implementation completion and results report (icr) document · 2019. 12. 23. · data sheet basic...

Document of

The World Bank FOR OFFICIAL USE ONLY

Report No: ICR00004627

IMPLEMENTATION COMPLETION AND RESULTS REPORT

ON A

LOAN

IN THE AMOUNT OF US$35 MILLION

TO THE

REPUBLIC OF PERU

FOR THE

Cusco Regional Development Project (P117318) December 11, 2019

Social, Urban, Rural And Resilience Global Practice

Latin America And Caribbean Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective November 27, 2019)

Currency Unit = Peruvian Nuevos Soles

PEN 3.39 = US$1

US$ 0.30 = PEN 1

FISCAL YEAR

July 1 - June 30

Regional Vice President: J. Humberto Lopez

Country Director: Marianne Fay

Regional Director: Anna Wellenstein

Practice Manager: Ming Zhang

Task Team Leader(s): Sergio Dell'anna, Zoe Elena Trohanis

ICR Main Contributor: Gabriel Arrisueño Fajardo

ABBREVIATIONS AND ACRONYMS

COPESCO Comisión Especial para Coordinar y Supervigilar el Plan Turístico y Cultural Perú UNESCO (Special Commission for the Coordination and Supervision of the Tourism and Cultural Plan Peru UNESCO)

COSITUC Comité de Servicios Integrados Turístico Culturales - Cusco (Committee of Integrated Tourism -Cultural Services of Cusco)

CPF Country Partnership Framework

CPS Country Partnership Strategy

CRG Cusco Regional Government

DRM Disaster Risk Management

ESIA Environmental and Social Impact Assessment

ESMF Environmental and Social Management Framework

ESMP Environmental and Social Management Plan

EWS Early Warning System

FM Financial Management

HEIS Procurement Hands-on Expanded Implementation Support

HSMP Historic Sanctuary of Machu Picchu

INEI Instituto Nacional de Estadística e Informática (National Institute of Statistics and Informatics)

INVIERTE.PE Sistema Nacional de Programación Multianual y Gestión de Inversiones (National Multiannual Programming and Investment Management System

ISR Implementation Status and Result Report

MINCETUR Ministry of External Trade and Tourism

M&E Monitoring and Evaluation

MEF Ministry of Economy and Finance

MINAM Ministry of Environment

MTR Mid Term Review

PAD Project Appraisal Document

PCM Presidency of the Council of Ministers

PCU Project Coordination Unit

PDO Project Development Objective

PER Plan COPESCO Proyecto Especial Regional Plan COPESCO (Special Regional Project Plan COPESCO)

PIU Project Implementation Unit

PRRVV Proyecto de Rehabilitación y Gestión del Valle del Vilcanota (Vilcanota Valley Rehabilitation and Management Project)

RDP Indigenous Peoples Plan

SNIP Sistema Nacional de Inversión Pública (National Public Investment System)

TA Technical Assistance

TABLE OF CONTENTS

DATA SHEET .......................................................................................................................... 1

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 6

A. CONTEXT AT APPRAISAL .........................................................................................................6

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION .............................................................. 11

II. OUTCOME .................................................................................................................... 15

A. RELEVANCE OF PDOs ............................................................................................................ 15

B. ACHIEVEMENT OF PDOs (EFFICACY) ...................................................................................... 15

C. EFFICIENCY ........................................................................................................................... 17

D. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 18

E. OTHER OUTCOMES AND IMPACTS (IF ANY) ............................................................................ 19

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 19

A. KEY FACTORS DURING PREPARATION ................................................................................... 19

B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 21

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 23

A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................ 23

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 24

C. BANK PERFORMANCE ........................................................................................................... 26

D. RISK TO DEVELOPMENT OUTCOME ....................................................................................... 28

V. LESSONS AND RECOMMENDATIONS ............................................................................. 28

ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 30

ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 39

ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 42

ANNEX 4. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 43

ANNEX 5. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 44

The World Bank Cusco Regional Development (P117318)

Page 1 of 44

DATA SHEET

BASIC INFORMATION

Product Information

Project ID Project Name

P117318 Cusco Regional Development

Country Financing Instrument

Peru Investment Project Financing

Original EA Category Revised EA Category

Full Assessment (A) Full Assessment (A)

Organizations

Borrower Implementing Agency

REPUBLIC OF PERU Cusco Regional Government

Project Development Objective (PDO) Original PDO

To improve the quality of tourism and solid waste management services and increase the resilience of the tourism sector to the impacts of natural disasters in the provinces of Calca, Urubamba, and Cusco.


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FINANCING

Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$)

World Bank Financing IBRD-83060

35,000,000 16,053,785 1,415,220

Total 35,000,000 16,053,785 1,415,220

Non-World Bank Financing 0 0 0

Borrower/Recipient 17,100,000 0 0

Total 17,100,000 0 0

Total Project Cost 52,100,000 16,053,785 1,415,220

KEY DATES

Approval Effectiveness MTR Review Original Closing Actual Closing

22-Nov-2013 03-Nov-2014 05-Sep-2016 31-Jan-2019 15-Jun-2019

RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions

16-Jul-2014 0

22-Jun-2017 1.00 Change in Results Framework Change in Components and Cost Reallocation between Disbursement Categories Other Change(s)

31-Oct-2018 4.70 Change in Results Framework Change in Components and Cost Reallocation between Disbursement Categories Change in Implementation Schedule

30-Jan-2019 4.77 Change in Loan Closing Date(s)

KEY RATINGS

Outcome Bank Performance M&E Quality

Unsatisfactory Unsatisfactory Negligible


Page 3 of 44

RATINGS OF PROJECT PERFORMANCE IN ISRs

No. Date ISR Archived DO Rating IP Rating Actual

Disbursements (US$M)

01 09-Feb-2014 Satisfactory Moderately Satisfactory .63

02 16-Sep-2014 Satisfactory Moderately Unsatisfactory .63

03 27-Jan-2015 Moderately Satisfactory Moderately Satisfactory .63

04 06-Aug-2015 Moderately

Unsatisfactory Moderately Unsatisfactory .63

05 03-Feb-2016 Moderately

Unsatisfactory Moderately Unsatisfactory .63

06 08-Aug-2016 Moderately

Unsatisfactory Moderately Unsatisfactory 1.63

07 01-Feb-2017 Moderately


08 28-Jun-2017 Moderately


09 09-Oct-2017 Moderately


10 03-May-2018 Unsatisfactory Unsatisfactory 5.32

11 19-Dec-2018 Unsatisfactory Unsatisfactory 5.40

12 14-Jun-2019 Unsatisfactory Unsatisfactory 2.95

SECTORS AND THEMES

Sectors

Major Sector/Sector (%)

Public Administration 5

Sub-National Government 4

Other Public Administration 1

Transportation 1

Other Transportation 1


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Water, Sanitation and Waste Management 43

Waste Management 40

Other Water Supply, Sanitation and Waste Management

3

Industry, Trade and Services 51

Other Industry, Trade and Services 51

Themes

Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Private Sector Development 118

Business Enabling Environment 18

Investment and Business Climate 18

Jobs 100

Finance 2

Finance for Development 2

Disaster Risk Finance 2

Urban and Rural Development 42

Cultural Heritage 36

Disaster Risk Management 6

Disaster Response and Recovery 2

Disaster Risk Reduction 2

Disaster Preparedness 2

Environment and Natural Resource Management 39

Environmental Health and Pollution Management 39

Air quality management 13

Water Pollution 13

Soil Pollution 13


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ADM STAFF

Role At Approval At ICR

Regional Vice President: Hasan A. Tuluy J. Humberto Lopez

Country Director: Susan G. Goldmark Marianne Fay

Director: Ede Jorge Ijjasz-Vasquez Sameh Naguib Wahba Tadros

Practice Manager: Anna Wellenstein Ming Zhang

Task Team Leader(s): Zoe Elena Trohanis Sergio Dell'anna, Zoe Elena Trohanis

ICR Contributing Author: Gabriel Sergio Arrisueno Fajardo


Page 6 of 44

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

A. CONTEXT AT APPRAISAL

Context

1. At appraisal, the Cusco Region was one of the principal tourism destinations in Peru, accommodating 88 percent

of the country's international visitors. The Cusco Towards 2021 Strategic Development Plan (Plan Estratégico de

Desarrollo Regional Concertado, Cusco a 2021) outlined the development goals of the region in a way that adequately

accounted for its unique social, cultural, and environmental characteristics. The plan specifically proposed investments

in infrastructure that would accommodate the ongoing growth of the tourism sector with adequate consideration for environmental concerns and disaster risk mitigation.

