas, with 12 areas demarcated and 10 management plans prepared under the Project (original targets were 11 and 7, respectively). Over the past two years, nine indigenous territories – comprising over 10,000 km2 or 8.5 percent of the national territory – have been demarcated and titled in the Caribbean, representing historical progress in the recognition of indigenous peoples’ land rights in Nicaragua and Latin America in general. This outcome has benefitted 121 indigenous communities. Finally, SIICAR is being piloted in Chinandega as planned. 12. Rationale for Additional Financing. PRODEP was originally designed as a pilot effort, with the long term objective of improving security of land tenure in Nicaragua. Both the long term objective and PDOs remain relevant for the country and the sector. The Government has demonstrated its commitment to this long-term objective and to the Project through its support to key land administration agencies and its following through with planned legal and procedural changes, as well as through its effective follow up to

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ensure adequate project implementation and its interest in continuing its partnership with the Bank beyond the original Credit closing date.

13. As detailed below, the AF is consistent with the current Country Partnership Strategy (CPS). Accordingly, encouraged by Project results, the Government would like to consolidate pilot efforts while a full-fledged operation is prepared and approved. The activities selected for scaling up under the AF are being successfully implemented and will help enhance Project impact and development effectiveness. At the same time, the AF complements other IDA-financed projects such as Agricultural Technology II (P087046), Rural Water and Sanitation, (P106283), Transport IV (P083952), and Rural Telecommunications (P089989).

14. The activities will be completed within three years after the current closing date of the original Credit. The AF focuses on activities that build on satisfactory implementation arrangements, proven methodologies and technology, and existing national capacity. Importantly, the AF would allow applying the methodology for cadastral surveying and regularization successfully implemented in León with financing from MCC but based on the lessons learned under the Project. This methodology will facilitate institutional strengthening while contributing to local capacity building for cadastral surveying, regularization, and supervision and institutionalization of project results. The AF will also help strengthen sustainability of project results by allowing to establish the SIICAR in three additional departments (León, Estelí and Madriz) and to provide further capacity building to 33 municipalities. C. Proposed Changes 15. Project Development Objectives, Design and Scope. No changes to the original PDOs, project components, or current implementation arrangements are proposed under the AF. Project scope will be expanded, and in addition to the original municipalities in Chinandega, Estelí and Madriz, the AF will include new municipalities in Madriz and in an additional department, León. As under the original project, the new municipalities have been selected based on their levels of poverty, property tenure insecurity and land conflicts. Moreover, the inclusion of the additional municipalities in Madriz and León will allow completing the cadastral surveying of both departments. 16. Project Duration, Execution and Oversight. The closing date of the Project would be extended to April 30, 2013, and the closing date of the original credit would be extended until July 31, 2010. Current implementation arrangements, following a decentralized model that relies on the co-executing agencies and a small PCU (Secretaría Ejecutiva or SE-PRODEP) under the PGR have been found to be satisfactory and will continue under the AF. The Project Inter-institutional Committee will be maintained as the coordinating mechanism of the project. The Operational Manual (OM) has been updated to reflect the scaled up activities. The OM also includes fiduciary requirements that will apply under the AF and confirms that current fiduciary arrangements will be maintained.

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17. Project Activities under the AF. For the most part, the AF supports scaling up of the same activities included under the original project, although in some cases, description of these activities has been adjusted to reflect changes in processes and methodology. At the same time, activities under the original project’s components (a) Policy and Legal Reforms and (e) Demarcation of Indigenous Lands will not receive funding under the AF. These two components are being implemented satisfactorily, have been allocated sufficient resources, and will be completed under the original Credit.

18. The AF would therefore finance activities under the other four original project components. Component (b) Institutional Strengthening and Decentralization would continue the decentralization and strengthening of the Republic of Nicaragua’s agencies in charge of administration of property rights, strengthening of implementation capacity of co-executing agencies and Technical Operational Units (UTOs), municipal capacity development, and project management support. Component (c) Titling and Regularization would include provision of technical and legal support for scaling up systematic regularization services in selected municipalities, processing of land claims (including titling of the beneficiaries of the Republic of Nicaragua’s agrarian land reform, ex-combatants and marginal urban and peri-urban settlers) and expropriation-based indemnification claims, and alternative conflict resolution activities. Component (d) Demarcation and Consolidation of Protected Areas would support demarcation of two protected areas (Complejo Volcánico Telica-Rota and Tepesmoto Pataste) and carrying out of a social and environmental campaign. Finally, Component (f) Information Systems would include the implementation of SIICAR in Chinandega, Estelí, Madriz and León and the development and implementation of the property information system (SIIPRO), as well as the implementation of the system to monitor the financial and administrative management and execution of the project (SIAFI), the Monitoring and Impact Evaluation System (SMEI) and participatory evaluations of the Project. Annex 1 provides a detailed description of AF activities.

19. Financing Plan and Project Costs. The estimated original project cost is US$38.5 million, and with the AF would be US$48.5 million. The AF Credit will include 100 percent financing of eligible expenditures and retroactive financing of 20 percent. Table 1 below presents the revised financing plan and Table 2 the revised project costs.

20. In August 2009, funds under the original credit were reallocated across most of the disbursement categories to reflect cost changes and implementation adjustments. Such reallocation also took into account the AF to ensure both project impact and continuity and successful completion of original activities under components (a) and (e). Table 1 – Revised Financing Plan (US$ million) Source Original Project Additional Financing Total Revised Project Borrower 5.83 -- 5.83 IDA 32.60 10.0 42.60 Local Communities 0.07 -- 0.07 Total 38.50 10.0 48.50

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Table 2 – Project Costs by Component (US$ million)

Component Original Project Additional Financing

Total Revised Project Cost

A. Policy and Legal Reforms 0.57 -- 0.57 B. Institutional Strengthening and Decentralization 13.77 3.56 17.33 C. Titling and Regularization Services 16.61 5.29 21.90 D. Demarcation and Consolidation of Protected Areas 2.24 0.25 2.49 E. Demarcation of Indigenous Lands 2.61 -- 2.61 F. Information Systems 2.70 0.90 3.60 Total 38.50 10.00 48.50

21. AF Credit Conditions. Under the AF Credit, the additional condition of effectiveness consists of the following, namely that the co-executing agency agreements have been executed on behalf of the Republic of Nicaragua and the co-executing agencies. The AF OM and the required 18-month Procurement Plan were given no objection before Credit negotiations. Project staff, including fiduciary staff, is expected to continue implementing the Project during the AF.

D. Consistency with CPS 22. The AF is consistent with the World Bank Group’s Country Partnership Strategy 2008-2012 (Report no. 39637-NI) discussed by the Executive Directors on October 11, 2007. In line with the CPS, the Project promotes the development of sector policies and consolidation of the institutional framework. The CPS recognizes the progress made in land administration and the importance of continued Bank support in this area, and proposes a second PRODEP in FY10. The CPS Progress Report (Report no. 51616-NI) corroborates the progress made through the Project and reiterates the Bank’s interest in maintaining a long term engagement in this sector.

23. Considering the objective of consolidating the pilot effort and IDA resource constraints, the Government has decided on scaling up the original Project through an AF in the short term and moving the second full-fledged PRODEP to the next CPS. Adopting a programmatic approach, PRODEP II would help consolidate the long term view and strategy for land administration modernization in the country.

E. Appraisal of Scaled-up Project Activities 24. Economic and Financial Analyses. Economic and financial analyses were carried out for AF activities (see Annex 2 for details). Results of these analyses indicate that the regularization activities are economically feasible, yielding an IRR of 21 percent (with deferred benefits of 10 years). The economic analysis focuses on the expected benefits derived from the impact of land regularization on increased agricultural productive investments, in the case of rural land, and building improvements, in the case of urban lots. As other economic benefits, such as those related to land that would be regularized but not titled during the project, or political and social stability, welfare gains and better environmental protection, are not considered in this analysis due to the difficulty in measuring them, the magnitude of the net benefits and the economic feasibility indicators would constitute a lower bound from which to assess the project’s economic feasibility. Benefits assumed for the original Project activities are already being

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realized. Combined with the original Project activities, therefore, the revised aggregate IRR would most likely exceed, or at least maintain, the original project’s IRR of 19 percent.

25. Technical Analysis. The AF builds upon the experience, methodologies, and local capacity built through, and technology and equipment provided by the Project as well as MCC and NDF-financed activities. The cadastral surveying and regularization methodology to be consolidated under the AF, in particular, was tested in Nagarote (León) with support by MCC, and the lessons learned incorporated into the design of the AF. Moreover, an assessment of the effectiveness of the technical processes and procedures was undertaken by international experts during the Project supervision mission of August 2009. Based on expert advice and implementation experience, operational procedures and supervision and quality control mechanisms have been developed to guide the key agencies that will be directly involved in the cadastral and regularization processes. Project technical manuals and the technical section of the OM have been updated accordingly.

26. Institutional Analysis. The institutional analysis carried out during AF preparation in conjunction with a new analysis of the legal framework for land administration, indicated that, in general, current implementation arrangements are adequate. Moreover, the institutional analysis corroborated that PGR, the Project implementing agency, has been given a clear mandate to coordinate the land administration system in the country. Over the life of the original project, there has been a process of consolidation of institutions and responsibilities, which has improved the land administration institutional framework. Implementation of SIICAR has facilitated a closer partnership between the Supreme Court (CSJ), which is responsible for the property registry, and executive branch agencies dealing with cadastre and regularization. The current framework is reflected in the AF through the inclusion of key institutions / ministries as co-executing agencies. These agencies are the Property Intendancy (IP), Ministry of Environment and Natural Resources (MARENA), Nicaraguan Institute of Territorial Studies (INETER), and Nicaraguan Institute of Municipal Development (INIFOM), as well as the Directorate for Alternative Conflict Resolution (DIRAC) and Public Registry, both of which fall under the CSJ. The Ministry of Agriculture and Forestry (MAGFOR) is the only initial co-executing agency that will not participate in the AF since it will successfully complete its activities under the original Credit. See Annex 3 for further details on Project implementation arrangements.

27. Financial Management and Disbursement Arrangements. PGR through the SE-PRODEP will continue to be fully responsible for financial management under the AF. The capacity assessment undertaken during AF preparation concluded that the SE-PRODEP meets the FM requirements stipulated in BP/OP 10.02. In particular, the Project counts with a financial management system that can provide, with reasonable assurance, accurate and timely information that Credit funds are, and will be used under the AF, for the intended purposes. The FM risk rating proposed for the AF is Moderate after mitigation actions have been implemented. Further details on FM are provided in Annex 4

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28. Procurement. PGR through the SE-PRODEP will also continue to carry out procurement under the AF. According to the capacity assessment undertaken during AF preparation, the SE-PRODEP is relatively well prepared and has gained experience and understanding of procurement-related issues throughout PRODEP’s implementation. The procurement system installed at PGR allows satisfactory monitoring, reporting, and record keeping of transactions. Moreover, an Action Plan is being implemented to address the issues identified during the assessment, such as weaknesses in the procurement unit’s infrastructure and need for additional qualified staff. A Procurement Plan for the first 18 months of the AF was also prepared by SE-PRODEP and received Bank’s no objection before Credit negotiations. The procurement risk rating proposed for the AF is Moderate after mitigation actions have been implemented. Further details on procurement are provided in Annex 5.

29. Safeguards. The AF finances similar activities to those included under the original project. As such, its environmental category, which is “B,” is maintained. The following policies would thus continue to apply under the AF: Environmental Assessment (OP/BP 4.01), Natural Habitats (OP/BP 4.04), Indigenous Peoples (OP/BP 4.10), Involuntary Resettlement (OP/BP 4.12), Forests (OP/BP 4.36) and Physical Cultural Resources (OP/BP 4.11). It should be noted that issues related to physical cultural resources has not arisen during Project implementation and are unlikely to emerge in the additional municipalities proposed in Madriz and León. In addition, the AF will not finance implementation of the management plans of the selected PAs or regularization within these PAs. See Annex 6 for details on main safeguard issues.

30. As required by the applicable safeguard policies, an Environmental Assessment, including an Environmental Management Plan (EMP), was prepared. Key inputs for the EA/EMP were an Agro-Forestry Study and an Analysis of the Legal Framework for Environmental Management. A new Social Assessment and an Indigenous Peoples Plan (IPP) were finalized to ensure adequate consultation of the indigenous population living within the AF area. A Gender Analysis was also carried out as part of the social assessment, and its findings and recommendations reflected in the IPP and used in updating the Project’s Gender Strategy. The IPP and the EA/EMP were disclosed in country and in InfoShop on December 1, 2009, before the appraisal of the AF Credit. All other relevant documents are available in Project files. As in the parent project, there will be no resettlement under the AF activities, but a new Resettlement Process Framework was prepared particularly for the case of demarcation in the two selected protected areas. The RPF was also disclosed in country and in InfoShop on December 1, 2009. Important lessons have been learned during project implementation, which were incorporated in the updated OM and other technical documents. Project staff has a good knowledge of Bank safeguards and have received training, most recently during the August 2009 mission.

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F. Expected Outcomes 31. The AF would extend Project impact to approximately 46,000 additional families through cadastral surveying and regularization activities, and to eight new municipalities through capacity building and improved technology. Extension of SIICAR to three additional departments will allow for broader reach of key PDO indicators related to reduction in time for processing registry transactions and in enhancing financial self-sufficiency of office registries in these departments. To measure better the impact of the project on rural poor and women, two PDO outcome indicators have been added to the Results Matrix. Selected indicators are highlighted below. The full Project Results Matrix including the AF is presented in Annex 7.

Table 3 – Selected Indicators

Original Project Additional Financing

Total

Improved land administration services (i.e. reduced transaction times, better access) (departmental level)

3 1 4

Improved land taxation capacity (municipal level) -- 26 26 Improved cadastral capacity (municipal level) 5 28 33 Families benefitting from cadastral surveying 158,000 46,000 205,000 Families benefitting from regularization 38,000 14,000 52,000 Protected areas demarcated 12 2 14 Piloting of SIICAR (departments) 1 3 4

G. Benefits and Risks 32. Benefits. The AF would help enhance the original Project’s benefits, including land tenure security, efficient resource allocation, equity and welfare, and environmental protection. The greatest benefit expected from land regularization is tenure security. Throughout Nicaragua, hundreds of large and small farmers are engaged in some form of land-ownership conflict or dispute, which have an impact on social and political stability and divert resources from productive endeavors. Related to this, an important benefit of land titling, albeit not easily quantifiable, is that it fosters increased land market activity. Moreover, as a direct result of greater land-tenure security, it is expected that owners would be motivated to undertake investments in their land and/or housing.

33. The agrarian reform of the 1980s was targeted to the poor, very small or landless rural households and titling and registration activities aimed to resolving their tenure status would strengthen these households’ ability to secure their land claims and investments. Furthermore, promoting gender equity will facilitate increased recognition of women’s land rights. At the same time, at a general level, security of tenure will provide environmental benefits, as people are more likely to improve or maintain forest and/or tree cover. In qualitative terms, the benefits of better conservation of protected areas would include, inter alia, protection of the biodiversity, sustainable management of the natural resources and the development of eco-tourism opportunities.

34. Risks. As detailed in Annex 8, overall residual Project risk is considered to be Moderate. The original project has been in the list of projects with substantial risk, but the AF would have a relatively lower risk considering that (a) it will not finance

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demarcation and titling of indigenous territories in the Caribbean or implementation of sub-projects in these territories; (b) only two protected areas will be demarcated, (c) local capacity for cadastre and land regularization has improved; and (d) the policy and legal framework for land administration has been considerably strengthened. Nevertheless, political and social and reputational risks remain substantial: national elections will take place in late 2011, and the elections period and political transition may slow down the final year of AF implementation. A worst case scenario, with potential impacts across the country portfolio, would be increased political instability as the elections get closer. On the other hand, overall land policy has remained consistent over several recent administrations. More crucially, there has been general agreement across parties about the importance of land regularization and resolving land conflicts in the country. This was made evident by the recent approval of the Public Registry Law with wide cross-party support.

