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Document ofThe World Bank
Report No: 203 89-BO
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LEARNING AND INNOVATION CREDIT
IN THE AMOUNT OF SDR 3.7 MILLION
(US$4.8 MILLION EQUIVALENT)
TO THE
REPUBLIC OF BOLIVIA
FORA
HYDROCARBON SECTOR SOCIAL AND ENVIRONMENTAL MANAGEMENTCAPACITY BUILDING PROJECT
MAY 30, 2000
Finance, Private Sector, and Infrastructure DepartmentBolivia, Paraguay, Peru Country Management UnitLatin America and the Caribbean Region
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CURRENCY EQUIVALENTS(Exchange Rate Effective May 2000)
Currency Unit = Bolivianos / US$1 = 6.1 10 Bolivianos
FISCAL YEARJanuary 1 - December 31
ABBREVIATIONS AND ACRONYMS
Andina, S.A. YPFB Capitalized by YPF of Argentina and Other Argentine Private CojmpaniesCABI Capitania Indigena del Alto y Bajo Isozo (Indigenous Group of the Upper and Lower Isozo)CAF Corporaci6n Andina de Fomento (Andean Development Corporation)CAS Country Assistance StrategyCBH Bolivian Chamber of HydrocarbonsCCTI Consejo de Coordinacion Tecnico Interinstitucional (Inter-institutional Technical Coordinating
Council)CDF Comprehensive Development FrameworkChaco, S.A. YPFB Capitalized by AMOCOCIDA Canadian International Development AgencyCIDOB Confederacion Indigena del Oriente, Chaco y Amazonia Boliviana (Indigenous Confederation of the
Bolivian Eastern, Chaco and Amazonian Regions)CTR Consejo Tecnico Regional (Regional Technical Council)EIA Environmental Impact AssessmentEL Environmental LicenseESMAP Energy Sector Management Assistance ProgramFOBOMADE Foro Boliviano de Medio Ambientey Desarrollo Econ6mico (Bolivian Forum for Environment and
Economic Development)GDP Gross Domestic ProductGEF Global Environmental FacilityGoB Government of BoliviaGTZ Aid Organization of GermanyIDA International Development AssociationIDB Inter-American Development BankINRA Law of National Service of Agrarian ReformKFW German Aid AgencyLIDEMA Liga de Defensa del Medio Ambiente (Environmental Defense League)LIL Learning and Innovation LoanM&E Monitoring and EvaluationNGO Non Governmental OrganizationPIP Project hnplementation PlanPPF Project Preparation FacilityPRIP Participatory Rural Investment ProjectRCDP Rural Communities Development ProjectSDR Special Drawing RightsSERNAP Servicio Nacional de Areas Protegidas (National Service of Protected Areas)TCO Tierras Comunitarias de Origen (Community Lands of Origin)Transredes S.A. YPFB Capitalized by Enron/ShellUCSP Unidad de Coordinaci6ny Seguimiento del Proyecto (Project Coordination and Monitoring Unit)UMA Unidad de Medio-Ambiente (Environmental Management Unit of VMEH)VAIPO Vice Ministry of Indigenous Affairs and Autochthonous PeoplesVIPFE Vice Ministry of Public Investment and External FinancingVMEH Vice Ministry of Energy and HydrocarbonsVMMARNDF Vice Ministry of Environment, Natural Resources and Forestry DevelopmentVMPEPP Vice Ministry of Strategic Planning and Popular ParticipationYPFB Bolivian National Oil Company
Vice President: David de FerrantiCountry Manager/Director: Isabel Guerrero
Opportunity Pillar Leader: Andrea SilvermanSector Manager/Director: Danny Leipziger
Team Leader: Philippe Durand
BolviaHydrocarbon Sector Social and Environmental Management Capacity Building Project
CONTENTSPage
PROJECT APPRAISAL DOCUMENT ........................................ 1
A: PROJECT DEVELOPMENT OBJECTIVE ....................................... 2
1. Project development objective: (See Annex 1) ...................................... ,.,.,.,., 22. Key performance indicators: (See Annex la) .................................... 2
B: STRATEGIC CONTEXT .................................... 3
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) ................ 32. Main sector issues and Government strategy: ...................... ................................................ 33. Learning and development issues to be addressed by the project: ............................................................... 64. Learning and innovation expectations: ...................................................................... 7
C: PROJECT DE SCRIPTION SUMMARY ....................................................................... 8
1. Project components: (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown). 82. Institutional and implementation arrangements: ....................................................................... 83. Evaluation and monitoring arrangements: ...................................................................... 10
D: PROJECT RATIONALE: ...................................................................... 10
E: SUMMARY PROJECT ANALYSIS: ...................................................................... 101. Economic: ....... ............................................................... 102. Financial: ....................................................................... 103. Technical: .1............4. Institutional: ........ 11S. Social: ..................... 116.Environmental assessment: .................... 127. Participatory approach: .................... 13