2. To mobilize financing for the key aspects of the Cusco Strategic Development Plan in an integrated way, the

Cusco Regional Government (CRG) prepared the Public Investment Program ‘Consolidation and Diversification of the Tourism Product - Sacred Valley of the Incas among the Provinces of Cusco, Calca and Urubamba in the Cusco Region’.

The program consisted of four components: (a) Entrepreneurial Competitiveness comprising a pilot competitive fund

for micro and small enterprises to enhance their ability to access the tourism market; (b) Consolidation of ‘Classic’ Tourist

Attractions and Diversification of Tourism Offerings, Integrated Solid Waste Management, and Disaster Risk

Management; (c) Technical Assistance for the Coordination of Public-Private Partnerships and Commercialization of

Tourism Services; and (d) Program Management and Monitoring. The World Bank-financed Cusco Regional

Development Project (hereinafter, the project) was to finance key elements of the government’s program, except for

the investments in diversification of new tourism sites. The reason for excluding this program component from the Bank-

financed project was due to the high level of complexity in supporting the archeological investigation required to expand

access to new sites for tourists. The CRG agreed to finance this component with other sources of funds.

3. The Project was the first Bank financed operation to be prepared and implemented by a regional government in Peru. It built on the long-standing relationship between Peru and the World Bank and was directly linked

to the work already begun under the Bank-financed Vilcanota Valley Rehabilitation and Management Project (P082625)

(Proyecto de Rehabilitación y Gestión del Valle de Vilcanota - PRRVV), which started in 2004. The PRRVV’s development objective was to support the Government of Peru's efforts to enhance the environmental and socio-economic

sustainability of historical, cultural and ecological assets in the Vilcanota Valley including the Historic Sanctuary of Machu Picchu (HSMP) and the Sacred Valley of the Incas. The PRRVV was originally implemented by the Ministry

of External Trade and Tourism (MINCETUR). After a restructuring in 2009, several activities were re-assigned to the

Special Regional Project Plan COPESCO (hereinafter COPESCO). The PRRVV sought to enhance the CRG's capacity to

identify, prepare, and implement infrastructure investments at the regional level. The PRRVV supported the preparation

of the proposed solid waste management component, as well as studies and capacity building with local governments

that were built upon in the proposed disaster risk management component. In 2007, the PRRVV had been downgraded as unsatisfactory, in part due to MINCETUR’s inability to effectively implement the Project from Lima. After the 2009

restructuring, COPESCO was able to initiate all activities, including contracting the solid waste studies. Upon completion,


Page 7 of 44

the PRRVV was rated moderately unsatisfactory, as project performance improved after the restructuring and some of the key indicators were achieved; however, none of the Outcome indicators were fully achieved.1

4. The Project was prepared in a context of national economic growth and supported Peru’s decentralization

efforts. It built on the work performed by the PRRVV and sought to incorporate the lessons learned from the it and to implement some of the civil works developed by it. However, given the inherent complexity of several project

subcomponents and lessons learned from the PRRVV, during preparation the number of activities included in the project

was reduced. One of the components originally proposed to be a part of this project, the construction of an expressway

through downtown Cusco, was financed by a separate World Bank financed project: the Cusco Transport Improvement

Project (P132505) which was approved in February 2014 with a World Bank loan of US$120 million. COPESCO was designated as the Project Implementation Unit (PIU) for both projects.

5. At the time of appraisal, the project was consistent with the World Bank Group’s (WBG’s) FY12–FY16 Peru

Country Partnership Strategy (CPS, Report No. 66187-PE), which was discussed by the Executive Directors on February

1, 2012. It supported three of the four strategic CPS objectives: (a) connecting the poor to services and markets; (b)

sustainable growth and productivity; and (c) improved public sector performance for greater inclusion. In line with the CPS, the project also supported subnational (regional) investments and capacity building in public management, as well

as the implementation of delegated sectoral functions. The project was also directly aligned with the 2021 Cusco

Strategic Development Plan.

Theory of Change (Results Chain)

6. The project’s Theory of Change is presented in Figure 1.

1 For more information, see the Implementation Completion and Results Report No: ICR00001942 for the Vilcanota Valley Rehabilitation and Management Project (P082625).


Page 8 of 44

Figure 1. Theory of Change: Cusco Regional Development Project

Note: DRM = Disaster risk management; EWS = Early warning system; TA = Technical assistance


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Project Development Objectives (PDOs)

7. As stated in both the Loan Agreement and the Project Appraisal Document (PAD), the objective of the project is

to improve the quality of tourism and solid waste management services and increase the resilience of the tourism sector to the impacts of natural disasters in the provinces of Calca, Urubamba, and Cusco.2

Key Expected Outcomes and Outcome Indicators

8. The outcome indicators of the project were: (a) Percent reduction in the dissatisfaction rating of the upgraded tourism sites under the project; (b) Direct project beneficiaries (percentage of which are female); (c) Number of people

(tourists and residents) in the project area from whom waste is collected and disposed in one of the project sanitary

landfills; and (d) Number of people (tourists and residents) covered by a functioning early warning system for natural

disasters under the project.

Components

9. The project consisted of four components, which are described below.

10. Component 1: Development and Consolidation of Tourism Services (US$25 million, of which US$18.8 million

was World Bank-financed). The objective of this component was to improve the quality and coverage of tourism services in the Sacred Valley and surrounding areas. This component included the following:

(a) Consolidating classic tourist attractions in the Sacred Valley by improving and expanding existing infrastructure through the provision, improvement, and/or construction of, among other things, three

observation points (miradores) access ways to tourist sites; internal trails (including footpath surfaces,

staircases, bridges, and railings); internal signage (both informative and interpretive); traffic distribution

points; lighting; drainage; tourist centers; toilets; ticketing offices; parking lots; craft markets; and other

small ancillary infrastructure in tourist sites.

(b) Developing and implementing a pilot competitive fund (fondo concursable) to provide technical assistance to private small and micro enterprises to improve the competitiveness of tourist products and services.

(c) Strengthening the institutional capacity of agencies and institutions involved in the operation of tourist activities in the Sacred Valley to (i) commercialize and position tourist products and services in the domestic

and international markets and (ii) collect tourist-related data and prepare a database for the evaluation

and analysis of the development of the sector.

2 The PAD adds that the PDO will be accomplished by improving the development and consolidation of tourism

services, enhancing capacity for solid waste management, and scaling up disaster risk management efforts in the

provinces of Calca, Urubamba, and Cusco, which makes up the Sacred Valley and surrounding tourism circuits in the

Cusco region.


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11. Component 2: Integrated Solid Waste Management (US$18.4 million, of which US$13.8 million was World Bank-financed). This component aimed at improving the local capacity to clean streets and public places and to

efficiently collect, transport, and dispose of solid waste in the provinces of Calca, Urubamba, and Cusco through,

among other things: (a) the construction of three new landfills, one in each of the provinces of Calca, Urubamba, and Cusco; (b) the strengthening of provincial and municipal administrations’ institutional capacity to administer the

management of solid waste facilities and services; (c) investments in solid waste services at the district level to

improve collection, recycling, and cleaning of streets and public spaces; and (d) carrying out of communication

campaigns in local communities for the promotion of adequate waste management practices and environmental

education.