35. Social and reputational risks under the AF relate to unresolved tenure issues that may turn contentious during the regularization process in municipalities within the AF area with indigenous communities. The cadastral process has advanced relatively free of these problems and the Government has demonstrated its commitment to recognizing the territorial rights of indigenous peoples. However, the legal framework is not always conducive to dealing with these issues in the Pacific and Central regions. Finally, country-level fiduciary risk is considered substantial, although PRODEP has not experienced problems in this respect. Action plans reflecting findings from the fiduciary capacity assessments are being implemented to further strengthen the SE-PRODEP (PCU).

H. Financial Terms and Conditions for the Additional Financing 36. Financial terms and conditions for the additional financing will be standard IDA conditions for Nicaragua: 10 years grace period and a maturity of 40 years.

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NICARAGUA Land Administration Project (PRODEP) Additional Financing

Annex 1: Detailed Project Description

A. Introduction

1. No changes to the original Project Development Objectives (PDOs), Project components, or current implementation arrangements are proposed under the Additional Financing (AF). Accordingly, PDOs under the AF are: (a) to develop the legal, institutional, technical and participatory framework for the administration of property rights in the Republic of Nicaragua’s territory; and (b) to demonstrate the feasibility of a systematic land rights regularization program. The AF will help consolidate pilot efforts started under the original project, focusing on activities that promote land tenure security, with particular emphasis on poor and vulnerable populations. 2. Consistent with the original Project, at the end of AF implementation, a methodology for systematic land regularization should have been established and a solid framework developed as a foundation for a sustainable, equitable and more comprehensive long term program. Key land administration agencies should have improved capacity to implement such program. More specifically, complementing other government efforts, cadastral surveying and property registry modernization would have been completed in four out of 15 departments in the country, covering 11.5 percent of total area. Moreover, 14 protected areas out of a total of 72 in Nicaragua would have been demarcated and geo-referenced; and almost a quarter of all municipalities would have participated in capacity building for cadastre activities. Overall, over a million people would benefit at different levels, representing 20.78 percent of the total population. Table 1 below provides details on pilot departments population and area.

Table 1 – Area and Population in Pilot Departments Department Population (No.) Area (Km2) Number of

Municipalities Total Country 5,142,098 120,339.57 153

León 355,779 5,138.03 10 Chinandega 378,970 4,822.42 13 Estelí 201,548 2,229.69 6 Madriz 132,459 1,708.20 9

Sub-Total Departments 1,068,756 13,898.34 38

% of Project relative to the Country 20.78% 11.54% 24.8%

Source: Population Census. INEC. 2005

B. Geographic Coverage under the Additional Financing 3. The AF includes the original municipalities in Chinandega, Estelí and Madriz, and selected new municipalities in Madriz, and an additional department, León (see Map in Annex 9). As under the original project, the new municipalities in Madriz and León have been selected based on their levels of poverty, property tenure insecurity and land

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conflicts. Moreover, in both Madriz and León, inclusion of the new municipalities would allow completing the cadastral surveying for the whole department. In addition, León was the department where a new cadastral surveying and regularization methodology was implemented with support from MCC, and preparatory activities have already been carried out.

4. The Project may include any other municipalities which may be agreed upon in the future between the Republic of Nicaragua and the Bank and reflected in the OM in addition to, or in substitution of, the municipalities mentioned below. As such, the OM will be the reference document indicating the specific municipalities and departments where the Project will intervene under each component. This contingency is reflected in the safeguard instruments prepared for the AF, which contain information of a social and environmental nature to ensure the comprehensive and timely implementation of safeguards at any new sites. Moreover, inclusion of any new municipality will require Bank’s no objection, which will be based, inter alia, on the availability and adequacy of such information. Table 1 below presents an indicative description of activities by department and municipality.

Table 2 – Activities by Department and Municipality

Activities Type of Intervention

Departament Municipalities

1. Scaled Up Regularization and Titling Activities (municipalities where cadastral surveying

has concluded) ORIGINAL

MUNICIPALITIES

Conflict resolution, regularization and titling of urban and

rural properties.

Chinandega

Chinandega, Posoltega, Chichigalpa, Corinto, El Realejo, El Viejo, Puerto Morazán, Villa Nueva, Somotillo, Cinco Pinos, Santo Tomás, San Pedro y San Francisco del Norte.

Estelí La Trinidad, Estelí, Condega. Limay, Pueblo Nuevo y San Nicolás.

Madriz Somoto, Yalaguina, San Juan de Rio Coco, Totogalpa, Palacaguina y San Lucas

2. Cadastral, Regularization, and

Titling in New Municipalities

NEW MUNICIPALITIES

Cadastral surveying, conflict

resolution, regularization and titling of urban and

rural properties.

León Nagarote, La Paz Centro, Telica, Larreynaga y Quezalguaque.

Madriz

Telpaneca, San José de Cusmapa y Las Sabanas.

3. Pilot demand-based regularization NATIONAL

Regularization and titling of urban and

rural properties affected by land

reforms (reformed sector)

N/A Based on beneficiaries’ demand

C. Project Components 5. The AF, to be financed by an IDA Credit of US$10.0 million equivalent, will be implemented over a period of three years by the Attorney General’s Office (PGR) through the Project Coordination Unit (Secretaría Ejecutiva or SE-PRODEP), in close

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coordination with the relevant co-executing agencies and participating municipalities. As detailed below, for the most part, the AF supports scaling up of the same activities included under the original project, although in some cases description of these activities has been adjusted to reflect changes in processes and methodology.

6. Activities under original project components (a) Policy and Legal Reforms and (e) Demarcation of Indigenous Lands will not receive funding under the AF. These two components are being implemented satisfactorily and their main activities will be completed under the original Credit. The Government has confirmed its commitment to recognizing indigenous peoples’ land rights in the draft National Human Development Strategy, and has demonstrated this commitment through the successful implementation of the activities agreed under Component (e). In the strategic context of the Project and IDA resource constraints, the Government has decided not to include these activities under the AF considering: (i) the need to ensure impact of the AF by scaling up activities selectively (in this case, focusing on the central-Pacific area); (ii) the interest of other donors, such as the Government of the Netherlands, in financing, mainly through grants, additional indigenous territories beyond the scope of the Project. Responding to this interest, the Government has finalized a proposal, backed up by the respective environmental and social assessments. Given different processing and operational requirements, it was not feasible to include the potential grant as co-financing under the AF; and (iii) the option, in the unlikely scenario that no financing were obtained, of including new territories in the next full-fledged PRODEP or through a more comprehensive indigenous peoples’ development project. In order to ensure its successful completion, activities under Component (e) are being monitored closely and the current closing date of the original Credit would be extended until July 31, 2010.

7. The AF would therefore provide support to the other four original Project components: (b) Institutional Strengthening and Decentralization; (c) Titling and regularization services; (d) Demarcation and Consolidation of Protected Areas; and (f) Information Systems. Details on the activities included in the AF are discussed below.

8. To ensure timely implementation within the three-year period of the AF, key activities have been planned as follows: cadastral surveying will be carried out during the first two years, beginning with the municipalities in Leon and ending with the municipalities in Madriz. By applying a new methodology, titling and regularization services will be conducted from the start of the AF and continuously until the end of the AF implementation period, along with institutional strengthening activities. Demarcation in protected areas should be completed during the first year of the AF. This plan has been reflected in the 18-month procurement plan agreed with PGR and given no objection before AF Credit negotiations.

Component A – Policy and Legal Reforms (No funding under AF)

9. Under the original project, this component aims to support the strengthening of the policy and legal frameworks for land administration in the country. No activities related to this component will be carried out under the AF.

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Component B – Institutional Strengthening and Decentralization (US$3.56 million)

10. This component aims to improve institutional capacity for (a) ensuring adequate Project implementation; (b) increasing efficiency in land administration services, including through a new organizational model and methodology for cadastral surveying and regularization; and (c) promoting coordination between key land sector institutions. Accordingly, as detailed below, this component includes the following subcomponents: B.1 – Decentralization and Strengthening for the Administration of Property Rights; B.2 – Municipal Capacity Development; and B.3 – Support to Project Management.

11. The main adjustments made to activities under this component relate to (a) institutional strengthening, particularly the support to the organizational development plan under the Property Intendancy (IP). Since the plan has been successfully prepared and implemented under the original credit, it is not included under the AF; (b) project management, which has been made more precise to reflect clearly the responsibilities of the Project Coordination Unit (SE-SINAPRED); and (c) provision of technical assistance and equipment for land titling to peri-urban areas in the cities of Granada, Managua, León and Rivas is not specifically mentioned since the AF covers all areas (i.e., both rural and urban) within any selected municipality (as detailed now in Component C).

B.1 – Decentralization and Strengthening for the Administration of Property Rights

12. The AF Credit will continue supporting (a) the decentralization and strengthening of the Republic of Nicaragua’s agencies in charge of administration of property rights, including: (i) the Property Intendancy (IP) for the provision of legal adjudication, titling and other regularization services at the central and departmental level as required for Project implementation; (ii) the Nicaragua Institute for Territorial Studies (INETER) for carrying out cadastral analysis and the issuing of documents required for regularization activities under the Project at the central and departmental level; (iii) the Registry, through: (A) the establishment of a national directorate; (B) the implementation of dissemination activities of the Registry Law; and (C) the strengthening and modernization of the departmental offices of the Registry located in the departments of Estelí, Madriz, Chinandega and León as required for implementation of SIICAR and in the city of Managua; and (iv) the Directorate for Alternative Conflict Resolution (DIRAC) for implementing alternative or extra-judicial methods for resolution of disputes that emerge during the cadastral surveying process.

13. The AF would also support (b) strengthening the capacity for Project implementation of the co-executing agencies and Technical Operational Units (UTOs).1

B.2 – Municipal Capacity Development 14. The AF would include provision of technical assistance, equipment and software to selected municipalities to: (a) enable them to participate in Project activities;2 (b) train

1 This includes support, inter alia, to the coordination units of the co-executing agencies and departmental delegations. 2 This would include, inter alia, assistance to promote increased coordination with co-executing agencies for cadastral and regularization activities, as well as for environmental protection and territorial planning.

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them in the usage of SIICAR and help them integrate the municipal cadastre systems with SIICAR; and (c) improve their capacity for cadastral and regularization activities.3

B.3 – Support to Project Management

15. The PCU (SE-PRODEP under PGR) will continue receiving Project management support required for: (a) financial management, Project audits, and procurement, (b) overall coordination of co-executing agencies, including the Project Inter-Institutional Committee (CIP) and its Operational Technical Committee (CTO); (c) training on fiduciary, operational and safeguard aspects of the Project, and (d) oversight of the Monitoring and Evaluation (M&E), communication and gender strategies of the Project and the application of safeguards requirements of the Project.

Component C – Titling and Regularization Services (US$5.29 million)

16. This component would focus on the consolidation of a methodology to clarify rights and to carry out a land regularization process that would serve as a foundation to develop a long-term, comprehensive Property Regularization Program. Accordingly, the component includes the following sub-components: C.1 – Systematic Regularization Services; C.2 – Titling and Review of Titles of the Reformed Sector, and C.3. Conflict Mediation. The main co-executing agencies under this component are IP, INETER, Public Registry and DIRAC, all of which should work in close partnership with the selected municipalities.

17. The main adjustments made under this component consist of (a) providing a more detailed description of activities under sub-component C.1, including mentioning of support to field supervision and quality control and to the social communication campaign; and (b) broadening the support to demand-based land claims under sub-component C.2 from marginal peri-urban settlers to marginal urban and peri-urban ones to enhance Project impact.

C.1 – Systematic Regularization Services 18. The AF will include provision of technical and legal support for scaling up systematic regularization services in selected municipalities, including photogrammetric restitution, preparation of cadastral databases, definition of urban boundaries, cadastral surveying, implementation of a social communication campaign, verification and validation of property rights, field conflict resolution, public disclosure of results (exposiciónes públicas), field supervision and quality control, and titling, regularization and registration of rural and urban parcels.

19. In the case of municipalities with indigenous communities, project safeguard documents, including an Indigenous Peoples Plan (IPP), will ensure that an adequate consultation process is followed and that indigenous communities agree to the cadastral surveying and regularization under the current legal framework. Moreover, the social

3 As per its mandate, the Nicaraguan Institute for Municipal Development (INIFOM) will be an active partner in this process.

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communication campaign, which was updated during AF preparation, will be conducted in each municipality with the active participation of mayors and community leaders to inform the population about the objectives, methods and requirements of the regularization process. Particular attention will be given to ensuring that beneficiaries understand their rights regarding fair access to legal services and due process, and to promoting gender equity.

20. Cadastral surveying will be carried out by INETER and IP/PGR under the new organizational model developed and successfully validated in the municipality of Nagarote (León) with support from MCC and in direct collaboration with the Millennium Challenge Account-Nicaragua. Through this experience, building on lessons learned under the Project, INETER and IP have developed an organizational and coordination mechanism that has improved the efficiency of the Project’s processes and achievement of results. By providing greater institutional ownership, control and coordination, and streamlining of technical processes, this experience helped to reduce processing times. Titling, for instance, will occur almost simultaneously with the cadastral surveying process, as parcels with technical and legal conditions that allow for early titling are identified. Early demand for titling of properties in the selected municipalities that are not yet being surveyed will also receive attention. As such, the organizational model has a demonstrated potential to help deliver project benefits to the population more rapidly, which will help to make rapid gains on the project regularization targets, while helping to strengthen institutional capacity, integrate local authorities better into the process, and to broaden project impact as the model is replicated in other areas of the country.

21. Quality control of cadastral products, using internationally accepted methodologies, will be under the responsibility of two units within INETER, external to its Cadastral Surveying Unit: (a) the Geodesy and Cartography Directorate will ensure quality control on precision, geodesic network, and other technical aspects; and (b) the Territorial Information System (SIT) Unit of the Physical Cadastre Directorate will conduct a final control through sampling of the surveying results as a pre-requisite to accept and formalize the use of the databases by the departmental cadastre offices. Furthermore, IP’s departmental representatives will conduct controls for parcel records and pre-diagnostic quality.

C.2 – Titling and Review of Titles of the Reformed Sector 22. The AF would continue supporting the processing of land titling requests from the reformed sector throughout the country through the simplification of bureaucratic procedures and the provision of judicial services, among others. IP will be responsible for this process, which generally begins with a demand from the beneficiary.

23. Specifically, the AF would support processing of (a) land claims, including titling of: (i) the beneficiaries of the Republic of Nicaragua’s agrarian land reform; (ii) ex-combatants; and (iii) marginal urban and peri-urban settlers; and (b) expropriation-based indemnification claims, including the provision of technical assistance to beneficiaries and agencies of the Republic of Nicaragua to simplify land-related procedures, juridical services, topographic services, and registration of parcels.

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24. As under the original Project, the process would involve three critical steps: (a) issuing of rural titles by IP; (b) issuing of urban titles by PGR; and (c) review of titles, which entails the provision of certifications, indemnifications, and other documents. For titling demands, the process begins with a diagnostic and socioeconomic profile of the property. Conflict mediation is eventually carried out, followed by topographic surveying and legal adjudication of the property, and concluding with the provision of a title and its registration in the Property Registry. The procedure is generally more straightforward for review cases, where research is conducted in IP’s databases, verification in situ and cadastral and registry research, concluding with a resolution and provision of a certificate or other pertinent administrative document.

C.3 – Conflict Mediation 25. The AF would support the carrying out of alternative conflict resolution activities through: (a) a training program in mediation, negotiation, collaboration and co-management of conflicts for community leaders and field mediators; (b) mediation of land conflicts; and (c) the carrying out of a communication campaign on alternative conflict resolution mechanisms for public officials and the beneficiary population.