F: SUSTAINABILITY AND RISKS ..................... 15
1. Sustainability: ..................... 152. Critical Risks: (reflecting assumptions in the fourth column of Annex 1) ............................................ 153. Possible Controversial Aspects: ........................................................... 16
G: MAIN CREDIT CONDITIONS ............................................................ 16
1. Conditions of Effectiveness ........................................................... 162. Other: ........................................................... 16
H: READINESS FOR IMPLEMENTATION ........................................................... 1 6
I: COMPLIANCE WITH IDA POLICIES ........................................................... 16
Annex 1: Project Design Summary ............................................................. 18Annex la: Project Design Summary ............................................................. 22Annex 2: Project Description ............................................................. 29Annex 2a: Project Implementation Summary ............................................................. 31Annex 3: Estimated Project Costs ............................................................. 32Annex 4: Project Processing Budget and Schedule ............................................................. 33Annex 5: Inter-Institutional Organizational Structure ............................................................. 34Annex 6: Procurement and Disbursement Arrangements ............................................................. 35Annex 6, Table A: Project Costs by Procurement Arrangements ............................................................. 39Annex 7: Indigenous Peoples Development Strategy ............................................................. 43Annex 8: Hydrocarbon Sector Regulatory Process for Environmental Licensing .......................................... 44Annex 9: Documents in the Project File* ............................................................. 45Annex 10: Statement of Loans and Credits ............................................................. 46Annex 11: Country at a Glance ............................................................. 48
IDA MapsMap 1. Concession Areas (IBRD30380)Map 2. Exploration Activity (IBRD 26624R)Map 3. National System of Protected Areas (IBRD 30382)Map 4. Communal Territories of Origin (IBRD 30383)Map 5. Indigenous and Autochthonous Peoples (IBRD 30381)
BoliviaHydrocarbon Sector Social and Environmental Management Capacity Building Project
PROJECT APPRAISAL DOCUMENT
Latin America and the Caribbean RegionBolivia, Paraguay, Peru Country Department
Date: May 30, 2000 Team Leader: Philippe DurandCountry Department Director: Isabel Guerrero Sector MIanager/Director: Danny LeipzigerOpportunity Pillar Leader: Andrea Silverman Sector: GI - Oil & Gas Exploration & DevelopmentProject ED: 65902 Theme(s): Envirornent, Social Development,
Capacity BuildingLending Instrument: Learning and Innovation Loan Poverty Targeted Intervention: [] Yes [x] No(Credit) - LIL
Project Financing Data
[ ] Loan [x] Credit [] Grant [] Guarantee [] Other [Specify]
For Loans/Credits/Others:Amount (SDRm): 3.7 (US4.8)Proposed terms: [ ] To be defined [ Multicurrency [j] Single currency
[x] Standard [ Fixed [] LIBOR-basedVariable
Grace period (years): 10Years to maturity: 40Commitment fee: StandardSERVICE CHARGE: 0.75%FRONT-END FEE ON IDA NoneCREDIT:Financing plan: 3 To be definedSource Local Foreign TotalGovernment .75 (US1.00) 0.00 .75 (US1.00)IDA 1.05 (US1.39) 2.57 (US3.41) 3.7 (US4.80)Other (specify) 0.00 0.00 0.00Total: 1.80 (US2.39) 2.57 (US3.41) 4.37 (US5.80)Borrower: Republic of BoliviaResponsible agency: Vice Ministry of Energy & Hydrocarbons (VMEH)
Estimated disbursements (EDA FY/SDR M):FY 2001 2002 2003 2004
Annual 1.36 (US1.80) 1.36 (US1.80) 0.75 (USO.90) 0.23 (US0.30)Cumulative 1.36 (US1.80) 2.72 (US3.60) 3.47 (US4.50) 3.70 (US4.80)
Project implementation period: July 2000-June 2003Expected effectiveness date: 08/31/00 Expected closing date: 12/31/03Implementing agency: Vice Ministry of Energy & Hydrocarbons (VMEH)
Contact person: Mario Candia, Director of Energy, VMEHAddress: Piso 12, Palacio de Comunicaciones, La Paz, Bolivia
Tel: 591-2-37-40-50 Fax: 591-8-11-38-57 E-mail: mcandia®)energia.gov.bo
2A: Project Development Objective
1. Project development objective: (see Annex 1)
The development objective of the Hydrocarbon Sector Social and Environmental Management CapacityBuilding Project is to improve the social and environmental management of the hydrocarbon sectorexploration, production and transport activities. To achieve that objective, the Project will strive toinstitutionalize systematic procedures for consultation and participation, as well as mechanisms anddispositions for increased compliance by oil companies, an evaluation and monitoring system that is bothfinancially and institutionally sustainable, and a system which allows for the flow of accessible, transparentand timely information between all stakeholders'.