12. Component 3: Disaster Risk Management and Disaster Preparedness (US$2.6 million, of which US$1.9 million

was World Bank-financed). This component sought to increase the resilience of the local population and tourism

infrastructure to natural disasters through, among other things: (a) designing and implementing early warning systems

to anticipate the flooding of the Vilcanota and Patacancha rivers in the Sacred Valley and Ollantaytambo; (b) designing

and implementing an integrated approach to the reduction of geological and climatic risks in the micro-basin of K'itamayu river in Pisaq; (c) designing and implementing an integrated approach to mitigate external geodynamic risks in the

Ccochoq river basin in the province of Calca; and (d) updating the disaster risk management plan for the Sacred Valley,

including plans for the evacuation of tourists, and carrying out evacuation training and simulation exercises with the local

population and tourists.

13. Component 4: Institutional Strengthening, Management, and Monitoring and Evaluation (US$6.1 million, of

which US$0.5 million was World Bank-financed). This component was to strengthen the institutional capacity of the Project Coordination Unit (PCU), PER Plan COPESCO, to enhance the institutional capabilities required for the successful

implementation of project activities, including compliance with procurement, safeguards, financial management, and

monitoring and evaluation (M&E) requirements.

Table 1. Original Resource Distribution by Financing Source

Component

Resource Distribution by Financing Source

Total Amount (US$ million)

Loan Amount (US$ million)

Counterpart Funds (US$ million)

Component 1: Development and Consolidation of Tourism Services

25.0 18.8 6.2

Component 2: Integrated Solid Waste Management 18.4 13.8 4.6 Component 3: Disaster Risk Management and Disaster Preparedness

2.6 1.9 0.6

Component 4: Institutional Strengthening, Management, and Monitoring and Evaluation

6.1 0.5 5.6

Total 52.1 35.0 17.1

Source: Project Appraisal Document


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B. SIGNIFICANT CHANGES DURING IMPLEMENTATION

Revised PDOs and Outcome Targets

14. The original project objectives remained unchanged throughout project implementation. The August 2017

restructuring (date of signature by the Peruvian authorities)3 of the project, following the World Bank’s recommendation

to restructure and cancel or reallocate funds as stated in the Midterm Review in November 2016, removed all Cusco solid waste management investments from the project, including the construction of the landfill under Component 2, as the

Municipal Council of Cusco decided not to delegate the responsibility of construction of the landfill to the CRG. In addition, the August 2017 restructuring reduced the scope of activities under Components 1 and 3 (for details, see Restructuring

Paper Report No.: RES28070).

Table 2. Resource Distribution after August 2017 Restructuring

Component




Counterpart Funds (US$ milllion)


19.54 14.65 4.88

Subcomponent 1.2: Competitive Fund 2.67 2.00 0.67

Component 2: Integrated Solid Waste Management 12.96 10.42 2.54

Component 3: Disaster Risk Management and Disaster Preparedness

7.51 4.92 2.59


5.59 3.00 2.59

Total 48.26 35.00 13.26

Source: Restructuring Paper Report No.: RES280704

15. Due to the lack of progress in project implementation, on June 28, 2018, a partial cancellation of US$18.9 million

from the loan was approved. It was followed by a second restructuring on January 8, 2019 (date of signature by the Peruvian authorities)5, which reflected the cancellation and aimed at focusing on the few activities that could be

completed before the fast-approaching loan closing date (January 31, 2019). The key changes included in this restructuring were the following: (a) in Component 1, the cancellation of the works at the Ollantaytambo and Pisac archeological sites

and the reduction of the scope of the Competitive Fund; (b) in Component 2, the exclusion of the construction of the

Calca landfill due to the lack of time to complete the works; (c) in Component 3, the cancellation of the risk mitigation works in the Ccochoq river basin; and (d) in Component 4, the reduction of loan proceeds for institutional strengthening

and management (for details, see Restructuring Paper Report No.: RES33054).

3 In the datasheet, the restructuring is dated June 22 2017. 4 Counterpart funds were calculated by deducting the loan amount from the total amount. 5 In the datasheet, this restructuring is dated October 31 2018.


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Table 3. Resource Distribution after the June 2018 Partial Cancellation and the January 8, 2019 Restructuring

Component




Counterpart Funds (US$ million)


2.72 2.23 0.49

Subcomponent 1.2: Competitive Fund 1.57 1.29 0.28

Component 2: Integrated Solid Waste Management 10.70 8.77 1.93


3.03 2.48 0.54


3.21 1.28 1.93

Total 21.22 16.05 5.17

Source: Restructuring Paper Report No.: RES330546

Revised PDO Indicators

16. The PDO indicators ‘Percent reduction in the dissatisfaction rating of the upgraded tourism sites under the

project’ and ‘Number of people (tourists and residents) covered by a functioning early warning system for natural

disasters under the project’ were dropped in the January 8 2019 restructuring as the related activities under Components

1 and 3 could not be completed by the loan closing date. In addition, the end targets for the remaining PDO indicators ‘Direct project beneficiaries’ and ‘Number of people (tourists and residents) in the project area from whom waste is

collected and disposed in one of the project sanitary landfills’ were reduced from 1,146,719 people to 751,683 people to

reflect the cancellation of the construction of the sanitary landfills in the provinces of Cusco and Calca, as well as other activities under Component 2.

Revised Components

17. The following changes were made to the project components as part of August 2017 and January 8 2019

restructurings: under Component 1,works in the Pisac archeological site under Subcomponent 1.1 were cancelled, along

with Strengthening the institutional capacity of agencies and institutions involved in the operation of tourist activities in the Sacred Valley (Subcomponent 1.3); under Component 2, the Cusco landfill, the Calca landfill, and most other activities

initially planned under this component were dropped; and under Component 3, the design and implementation of the early warning system of the Vilcanota River was cancelled (except for the preparation of the administrative technical

files), and the works of the K’itamayu and Ccochoq Comprehensive Treatment sub-projects, the early warning system of

the Patacancha river, and the Emergency Preparedness and Risk Reduction Plan were dropped.

18. As Table 4 shows, most civil works and other project activities were not fully completed. However, progress was

achieved in several on them, including the completion of technical specifications, bidding documents, or terms of

reference.

6 Counterpart funds were calculated by deducting the loan amount from the total amount.


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Table 4: Summary of Project Activities and Results achieved at closing date

Project Activities Results


Pisac - Road rehabilitation and archeological works Technical specifications under

preparation

Ollantaytambo - Road rehabilitation and archeological

works

Technical specifications

prepared

Observation sites Technical specifications

prepared

Competitive Fund for Tourism Launched

Component 2: Integrated Solid Waste Management

Urubamba landfill Completed

Calca landfill Technical specifications,

permits, and bidding documents

prepared

Capacity building for landfill operation (Profesionalización) Contracted in July 2019,

expected to be completed by

December 2019

Consultancy for the set-up of a financial management trust

fund (Fideicomiso)

Consultant contracted after

Project closing resigned.

Fideicomiso is planned to be

replaced by mechanism

proposed by firm in charge of

Profesionalización

Rural and Social Safeguard Plans Terms of reference prepared

Machinery (trucks, heavy machinery for landfill operation, protection and cleaning materials)

Partially purchased


Early Warning System for Kitamayu and Patacancha Technical specifications

prepared

Prevention and Risk Reduction Plan Terms of reference prepared

Component 4: Institutional Strengthening, Management and Monitoring and Evaluation

Project Management Scope reduced


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Other Changes

19. On January 30, 2019, the loan closing date was revised from January 31, 2019 to June 15, 2019. For details, see Restructuring Paper Report No.: RES33054.

Rationale for Changes and Their Implication on the Original Theory of Change

20. The August 2017 restructuring paper noted that project implementation was lagging due to, among other things: (a) lack of counterpart budget; (b) lack of key personnel and high staff turnover at COPESCO; (c) delays and problems of

coordination between the different agencies involved (at the local, regional, and national levels); (d) opposition of some

communities to the construction of two of the three sanitary landfills in the provinces of Cusco and Calca due to

contamination risks and social issues in a neighboring community related to compensation for the purchase of land to

construct the landfill in Calca; (e) lack of willingness of the Mayor of Cusco to delegate responsibility to the CRG for the

construction of the sanitary landfill in Cusco; and (f) minimal progress in the preparation of the investments to be

executed.