26. Coordination and implementation of conflict mediation falls under the responsibility of the Supreme Court’s Directorate for Alternative Conflict Resolution (DIRAC) through its National Mediation Office. Mediation for conflict resolution has proven to be a vital and effective tool that contributes to development and to a culture of peace and negotiation in Nicaragua. To ensure adequate provision of services, mediation will be implemented by qualified community mediators, previously trained by DIRAC. In addition, DIRAC would coordinate and be present in each of the four pilot departments through a local supervisor. Systematic promotion and educational campaigns will be conducted to bring benefits of the process directly to the target population.

Component D – Demarcation and Consolidation of Protected Areas (US$0.25 million) 27. This component aims specifically to physically demarcate two protected areas and implement an environmental communication program in such areas and neighboring locations. Accordingly, the component includes: C.1 – Demarcation of Protected Areas; and C.2 – Social Communication and Environmental Education. As has been the practice, the Republic of Nicaragua shall refrain from granting or considering any claims for lands within or adjacent to Protected Areas, unless said lands have been physically demarcated in a manner satisfactory to the Bank.

28. As noted above, the objective of this component has been made more specific under the AF. Many activities under this component have been successfully completed under the original credit (see Annex 6 for details), and the AF focuses on the last two major protected areas that still remain to be demarcated within the pilot departments. As such, it is important to note that, in contrast to the original Credit, the AF does not finance the implementation of the selected protected areas’ management plans or studies to identify new protected areas.

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D.1 – Demarcation of Protected Areas

29. The AF would support demarcation of the Complejo Volcánico Telica-Rota and Tepesomoto Pataste Protected Areas through: (a) preparatory work, obtaining preliminary information and consultation with beneficiaries; (b) field socio-economic and tenure data collection, and ecological assessments; (c) determination of the precise boundaries to be demarcated; and (d) physical demarcation, geo-referencing and registration in the Cadastre and Registry.

30. The Ministry of Environment and Natural Resources (MARENA) will be responsible for this component, in coordination with relevant co-executing agencies particularly INETER. Complejo Volcánico Telica-Rota and Tepesomoto Pataste are located in León and between Estelí and Madriz, respectively.4 With this, all major protected areas within the Project area would have been demarcated. The demarcation process starts with consultations with municipalities and other local stakeholders, followed by the selection and hiring of technical services. Actual demarcation is carried out with the participation of local actors associated with the protected area. Markers (mojones) and signs (rótulos) are placed after quality control is completed, in coordination with INETER. The process concludes with the geo-referencing of mojones, also carried out in coordination with INETER. As detailed below, an information and educational campaign on the environment will be implemented in parallel to these activities. It is noted that the AF will not finance implementation of the selected PA’s management plans or regularization activities within the PAs.

D.2. Environmental Communication and Education 31. The AF would also support the carrying out of a social and environmental communication campaign in the two protected areas listed above and the surrounding areas, including the dissemination of information on each protected area, environmental laws and regulations, direct and indirect benefits of natural resources conservation activities, and recommended land management practices. 32. This process is expected to include the participation of land owners, community members, government and non-governmental institutions that are present in the protected areas and buffer zones. The communication campaign has been an integral part of this component under the original project, but will now be a specific sub-component with increased focus on ensuring adequate information dissemination and broader educational reach. Component E – Demarcation of Indigenous Lands (No funding under AF) 33. Under the original project, this component’s goal was to promote the strengthening of indigenous peoples’ land rights in the Caribbean region of the country through demarcation and titling of selected indigenous territories. No activities related to this component will be carried out under the AF.

4 These PAs were established within the framework of Law 217 and its regulation.

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Component F – Information Systems (US$0.90 million) 34. This component aims to develop an efficient technological framework to (a) help modernize cadastre and registry services and land titling and regularization procedures, and (b) ensure adequate Project’s financial management and monitoring and evaluation (M&E). Accordingly, there are five subcomponents under this component: F.1 – Integrated Cadastre and Registry Information System (SIICAR); F.2 – Integrated Property Information System (SIIPRO); F.3 – Project Financial Management System (SIAFI); F.4 – Monitoring and Impact Evaluation System (SMEI); and F.5 – Participatory Evaluation.

35. The main adjustments made to this component include a more detailed description of activities related to Project monitoring and evaluation (sub-component F.4) to reflect the main agreements in this respect; and the transferring of financing of project audits to sub-component B.3 (Support to Project Management).

F.1 – Integrated Cadastre and Registry Information System (SIICAR) 36. The AF will finance (a) implementation in the departments of Chinandega, Estelí, Madriz and León of SIICAR to: (i) modernize, secure and computerize land related records; (ii) establish at the departmental level a unified information system which will record graphic and alphanumerical data; (iii) link cadastral data with Registry information; and (iv) maintain updated Registry and cadastral field information, and (v) grant easy access to land tenure information to public and private parties; and (b) provision of training on SIICAR to relevant staff of the Republic of Nicaragua’s agencies in charge of land matters, municipalities and selected private parties.

37. Main co-executing agencies for this component are the Property Registry under the Supreme Court (CSJ) and INETER. As part of this effort, an Informatics Central Office for SIICAR will be established bringing together cadastre, registry, info-technology, and quality control specialists. At the end of Project implementation, SIICAR should be operating in Chinandega, Estelí, Madriz and León, bringing together at the departmental level (a) the cadastral information (exact geographical description of the parcel) managed by INETER and (b) the legal information (certainty of ownership and rights) managed by the Public Registry. INETER has traditionally managed cadastral information in a decentralized fashion through the Cadastral Information System (SIC). SIC contains cadastral maps and is currently operative in Chinandega, Estelí, Madriz, Leon, and Managua, allowing for the alphanumeric updating of cadastre and the provision of cadastral documents. However, SIC does not currently function as an integrated database with the required access level. In surveyed areas, the database contains all surveyed parcels with a new single cadastral number that allows the geo-referencing and identification of every parcel. Property registration has been done manually using paper-based records collected in large books. The Public Registry Law (2009) has drastically changed this approach by mandating the implementation of SIICAR.

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F.2 – Integrated Property Information System (SIIPRO) 38. The AF will support the development and implementation of SIIPRO to help track the issuance of land titles, including, inter alia, the development of the relevant software and provision of training. SIIPRO was also piloted under the original project, and would be provided under the AF to the departmental offices of IP covering the selected municipalities.

F.3 – Project Financial Management System (SIAFI)

39. The AF will continue financing the implementation of a system to monitor the financial and administrative management and execution of the project (SIAFI).

40. SIAFI will be managed by the PCU (SE-PRODEP under PGR) in order to provide automated registration and control of the Project’s accounting records, procurement and planning; and timely preparation of FM reports required by the Bank. Computer equipment will be acquired for the System’s strengthening and technical support made available to ensure adequate functioning of the system.

F.4 – Monitoring and Impact Evaluation System (SMEI) 41. The AF would also support the implementation of SMEI including: (a) maintaining a specialized unit to ensure adequate attention to SMEI implementation; (b) carrying out of validation or consultation workshops with the Project beneficiaries; (c) conducting relevant studies as agreed in the M&E Strategy included in the Operational Manual, such as evaluation of the efficiency of the Registry and regularization services and a study for the updating of relevant baseline information; and (d) carrying out of the final Project impact evaluation during the last year of Project implementation.

F.5 – Participatory Evaluation 42. The AF will support the carrying out of participatory evaluations of the Project.

43. This subcomponent will contribute to the social and institutional learning process, and will help evaluate the accessibility, fairness, opportunity, transparency, and quality of the land administration services. At least nine focal groups will take place with beneficiaries of the different Project components to validate results and gather feedback to make adjustments to procedures and improve the quality of service provision. Attention will also be paid to gender equity issues. SMEI technical team will coordinate with the PCU (SE-PRODEP) to organize and implement participatory evaluations. Results from these evaluations should be provided to co-executing agencies in a timely fashion.

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NICARAGUA Land Administration Project (PRODEP) Additional Financing

Annex 2: Economic and Financial Analyses for the Additional Financing

Summary of Benefits and Costs:

Net Present Value of Flows

Expected Benefits (Rural): Expected Benefits (Urban): Total Project Costs:

USD 6.42 Million USD 2.25 Million USD (7.29) Million

Net Benefits: IRR:

USD 1.38 Million 21%

I. Economic Benefits

1. As assumed under the original project, land titling and registration can generate economic benefits through (a) more efficient resource allocation, (b) welfare and equity gains, and (c) environmental protection. 2. More specifically, land-tenure security: (a) provides the necessary incentives for owners to undertake land-related investments, thus helping to maintain and increase sustainability of natural resources and agricultural productivity, and through these achieve increased land value; (b) decreases the transaction costs of participating in land markets, thus helping to increase their efficiency; and (c) improves access to credit by providing a basis for a generally accepted institutional collateral. By reducing risk, a more secure land-tenure would be expected to increase the propensity to invest in the land and in economic activities based on it, or in other natural resources within it, and therefore, result in higher levels of production, productivity, and finally rural household incomes.

3. The following analysis refers to the additional financing. It is noted, however, that benefits assumed for the original Project activities are already being realized. Combined with the original Project activities, therefore, the revised aggregate IRR would most likely exceed, or at least maintain, the original project’s IRR of 19 percent. II. Project Benefits 4. As is the case under the original Project, the AF would enhance: (a) land tenure security; (b) efficient resource allocation; (c) equity and welfare; and (d) environmental protection. (a) Improved Land-Tenure Security: The greatest benefit of land regularization is

land tenure security. Throughout Nicaragua, hundreds of large and small farmers are engaged in some form of land-ownership conflict or dispute. These entanglements disturb the social and political stability and divert resources from productive endeavors. Land-holders consider land-tenure security essential,

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particularly when considering long term investments. Other economic gains from greater land-tenure security are those related to the reduction in costs associated with protecting one’s land rights through extra-legal means.

(b) Improved Economic Resource Allocation:

(i) One of the most important direct benefits of land titling, albeit not easily quantifiable, is fostering increased land market activity. In Nicaragua, there is evidence of under-utilization of productive crop-land. Lack of tenure security (registered title) has traditionally been an important deterrent to land-holders to supply land on the rental market. To the extent that land regularization and titling facilitate the market's ability to mobilize and allocate resources more efficiently, important productivity gains would be realized.

(ii) As a direct result of greater land-tenure security, owners would be motivated to undertake investments, such as housing improvements, other buildings and installations, irrigation systems, permanent crops, pastures, and forestry, among others. Past experiences in Nicaragua have shown that full registration has a very significant investment-enhancing impact. The result of these investments would manifest itself in higher land productivity and, consequently, higher land value.

(iii)Evidence also suggests that there would be important indirect gains to be realized by increased productivity of rural labor and increased employment. Normally, the propensity to undertake labor-intensive investments in agriculture is significantly increased by land-tenure security.

(c) Equity and Welfare:

(i) In Nicaragua, the agrarian reform of the 1980’s was targeted to the poor, very small or landless rural households. Currently, emphasis has been given to titling and registration activities of land-holders who were given land-tenure documents outside the scope of established cadastral and registry regulations, and which now demand that their land be regularized. The project regularization activities would strengthen their ability to secure their land claims and investments on the ground.

(ii) Improved land registry and cadastre services contribute to the dynamism of land markets through greater efficiency and agility in both the sell/purchase and rental markets. A great deal of farm households depends on the rental market to gain access to land. However, in cases when land-holders lack property title they may be reluctant to lease their land, fearing that it may prove difficult to reclaim their property at lease end. Therefore, strong equity and welfare gains are to be made with the regularization of land documentation, by increasing land access to the landless rural households.

(d) Environmental: Security of tenure provides environmental benefits, as people are more likely to improve or maintain forest and/or tree cover. First, owners can expect to reap the benefits of long-term investments such as reforestation. Second, landholders no longer need to clear forests to prove land tenure through the "use of land." The environmental benefits of protected-areas demarcation have not

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been incorporated in the quantitative ex-ante evaluation due to lack of appropriate information. In qualitative terms, the benefits of better conservation of protected areas would include protection of the biodiversity, sustainable management of the natural resources and the development of eco-tourism opportunities.

III. Project Benefits and Costs Analyzed 5. The analysis focuses on the expected benefits derived from the impact of land regularization on increased agricultural productive investments, in the case of rural land, and building improvements, in the case of urban lots. The analysis estimates the expected economic benefits on those lands to be titled as a result of the AF during its implementation, as per the established project targets (at least 12,660 by year 3). As other economic benefits, such as those related to land that would be regularized but not titled during the project, or political and social stability, welfare gains and better environmental protection, are not considered in this analysis, the magnitude of the net benefits and the economic feasibility indicators would constitute a lower bound from which to assess the project’s economic feasibility. IV. Methodological Approach to the Economic Analysis 6. The economic analysis of project benefits was based on estimating the expected impact on rural and urban land values, resulting from more secure land tenancy. If land-tenure security improves, leading to higher investments and higher net returns (from productive activities or the rental market), this would ultimately result in higher property values. Data series from the MECOVI5 (2005) were used in the analysis. Although the purpose of the survey was to assess the living standard conditions and welfare of households, sufficient land-related information was collected to allow for the ex-ante cost-benefit analysis of the project land titling activities. Rural and urban land sale-values were determined based on self-valuation by occupants of the land (with and without registered title) responding to the MECOVI. 7. With respect to rural land, common value patterns were found for lands with permanent crops as main use, and lands with other types of uses, as well as for land with uneven terrain vis-à-vis land with flat or relatively flat topography, while for urban land common patterns were found for properties with in-house running water and without it. The data demonstrated that the expected property value differentials due to titling were statistically significant, with a 99.9% confidence level, in favor of titled urban and rural properties with respect to their untitled counterparts. 8. The regression model used for the analysis was: Y = f (Xi) + b, where: Y = expected value per manzana of rural land, b = constant; and, the variables Xi=l,...,3

5 Living Standard Measurement Survey, 2005.

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For rural land were: X1 = 1 for property with title, 0 for property without title X2 = 1 permanent crops are main use of land, 0 for other uses X3 = 1 for abrupt/irregular topography, 0 for flat or relatively flat

For urban property were:

X1 = 1 for property with title, 0 for property without title X2 = 1 for in-house running water, 0 without in-house running water

9. As expected, the regression results showed that the value of rural land per manzana was positively correlated with: (a) property title; and (b) perennial crops; while negatively correlated to (c) abrupt/irregular topography. For urban properties, their value was positively correlated to: (a) property title; and (b) with in-house running water. 10. As the incremental value of rural lands was estimated in a per manzana basis, for the purpose of projecting the flow of benefits, the average size of rural lots to be titled was assumed at 22.3 manzanas, which is the average size of lots in the geographic areas to be covered by the AF, according to CENAGRO6 (2001).

11. In the case of urban real estate, the sale-value of titled and untitled properties was estimated by calculating the NPV of the future stream of expected rental income over a period of 20 years. This is considering that the value of land is a reflection of future net benefit flows from the property over the long-term.

12. For the purpose of this analysis it was assumed that property values grow by a constant stream of increments starting after titling. This is supported by the notion that immediately after titling the property gains marketability, and thus value, with respect to its untitled situation. The analysis takes into account all costs associated with the incremental flow of quantified benefits. This represents approximately 90% of total costs. Net flows have been discounted at a 12% annual rate to reflect the opportunity cost of capital at international level. V. Results 13. Given the above assumptions, the difference in value between titled and untitled properties was used as a proxy to estimate the expected economic benefit generated by titling. This parameter was USD 151/manzana for rural land (or approximately USD 3,369 per rural lot), and USD 2,083 per urban property. 14. The Net Present Value (NPV) and Internal Rate of Return (IRR) of expected incremental economic benefits, derived from tenancy regularization up to titling, were estimated under two main scenarios: (a) the increased value is achieved over a period of 10 years; and (b) the increased value is achieved over 20 years. Table 1 shows the results for both options. The former was used as the base-case scenario.