Specifically, the project will: (a) strengthen the capacity of institutions and communities involved in oraffected by hydrocarbon sector activities to participate in the regulation and mitigation of social andenvironmental impacts; (b) improve stakeholder access to relevant information in a timely manner; (c)improve the capacity of the VMEH for on-site monitoring, evaluation, and reporting; (d) through fieldstudies in problem areas, increase knowledge of the extent of problems in the development andimplementation of Environmental Impact Assessments (EIAs) and increase compliance with EIAs andapplication of best practices by oil companies; (e) analyze and develop mechanisnms for financialsustainability of social and environment management; (f) review and make compatible existing regulationsand develop new regulations when necessary; and (g) develop and pilot a participatory, institutionalframework that would facilitate the processes described above.
2. Key performance indicators: (See Annex la)
Key performance indicators form part of Project Implementation Plan and are divided into two groups: (i)performance indicators, related to on-site evaluation and monitoring carried out by the UMA; and (ii)implementation indicators, which assess implementation of key project activities involving all stakeholders.Key performnance indicators are the following:
Group 1: (a) Presence of UMA in field monitoring;(b) Control of compliance with mitigation measures agreed upon;(c) On-site control of environmental impacts; and(d) Environmental quality compliance with EIA standards.
Group 2: (a) Oil company compliance with best practices;(b) Dissemination by the UMA of EIAs through a website and in the La Paz and SantaCruz offices.(c) Satisfactory participation of government representatives in training program;(d) Satisfactory participation of government representatives in stakeholder workshops;(e) Satisfactory participation of civil society representatives in training program;(f) Satisfactory participation of civil society representatives in sta]keholder workshops;(g) Effective technical contributions by CCTI and CTRs(h) Effective participation of CCTI and CTR representatives;(i) Preparation of a proposed framework to make compatible roles and regulations forimproved social and environmental management of the hydrocarbon sector;(j) Preparation of a proposed mechanism for fnancial and institutional sustainability ofhydrocarbon sector social and environmental management;(k) Number of stakeholder workshops; and(1) Completion and dissemination of participatory case studies.
Stakeholders, broadly defined, are representatives from the national, regional and local government agencies,indigenous and non-indigenous people's community organizations, oil companies, non-governmentalorganizations, prefectures and municipalities.
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The definitions and methodologies for the independent evaluation of indicators are included in Annex I aand in the Project Implementation Plan.
B: Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)
Document number: 17890 Date of latest CAS discussion: 6/16/98
The Country Assistance Strategy (CAS) proposes that the World Bank focus its effort on several themes,including: (a) increasing the quality and quantity of investments; (b) improving physical and productiveinfrastructure; (c) increasing productivity; and (d) developing an efficient and transparent state. Thesethemes are central to the sustainable growth of the country and will facilitate the successful regulation andmitigation of hydrocarbon sector social and environmental impacts, as well as stakeholder commitment toand integration into this process. A primary objective of the Project is to enhance the quality andcompliance of private investments in the hydrocarbon sector in the long term through the fostering ofsustainable institutions, regulations and processes. As a Learning and Innovation Loan (LIL), the Projectwill seek to establish and test improved mechanisms for the regulation and mitigation of social andenvironmental impacts are implemented, by evaluating and piloting new mechanisms to strengthen sectorinstitutions, harmonize regulations and develop and implement sustainable financing mechanisms.