21. Even after the 2017 restructuring and the reduction in the project’s scope, the project continued to experience delays in implementation, with the main challenges (as cited in the January 8 2019 restructuring paper), being:(a) the lack

of key personnel and high staff turnover within COPESCO; and (b) overall weaknesses in procurement capacity, financial management, and safeguard procedures.

22. The January 30, 2019 restructuring was requested by the CRG administration that had just taken office at the start

of the year. The most important factor that affected the implementation of this project from inception to December 31,

2019, had been the lack of ownership, interest and commitment on the part of the previous CRG administrations and of

the COPESCO management. With a new regional Governor and a new Director of COPESCO, and a new Mayor of the

Province of Urubamba, the CRG supported its request with a detailed implementation plan, focusing on the operational

capability/know-how and sustainability of the Urubamba sanitary landfill and to have more time to comply with safeguard

requirements. While the new CRG and COPESCO management team did everything in the power to salvage this project,

by January 2019 it was too late, and the project carried too many legacy issues and constraints which made it impossible

to turn implementation around. The concerted efforts and non-negligible achievements of the new Administration in just

five months, however, further corroborate the lack of interest and commitment of previous Administrations to the

project.

23. The implications for the original Theory of Change were profound, as most of the original project activities were

dropped. The original outcomes and intermediate outcomes could no longer be achieved.


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II. OUTCOME

A. RELEVANCE OF PDOs

Assessment of Relevance of PDOs and Rating

24. The relevance of the PDO is rated Substantial. The WBG Peru Country Partnership Framework 2017–2021 (CPF,

Report No. 112299-PE) mentions the Project as conducive to achieving Objective 8: Strengthen the management of natural resources. One of the indicators tied to this objective was the industrial and municipal waste disposal capacity

created under the project. However, the Performance and Learning Review of the CPF (Report No. 135267-PE, dated April

25, 2019) excluded this indicator, citing difficulties in project implementation.

25. Despite these changes, the PDO remained aligned with the CPF objectives, especially with Objective 7 (previously

Objective 8, Strengthen the management of natural resources) and Objective 8 (Improve disaster risk planning and financial management) of the revised CPF. Furthermore, the CPF seeks to address gender and indigenous disparities. Both

topics were integrated in the design, activities, and, in the case of gender, the PDO indicators of the project.

B. ACHIEVEMENT OF PDOs (EFFICACY)

Assessment of Achievement of Each Objective/Outcome

26. Most project activities were not completed, which resulted in the lack of achievement of most intermediate

indicator targets and of the PDO outcomes.

27. Achievement of the objective ‘to improve the quality of tourism services in the provinces of Calca, Urubamba,

and Cusco’ is rated Negligible. None of the works and improvements planned for the Pisac and Ollantaytambo

archeological sites and the observation points were carried out, as the administrative processes required to obtain the

necessary authorizations suffered significant delays. The following activities were carried out:

• The consulting service to implement the Competitive Fund for Tourism was launched, a working plan was

prepared, an initial logo and campaign were launched, and 50 small enterprises were registered to benefit

from the grant program. In June 2018, misprocurement without cancellation was declared by the Bank for

this contract following a procurement post- review; these activities are continuing with government funds.7

• Terms of reference were completed for technical studies to evaluate: (a) the maximum capacity at the classic

tourism attractions; (b) an appropriate fee rate for the various sites in the Sacred Valley; (c) operation and

7 According to the Letter No. 164-2018-BM-LC6-PE, the World Bank’s review concluded that the Borrower did not follow the applicable Bank’s Consultant Guidelines (“Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” published by the Bank on January 2011 and revised on July 2014) established under the Loan Agreement, since they did not comply with sections 1.12, 2.22, 2.30.


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maintenance costs of the assets linked to tourism services; and (d) fee collection and distribution mechanisms and patterns in the use of tourism fees. However, these studies were not contracted.

• The technical designs for the Ollantaytambo subcomponents have been finalized and are planned to be executed with government resources in 2020. In the case of Pisac, the contract for the preparation of the

technical design contract is under arbitration.

• Technical designs for the three Miradores were concluded. Construction was underway in November 2019 and is planned to be completed in early 2020.

28. The achievement of the objective ‘to improve the quality of solid waste management services in the provinces of Calca, Urubamba, and Cusco’ is rated Modest. This rating is based on the lack of completion of most activities included

in Component 2: Integrated Solid Waste Management. The status of activities that were intended to achieve this outcome

is summarized below:

• The Urubamba landfill was completed under acceptable quality standards. It is only the second landfill in

the Cusco region, and by far the one with the largest capacity. However, in June 2018 the World Bank declared misprocurement (without cancellation) of the construction contract.8

• The technical designs for the Calca landfill were completed. Due to the opposition of a peasant community

to the construction of the landfill, it was not possible to complete its construction before the loan closing date, and it was dropped in the November 2018 restructuring. In November 2019, COPESCO informed that

the technical designs had been adapted to Peru’s public investment regulations and opposition to the landfill had been overcome. The new management of COPESCO is fully committed to building the landfill with

government resources in 2020, and has already secured all the necessary community and institutional

agreements and permits to do so.

• The Cusco landfill faced delays and opposition from stakeholders and was dropped in the August 2017

restructuring.

• The acquisition and delivery of vehicles and equipment for solid waste collection for four municipalities in

Calca and three municipalities in Urubamba were completed.

• The acquisition of special equipment for the operation of the landfills of Calca and Urubamba was

completed. Payment for the acquisition of this equipment was partially pending on the loan closing date and

will be completed with government funds.

8 According to the Letter No. 165-2018-BM-LC6-PE, the World Bank’s review concluded that the COPESCO had not followed the Bank’s Procurement Guidelines (“Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” published by the Bank on January 2011 and revised on July 2014) since they did not comply with Section 2.59: “The Borrower shall award the contract within the period of the validity of bids, to the bidder who meets the appropriate standards of capability and resources and whose bid has been determined (i) to be substantially responsive to the bidding documents and (ii) to offer the lowest evaluated cost.”


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• Consulting services for the Operational Plan was ongoing on the loan closing date and is being financed with government funds.

• The Fideicomiso contract was ongoing on closing date. However, the consultant later resigned without

completing the task. The consulting firm in charge of preparing the operational plan is preparing a proposal

for the financing of the solid waste management activities and landfill operation.

• The technical studies needed for the implementation of the Social Inclusion Plan for Informal Recyclers (which included 12 waste pickers in the Urubamba province) were completed, while the plan was

implemented one month after loan closing.

• The construction contract for two wells for the communities in the proximity of the landfill (the final activity

of the Rural Action Plan) was not awarded prior to the loan closing date and is planned to be financed by government funds.

29. The achievement of the objective ‘to increase the resilience of the tourism sector to the impacts of natural

disasters in the provinces of Calca, Urubamba, and Cusco’ is rated Negligible. This rating is based on the lack of completion of most activities included in Component 3: Disaster Risk Management and Disaster Preparedness. The

Strategic Regional Plan for prevention and reduction of disaster risk, which was an intermediate result indicator, was

updated. Despite the restructuring of this component, none of the early warning systems or integrated disaster risk management approach subprojects were completed due to the cumbersome review and clearance procedures for the

technical specifications by the national, regional and municipal governments. By the loan closing date, only technical specifications had been prepared for the Vilcanota, Patacancha, K’itamayu, and Ccochoq subprojects, which can be

financed with government funds (Patacancha and K’itamayu are planned to be implemented in 2020). Further, none of

the activities of Subcomponent 3.2: Planning and Capacity Building for Disaster Risk Management were contracted.