6 National Agricultural Census, 2001.

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Table 1. Summary of Economic Feasibility Assumption NPV (million USD) IRR Benefits deferred over 10 years 1.38 21%

Benefits deferred over 20 years 0.21 13%

15. The following scenarios were use to test the sensibility of the investment’s economic feasibility:

(a) Delayed benefit generation: Assuming that the incremental benefits are generated over 10 years, starting to accrue one year after titling, the estimated NPV would be US$ 0.78 million and the IRR would be 15 percent.

(b) Fewer beneficiaries: Assuming that plots covered in the cadastral surveying that obtain title are reduced by 25 percent: (1) If the economic benefits were generated over 10 years, the NPV would be USD 0.25 million, and the IRR, 14 percent; and (2) If the economic benefits were generated over 20 years, the NPV would be US$ (0.85) million, and the IRR, 8 percent.

(c) Increased project costs: (1) For a cost increase of 5%, the NPV would be USD million 0.58, and the IRR, 16 percent; and, (2) For a cost increase of 10%, the NPV would be USD (0.21) million, and the IRR 11 percent.

(d) Accounting for total project costs: Undertaking the analysis using 100% of project costs instead of only those associated with the generation of the stream of quantified benefits, the NPV would be USD 0.54 Million, and IRR 15%.

16. Furthermore, Table 2 shows the switching values for some relevant parameters. Table 2. Switching Values

Parameter Switching Value Percentage Increase in Total Costs 9% Minimum average size of rural lots titled 17.5 manzanas7 Percentage reduction in the expected area to be titled as a result of project activities

16%

Maximum lag in accrual of benefits after titling 2 years8

17. Thus, even though the project is likely to have additional benefits that are either difficult to quantify (as in the case of land rental market activation) or completely non-monetary (as increased social peace in rural areas), it can also be justified on traditional economic grounds, and under realistic assumptions on the expected benefits from increased property values. VI. Fiscal impact 18. Four different types of incremental fiscal benefits are likely to be generated by the Project, namely: (a) Fiscal benefits to the Central Government; (b) fiscal benefits to municipalities through increased collection of the immovable goods tax (IBI);9 (c) net

7 This is the average size of rural plots beneath which the investment would cease to be economically feasible. 8 This is the maximum lag to start accruing benefits in order for the investment to be economically feasible. 9 Impuesto de Bienes Inmuebles.

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benefits to the Property Registry; and (d) net benefits to INETER.10 These are discussed below. (a) Increased employment to be generated by productive investments resulting from land

regularization and titling would be expected to increase the fiscal base and taxable revenues, and to generate incremental fiscal receipts to the Central Government, mainly in the form of increased income tax and sales tax revenues. For the purpose of this analysis sufficient and sufficiently robust information to make a sound estimate was not available, and thus this benefit could not be quantified.

(b) For the case of the municipalities, the cadastral information generated and provided by the project is expected to allow municipalities to expand their collection of the IBI. As a matter of fact, a 30% increase in collection of the IBI by municipalities is amongst the target indicators for the project. Using this increment as basis, and assuming that the cost of collection for the incremental fiscal revenue is 20% of the actual collected amount, it was estimated that the NPV for a ten-year flow of net benefits from IBI collection by municipalities would be around USD 4.9 Million. This is expected, by far, to be the largest fiscal benefit resulting from the AF. When the expected IBI net benefit increment is reduced to 20% and to 10%, the incremental fiscal benefits to municipalities would be USD 3.3 and USD 1.6 Million, respectively.

(c) Income benefits to the Property Register associated with the project’s activities would

be expected from the following services: (i) property registering, which is charged at a rate of 5/1,000 of the value of the immovable good; (ii) registry certifications, which are charged at C$50.00 (approx. USD 2.46) per request; and (iii) the inscription of mortgages or promise-of-sale contracts, which are charged at 2/1,000 of the property value. Assuming that the properties entering the market for land as a result of the project have a rotation of 5% annually (or the equivalent to every 20 years per property) and that there is no property appreciation, the NPV of gross11 benefits for a ten year period would be USD 0.48 Million.

(d) In the case of INETER, the increased benefits associated with the project activities

would be collected through the following: (i) issuing of cadastral certificates at C$ 300.00 (USD 14.75); (ii) affidavit of cadastral information; (iii) sale of special form at C$300.00 (USD 14.75); (iv) affidavit of cadastral record replacement, which has a cost of C$ 100.00 (USD 4.92); (v) revision and approval of cadastral map, costing C$360.00 (USD 17.70) for rural maps and C$ 180.00 (USD 8.85) for urban maps. The NPV of the incremental gross12 benefits accrued to INETER were estimated at USD 0.26 Million.

10 Instituto Nicaragüense de Estudios Territoriales 11 No data were available to estimate the net benefit. 12 Ibid.

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VII. Financial Feasibility of the Institutions 19. The Nicaraguan land administration system is integrated by the Dirección General de Catastro Físico (DGCF) under INETER, the Registro Público de la Propiedad (RPP) under the CSJ, and the IP/PGR, and satellite institutions that provide complementary services such as DIRAC, MARENA, and the municipalities (supported by INIFOM). Among these, the institutions that generate revenue with respect to land administration services are DGCF, RPP and MARENA. These institutions have a set schedule of fees and charges for services provided. These fees and charges have been recently updated. 20. Detailed information on revenues generated by the institutions through their land administration services, and the corresponding costs, were not available to undertake a thorough cost-benefit analysis or institutional financial sustainability analysis. However, by reviewing the budgets and revenues for the institutions involved, it can be ascertained that some institutions only provide services (IP, DIRAC, INIFOM), that other institutions do not generate nearly sufficient revenue to be self-sustaining (MARENA and INETER), and that one could be self-sustaining (RPP). In the longer-term, however, as land administration problems that arose from the agrarian reform get resolved, the institutions that are expected to remain most engaged in providing land administration services are the DGCF and the RPP. Table 3 shows the extent to which generated revenues, from all sources, have covered the institutional budgets for the last five years. Table 3. Budget coverage by institutional revenues

INSTITUTION 2005 2006 2007 2008 2009

INETER 14.9% 18.3% 18.3% 15.4% 14.7%

IP* 0.0% 0.0% 0.0% 0.0% 0.0%

RPP 162.9% 244.9% 224.0% 55.9% 206.9%

DIRAC 0.0% 0.0% 0.0% 0.0% 0.0%

MARENA 1.8% 2.0% 3.9% 6.8% 7.0%

INIFOM 0.0% 0.0% 0.0% 0.0% 0.0%

TOTAL 11.1% 10.7% 15.4% 14.0% 21.1%

*It includes the funds assigned to the PGR for land use planning. Source: Ministry of Finance (MHCP)

21. Other than increasing fees and charges, alternative ways to improve the financial sustainability of the system could be explored. For instance, a major concern with respect to revenue generation by the RPP is tax evasion, by the way of property undervaluation. Also, with respect to the DGCF, a major issue, with respect to the current cost-benefit relationship for its services, is the cost of providing cadastral services in those cases requiring a field visit (review, approval and revalidation of topographic maps). This is due to the often long distances and poor conditions under which such visits must be undertaken and their reflection on costs. Procedural and/or technological improvements, supported by the Project, may be as or more important than adjusting fees and charges to bring the cost-benefit of land administration services more into balance.

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NICARAGUA Land Administration Project (PRODEP) Additional Financing

Annex 3: Project Implementation Arrangements

1. The Attorney General’s Office (PGR) will continue to be the Project’s implementing agency under the AF Credit, through the Project Coordination Unit (Secretaría Ejecutiva or SE-PRODEP). SE-PRODEP will continue to have full responsibility for procurement and financial management under the Project, as specified in annexes 4 and 5.13 The decentralized structure for technical project implementation would also be maintained. Accordingly, there will be coordination units under each co-executing agency, and the Project Inter-Institutional Committee (CIP), chaired by PGR, would provide overall policy and strategic guidance. This model has proven effective in promoting the active participation and Project ownership of co-executing agencies. 2. The only minor change to the initial project implementation arrangements is that the Ministry of Agriculture and Forestry (MAGFOR) will not be a co-executing agency under the Additional Financing (AF). MAGFOR has participated in components A and F.4. MAGFOR will successfully complete its activities related to component A under the original Credit, while responsibility for F.4 was transferred during project implementation to PGR. It is noted that the regional technical and administration project units (UTAP-R) needed for component E will not continue since no activities related to this component will be implemented under the AF. 3. Specifically, co-executing agencies under the AF will include the Property Intendancy (IP) – a decentralized entity under PGR, Ministry of Environment and Natural Resources (MARENA), Nicaraguan Institute of Territorial Studies (INETER), and Nicaraguan Institute of Municipal Development (INIFOM), as well as the Directorate for Alternative Conflict Resolution (DIRAC) and Property Registry, both of which fall under CSJ. The agreements to be signed between PGR and the co-executing agencies have been updated and should be signed before Project effectiveness. Specific responsibilities of the co-executing agencies include:

(a) IP coordinates the regularization and titling component along with INETER and CSJ.

(b) MARENA coordinates the demarcation and consolidation of protected areas. (c) INIFOM coordinates the provision of technical assistance in the incorporation of

municipalities in the implementation process and in the use of products generated by the Project within the scope of its local competencies.

(d) INETER co-implements the regularization and titling component, the development of SIICAR, participates in the demarcation of protected areas along with IP and CSJ, and is responsible for the transfer of the databases to municipalities along with INIFOM.

13 Co-executing agencies will continue to help SE-PRODEP prepare TORs, technical specifications, and requests for proposals related to their activities, and participate in evaluation committees. They will also continue to participate actively in the preparation of the Annual Operational Plans (POAs) and Procurement Plans (PACs).

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(e) CSJ is responsible for the implementation of SIICAR subcomponent along with INETER through the Public Registry. It is also responsible for the coordination and implementation of the Conflict Mediation subcomponent through DIRAC. Moreover, it co-executes through Public Registry the titling and regularization services component along with IP and INETER. Finally, it coordinates the subcomponents related to the strengthening of DIRAC and the public registries.

4. Table 1 below maps out co-executing agencies and PCU roles in Project implementation under the AF: Table 1 – Roles of Co-Executing Agencies and SE-PRODEP

Components and Sub-Components

INETER MARENA CSJ REGISTRY

CSJ DIRAC

INIFOM IP/PGR PGR SE-PRODEP

B Institutional Strengthening and Decentralization

B.1 Decentralization and Strengthening

X X X X

B.2 Municipal Capacity Development

X

B.3 Support to Project Management

X

C Titling and Regularization Services

C.1 Systematic Regularization Services

X X X

C.2 Titling and Review of Titles of Ref. Sector

X X X

C.3 Conflict Mediation X

D Demarcation and Consolidation of PAs

D.1 Demarcation of Protected Areas

X X

D.2 Env. Communication and Education

X

F Information Systems

F.1 SIICAR X X

F.2 SIIPRO X

F.3 SIAFI X

F.4 SMEI X

F.5 Participatory Evaluation X

Project Inter-institutional Committee (CIP) and Project Operational Technical Committee (CTO) 5. The Project Inter-Institutional Committee (CIP) is comprised of the heads or the delegates of IP, MHCP, PGR, CSJ and INETER. Nonetheless, CIP should invite other public administration officers or representatives, centralized or decentralized, territorial or autonomous whose operations are related to Project activities to discuss specific policy

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and operational issues. CIP’s responsibilities are to (a) formulate, coordinate and dictate policies related to urban and rural properties, (b) ensure effective inter-institutional coordination, and (c) oversee Project implementation. 6. The Project Operational Technical Committee (CTO) is an ad hoc committee under CIP with consultative character whose objective is to ensure efficient operational Project implementation based on CIP’s strategic needs. The CTO would be integrated by technical experts from public sector institutions working closely with the Project. The CTO’s duties and authority will also be determined by the CIP, and will be presided by the Attorney General or whom he delegates. Executive Secretariat of PRODEP (PCU) 7. The Project Coordination Unit, under PGR, is the Executive Secretariat-PRODEP (SE-PRODEP). SE-PRODEP, led by a Project Coordinator (Secretario/a Ejecutivo) should ensure that the Project is implemented adequately and in accordance with CIP guidance. Responsibilities of SE-PRODEP include, inter alia:

(a) Socialize and reach agreements on the general strategic areas and institutional programs that would be considered in the formulation and implementation of public policies and Project activities;

(b) Ensure efficient coordination between co-executing agencies and municipalities participating in the Project;

(c) Organize pertinent work areas that facilitate Project implementation, (d) Approve the instruments and subsidiary agreements that will be the basis for the

physical and financial implementation of the Project, (e) Implement, follow up and monitor the Environmental Management Plan (EMP)

and social safeguards applicable to the Project, and ensure that co-executing agencies have adequate knowledge of the safeguards pertinent to the Project.

(f) Monitor and evaluate project activities. (g) Define the Project’s operational procedures and ensure that the Operational

Manual (OM) is adequately known by all co-executing agencies. 8. To fulfill its responsibilities efficiently, SE-PRODEP should have at least (a) a Technical Unit, (b) an Environmental and Social Unit, (c) a monitoring and evaluation unit (SMEI), (d) a Financial Management Unit, and (e) a Procurement Unit. Details on the specific tasks of each unit are outlined in the OM and Financial Administrative Manual, including all other duties delegated by applicable Nicaraguan law. Technical Operational Units (Departmental UTO's) 9. UTOs, organized within IP and Physical Cadastre/INETER’s departmental delegations, will help coordinate and manage (a) the interactions of the regional offices of institutions participating in the Project, (b) the fieldwork activities, including coordination of safeguard instruments’ implementation, (c) the cadastral surveying quality control, and (d) the participation of local and civil society authorities.

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NICARAGUA Land Administration Project (PRODEP) Additional Financing

Annex 4: Financial Management and Disbursements

1. PGR through its existing SE-PRODEP will be responsible for financial management activities under the Additional Financing. It will consolidate the financial registration in the SIAFI system, financial reports and perform reconciliation of accounts. Financial Management activities will be centralized within the PCU (SE-PRODEP). 2. A financial management assessment was carried out to determine Financial Management (FM) implementation risk for the Additional Financing (AF) and help establish adequate FM arrangements. Based on the assessment, recommendations and complementary actions have been provided to ensure that the Project is implemented within a sound fiduciary environment in compliance with Bank requirements. It is important to mention that in accordance with Bank practices, the adequacy of FM arrangements will be continuously monitored during project supervision and adjustments made when necessary to ensure fiduciary compliance. 3. As indicated in the risk table presented in this annex, the overall FM risk for this Additional Financing has been assessed at Moderate (M), which is consistent with the Moderate (M) risk assessed for the original project (IDA credit 3665-NI) during the last FM supervision mission in June 2009. The last FM supervision mission found the FM arrangements for the original project adequate and gave an FM ISR rating of Moderately Satisfactory (MS) due to moderate shortcomings in financial management which do not prevent the timely and reliable provision of information required to manage and monitor the implementation of the project. An action plan has been prepared and is currently being implemented by the PCU to resolve the moderate shortcomings encountered. In addition, the FM team found an acceptable level of completion of the 2007 and 2008 audit recommendations and FM Supervisions. Finally, the latest audit report, which covers the year ended December 31, 2008, presented a clean (unqualified opinion) on the project’s financial statements. 4. Staffing. Currently the SE-PRODEP financial staff includes a Financial Management Specialist and an Accountant. Both have acceptable experience in managing WB procedures and are expected to remain responsible for the FM activities of the Additional Financing.

5. Accounting System. The SE-PRODEP will continue using SIAFI for recording project financial transactions and will report based on cash basis.

6. Project Financial Reporting. On a quarterly basis, the SE-PRODEP will prepare financial information and submit to the Bank Interim Financial Reports (IFRs) containing: (a) Statement of Sources and Uses of Funds (with expenditures classified by disbursement category) and Cash Balances; (b) Statement of Budget Execution (with

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expenditures classified by subcomponent); along with the reconciliation of the segregated account with project records and with the Budgetary execution in SIGFA.

7. The IFRs will be submitted to the Bank not later than 45 days after the end of each quarter. This review will enhance FM supervision, enabling a periodic control over project accounts that will complement the planned supervisions, thus helping to mitigate fiduciary risk. The IFRs will be part of an overall Project Report including information on progress on project targets and implementation of the Annual Operational Plan (POA) and Procurement Plan. 8. External Audit. An external, independent, private firm acceptable to the Bank will be contracted by SE-PRODEP not later than two months after Credit effectiveness to audit the financial statements of the Additional Financing (contract is expected to be for the duration of the Additional Financing). Given the implementation schedule of the Additional Financing, it is expected that an annual audit will be carried out for the each fiscal year of implementation. The audited financial statements shall be presented to the Bank no later than six months after the end of each fiscal year (which is the same at the calendar year in Nicaragua). The TORS and Short List should be reviewed and approved by the Bank prior to contracting the auditors.

9. Internal Control. PGR is subject to the control of the Internal Audit Department and the Country’s General Comptroller (Contraloría General de la República). Under international standards, it is expected that the IA Unit include the revision of the financial documentation of this Project in the internal audit plan.

10. Disbursements. The Disbursement methods for the Additional Financing Credit will include Reimbursements, Advances and Direct Payments and will be indicated in the Disbursement Letter.

11. Retroactive Financing. The AF Credit includes retroactive financing of 20 percent (aggregate amount of up to $2,000,000 equivalent) for payments related to eligible expenditures made within one year prior to the date of the Financing Agreement but on or after December 16, 2009 (date of Credit negotiations). 12. WB Designated Account. Under the advance method and to facilitate project implementation, a new Designated Account to be used with an authorized ceiling of US$1,200,000 will be opened for the Additional Financing. This initial amount could be changed and amended in the Disbursement Letter upon specific request. The Designated Account will be located in the Central Bank of Nicaragua under the control of the Treasury from where the funds will be transferred to SE-PRODEP’s operating accounts (Fondo Rotatorio) to finance expenditures made or to be made within 30 days.

13. The funds of the AF will be advanced under the AF in parallel to the original credit subject to the disbursement condition set forth in paragraph 17 below. Nevertheless, AF Credit effectiveness is expected on June 2010 and the original Credit will close on July 31, 2010, so the overlap between the two credits will be minimal.

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14. Supporting documentation for documenting project expenditures under the advance and reimbursement methods would be records evidencing eligible expenditures (e.g. copies of receipts, invoices, etc.) for payments against contracts above the thresholds indicated in the Disbursement Letter. For all other expenditures below these thresholds, supporting documentation for documenting project expenditures will be Statements of Expenditures (SOEs). 15. All consolidated SOEs documentation will be maintained for post review and audit purpose for up to one year after the final withdraw of the Designated Account.

16. The credit will finance 100 percent of specifically identified expenditures, according to the following table:

Allocation of AF Credit Proceeds

17. Disbursement condition: Payments for expenditures covered under Components B, C, D and F will only be disbursed under the AF once the allocation for such expenditures under the Original Financing has been fully disbursed or committed.

14 Non consultant services means expenditures for technical services (other than Field Technical Services) provided by firms for

surveying, aerial photography, demarcation and digitalization of registries’ books, printing services, video production and communications.

15 Field technical services means expenditures for field technical support services provided by individuals for cadastral surveying, demarcation, cadastral maintenance, registry modernization, regularization and titling contracted following the requirements of the Operational Manual.

16 Training means reasonable expenditures (other than those for consultants services) related to training activities, such as travel, per diem of trainees, study tours, rental of facilities and equipment, and training materials.

17 Operating costs include expenditures for the reasonable incremental costs (as such reasonability shall be determined by the Association) associated with the implementation of the Project, such as: (i) operation and maintenance of vehicles, including repairs, fuel and spare parts; (ii) maintenance of computer, geodetic and office equipment; (iii) rental of office space and office supplies; (iv) phone and other communication expenses; (v) transportation, travel and per diem for technical staff to carry out field, supervisory and monitoring activities, as such costs shall be included in the Operational Manual; and (vi) salaries of support and administrative staff of the UCP and UTOs, as previously approved by the Association.

Category Allocation in SDR % of Financing

1) Goods, non-consultant services,14 consultant services, field technical services,15 training 16 and operating costs17 for components (b) (c) (d) and (f)

6,300,000

100 %

TOTAL

6,300,000

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Risk Assessment and Mitigation 18. Risk Rating. Based on the evaluation undertaken, the overall FM risk is rated as Moderate after mitigation measures have been implemented. The FM design, which includes a series of additional measures, responds to the identified risk and proposes a suitable supervision strategy. The adequacy of FM arrangements would be continuously monitored during project supervision, and adjustments made when necessary to ensure fiduciary compliance. Table A.1 presents the risk assessment and mitigating measures incorporated into Project design and the FM implementation arrangements also prepared to reduce the level of risk.

Table A.1 Risk Assessment and Mitigation Measures Risk Risk

Rating Risk Mitigating Measures Completion Date

Inherent Risk

Country Level S Entity Level M Project Level S • Contract external audit for the

implementation period of the project. A relatively rapid execution is expected

• Update the OM

External auditors: 2 months after effectiveness OM: by negotiations

Control risk Budgeting, Accounting, Internal Control

M • Utilization of SIAFI system Ongoing during implementation

Funds Flow M • Segregated account in dollars, under traditional mechanism of replenishment by SOE method

Ongoing during implementation

Financial Reporting, Auditing

S • Quarterly Reports. • Annual Audit Financial Statements.

Ongoing during implementation

FM Risk M

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NICARAGUA Land Administration Project (PRODEP) Additional Financing

Annex 5: Procurement Arrangements

A. General 1. As in the original credit, procurement under the Additional Financing will be carried out by the Secretaría Ejecutiva or SE-PRODEP (PCU) at the Attorney General’s Office (PGR), in close coordination with the relevant co-executing agencies and participating municipalities. However, the additional financing would be carried out in accordance with (i) the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; revised October 2006; (ii) "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006, and (iii) the provisions stipulated in the Financing Agreement. The various items under different expenditure categories are described below. For each contract to be financed by this Credit, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame are agreed between the Government and the Bank project team and reflected in the Procurement Plan. The Procurement Plan will be updated annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 2. Procurement of Goods and Non-consulting services: Goods to be procured under the AF include vehicles, computers, software, office equipment, furniture, and field equipment, i.e. GPS. The procurement will be done using the Bank’s SBD for all ICB and National SBD agreed with or satisfactory to the Bank. For small value goods, shopping procedures will be followed, using request for quotation documents acceptable to the Bank.

3. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for the goods and non-consulting services procured, will be included in the Operational Manual (OM).

4. Procurement of Works: No procurement of works is anticipated to be financed under the AF credit.

5. Procurement of Non Consultant Services: Technical services provided by firms for surveying, aerial photography, demarcation, digitalization of registries’ books, printing services, video production and communications services will be procured as non-consultant services. To the extent possible, services will be grouped in packages that will be procured through ICB or NCB procedures. For small value contracts, shopping procedures will be followed.

6. Selection of Consultants: Contracts for employment of firms will include services for different types of studies, surveys, project monitoring and evaluation, and

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financial audits. Selection methods for consultants would include: QCBS, CQ, LCS, and SS. Contracts for employment of individuals will include hiring of the SE-PRODEP technical and administrative staff, as well as staff of the coordination units in each of the co-executing agencies. Short lists of consultants for services estimated to cost less than $100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

7. Field Technical Services (Individuals): In addition, individuals will be required to provide field technical support for cadastral surveying, demarcation, cadastral maintenance, regularization and titling, and registry modernization. These services are essential to the implementation of the new methodology to be applied under the AF (see Annex 1 for details). The services provided by these individuals are not meant to be of intellectual nature but rather of manual and physical nature for, inter alia, data collection, mapping, digitalization and indexing, measurement, and mapping. These individuals will be recruited following transparent and competitive procedures detailed in the Operational Manual, including, inter alia, advertisement and qualification criteria. Some of these individuals have previously worked in the original project and would be rehired in order to take advantage of their experience. Rehiring will be subject to good performance assessment reports. The external audits and specific contract audits will review these processes. 8. Operating Costs: The AF credit is expected to finance the following items under this category: per diem, air tickets and local transportation for the capacity building program directed to the supervision and quality control activities, operating and maintenance of vehicles and equipment, office supplies, rent of office facilities, utilities, and support and administrative staff for the project.

B. Assessment of the Agency’s Capacity to implement Procurement 9. As in the original project, the Procurement Unit of SE-PRODEP, located in the Attorney General’s Office (PGR), will be handling all procurement for this Additional Financing (AF). According to the procurement capacity assessment of PGR, the Implementing Agency, the initial risk classification for SE-PRODEP is considered High (H) since (a) the two staff handling procurement at the time of the assessment had none or limited experience in Bank’s procurement procedures, although the Project Coordinator has procurement experience; and (b) working conditions of the Procurement Unit were not completely adequate. 10. The other issues and risks concerning procurement for implementation of the project include (a) inconsistencies and/or differences between Law 323 and World Bank policies on (i) registration requirements; (ii) evaluation systems; and (iii) consulting services, which is an issue across the Country’s portfolio; (b) weaknesses in the Unit’s infrastructure, related to office equipment and confidentiality conditions; and (c) need for additional qualified staff to manage project procurement. Issue (a) is mitigated, as is the practice across the portfolio, through special provisions included in the Financing Agreement, and inconsistencies in actual processes mitigated through training and by

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hiring and maintaining experienced procurement staff to, inter alia, address audit recommendations regarding these differences. Issue (b) is being resolved through improvements to the office of the procurement unit, including locked files and separate office space for procurement staff. Finally, regarding issue (c) it is noted that a new Procurement Specialist has been hired for the project. 11. To strengthen the capacity of the SE-PRODEP’s Procurement Unit, an Action Plan, described below in Table 1, is being implemented, including the hiring of the full-time procurement specialist with adequate experience with Bank’s guidelines and two analysts well trained in Bank’s procedures to be retained during project’s implementation. 12. As such, residual procurement risk for the project is considered Moderate (M) after mitigation measures have been completed.

Table 1 – Action Plan

Activity No.

Agreements Due Dates

1. Hire individual consultants to integrate the existing SE-PRODEP: one procurement specialist, two full-time procurement analysts with large experience in Bank’s procurement and selection of consultants’ procedures, capable of doing upstream work in procurement, and a dedicated messenger.

After effectiveness (new Procurement Specialist already hired)

2. SE-PRODEP will submit to the Bank the sample format of the procurement and monitoring report, extracting from the current Government information system.

After effectiveness

3. Establish a file room where the project’s files are kept safe and confidential.

After effectiveness.

4. Procurement Audits will be carried out on an annually basis by independent consultant(s) hired by the Republic of Nicaragua, in accordance with terms of reference acceptable to the Bank (see External Audits in FM annex).

SE-PRODEP will proceed with only one selection of consultants through LCS procedure to hire the audits for the three-year implementation period.

5. SE-PRODEP will have the responsibility to ensure that all participants involved in Project’s implementation receive adequate training on carrying out procurement using the Bank’s Guidelines.

SE-PRODEP presented a training plan as part of the initial PAC.

6. SE-PRODEP should maintain and update the existing manual on procurement to include the hiring of trainers and other operational administrative expenditures such as support costs under operational costs, etc. The sample documents shall also be part of the OM.

Completed

7. SE-PRODEP should improve the space of the Procurement Unit to guarantee adequate work conditions and establish a healthy environment. SE-PRODEP should provide the procurement function adequate equipment and office supplies & materials, including computers and telephones (with direct lines) to each procurement staff; and access to a fax machine, scanner, laser printer, and archives (with keys).

After effectiveness

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Table 2 Procurement Thresholds and Bank’s reviews.

GOODS AND NON CONSULTING SERVICES

US$ Equivalent Thresholds

PRIOR REVIEW

ICB International Competitive Bidding = > 150,000 ALL NCB National Competitive Bidding = > 25,000 First two

Shopping Shopping < 25,000 First three DC Direct Contracting Regardless of value ALL

FIELD TECHNICAL SERVICES Individuals

Competitive procedure described in the Operational Manual

> <

35,000 35,000

All by the TTL First two by the

TTL CONSULTING SERVICES

Firms US$ Equivalent

Thresholds PRIOR

REVIEW QCBS Quality Cost Based Selection > 100,000 ALL QCBS Quality Cost Based Selection < 100,000 First contract

CQ Consultants Qualifications > 100,000 First two LCS Least Cost Selection > 50,000 First two SSS Sole-Source Selection Regardless of value ALL

Individual Consultants IC Individual Consultant > 50,000 ALL

C. Procurement Plan 13. The UCP has prepared a detailed plan for procurement of goods, consulting services and non-consulting services for the implementation of the Additional Finance based on the content of the lists of goods and services agreed with the Bank. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. D. Frequency of Procurement Supervision 14. In addition to the supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended one supervision mission in the field to carry out a post review of procurement actions related to the hiring of the field services.

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NICARAGUA Land Administration Project (PRODEP) Additional Financing

Annex 6: Safeguards

A. Overview

1. The environmental category under the Additional Financing (AF) would remain as “B,” considering that it will finance similar activities to those included under the original project, particularly those related to components (B) Institutional Strengthening, (C) Titling and Regularization Services, (D) Demarcation and Consolidation of Protected Areas, and (F) Information Systems. Expected results are overwhelmingly positive but there is potential for, though unlikely, minor adverse environmental impacts. These potential impacts would be indirect since the Project’s physical activities are very small-scale. 2. Accordingly, the following policies would continue to apply under the AF: Environmental Assessment (OP/BP 4.01), Natural Habitats (OP/BP 4.04), Indigenous Peoples (OP/BP 4.10), Involuntary Resettlement (OP/BP 4.12), Forests (OP/BP 4.36) and Physical Cultural Resources (OP/BP 4.11). It should be noted that issues of physical cultural resources have not arisen during project implementation and are unlikely to emerge in the additional municipalities proposed in Madriz and León. Moreover, the AF will not finance implementation of management plans of the selected PAs or regularization within these PAs. 3. Although there will be no resettlement under the AF, Involuntary Resettlement (OP/BP 4.12) is triggered given the possibility that demarcation and better enforcement of the boundaries of the two selected protected areas may potentially lead to restrictions of access to natural resources. Accordingly, a Resettlement Process Framework has been prepared outlining the participatory process for the identification, monitoring and mitigation of such potential restrictions. It is noted that the likelihood of restriction of access is minimal, considering the experience of demarcation of 12 protected areas under the original project. B. Implementation of Safeguard Instruments and Relevant Policies under the Original Project 4. Under the original Project, Component D (Demarcation and Consolidation of Protected Areas) was designed taking into account the applicable safeguard policies. The component was aimed to demarcate, prepare management plans, and address land tenure issues within 11 existing protected areas, encompassing a total area of approximately 128,000 hectares.18 Activities under this component would entail, depending on the situation, mapping, ecological and land tenure-socioeconomic data collection, and

18 The original list of protected areas included: Apacunca, Complejo Volcanico San Cristobal-Casitas, Delta del Estero Real, Estero Padre Ramos, and Volcán Cosiguina in Chinandega; as well as Cerro Quiabuc-Las Brisas, Cerro Tisey-Estanzuela, Cerro Tomabu, Mesa de Moropotente, and Miraflor in Esteli; and Tepesomoto-Pataste in Madriz.