Justification of Overall Efficacy Rating

30. The overall efficacy rating is Negligible. Only some activities were completed; while technical specifications and

bidding documents were prepared for several other activities, most of them were not completed by the loan closing date.

C. EFFICIENCY

Assessment of Efficiency and Rating

31. Most activities were not completed and none of the outcomes were achieved. There were several aspects

pertaining to the design and implementation of the project which reduced its efficiency:

• Project timeframe. The project timeframe of just over five years was unrealistic and had to be constantly revised as it included multiple activities across several sectors. In addition, it was the first project to be

carried out by a subnational government in Peru.


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• Lengthy bureaucratic procedures. Several project activities required obtaining authorization through long and cumbersome bureaucratic processes involving multiple local, regional and national level government

agencies. For example, it took over a year to obtain approval for the technical specifications for the EWS from the Ministry of Economy and Finance (MEF), COPESCO, and the Presidency of the Council of Ministers

(PCM, Peru’s Prime Minister’s office).

• Lack of local engagement and support. Many activities (such as the construction of the sanitary landfills) required the active support of provincial and district municipalities as well as of the local population, which

was not forthcoming. While environmental considerations were raised by a peasant community that opposed the construction of the Calca landfill, this landfill was planned to be built in the land of a different

community. The previous CRG and COPESCO management lacked the interest in and commitment to the

project and therefore did do what was required to address and alleviate local community and beneficiary

concerns. Once again, the new CRG and COPESCO management were able to tackle those outstanding issues

and are actively going forward with the implementation of several of the components that were canceled in

the project, chiefly including the Calca landfill.

• Capacity constraints. The implementation agency and the PIU did not have the required capacity for the

implementation of this project. This capacity gap was further compounded by continuous staff turnover and

delays in filling vacant positions. PIU capacity was further challenged when it was made responsible for the

implementation of the Bank-financed Cusco Transport Improvement Project in 2014. This project, still

ongoing, also suffered considerable delays in implementation. Leadership changes at COPESCO also caused significant delays.

• Procurement. Capacity constraints particularly affected procurement, resulting in the lack of adequate

documentation and controls for procurement processes. Declarations of misprocurement without

cancellation for the construction contract for the Urubamba landfill and the contract for the implementation

of the competitive fund resulted in ineligible use of loan funds amounting to US$2.45 million. Despite the

reduction in the number of activities and cancellation of 55 percent of loan proceeds in June 2018, the

misprocurement declarations compromised operationalization and management of the Urubamba landfill

and stalled project implementation. After the declarations of misprocurement, MEF did not authorize

further project disbursements. The CRG did not allow the necessary budgetary changes to enable the PIU to

reimburse the ineligible expenditures. As a result, several contract payments were pending at the loan closing date.

32. For these reasons, efficiency of the project is rated Negligible.

D. JUSTIFICATION OF OVERALL OUTCOME RATING

33. Based on the above discussion of Relevance, Efficacy, and Efficiency, the overall Outcome of the project is

rated Unsatisfactory. However, despite the significant obstacles to implementation, the project managed to complete the

Urubamba sanitary landfill, one of the first of its kind in Peru, and some complementary activities (such as the purchase of machinery to operate the landfill and of equipment for trash collection, recycling and street sweeping). The Urubamba

landfill is expected to be operational in 2020 after the complementary activities are completed with government funds.


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The project also managed to produce technical specifications for most of its main activities; and several of them are planned to be completed in the following months. Without these outputs, which can be used by the government to

complete the originally planned investments under the project in the future, and thus achieve the project’s intended

outcomes, the project would have been rated Highly Unsatisfactory.

E. OTHER OUTCOMES AND IMPACTS (IF ANY)

Institutional Strengthening

34. The comprehensive solid waste management approach proposed and partially implemented by the project, which

includes the technical operation of landfills, represents a significant improvement over the waste management practices and dumpsites currently operated by local governments in the Cusco Region. The planned investments, which remain

part of the CRG’s Public Investment Program, could have a significant and positive impact if they are implemented. The

new regional government administration and the new executive director of COPESCO, who was appointed in January 2019, contributed to the project making good implementation progress by preparing several bidding documents and

starting the implementation of several contracts.9 Moreover, the CRG and COPESCO are fully committed to implement

several subcomponents: in November 2019 the three Miradores were being built; the Calca landfill technical

specifications had been adapted to the INVIERTE.PE with plans to execute it in 2020; technical designs for infrastructure

works in Ollantaytambo and the K’itamayu and Patacancha early warning systems have been concluded and were also

planned to be implemented in 2020.

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

A. KEY FACTORS DURING PREPARATION

35. Complex design. The project included multiple activities, several of which required obtaining different

authorizations and going through long and cumbersome bureaucratic processes and coordination needs involving

different local, regional and national level government agencies (e.g., the early warning systems and the infrastructure works in tourism sites). Other activities depended on the active support of provincial and district municipalities, as well as

of the local population, e.g., the construction of the sanitary landfills. In the end, this first ever project to be carried out at

the subnational level in Peru proved too complex to be fully implemented by a regional government agency with limited support and commitment from the CRG, limited institutional capacity, and with less than sufficient support from the

central government.

36. Insufficient Risk Management. The risk management measures developed to counter the identified risks were not sufficient:

9 For details, see ISR Seq. No. 12, archived on 14 June 2019.


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• To counter the risk of opposition or lack of support, primarily for the solid waste component, the CRG worked with communities in the project areas to explain project benefits to raise awareness, build support for the

investments, and negotiate other means of support, including economic development, basic service provision, and improved road access. However, those efforts were largely insufficient, and these planned investments

were delayed and many of these communities became skeptical of the CRG’s ability to deliver on its promises.

In addition, opposition by peasant communities to the Cusco and Calca landfills due to uninformed – and politically motivated -- concerns over potential contamination, lack of awareness of the project benefits, and

jealousy over compensation received by one community for the purchase of land for the construction of the

landfill, forced the exclusion of those landfill from the project.

• The PAD also identified COPESCO’s overall administrative, human resource, and fiduciary capacity as well as

its capacity to award infrastructure contracts, manage contracts, and handle financial matters as a potential

risk. However, the agreed procurement thresholds did not allow for prior review of key contracts, e.g., the

package for the construction of the Urubamba landfill (for which the World Bank declared misprocurement).

Mitigation measures considered that COPESCO had some staff members with experience in World Bank-financed projects as part of the project key staff team and included the development of a support strategy

and capacity strengthening measures. COPESCO’s commitment to develop its in-house technical capacity and

to be held accountable for the technical quality of contracted activities was also considered an adequate risk

management measure. However, staff rotation and the delay in loan effectiveness meant that by the time

implementation started, the experienced key staff had already been replaced. Lack of managerial commitment from COPESCO resulted in the mismanagement of the project as a whole.

• To mitigate risks associated with the project being the first Bank-financed operation prepared by a regional government and intergovernmental difficulties, the project proposed the creation of a Project Coordination

Committee, as well as Technical Working Groups, to operationalize the decisions reached at the Coordination

Committee level and to ensure that the municipalities and technical staff were fully engaged in project implementation. These units were initially established in 2014 but did not function during project

implementation due to changes in the regional government.

• The project identified the risk that the preparation of some components could be affected by delays in

securing MEF approval for specific infrastructure investments within the national public investment system

(SNIP). To manage this risk, MEF sector specialists were involved in project preparation from an early stage and made several supervision trips to Cusco during project preparation. In addition, both the CRG and MEF

were committed to finalizing the remaining activities and investments on time. However, the disaster risk

activities (such as the integrated approaches and the early warning systems) suffered significant delays, as other national government agencies, such as the PCM, were involved in the SNIP administrative procedures,

while MEF’s involvement diminished during project implementation. In December 2016, the SNIP was

replaced by the Sistema Nacional de Programación Multianual y Gestión de Inversiones (National Multiannual

Programming and Investment Management System), known as INVIERTE.PE. This change generated confusion

and delays over its application to the project’s investment procedures, and decisions on which level of

government was responsible for each step in the investment system.