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physical demarcation of the protected areas’ boundaries. It was considered that PRODEP’s potential environmental impacts (positive or negative) would relate primarily to land use and so Component D was designed on the basis that effective demarcation of protected areas would prevent any inadvertent titling of land located in protected areas (PAs). At the same time, geographical referencing – putting the exact location coordinates of the protected areas into a Geographic Information System – does not have any direct physical impacts. Rather, the indirect impacts of this activity should be positive in that it provides precise information on the location of protected areas to decision-makers and thus avoid potentially harmful activities in and around the area. 5. The component’s performance has been evaluated through desk review (including GIS analysis), field visits, and interviews with Project consultants, as well as through three consultations held on September 2 in Chinandega, September 4 in Léon, September 8 in Estelí and Madriz, and October 16, 2009 in Meseta del Tisey Estanzuela). Overall, it was acknowledged that the positive results come from multiple factors, including Project activities. Importantly, no problems were detected and multiple positive phenomena were observed. Nor was evidence found of any indirect environmental impacts such as increased deforestation as a result of demarcation and titling activities. 6. The Project has exceeded its original goals under Component D, and achieved the following results:

(a) The National Land Policy Framework was successfully adjusted to accommodate

land management within PAs.19 (b) 12 PAs were demarcated, exceeding the original target of 11, and additionally,

certain areas of ecological importance were also identified. Demarcation in one of the original PAs, Tepesomoto Pataste, was postponed, but two other PAs, the Cañón de Somoto National Monument and the Memorial Park for Hurricane Mitch Victims, were demarcated in its place.

(c) 10 Management Plans for PAs were formulated,20 exceeding the original target of 7.

(d) Additionally, activities from 3 management plans were implemented, which is one more than originally planned.

Consultations on PRODEP and Lessons Learned 7. Four consultations were held on environmental results or issues in the Project area – one each in Chinandega, Estelí, Madriz and León. Important feedback includes:

(a) In one of Cosiguina’s APs, as in other PAs, PRODEP found that the core zone belongs to the State. However, these findings were not communicated to the AP’s inhabitants in a timely fashion, which generated the potential for social instability.

19 The policy is awaiting approval by MARENA’s Superior Directorate, which will then submit it to the President of Nicaragua for

final approval before promulgation. 20 Management plans were established for the following areas: Complejo Volcánico Cosigüina Ap, the Apacunca Genetic Resources

Reserve, the Delta del Estero Real PA, the San Cristóbal-Casita Volcano PA, the National Monument to the Victims of Hurricane Mitch, the Quiabuc-Las Brisas PA, the Tomabú PA and the Cañón de Somoto National Monument.

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Since the inhabitants of the core zone were not informed in a timely manner of resolutions from the Attorney General’s Office (PGR), there was a possibility that people could consider moving into the area. This, in turn, could have caused environmental degradation especially in the core zone, which is the most important part of a protected area. This issue has been addressed through delivery of improved and timely information. Recent field visits confirm that no negative social or environmental impacts have materialized.

(b) In Parque Memorial a los Víctimas del Huracán Mitch, it was felt that project benefits were somewhat limited. The main positive aspect identified was the knowledge gained about land tenure patterns in the protected area. However, it was considered that further capacity strengthening for implementing environmental management plans was still needed. It was agreed that it is critical to educate the population on the potential benefits of the Project and to train them to use the protected areas in environmentally friendly ways compatible with protected area status.

(c) It was seen as very positive that the project helped to resolve a boundary conflict between the municipalities of Somotillo and Morazan through delimitation.

Lessons Learned 8. Although no environmental problems resulting from the Project were detected, several safeguard lessons were learned during implementation. These are as follows: 9. The first major lesson is that clear information should be conveyed in a timely manner to people about what the Project will mean for them in terms of land uses, especially for protected areas. A main target should be population in protected areas to be demarcated so that they know better about land uses considered appropriate ecologically. While there were consultations under the original Project, the experience suggests that more public involvement will help enhance results. Based on the most recent consultations to evaluate Project impacts and other inputs, the AF phase will include a specific communication subcomponent under Component D – Demarcation of Protected Areas, to inform residents of Project activities and implications. Moreover, there is also an updated communication strategy for Component C – Titling and Regularization Services. 10. A second important lesson is that monitoring of environmental issues should be provided across all Project components. As such, under the AF an Environmental and Social Unit (ESU), with a Safeguard Specialist and a Communication Expert, will be established under the SE-PRODEP to implement the EMP and coordinate environmental and socially related activities for the entire Project, including but not limited to, Component D (see below). 11. The ESU will help address the third lesson learned, that is the need to better track environmentally related impacts from all relevant components of the Project by including more explicit monitoring measures in the EMP.

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12. The ESU will also help address the fourth lesson learned, which is that the cadastral surveying and regularization activities should pay increased attention to the ecological sensitivity of the targeted area and consider its status. Among other matters, as detailed below, the EA includes relevant information regarding risk associated with geological and land management issues. Reflecting Lessons into AF Design 13. Component C – Titling and Regularization Services. This component would focus on the consolidation of a methodology to clarify rights and to carry out a land regularization process that would serve as a foundation to develop a long-term, comprehensive property regularization program. In the case of municipalities with indigenous communities, project safeguard documents, including an Indigenous Peoples Plan (IPP), will ensure that an adequate consultation process is followed and that indigenous communities agree to the cadastral surveying and regularization under the current legal framework. These safeguard documents build upon the experience of the original project. 14. Moreover, the social communication campaign, which was updated during AF preparation, will be conducted in each municipality with the active participation of mayors and community leaders to inform the population about the objectives, methods and requirements of the regularization process. Particular attention will be given to ensuring that beneficiaries understand their rights regarding fair access to legal services and due process, and to promoting gender equity. The updated Gender Strategy should also help in this effort. 15. Component D – Demarcation and Consolidation of Protected Areas. In line with the original Project, design of the AF also recognizes that one of the main environmental concerns in a land administration project is to avoid titling of land in areas of ecological importance. Accordingly, the AF will include demarcation activities for two existing protected areas: Complejo Volcánico Telica-Rota in León and Tepesomoto Pataste, located between Estelí and Madriz. Physical demarcation of these PAs is considered very important as it allows stakeholders,21 which are critical for conservation and development in a given PA, to know the boundaries of each PA and to respect or implement better the rules and activities identified in a management plan. At the end of AF implementation, all major protected areas within the Project area would have been demarcated. 16. The process for demarcation starts with a consultation on the specifications and scope of the demarcation with departments, municipalities and other local actors. Subsequently, the technical services are contracted out and the demarcation is implemented with the participation of local actors associated with the protected areas. Markers and signs are placed and MARENA, in coordination with INETER, follows up with quality control. The process concludes with geo-referencing the markers also in

21 These stake holders include, inter alia, residents, businesses, community associations, institutions, and mayors.

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coordination with INETER. As noted above, the AF will not finance implementation of management plans or regularization within the selected PAs. 17. Along with the demarcation activities, a program of social and environmental communication will be implemented in the two selected PAs and surrounding areas. The purpose of this program is to secure the participation of land owners, residents, governmental and non-governmental entities present in the PAs and their buffer zones. The Program will communicate PA benefits, good natural resource management practices, environmental laws and regulations, conservation priority species as well as other pertinent topics. Under the AF, MARENA will hold at least four workshops on environmental education, two training sessions on fighting forest fires for the brigades and the digitalization and reproduction of two maps of the PAs to be demarcated. C. Promoting Gender Equity 18. The original project has a Gender Strategy, implementation manuals and indicators to monitor the strategy. The Project recognized that despite progress, women faced disadvantages in accessing land and obtaining legal recognition of their land rights. Moreover, that although progress had been made in the legal framework related to women’s land rights, cultural resistance and women’s lack of awareness often constrained its effective implementation. Overall, the Gender Analysis carried out as part of the AF preparation found that through the Gender Strategy the project has helped promote the gender focus across the main co-executing agencies and that, in the pilot departments, the number of rural women receiving titles has increased significantly. 19. The Gender Strategy has been updated taking into consideration the findings and recommendations of the Gender Analysis. The strategy aims to strengthen the integration of gender equity concerns across all components of the AF, take advantage of the synergies of the various efforts by co-executing agencies to promote gender equity, and facilitate the engagement of women’s associations and other stakeholders during Project implementation. Importantly, the strategy includes specific results related to gender equity that will be monitored during AF implementation. D. Safeguard Instruments under the Additional Financing

20. Since the additional financing will include similar activities as the original project, the same kinds of safeguard instruments are pertinent with one main difference. When the original project was conceived, the main environmental concern was to avoid titling of land in PAs. It was expected that Component D would prevent this and help implement all of the applicable environmental safeguards. The original Project’s safeguards instruments were prepared about eight years ago and new municipalities and Protected Areas are involved. Therefore new environmental safeguards instruments (EA and EMP) were developed in order to address the considerable changes in the applicable safeguards policies. While the original EA was sufficient when the Project was first approved, the AF Phase EA is more comprehensive and in-depth. The previous EMP was mainstreamed throughout the Project components and was not stand-alone. Therefore, for

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the AF phase, a specific EMP, contained in the EA, has been developed and an ESU will be established to monitor its implementation. 21. Specifically, in addition to activities under Component D, the SE-PRODEP will be strengthened with the ESU, including at least a Safeguard Coordinator and a Communication Specialist. This unit will monitor and help implement the EMP and applicable social safeguards. Under the guidance of the Project Coordinator (Secretarío Ejecutivo of PRODEP), ESU will establish environmental and social checklists for all pertinent project activities and coordination of activities within the current organizational structure, including inter alia, through the departmental UTOs.22 The Unit will actively oversee all Project components with activities that could have environmental implications (particularly components C and D). The Bank plans to provide training on safeguards to ESU and other relevant project counterparts (as necessary) at the beginning of AF implementation. In turn, ESU will provide training on safeguard instruments throughout project implementation to the co-executing agencies.

22. Overall, in addition to the specific measures and actions in and for the protected areas, the EMP has been designed to ensure that all components will be executed in accordance with national environmental and social laws and applicable World Bank safeguards. Environmental Assessment (OP 4.01) 23. The AF, as the original Project, is classified as Category B, requiring the preparation, approval and disclosure of an Environmental Analysis. Accordingly, an EA was completed along with its respective EMP in November 2009. The EA (i) identifies potential direct and indirect impacts associated with the Project considering all the applicable safeguard policies; (ii) identifies mechanisms and measures to avoid, minimize, or mitigate negative impacts, and (iii) includes the EMP detailed below. As part of the preparation of the EA, an analysis of the legal framework for environmental management and an Agro-Forestry Study of the Project Area were also carried out. Findings from these studies have been reflected in the EA. 24. The EA includes relevant information regarding risks associated with geological and land management issues. PRODEP will use this information as a tool to promote mitigation of economic and social risks associated with land-use occupation, management and geological characteristics that together can induce disasters such as landslides. Additionally, in the case of critical natural ecosystems outside the protected areas, PRODEP could use this information to promote conservation in the rural landscape as part of cadastral and regularization activities by including references to ecosystem conservation in the property titles if permissible by Nicaraguan law.

22 UTOs help coordinate Project activities at the department level. Specifically, they coordinate and administer the relationships between regional offices of participating institutions, field work and quality control of cadastral surveying.

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25. Environmental Management Plan. The EMP incorporates lessons learned and feedback from consultations on safeguard instruments and their current implementation under the original project. As previously mentioned, the EMP includes information on areas of ecological interest such as geo-hazards and conservation (outside of the already declared protected areas) and recommendations to manage them and diminish risks. The EMP also includes activities, financial resources, and specific responsibilities to ensure implementation of such activities. It was disclosed in country and in InfoShop on December 1, 2010. Natural Habitats (OP 4.04) and Forests (OP 4.36) 26. These two policies are triggered mainly in relation to the protected areas to be demarcated under the Additional Finance. The PAs, although already inhabited, are generally natural habitats and forested. The EMP contains the measures to address all the environmental safeguards triggered. It is noted that the Project is expected to contribute to the preservation of forests and other natural habitats by clarifying the boundaries of protected areas on the ground and in government records. Physical Cultural Resources (OP 4.11) 27. The usual “chance find” procedures contained in the EA for archeological or culturally important artifacts will apply to the entire Project. Indigenous Peoples Policy (OP 4.10) 28. Social Assessment. Given that some of the project’s beneficiaries are indigenous communities, an Indigenous Peoples Plan (IPP) was prepared on the basis of a social assessment to account for the selected new municipalities in León and Madriz, and the scaling-up of project activities within the original municipalities in Chinandega, Estelí, and Madriz. 29. A social assessment was completed in November 2009 with the objective of identifying challenges and risks associated with cadastral and regularization activities in the central-Pacific region. The social assessment sets out the following: (a) legal and institutional framework applicable to Indigenous Peoples; (b) baseline information on the demographic, social, cultural, and political characteristics of the affected indigenous populations; (c) process for consulting with the affected indigenous communities; and (d) measures to minimize and mitigate any adverse effects on indigenous communities.23 30. The social assessment analyzes the key factors challenging project implementation with special attention to the historical factors influencing the current ethnic and socio-political situation in the Central and Pacific regions. Implementing the

23 The Social Assessment helped confirm that in the proposed AF area there are indigenous peoples in the following municipalities: Telpaneca and San José de Cusmapa (where cadastral surveying will be undertaken, followed by regularization activities); and Totogalpa and San Lucas de Madriz, and el Viejo (where cadastral surveying already took place but regularization activities are pending).

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AF in these regions represents a major challenge with respect to indigenous peoples’ land rights. In contrast to the Caribbean region, the legal framework in these regions is not as conducive to recognizing indigenous territorial rights. Moreover, indigenous peoples in this region are more difficult to differentiate and distinguish from other ethnic groups because of the disintegration of their cultural patterns and insertion within the Spanish culture and political institutions of the Nation/State structure. 31. As part of the social assessment, consultations were held with community leaders, indigenous organizations, and government representatives. 32. Indigenous Peoples Plan. On the basis of the social assessment, an IPP was prepared for the AF phase of the project in order to appropriately manage any impact, positive or adverse, which may affect indigenous peoples. The IPP ensures that free, prior, and informed consultation takes place with indigenous communities, and that any identified potential adverse impacts will be avoided, minimized, mitigated or compensated. The IPP was completed in November 2009 and includes: (a) a summary of the results of the consultation, and a framework for ensuring free, prior, and informed consultation during the implementation of the AF phase of the project; (b) an action plan of measures designed to ensure that indigenous peoples receive culturally appropriate social and economic benefits; (c) measures designed to avoid, minimize, mitigate or compensate for any identified potential adverse impact on indigenous communities; and (d) cost estimates and a financing plan for the activities. 33. The process of consultation, participation, and collection of baseline information for the preparation of the IPP was achieved through focal groups, semi-structured interviews with the technical specialists, indigenous leaders, nongovernment organizations, and provincial government representatives from Madriz, Chinandega, and Sutiaba. Through these consultations, it was confirmed that indigenous communities within the AF area are broadly supportive of the regularization activities. The IPP has been made available to indigenous communities in appropriate form, manner, and language through consultations and by disclosing the document in country in the central and departmental offices (UTOs) of the Project. Additionally, the IPP has been disclosed in country and in the Bank’s InfoShop under the AF phase of the project on December 1, 2010. 34. Resettlement Process Framework. Given the possibility that current livelihoods of Nicaraguans living within or near the protected areas targeted under the project’s demarcation activities may be affected, OP 4.12 remains triggered under the AF phase of the project. In order to ensure that project affected stakeholders participate in the design of project components, a Resettlement Process Framework (RPF) has been prepared. The RPF was updated in November 2009 and includes: (a) a description of project components that will be prepared and implemented; (b) criteria eligibility; (c) measures to assist affected persons while maintaining the sustainability of the park or protected area; (d) grievance mechanisms; (e) institutional responsibilities; and (f) monitoring arrangements. The RPF was disclosed in country and in InfoShop on December 1, 2010.

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Safeguards under Component E 35. No activities related to this component will be financed under the AF. However, the Indigenous Peoples Policy Process Framework prepared for this component will continue to apply during its implementation under the original Credit.

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NICARAGUA Land Administration Project (PRODEP) Additional Financing

Annex 7: Revised Results Framework and Monitoring

Project Development Objectives

Project Outcome Indicators Use of Outcome Information

a) Develop a legal, institutional, technological, and participation framework for land administration in the pilot area of the Project. b) Prove the feasibility of implementing a systematic land rights regularization program.

1. Key legal and procedural reforms have been approved, that allow carrying out a Comprehensive National Regularization program; land administration system strengthened by the end of the Project. This includes:

a) Adjustments to the legal framework to modernize the Property Public Registry, b) Adjustments to the legal framework to support land tenure regularization, c) Development of a legal framework for indigenous land titling (in the Caribbean region), d) Protected area land policy designed and approved, e) General Land Policy Framework designed and approved by the Agricultural National Council.

Ensure that the legal framework is modified to support the efficient implementation of the processes for property regularization, registry and cadastre modernization, and indigenous land titling by pertinent institutions.

2. A less costly and more effective systematic approach is in place to regularize land rights and clearing the backlog of titles and juridical services provision. Measured by: a) At least 30% reduction in the average number of days to regularize property rights through the Property Intendancy within the pilot area. b) At least 40% of the territory under irregular land tenure status (i.e. reformed sector, national and state land) in the pilot area has legal certainty about land tenure.

Ensure that the Property Intendancy has improved its efficiency and capacity to respond to regularization demands. Ensure that the regularization processes are systematically conducted and cover a significant portion of the territory under irregular land tenure status in the 4 pilot departments.

3. At least 70% of beneficiaries receiving new rural titles fall under the category of “very small producer” (according to classification criteria from MAGFOR).[NEW INDICATOR]

Ensure that the Project effectively targets the poor sectors of the population.

4. At least 40% of new titles are provided directly to women and /or jointly with their spouse/partner. [NEW INDICATOR]

Ensure that women will benefit from the Project.

5. Transaction time and costs at the Property Intendancy, INETER and the Property Registry have decreased, as measured by:

Ensure that the modernization of the Public Registries through SIICAR

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Project Development Objectives

Project Outcome Indicators Use of Outcome Information

a) At least 50% reduction in number of days required to register a transaction in SIICAR, in the pilot area. b) Public Registries in the pilot area are financially sustainable.

in the 4 pilot departments makes transaction processing more efficient (i.e. cases of division, parcel fusion and sale-purchase, mortgages, and others). Ensure that the modernization of the Public Registries through SIICAR in the 4 pilot departments guarantees the financial sustainability of these institutions.

6. Land taxation rates updated in 33 municipalities in the pilot area through the use of cadastral survey information in SISCAT. [NEW INDICATOR]

Ensure that the Project transfers cadastral information to municipalities to allow them to update their land taxes and increase municipal revenues.

7. All protected areas under the Project are included in INETER’s geographical database.

Ensure that all protected areas under the Project are formally incorporated in INETER’s geographic database, which would allow access to territorial boundary information to the general public.

8. Indigenous Peoples land rights are enforced in 15 territories and are respected by government authorities at the national, regional, and municipal levels, providing them with greater access to land administration services and land tenure security.

Ensure that land titles provided to indigenous peoples are recognized and their collective land rights respected by all levels of government.

Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate

Outcome Monitoring A. Policy and Legal

Reforms

A.1. Land Policy Framework Document has been discussed with stakeholders and endorsed by CIP

Land policy framework prepared and consulted with key land administration actors.

Ensure that the Project has prepared and consulted the land policy framework for approval by Congress, key government actors and civil society.

B. Decentralization and Institutional Strengthening

B.1. An efficient and strengthened

Organizational Development Plans designed, approved, and implemented (main bottlenecks in the regularization process identified and resolved).

Manuals prepared and approved for

Ensure that co-executing agencies in charge of Project components have been strengthened to achieve expected outcomes.

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Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring

institutional framework

cadastral surveying, public disclosure of results, regularization, protected area demarcation, indigenous land titling and demarcation, and conflict mediation. [NEW INDICATOR]

Ensure that Project co-executing agencies have designed methodologies and procedures to conduct main regularization processes in Nicaragua.

B.2. Decentralization of the provision of land administration services

UTOs established and maintaining close coordination in municipalities where surveying has been completed.

INETER has opened departmental offices where lacking in the Project Area.

Ensure that IP and INETER have become more efficient through the decentralization of services provided in pilot area.

C. Titling and Regularization Services

C.1. Systematic Regularization

C.2. Titling and review of titles from the reformed sector

C.3. Conflict Mediation

The Property Intendancy (IP) and Attorney General’s Office (PGR) prepare and implement an annual plan for regularization at the department level, and share it with municipalities, INETER, DIRAC, and Property Registry. (NEW INDICATOR)

Cadastral surveying database transferred to 33 municipalities in the pilot area, and in at least 4 municipalities SIICAR and SISCAT share data as well as resources and technology for their management.

Diagnostics to identify land tenure status on ejido and municipal lands have been carried out in 33 municipalities, to support titling processes.

At least 52,282 rural and urban parcels regularized in the pilot area, and at least 12,600 of these receive new titles.

At least 14,230 pending urban titles resolved.

At least 15,554 rural titles provided.

At least 10,565 agrarian titles reviewed.

At least 4,985 cases resolved by OCI, along with the provision of compensation resolutions.

At least 450 trained community mediators.

At least 2,225 detected boundary conflicts

Ensure that IP outlines and communicates its regularization plans to include the efficient cooperation and awareness of other involved institutions.

Ensure that municipalities have been assisted to receive and manage the cadastral database and that the Project advises them for the titling of ejido lands.

Ensure that municipalities in the pilot area are supported by the Project to receive and manage the cadastral database and for titling processes.

Outline and show progress on regularization objectives in the pilot area.

Outline and show progress on regularization objectives, outside the area where surveying has been completed.

Outline and show progress made by DIRAC toward establishing and effective conflict resolution system for boundary disputes and developing mechanisms to register agreements in the Property Registry.

- 51 -

Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring

mediated (60% of agreements allow changes to boundaries in cadastre and public registry).

D. Demarcation and Consolidation of Protected Areas

8 protected areas studied and 14 physically demarcated

3 protected areas with management plans under implementation. Pilot project in Cosiguina implemented

Outline and show progress made by MARENA

E. Demarcation of Indigenous Land

At least 15 indigenous territories demarcated.

At least 5 of titled territories have a productive subproject under implementation.

Outline and show progress made by IP for titling and demarcation of indigenous territories

F. Information System

F.1. Cadastre-Registry Integrated System

F.2. Land Titling Information System

F.3. Impact Monitoring and Evaluation System (SMEI)

F.4 Participatory Evaluation

Integrated Registry-Cadastral Information System (SIICAR) linking the legal and geographic information on each property is fully operational in the pilot area.

At least 80% of regular properties included in SIICAT CAT are transferred to SIICAR REG.

SIIPRO contains updated information of the regularization cases submitted to the IP central level. (NEW INDICATOR)

SMEI operating and conducting evaluation and fieldwork, including participatory activities and Project impact evaluation for beneficiaries.

Outline and show progress made by the Property Registry to SIICAR operational at the central level and in the pilot area.

Outline and show progress made by IP to make SIIPRO operational as a critical instrument to improve the efficiency of regularization processes

- 52

-

Mon

itor

ing

and

Eva

lua

tion

Arr

ange

men

ts

Ori

gin

al C

red

it p

lus

Ad

dit

ion

al F

inan

cin

g

Pro

ject

Ou

tcom

e In

dic

ato

rs

Ba

seli

ne

Ta

rget

Va

lues

D

ata

Co

llec

tion

an

d R

epo

rtin

g

P

rog

ress

u

nd

er

Ori

gin

al

Cre

dit

AF

Y1

AF

Y2

AF

Y3

Fre

qu

ency

a

nd

R

epo

rts

Dat

a C

oll

ecti

on I

nst

rum

ents

R

esp

on

sib

ilit

y fo

r D

ata

C

oll

ecti

on

1. K

ey l

egal

and

pro

ced

ural

re

form

s h

ave

been

ap

pro

ved

th

at a

llo

w c

arry

ing

ou

t a

Co

mp

reh

ensi

ve N

atio

nal

R

egu

lari

zati

on P

rogr

am;

lan

d

adm

inis

trat

ion

sys

tem

st

reng

then

ed b

y th

e en

d o

f th

e P

roje

ct.

No

Ind

igen

ous

Lan

d T

itli

ng

Law

; R

egis

try

Law

did

no

t al

low

SII

CA

R;

leg

al d

iffi

cult

ies

for

regu

lari

zati

on

100

%

--

--

100

%

Ann

ual

In

200

9, a

nal

ysis

for

th

e p

rep

arat

ion

of

AF

up

dat

ed t

he

dia

gnos

tic

of

the

leg

al r

efor

ms

and

k

ey p

roce

dure

s of

th

e la

nd

adm

inis

trat

ion

sys

tem

. T

he

leg

al

anal

ysis

con

firm

ed t

hat

leg

al

fram

ewo

rk h

as b

een

str

eng

then

ed

and

that

a n

ew r

egu

lari

zati

on l

aw i

s n

ot

curr

entl

y ne

eded

in

th

e co

untr

y.

SM

EI/

SE

-P

RO

DE

P, I

P a

nd

CS

J

2.

a) A

t le

ast

30%

red

uct

ion

in

th

e av

erag

e n

um

ber

of

day

s to

reg

ula

rize

pro

per

ty r

igh

ts

thro

ugh

th

e P

rop

erty

In

ten

dan

cy i

n th

e p

ilo

t ar

ea.

No

bas

elin

e in

itia

lly.

B

asel

ine

wil

l be

u

pdat

ed b

y th

e en

d of

20

09

Pil

ot

stu

dy

show

ed

init

ial

redu

ctio

n

in t

ime

--

--

30%

B

egin

nin

g

and

end

of

AF

Stu

dy

of s

amp

le o

f re

gula

riza

tio

n

file

s st

rati

fied

by

typ

e o

f te

nure

an

d o

ccup

atio

n w

hic

h w

ere

pro

cess

ed b

efor

e an

d af

ter

the

exis

ten

ce o

f S

ILE

C a

nd S

IIP

RO

. B

asel

ine

wil

l be

up

dat

ed i

n 2

009,

an

d a

stu

dy

con

duct

ed i

n 2

013

SM

EI/

SE

-P

RO

DE

P a

nd I

P

2.b

) A

t le

ast

40%

of

the

terr

ito

ry u

nd

er i

rreg

ula

r la

nd

ten

ure

stat

us

(i.e

. re

form

ed

sect

or,

nat

ion

al a

nd s

tate

lan

d)

in t

he

pil

ot

area

has

leg

al

cert

ain

ty a

bou

t te

nur

e.

0%

of

the

pil

ot

area

was

re

gula

rize

d

19%

(C

hin

an-

deg

a an

d

Est

eli)

22%

3

0%

40%

Q

uar

terl

y C

om

par

iso

n b

etw

een

th

e n

um

ber

o

f re

gu

lari

zed

an

d ti

tled

par

cels

an

d th

e to

tal

to b

e re

gu

lari

zed

as

show

n i

n S

ILE

C (

stud

y co

nduc

ted

b

y S

ME

I w

ith

in

form

atio

n f

rom

IP

).

SM

EI/

SA

-P

RO

DE

P i

n

coor

din

atio

n w

ith

IP

3. A

t le

ast

70%

of

ben

efic

iari

es r

ecei

vin

g n

ew

rura

l ti

tles

fal

l u

nder

th

e ca

teg

ory

of “

very

sm

all

pro

du

cer.

”

New

In

dic

ato

r

28%

(C

hin

and

ega

and

Est

elí)

40%

5

6%

70%

B

egin

nin

g

and

end

of

AF

Stu

dy

abo

ut

the

cate

gor

y (i

.e. v

ery

smal

l, s

mal

l, m

ediu

m,

larg

e sc

ale

pro

du

cer)

in

to w

hic

h t

he

ben

efic

iari

es o

f ru

ral

titl

es i

n t

he

cad

astr

e ar

ea f

all

SM

EI/

SE

-P

RO

DE

P i

n

coor

din

atio

n w

ith

IP

- 53

-

Pro

ject

Ou

tcom

e In

dic

ato

rs

Ba

seli

ne

Ta

rget

Va

lues

D

ata

Co

llec

tion

an

d R

epo

rtin

g

P

rog

ress

u

nd

er

Ori

gin

al

Cre

dit

AF

Y1

AF

Y2

AF

Y3

Fre

qu

ency

a

nd

R

epo

rts

Dat

a C

oll

ecti

on I

nst

rum

ents

R

esp

on

sib

ilit

y fo

r D

ata

C

oll

ecti

on

4. A

t le

ast

40%

of

new

tit

les

are

pro

vid

ed d

irec

tly

to

wo

men

and

/o

r jo

intl

y w

ith

thei

r sp

ouse

/par

tner

.

New

In

dic

ato

r

20-

25

%

--

--

4

0%

Beg

inn

ing

an

d en

d o

f A

F

SM

EI

wil

l co

mp

are

the

num

ber

of

par

cels

tit

led

fo

r w

om

en o

r jo

intl

y w

ith

th

e to

tal

num

ber

of

par

cels

ti

tled

in

th

e p

ilo

t d

epar

tmen

ts a

nd

in t

hose

ou

tsid

e th

e ca

das

tre

area

.

SM

EI

/SE

-P

RO

DE

P i

n

coor

din

atio

n w

ith

IP

5.a

) A

t le

ast

50%

red

uct

ion

in

n

um

ber

of

day

s re

qu

ired

to

re

gis

ter

a tr

ansa

ctio

n i

n S

IIC

AR

, in

th

e p

ilo

t ar

ea.

Bas

elin

e w

ill

be

set

by

the

end

of

200

9

SII

CA

R

is b

eing

p

ilo

ted

in

C

hin

and

eg

a

--

--

50%

B

egin

nin

g

and

end

of

AF

Bas

elin

e se

t in

200

9. S

tud

y in

201

3

bas

ed o

n a

repr

esen

tati

ve

sam

ple

o

f re

gis

trat

ion

tra

nsa

ctio

ns

(fr

om

Cad

astr

al C

erti

fica

te t

o t

he

pro

vis

ion

of t

he f

inal

do

cum

ent

for

a re

gu

lar

or r

egu

lari

zed

par

cel

reg

iste

red

in

SII

CA

R).

SM

EI

/ S

E-

PR

OD

EP

5.b

) P

ubli

c R

egis

trie

s in

th

e p

ilo

t ar

ea a

re f

inan

cial

ly

sust

ain

able

.

Bas

elin

e w

ill

be

set

by

the

end

o

f 20

09

SII

CA

R

pil

ote

d i

n

Ch

inan

de

ga

--

--

100

%

Beg

inn

ing

an

d en

d o

f th

e A

F

Stu

dy

on t

he

tim

e an

d c

ost

s of

re

gis

trat

ion

pro

cess

es

SM

EI

/ S

E-

PR

OD

EP

and

P

ubli

c R

egis

try

6.

Lan

d ta

xat

ion

rate

s u

pdat

ed i

n 3

3 m

un

icip

alit

ies

in t

he

pil

ot

area

th

rou

gh t

he

use

of

cad

astr

al s

urv

ey

info

rmat

ion

in

SIS

CA

T.

New

In

dic

ato

r n

/a

8 1

6 3

3 A

nnu

al

200

7 a

nd

200

9 la

nd

tax

rev

enu

e b

asel

ine

esta

bli

shed

fro

m a

sam

ple

o

f 19

mu

nic

ipal

itie

s; a

nd

in

20

10

fro

m a

sam

ple

of

14 m

un

icip

alit

ies

SM

EI

/ S

E-

PR

OD

EP

in

co

ord

inat

ion

wit

h

INIF

OM

7. A

ll p

rote

cted

are

as u

nder

th

e P

roje

ct a

re i

ncl

ud

ed i

n

INE

TE

R’s

geo

gra

phic

al

dat

abas

e

PA

s w

ere

no

t d

emar

cate

d o

r g

eo-r

efer

ence

d

12

14

--

14

Ann

ual

V

erif

icat

ion

bas

ed o

n r

evie

w o

f th

e g

eogr

aph

ical

dat

abas

e S

ME

I /

SE

-P

RO

DE

P a

nd

MA

RE

NA

8. I

nd

igen

ous

peo

ple

s’ r

igh

ts

are

enfo

rced

in

15 t

erri

tori

es

and

resp

ecte

d b

y go

ver

nm

ent

auth

ori

ties

at

the

nat

ion

al,

reg

ion

al, a

nd m

un

icip

al l

evel

s

Ter

rito

ries

wer

e n

ot

dem

arca

ted

an

d ti

tled

.