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B. KEY FACTORS DURING IMPLEMENTATION

Factors subject to government and/or implementing entities control

37. Coordination. The project required close and efficient coordination between COPESCO, the CRG, MEF, local

municipalities, and other agencies. There was no clear support from MEF in the approval of investment activities during project implementation. In the case of the DRM component, significant delays in the approval of preliminary studies and

technical specifications for each study slowed down their implementation. After the declarations of misprocurement in

June 2018, the CRG and COPESCO did not receive clear guidance from MEF on how to reimburse the World Bank for the expenses incurred on the two contracts.

38. Commitment and leadership. Despite its initial commitment, the provincial municipality of Cusco opposed the

delegation of authority to the CRG for the building of the landfill, which resulted in its cancellation. In addition, for most

of the project’s duration, the provincial municipality of Calca did not back COPESCO’s efforts to obtain the support of the

peasant community that opposed the construction of the landfill. The fact that the new CRG and COPESCO management have managed to overcome all those problems and are going forward with the construction of the Calca landfill in 2020

demonstrates that the previous administrations lacked the interest and political will to implement the project.

39. The project was also affected by constant changes in leadership, with three different administrations and four

regional governors at the CRG during the life of the project.10 Regional elections delayed the effectiveness of the project.

Moreover, changes at the regional level were also accompanied by changes in leadership at COPESCO, with seven different

executive directors at COPESCO. Five different project coordinators oversaw the PIU. These changes in leadership, as well as political factors, created an environment of uncertainty that contributed to the delay in implementation of project

activities.

40. Staffing. High staff turnover is a characteristic of Peru’s subnational public administration. At different stages, the

key staffing was incomplete. There were few professionals in Cusco with work experience in World Bank projects; such

professionals elsewhere were unwilling to relocate to Cusco. For some periods, the staff was not paid on time and lacked suitable working space; these problems affected staff morale.11 There was also tension between COPESCO and the PIU

staff due to differences in salaries and working conditions.

41. Cumbersome bureaucratic procedures to obtain government permits and authorizations, sometimes taking over a year, delayed the implementation of project activities (e.g., the early warning systems needed approvals from the

National Meteorological and Hydrological Service, MEF, PCM, and, the municipalities; the infrastructure works in tourism sites required approvals from the Ministry of International Trade and Tourism, the Ministry of Culture, and the

10 The project was signed when Jorge Acurio was the Regional Governor. He was removed from office in December 2013 and replaced in January 2014 by René Concha. Edwin Licona won the 2016 regional elections and took office on January 11, 2015. He was replaced four years later by Jean Paul Benavente. 11 See Implementation Supervision Report Seq. No. 9, archived on 9 October 2017. According to this report, “There have been delays due to the of lack of capacity of COPESCO to implement large-scale, complex investment projects, which has been exacerbated by the COPESCO Director’s decision to carry out a restructuring of staff in June 2017, during which the Principal Social Specialist, the Lawyer and the Project coordinator were dismissed. Due to the lack of clarity of contracts of other key staff, the DRM Specialist and the Social Specialist quit in July 2017.”


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municipalities; and the works on the Miradores required the approval of the Ministry of Transport, the Ministry of Culture, and the municipalities).

42. Fiduciary capacity. There were management issues related to cumbersome procedures to allocate the budget for

the project, problems with archiving and documentation, delays in submitting audit reports of the project, and PIU staff’s limited knowledge of the World Bank’s financial management and procurement policies and procedures. Measures to

increase PIU fiduciary capacity, including training sessions, recommendations to hire additional staff, and hiring of experts

to provide advice on procurement matters, proved insufficient.

43. Social issues. From the beginning, the project confronted opposition from some communities and other actors to

the construction of the landfills in Cusco and Calca. The PIU did not manage to develop an effective communication strategy to convince these actors of the benefits of the project. Efforts to overcome the political and social difficulties

around the Cusco landfill also required significant amounts of time and work, causing the PIU to postpone other relevant

activities to address political and community pressures and concerns. The social team was fully staffed and reached out

to the communities only after the dropping of the Cusco landfill in 2017. There were significant delays in the

implementation of the Rural Action (Indigenous Peoples) Plan and the Social Inclusion Plan for Recyclers. The social safeguards activities included in the Rural Action Plan and the Social Inclusion Plan—which seek to benefit the neighboring

communities and the former waste pickers, respectively—were not fully implemented by loan closing date.

44. M&E. The PIU was unable to put in place an appropriate mechanism for data collection. After several delays, the

baseline study was dropped. Constant changes in the PIU staff further complicated timely reporting.

Factors Subject to World Bank Control

• Adequacy of supervision

o Resources allocated were not adequate to strengthen implementation support when the project was in

problem status. Nevertheless, the Task team members performed technical visits to Cusco regularly and organized videoconferences to check on project progress and provide technical assistance to the PIU. The

Country Director and the Operations Manager also went to Cusco on several occasions, as did the Practice

Manager and the Regional Safeguards Advisor. They met with CRG and COPESCO officials and address the critical issues such as the delegation of power, counterpart funding, safeguards issues, delays putting at

risk achievement of PDO, etc.

o No changes were made to the procurement thresholds either prior to or even after the declarations

misprocurement, despite the known weaknesses in the PIU’s procurement capacity.12

o Social issues, such as the opposition to the construction of the Cusco and Calca landfills, could have

benefited from more intensive, hands-on implementation support from the Bank.

12 In July 2016, the procurement thresholds for prior review became mandatory. They made no distinction between projects implemented at the national and subnational level and therefore COPESCO fell under those rules. The contract for the construction of the Urubamba landfill as well as the contract for the implementation of the pilot competitive fund were under the established thresholds that apply for High risk activities and thus were not subject to prior review.


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Factors Outside the Control of Government and/or Implementing Entities

45. Impact of Corruption Issues in Peru. From July 2016 through 2018, Peru faced political and institutional turmoil, partly caused by two significant corruption cases. First, various high-level officials were implicated in infrastructure

corruption scandals fueled by the ‘Lava Jato’ investigation, which affected Peru as well as other Latin American countries. Second, in July 2018 there was a case of systemic trafficking of influence and corrupt practices in the judicial system,

including soliciting bribes to obtain positions and alter sentencing decisions. These cases added to a widespread

perception of corruption in public service delivery, which led to the introduction of more bureaucratic review and

clearance processes in decision making, which affected most public investment projects in Peru13, including this project.

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

A. QUALITY OF MONITORING AND EVALUATION (M&E)

M&E Design

46. The project’s Theory of Change was clear. Indicators were included in the project’s Results Framework and were appropriate to monitor progress toward the PDOs as well as the achievement of intermediate results:

• To measure the reduction in the dissatisfaction rating of the upgraded tourism sites under the project, a baseline survey was to be carried out before the start of the works and a final survey to be carried out within six months

of the completion of the works.

• The remaining PDO-level indicators used Peru’s official sources14 to calculate the number of beneficiaries (tourists

and residents) and percentage of female beneficiaries. Information was to be reported annually by COPESCO and,

in the case of solid waste management indicator, by COPESCO and the provincial municipalities of Cusco, Calca,

and Urubamba.

• For all intermediate result indicators, the baseline was “0” or “No” and progress (“Yes” or annual incremental

targets, respectively) was to be reported annually by COPESCO. For indicators related to solid waste management, data would be collected annually and reports would be prepared by the provincial municipalities of Cusco, Calca,

and Urubamba.

13 According to the Country Partnership Framework Performance and Learning Review (2019), while many countries of the Latin America and Caribbean region have witnessed large corruption cases, Peru experienced changes at the highest level of government. President Pedro Pablo Kuczynski, who took office on July 28, 2017, resigned in March 2018 in view of a second impeachment process by Congress. Martín Vizcarra, the constitutional Vice -President, assumed the Presidency on March 23, 2018. These changes resulted in high turnover at the ministerial level, and among senior staff in public agencies, delaying (and in some cases disrupting) the implementation of ongoing projects, including the Cusco Regional Development Project. 14 From the National Institute for Statistics and Informatics (INEI) ant the Committee of Integrated Tourism -Cultural Services of Cusco (COSITUC).