15

--

--

15

At

the

end

o

f A

F

Ev

alu

atio

n s

tud

y on

in

dig

enou

s ri

ghts

pro

tect

ion

in

201

3

SM

EI

/ S

E-

PR

OD

EP

and

IP

- 54

-

Inte

rmed

iate

Ou

tco

me

Ind

icat

ors

B

ase

lin

e T

arg

et V

alu

es

Dat

a C

oll

ecti

on a

nd

Rep

ort

ing

Pro

gre

ss

un

der

O

rig

ina

l C

red

it

AF

Y1

AF

Y2

AF

Y3

Fre

qu

ency

a

nd

R

epo

rts

Dat

a C

oll

ecti

on I

nst

rum

ents

R

esp

on

sib

ilit

y fo

r D

ata

C

oll

ecti

on

Lan

d p

oli

cy f

ram

ewo

rk

pre

par

ed a

nd c

on

sult

ed w

ith

key

lan

d a

dm

inis

trat

ion

acto

rs.

Lan

d p

oli

cy

fram

ewo

rk

do

cum

ent

did

n

ot

exis

t.

Fin

aliz

ed

--

--

Fin

aliz

ed

At

beg

inn

ing

of

AF

Cop

y of

ap

prov

ed d

ocu

men

t S

ME

I /

SE

-P

RO

DE

P a

nd

MA

GF

OR

Org

aniz

atio

nal

Dev

elop

men

t P

lan

s d

esig

ned

, ap

prov

ed,

and

im

ple

men

ted

Dia

gnos

tic

esta

bli

shed

in

200

1

Init

ial

OD

Ps

imp

lem

en

ted

--

--

OD

Ps

full

y im

ple

men

ted

Beg

inn

ing

an

d en

d o

f A

F

Imp

lem

enta

tio

n o

f in

itia

l O

DP

s an

alyz

ed i

n t

he

inst

itu

tio

nal

stu

dy

carr

ied

out

for

AF

pre

par

atio

n;

Pro

ject

clo

sing

stu

dy

in 2

013

SM

EI

/ S

E-

PR

OD

EP

Man

ual

s pr

epar

ed a

nd

appr

ov

ed f

or c

adas

tral

su

rvey

ing

, pu

blic

dis

clo

sure

o

f re

sult

s, r

egul

ariz

atio

n,

pro

tect

ed a

rea

dem

arca

tio

n,

ind

igen

ous

lan

d t

itli

ng

and

d

emar

cati

on

, an

d co

nfli

ct

med

iati

on

.

New

In

dic

ato

r

Man

ual

s p

rep

ared

an

d ap

pli

ed.

Upd

ate

as

nee

ded

Upd

ate

as

nee

ded

Man

ua

ls

inst

itu

tio

nal

ized

Fin

al

Pro

ject

re

port

Co

pie

s of

th

e m

anu

als

and

thei

r u

pdat

ed v

ersi

ons.

Mon

ito

rin

g of

th

eir

app

lica

tion

dur

ing

Pro

ject

im

ple

men

tati

on

.

SM

EI

/ S

E-

PR

OD

EP

and

C

TO

UT

Os

esta

bli

shed

and

m

ain

tain

ing

clo

se

coor

din

atio

n i

n m

un

icip

alit

ies

wh

ere

surv

eyin

g h

as b

een

co

mp

lete

d.

UT

Os

did

no

t ex

ist

bef

ore

the

Pro

ject

UT

Os

esta

bli

she

d i

n p

ilo

t d

epar

tme

nts

New

U

TO

es

tab

lis

hed

--

UT

Os

op

erat

in

g in

P

roje

ct

area

Ann

ual

R

epor

ts o

n U

TO

s o

per

atio

ns

thro

ugh

out

Pro

ject

im

ple

men

tati

on

.

SM

EI

/ S

E-

PR

OD

EP

INE

TE

R h

as o

pen

ed

dep

artm

enta

l o

ffic

es w

her

e la

ckin

g in

th

e P

roje

ct A

rea.

Mad

riz

did

no

t h

ave

an

INE

TE

R

off

ice

All

n

eces

sary

o

ffic

es

op

erat

ing

--

--

Off

ices

o

per

ati

ng

Beg

inn

ing

an

d en

d o

f A

F

201

0 r

epo

rt a

nd f

inal

Pro

ject

rep

ort

S

ME

I /

SE

-P

RO

DE

P i

n

coor

din

atio

n

wit

h I

NE

TE

R

IP a

nd P

GR

pre

par

e an

d

imp

lem

ent

an a

nnu

al p

lan

fo

r re

gula

riza

tion

at

the

dep

artm

ent

lev

el.

New

In

dic

ato

r n

/a

Ann

ual

P

lan

A

nnu

al

Pla

n A

nnu

al

Pla

n Q

uar

terl

y R

epor

t M

on

itor

ing

of

annu

al p

lan

s S

ME

I /

SE

-P

RO

DE

P i

n

coor

din

atio

n

wit

h I

P a

nd P

GR

C

adas

tral

su

rvey

ing

dat

abas

e tr

ansf

erre

d to

at

leas

t 3

3 0

5 1

5 2

8 3

3 Q

uar

terl

y R

epor

t V

erif

icat

ion

wit

h a

sam

ple

of

mu

nic

ipal

itie

s S

ME

I /

SE

-P

RO

DE

P

- 55

-

Inte

rmed

iate

Ou

tco

me

Ind

icat

ors

B

ase

lin

e T

arg

et V

alu

es

Dat

a C

oll

ecti

on a

nd

Rep

ort

ing

Pro

gre

ss

un

der

O

rig

ina

l C

red

it

AF

Y1

AF

Y2

AF

Y3

Fre

qu

ency

a

nd

R

epo

rts

Dat

a C

oll

ecti

on I

nst

rum

ents

R

esp

on

sib

ilit

y fo

r D

ata

C

oll

ecti

on

mu

nic

ipal

itie

s in

th

e p

ilo

t ar

ea,

and

in

at l

east

4

mu

nic

ipal

itie

s S

IIC

AR

an

d S

ISC

AT

sh

are

dat

a as

wel

l as

re

sour

ces

and

tech

nolo

gy

for

thei

r m

anag

emen

t.

Dia

gnos

tics

to

id

enti

fy l

and

te

nur

e st

atu

s on

eji

do a

nd

mu

nic

ipal

lan

ds h

ave

bee

n

carr

ied

out

in a

t le

ast

33

mu

nic

ipal

itie

s, t

o s

uppo

rt

titl

ing

pro

cess

es.

0 5

15

28

33

Qu

arte

rly

Rep

ort

Ver

ific

atio

n w

ith

a s

amp

le o

f m

un

icip

alit

ies

S

ME

I /

SE

-P

RO

DE

P

At

leas

t 52

,28

2 ru

ral

and

urb

an p

arce

ls r

egu

lari

zed

in

th

e p

ilo

t ar

ea

0 1

4,96

7 2

3,00

0 4

0,00

0 5

2,28

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- 57 -

NICARAGUA Land Administration Project (PRODEP) Additional Financing

Annex 8: Project Risks Matrix

Description of Risk

Risk Mitigation Measures

Residual Risk

Ratinga

To Project Development Objective (PDO)

Political governance and stability issues. Political impasse created by the aftermath of the contested municipal elections of November 2008 contributed to delays in the legislative assembly and a reduction in budget support aid flows. More recently, political instability due to attempts to reform electoral rules to allow presidential and mayors’ reelection. In general, poor collaboration between the different parties in the Legislature – where none of the parties command a majority.

Despite ongoing political governance tensions, the current operation is progressing satisfactorily and client operational capacity has actually strengthened. The Bank is limited in terms of mitigation efforts on political governance issues but will maintain communication with the National Assembly’s Economic Commission to keep them abreast of Bank activities and progress.

S

Potential delays in approval of projects by Congress and slow down in implementation as national elections in 2011 approach. Delays could impact project effectiveness and performance.

Overall land policy has remained consistent over several recent administrations. More specifically, there has been general agreement across parties about the importance of land regularization and resolving land conflicts in the country. Across the portfolio, project design should take into account potential delay between Board approval and effectiveness. The AF is ready for implementation given that implementation arrangements will remain unchanged while focusing on activities that build on proven methodologies and technology, and existing national capacity. Moreover, project staff is expected to continue, most of the needed equipment is already available, and all technical manuals are ready. Finally, the AF includes retroactive financing, as well as methods and plans that will ensure, inter alia, that cadastral activities are completed in the first two years of the implementation period. Moreover, the AF OM, the 18-month PAC and draft co-execution agreements were ready for negotiations.

M

Sector Governance, Policies and Institutions. At least five agencies / ministries play key roles in the land administration sector in Nicaragua. Despite progress, inter-institutional coordination remains challenging and institutional capacity uneven.

Through the implementation of an Organizational Development Plan, the Project has helped to strengthen the institutional framework. PGR, the Project’s implementing agency, has been given a strong mandate to coordinate land administration in the country, and has so far managed to fulfill this mandate. Moreover, implementation of SIICAR has

M

- 58 -

Description of Risk

Risk Mitigation Measures

Residual

Risk Ratinga

promoted a closer partnership between the Judiciary (which has the property registry) and the Executive Branch (which has the cadastre). Emphasis on institutional strengthening will continue under the AF. This support has been designed on the basis of an institutional assessment carried out as part of AF preparation to help clarify roles and responsibilities. Co-executing agreements under the Project have helped create better working relationships across institutions. These agreements have been updated to reflect the current institutional framework and AF activities. The Project Inter-Institutional Committee, which will continue under the AF, has also proven to be an effective coordination mechanism.

To Component Results

Technical/Design. Municipalities should be further integrated into Project activities to promote decentralization and sustainability of cadastral processes and data update and maintenance.

AF design emphasizes the role of municipalities through specific activities for capacity building, including technical assistance and training. INIFOM, the agency in charge of municipal capacity building, has also been given a clearer role under the Project.

L

Implementation Capacity / Sustainability. The AF includes the scaling up of a methodology for cadastral surveying and regularization involving direct implementation by key agencies such as INETER and IP/PGR.

Local capacity for cadastre surveying and supervision has improved over the life of the original project. The new methodology has been tested successfully, with additional support from MCC and NDF, and lessons learned reflected in the AF OM and relevant technical manuals. MCC’s donation of equipment has strengthened overall implementation capacity. Readiness for implementing the methodology has been assessed and considered adequate by international experts.

M

Financial Management. Remaining concerns with general country fiduciary risk. Although it has recently improved, Project has a history of late submission of Audit Reports, which used to have qualified opinions.

FM of the Project is currently considered Moderately Satisfactory. FM Capacity of SE-PRODEP has been strengthened through the implementation of an Action Plan. Fiduciary aspects of the Project updated and reflected in the AF OM. The Bank has an FM Specialist in the Country Office that provides close follow up to FM issues of the Project.

M

Procurement. Remaining concerns with general country fiduciary risk. The Project, however, has not experienced problems in this respect. In general, in Central America, substantial problems found in shopping procedures.

Procurement under the Project is currently rated Satisfactory. Thus far, the Project has not experienced major procurement issues. Fiduciary aspects of the Project have been updated and reflected in the AF OM. The Country office has an international Procurement Specialist following up closely on procurement matters. Reduced thresholds for shopping have been applied to the whole

M

- 59 -

Description of Risk

Risk Mitigation Measures

Residual

Risk Ratinga

portfolio. An Action Plan is under implementation to further strengthen PCU’s capacity. As proposed in other recent Land Administration Projects, a new category for individual technical field services is proposed. Selection procedures for this category will be reflected in the updated OM. An HR officer will also be added to the SE-PRODEP to ensure adequate management of consultants and technical personnel.

Social and environmental safeguards. The Project is expected to generate limited negative impact on environment and people living within its area of influence. However, there still exists an uneven understanding of safeguards among co-executing agencies.

Periodic training and close supervision of critical safeguard aspects will continue during AF implementation. Special attention will be given to implementation of EMP, IPP, and Process Framework, all of which have been updated as part of the AF preparation process. Under the AF, the SE-PRODEP will be strengthened with a Social and Environmental Unit, which will include a Safeguard Coordinator and a Communication Specialist. Updated OM includes clear procedures to ensure compliance with safeguards.

M

Social / Reputational Risk. The AF will focus mainly on the Pacific region. Nevertheless, the AF merges with the original Project after approval, which included demarcation and titling of indigenous territories in the Caribbean. There are indigenous peoples living in four municipalities within the Project area. Under the AF, social and reputational risks mainly relate to unresolved tenure issues for these indigenous communities, which may turn contentious during the regularization process, especially since the legal framework on the Pacific and Central regions is limited regarding the recognition of indigenous territories.

Under the original project, the cadastral and regularization process has advanced relatively free of these problems and the Government has demonstrated its commitment to recognizing the tenure rights of indigenous peoples. As has been the practice, no cadastral activities will take place in a municipality with indigenous peoples until they have agreed to such activity and to land tenure regularization under the existing legislative framework. A new IPP has been prepared and the Communication Strategy updated to ensure adequate information and consultation. AF design also includes resources for conflict resolution. Demarcation and titling of indigenous peoples’ territories in the Caribbean is one of the most successful aspects of the project. Government has demonstrated its commitment to recognizing indigenous land rights, and has titled nine indigenous territories in the past two years. This achievement, which stands out in the region, is also reflected in the resolution of the historical case of Awas Tigni. It is expected that the component will be satisfactorily implemented under the original Credit, whose closing date will be extended to July 2010 to provide

S

- 60 -

Description of Risk

Risk Mitigation Measures

Residual

Risk Ratinga

sufficient time for this. Given the success of these activities, other donors have expressed interest in providing grants to cover additional territories outside the scope of the original project.

Overall Risk (including Reputational Risks) M a Rating of risks on a four-point scale – High, Substantial, Moderate, Low - according to the likelihood of occurrence and magnitude of potential adverse impact.

- 61 -

NICARAGUA

Land Administration Project (PRODEP) Additional Financing

Annex 9: MAP IBRD 37449

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PACIFIC OCEAN

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13°N

15°N

14°N

13°N

12°N12°N

11°N

86°W 85°W 84°W 83°W

86°W

88°W

85°W 84°W 83°W

NICARAGUA

AREA INTERVENTION TYPEMUNICIPALITIES WHERE CADASTRAL

SURVEYING HAS CONCLUDEDCONFLICT RESOLUTION, REGULARIZATION AND TITLING OF URBAN AND RURAL

PROPERTIES

CADASTRAL SURVEYING, CONFLICT RESOLUTION, REGULARIZATION OFURBAN AND RURAL PROPERTIES

MUNICIPALITIES WITHOUTCADASTRAL SURVEYING

Th is map was produced by the Map Des ign Uni t o f The Wor ld Bank. The boundar ies , co lo rs , denominat ions and any other in format ionshown on th is map do not imply, on the par t o f The Wor ld BankGroup, any judgment on the lega l s ta tus of any te r r i to ry , o r anyendorsement or acceptance of such boundar ies .

0 20 40

0 10 20 30 40 50 Miles

60 Kilometers

IBRD 37449

JAN

UA

RY 2010

NICARAGUALAND ADMINISTRATION PROJECT (PRODEP)

ADDITIONAL FINANCING

MAIN CITIES AND TOWNS

DEPARTMENT CAPITALS

NATIONAL CAPITAL

MAIN ROADS

RAILROADS

DEPARTMENT BOUNDARIES

INTERNATIONAL BOUNDARIES