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M&E Implementation

47. Given the very limited progress in project implementation, the planned annual reports and information collection

activities to measure progress towards the PDOs and on intermediate result indicators were not prepared. In addition, the preparation of the terms of reference for the baseline survey to measure dissatisfaction took considerable time, and

this activity was cancelled in the January 8 2019 restructuring, because the tourism infrastructure works were dropped

from this project.

M&E Utilization

48. In the absence of regular reporting, the M&E system was not utilized for project monitoring.

Justification of Overall Rating of Quality of M&E

49. Based on the above discussion, the overall M&E quality is rated Negligible.

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Social Compliance

50. The project triggered the Bank’s Indigenous Peoples (OP/BP 4.10) and Involuntary Resettlement (OP/BP 4.12)

social safeguard policies. The solid waste component was expected to affect the livelihoods of approximately 645 waste pickers as a result of the construction of landfills and the changes in solid waste collection and disposal practices (including

recycling) in Cusco. A Social Inclusion Plan was prepared to address these impacts.

51. A social assessment determined that the landfills of Calca and Urubamba would affect communities of indigenous

peoples, as the landfills required the acquisition of community land in Calca and the proposed landfill in Urubamba would

be built adjacent to the community land. Indigenous Peoples Plans (RDPs) were prepared for these subprojects. It was

also assessed that the interventions planned in the Sacred Valley as part of the tourism and DRM components could affect

communities of indigenous peoples. Until December 2015, the full PIU safeguards team was not in place, causing delays

in addressing the concerns of the communities that opposed the construction of landfills in Calca and Urubamba.15

52. Compliance with social safeguards was downgraded to Moderately Unsatisfactory in July 2016, given the

considerable delays on the part of COPESCO to prepare the terms of reference for the Rural Development Plans and the

Social Inclusion Plan. The grievance redress mechanism was not fully functional and needed significant improvement in

terms of concept, strategy, and operational approach.16 From September 2017 to June 2018, the PIU did not have a Social

Management Official. The PIU also took significant time to update the social safeguard instruments as requested by the Bank.17 In June 2019, OP 4.12 was upgraded to Moderately Satisfactory due to the start of implementation of the Social

15 See ISR Seq. No. 5, archived on 3 February 2016. 16 See ISR Seq. No. 6, archived on 8 August 2016. 17 See ISR Seq. No. 10, archived on 3 May 2018 and ISR Seq. No. 11, archived on 19 December 2018.


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Inclusion Plan. However, compliance with OP 4.10 was downgraded to Unsatisfactory, because COPESCO had not been able to implement the RDP.18

Environmental Compliance

53. The project triggered the following Bank environmental safeguard policies: Environmental Assessment (OP/BP 4.01); Natural Habitats (OP/BP 4.04); Physical Cultural Resources (OP/BP 4.11); and Safety of Dams (OP/BP 4.37).

54. The project was classified as Category A under OP/BP 4.01 based on the construction of the landfill in Cusco

(Component 2). Components 1 and 3 were assessed to involve relatively standard, smaller-scale infrastructure works with

potential short-term, non-significant environmental and social impacts that could be prevented and mitigated with

standard measures. No negative indirect or long-term impacts related to the project were anticipated.

55. Natural Habitats (OP/BP 4.04) was triggered as a precautionary measure, even though the project was not expected to involve significant conversion of natural habitats or critical natural habitats. The necessary environmental

assessment and management requirements were included in the Environmental and Social Management Framework

(ESMF) for Components 1 and 3.

56. Physical Cultural Resources (OP/BP 4.11) was triggered since the project was to be implemented in a highly

sensitive social and cultural heritage context. Several activities for Components 1 and 3 would take place near or directly within the limits of archeological sites such as Ollantaytambo, which was declared as a National Cultural Patrimony in

2002. All environmental analyses associated with Components 1 and 3 were to specifically include consideration of

physical cultural resources.

57. Safety of Dams (OP/BP 4.37) was triggered even though the project did not support the construction or

rehabilitation of dams, since works under Component 3: Disaster Risk Management and Disaster Preparedness were planned to take place in two streams or river basins that had relatively small reservoirs located in their headwaters.

58. An ESMF was prepared for Components 1 and 3, and included an Indigenous Peoples Planning Framework and a

Resettlement Policy Framework. The ESMF was prepared, consulted locally, and was publicly disclosed (both locally and

in the Infoshop).

59. Under Component 2, Environmental and Social Impact Assessments (ESIA) were carried out for each of the three

landfills, including an Environmental and Social Management Plan (ESMP) for each landfill. The ESIA for the Calca and Urubamba landfills also included an Indigenous Peoples Plan, while the ESIA for the Cusco and Calca landfills included an

Abbreviated Resettlement Plan. The draft ESIAs for Calca and Urubamba were completed, consulted and publicy disclosed, both locally and in Infoshop in July 2013.

60. In December 2018, the rating for Environmental Assessment was downgraded to Moderately Satisfactory and

remained as such until the end of the project, as some areas of the Urubamba landfill lacked a ditch system. In addition, there were some signs of erosion in specific areas where excess material was disposed. Further, a provisional dirt bridge

that cut across a creek outside the perimeter of the landfill interrupted the flow of the effluent, with the consequent risk

of flooding during heavy rains.19 This bridge was built by people who have also built some houses in a plot adjacent to the

18 See ISR Seq. No. 12, archived 14 June 2019. 19 See ISR Seq. No. 11, archived on 19 December 2018.


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landfill, which belongs to a peasant community. These issues were reported to the PIU and their resolution was pending on the loan closing date. In November 2019, the houses and the dirt bridge were still in place. COPESCO informed that

there was a judicial order to vacate the land, which was going to be executed prior to the start of the operation of the

landfill.

Procurement

61. There was an overall lack of capacity in procurement. The Independent Procurement Review conducted in March

2018, as well as the financial audit for the years 2015 and 2016, identified serious shortcomings in procurement

documentation. Complaints were submitted by bidders in several procurement processes. In several instances, the CRG

stated that the project should use national procurement regulations, which caused confusion and delays. Despite close

supervision and the provision of training for the project’s procurement staff—which changed throughout the project—

the PIU’s procurement performance did not improve. After the declarations of misprocurement in June 2018, MEF’s

decision to stop further disbursements effectively made it impossible to award further contracts for project activities. In

April 2018, the rating for procurement was downgraded from Moderately Satisfactory to Moderately Unsatisfactory. It

was further downgraded to Unsatisfactory in December 2018, and this rating was maintained until the loan closing date.

Financial Management (FM)

62. There were problems related to FM throughout, including: cumbersome procedures to allocate budget funds from the central government to the subnational entity; low levels of budget execution; delayed submissions of financial audits

and intermediate financial reports (IFRs)20; internal control deficiencies identified by the auditors; delays in contracting of audit firms; and lack of knowledge of World Bank fiduciary requirements. In addition, MEF stopped authorizing the PIU

to request disbursements due to the misprocurement. The audit report for 2015–2016 was submitted after a one-year

delay. The auditors continuously highlighted the low level of budget execution, documentation discrepancies (which

related mainly to procurement processes and procedures followed by the PIU), and internal control deficiencies. These

were reflected in the auditor’s opinion (“exception opinion”) on the project financial statements. Due to the declarations

of misprocurement, the CRG had to reimburse the World Bank US$2.45 million of ineligible expenses; a balance of US$0.9

million was due to the Bank on the loan closing date. The final financial audit report is to be submitted to the Bank by

December 15, 2019.

63. The FM rating was downgraded in September 2017 from Moderately Satisfactory to Moderately Unsatisfactory.

This rating was further downgraded to Unsatisfactory in April 2018 and was retained as Unsatisfactory until the loan

closing date.

C. BANK PERFORMANCE

Quality at Entry

64. Quality at entry was acceptable in the following areas:

20 See ISR Seq. No. 9.


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• Strategic relevance and approach. This project built on the PRRVV, which was implemented by the national government. It supported activities identified and included by the CRG in its program ‘Consolidation and

Diversification of the Tourism Product - Sacred Valley of the Incas among the Provinces of Cusco, Calca and Urubamba in the Cusco Region’. The subsequent Cusco Transport Improvement Project further highlights the

importance of regional development for the CRG and the Government of Peru.

• Technical aspects and project readiness. COPESCO prepared feasibility studies for the solid waste management and the disaster risk management components. Alternatives were assessed for the collection,

recycling, and disposal of solid waste in the three provinces. Peruvian officials visited Colombia to assess alternatives. The Bank reviewed the tourism subprojects to ensure feasibility in terms of design and

appropriateness to meet the project objectives, adequacy of the institutional arrangements for

implementation, compliance with Bank safeguards requirements, and cost effectiveness.

• Poverty, gender, and social development aspects. The Project addressed these aspects, and indicators were

included to measure the percentage of female project beneficiaries.

65. The project, however, suffered from major shortcomings at entry, which are discussed in the sections on Key

Factors During Preparation, Quality of M&E, Design efficiency, and capacity for procurement and FM.

Quality of Supervision

66. The Bank made substantial efforts to help the PIU overcome the different problems that affected the project, and

to provide technical assistance. Several team members, and the team leader were based in Lima. In all, there were more

than 20 supervision missions and technical visits to Cusco. The teams included expertise on project management,

procurement, financial management, solid waste management, environmental and social safeguards, and competitive

funds. The task team scheduled regular conference calls with the PIU to monitor project status, address PIU concerns, revise the project time frame, and propose remedial measures. It participated in meetings with staff of the Presidency of

the Council of Ministers on the approval of preliminary studies and technical profiles for disaster risk management subprojects, with the Ministry of Environment (MINAM) to advance the review of the solid waste component activities, as

well as with the provincial municipalities of Calca and Urubamba to discuss implementation of solid waste management

subprojects. The Country Director, the Operations Manager, the Regional Safeguards Advisor, and the Practice Manager

visited Cusco on several occasions to discuss the main issues with senior officials. In addition, the Bank hosted a workshop

for CRG officials to better understand the project objectives, scope, the role of the World Bank and its policies and

procedures.

67. The task team candidly reported problems in the Aide Memoires, management letters, and the Implementation

and Supervision Reports (ISR), and highlighted issues that required attention, along with agreed actions. At the time of the

Mid Term Review (MTR), an internal Quality Control meeting was organized by the Global Practice to support the task team

to identify potential solutions for the various implementation bottlenecks. Based on the MTR, the Bank proposed several

measures, such as the dropping of components and the partial cancelation of the loan, to focus on the activities that could

be completed within the project timeframe; however, agreement on these measures could not be reached with the CRG.

Prior to loan closure, the task team worked very closely with the new COPESCO management and the new CRG to ensure


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that pending activities that were crucial for sound operation and sustainability of the Urubamba landfill, as well as those included in the social safeguards instruments, would be implemented.

Justification of Overall Rating of Bank Performance

68. There were significant shortcomings in quality at entry, which could not be overcome despite the Bank’s

considerable efforts in providing implementation support. Consistent with the rating of project outcome, overall World Bank performance is rated Unsatisfactory.

D. RISK TO DEVELOPMENT OUTCOME

69. None of the project development outcomes were achieved. However, during the final months of the project, the task team worked with the PIU, the new CRG, and new COPESCO management to agree on activities

that must be completed to avoid unintended negative outcomes. These include steps to ensure the safe operation

of the Urubamba landfill, including the associated social safeguards. These activities have either been completed

or are currently being implemented with government funds (e.g., the contract for the preparation of the operations

system is being implemented; the construction of the wells is expected to be executed in early 2020). Moreover,

as stated above, the GRC and COPESCO are now committed to complete several key project subcomponents with its own resources.

V. LESSONS AND RECOMMENDATIONS

• Conduct a more stringent institutional capacity assessment prior to appraisal, that includes an integrated approach (management, technical, fiduciary, safeguards, and sustainability) to assess and manage the risks

associated with project implementation. Risk management could include a degree of flexibility with procurement thresholds to reflect the project situation and needs. Furthermore, projects in difficult contexts

should devote a higher percentage of the cost allocation to project management.

• An incremental, programmatic approach could be considered for future investment projects, when they are to be implemented for the first time by subnational governments with weak capacity. Subnational

governments and their agencies in Peru often struggle to implement complex projects with numerous components and activities, especially if they are required to go through the national investment system.

Instead, a programmatic approach may be considered, through which a less complex project with a small

number of components could be implemented, starting with the simplest activities first to show quick wins and results, while building PIU capacity. Thereafter, new components and/or activities could be added

incrementally as progress is made and project milestones are reached.

• Consider a more hands-on approach for high risk projects that are implemented by agencies with limited capacity, particularly during the first two years of project implementation. This approach could include:


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- More emphasis on early capacity building of the implementing agency and other relevant actors to help promote a better understanding of the project and buy-in, as well as to help identify and mitigate risks.

- Constant and fluid coordination between the implementing agency and the relevant agencies of the

national government, in order to find solutions to bottlenecks that occur during project implementation. - Intensive implementation support through technical visits, training activities, and the provision of hands

on technical assistance including on social and environmental aspects.

- This approach can include the provision of Procurement Hands-on Expanded Implementation Support

(HEIS)21 at the borrower’s request. HEIS allows task teams to assist Borrowers to deliver effective

procurement processes beyond the normal implementation support. - Consider contracting a firm to support the regional government during project implementation and to

build local capacity.

• Promote a greater involvement of the national government to be better informed about project implementation, ensure subnational government commitment, and overcome burdensome bureaucratic

procedures. Measures can include the following:

- Regular visits to project areas can help the national government authorities obtain a better understanding

of the project and the problems affecting it.

- To ensure cooperation and continuous commitment of subnational governments during project

implementation, consider the use of incentives (for example, budgetary allocations conditional to the

achievement of specific project-related goals), which could be implemented through interinstitutional

agreements. The different outcomes of the construction of the three landfills stress the importance of

ensuring that local and regional administrations fulfill the commitments made at the time of appraisal.

- As project subcomponents such as infrastructure works and early warning systems demonstrated,

navigating the public investment system requires obtaining several permits and authorizations, which can

result in significant delays. Technical working groups, sectorial focal points, or other institutional

arrangements involving the national government can help solve operational issues if they have a clear mandate and are comprised of relevant actors that can play an effective role in overcoming bureaucratic

obstacles, eliminating bottlenecks, and/or facilitating project implementation.

. • Social aspects should be adequately addressed through a social team within the PIU that is in place for the

duration of the project. In addition, a clear and effective communications and social outreach strategy should be developed and implemented, especially when sensitive issues like siting of landfills need to be addressed.

21Guidance on how to provide HEIS to help Borrowers achieve the development objectives and outcomes of an IPF operation. OPS5.05-GUID.175.


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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS

A. RESULTS INDICATORS A.1 PDO Indicators

Indicator Name Unit of Measure Baseline Original Target Formally Revised

Target

Actual Achieved at Completion

Percent reduction in the dissatisfaction rating of the upgraded tourism sites under the Project

Percentage 0.00 30.00 0.00 0.00

03-Nov-2014 03-Nov-2014 06-Nov-2018 15-Jun-2019

Comments (achievements against targets): The baseline survey to measure this indicator was not carried out. Although technical specifications were completed, the works at archeological sites and miradores were not executed. Therefore, changes in tourism satisfaction cannot be attributed to the project. The indicator was deleted in the January 8 2019 res

implementation completion and results report (icr) document · 2019. 12. 23. · data sheet basic...

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