The World Bank Group Country Assistance Strategy was developed through a long process of consultationand participation in five distinct phases starting with the National Dialogues, a World Bank Group Teamworkshop on November 11-12, 1997 in Washington followed by a joint GoB/World Bank Groupworkshop, a joint GoB/External donors workshop, GoB/Donors working groups, and ending with aConsultative Group meeting on April 28-29, 1998 in Paris. Though the Project is not mentioned as one ofCAS's key lending operations, it was discussed in the Comprehensive Development Framework (CDF) andwill contribute to the Opportunity Pillar by contributing to: (a) increasing and maintaining physicalproductive infrastructure and the capacity of the public and private sectors to manage it; and (b)strengthening the regulatory framework and promoting private participation. The Project will specificallycontribute to strengthen the key performance indicators of the CAS and CDF in terms of mainstreamingenvironmental and social safeguard compliance in infrastructure projects.
2. Main sector issues and Government strategy:
Main Sector IssuesThe 1997 reform and capitalization of the hydrocarbon sector in Bolivia, coupled with the huge Braziliannatural gas market demand has intensified private sector investments in exploration/production andconstruction of pipelines. Private oil companies are investing more than US$800 million per year, onaverage. This represents more than ten times what YPFB, the National Oil Company, invested prior to itscapitalization. There are now seventeen oil companies active in exploration and production activities with adrilling program of about nineteen exploration wells a year. The 600 Km Bolivian section of the Bolivia-Brazil natural gas pipeline was inaugurated on February 19, 1999 and gas export to Brazil began on July1, 1999. Private companies Shell and Enron are constructing a branch of the Bolivia-Brazil pipeline toCuiaba in Brazil. Hydrocarbon sector activities presently occur in five prefectures, nine indigenous peoplecomnmunity areas and nine protected areas and result in significant social and environmental impacts (Seemaps 3 and 4).
Recent experiences in the sector demonstrate that there is a strong need for improved socio-envirormentalmanagement of hydrocarbon exploration, production and transportation activities. With limited human,technical and financial resources, the government entities have provided slow or inadequate response inmany of the ongoing cases. The quality of private investments in the hydrocarbon sector, which are vital to
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the sustainable economic growth of Bolivia, can only be maintained over the long term if actions are takennow to address the following issues:
Lack of compliance with the social and environmental regulation requirements a7nd unmitigatedenvironmental liabilities - Approximately seventeen oil companies are undertaking hydrocarbonexploration and/or production activities. Certain companies have complied with social and environmentalregulations and have developed a good reputation in complying with the social and environmentalrequirements. However, for others it is difficult to verify whether they may have taken shortcuts incompliance with these regulations for economic reasons. In addition, some companies are hesitant toconsider local communities and, particularly, indigenous peoples' communities as partners in any phase oftheir activities. Meanwhile, local communities and indigenous peoples' organizations are requestingincreased participation in the regulation of hydrocarbon activities. Consequently, oil companies aredrawing criticisms from local civil society organizations and international NGOs.
While there are specific and obvious cases of environmental and social impacts as a result of non-compliance, it is difficult to assess the practices of oil companies because: (i) the government agencies arecentralized and lack adequate capacity and resources for field monitoring; (ii) there is inadequatemonitoring in the field by independent consultants; (iii) local government and civil society organizations donot have the capacity or resources to carry out substantial independent monitoring and do not have accessto sources of information or channels for logging complaints; and, (iv) the lack of definition and agreementof what makes good practices by oil companies in Bolivia.
Lack of coordination and greement between national, regional and local governIment agencies onrespective roles - The stakeholders involved in hydrocarbon activities have distinct interpretations ofrecently issued laws and the institutional framework for the implementation of regulations. As a result, avacuum exists between certain regulations and the lack of operational procedures and practices. Forinstance, several national, regional and local government agencies are involved in matters dealing withregulation and mitigation of social and enviromnental issues in the hydrocarbon sector but with unclearmandates and often times overlapping responsibilities. In addition to the VMEH, this includes the ViceMinistry of Environment, Natural Resources, and Forestry Development (VMMARNDF), the ViceMinistry of Indigenous Affairs and Autochthonous Peoples (VAIPO), the Vice Ministry of StrategicPlanning and Popular Participation (VMPEPP), the National Service of Protected Areas (SERNAP),regional prefectures, local municipalities, and a residual enviromnental entity remaining in the BolivianNational Oil Company (YPFB). Other stakeholders with vested interests include oil companies, indigenouspeoples, local affected communities, and non governmental organizations have taken on a proactive role inregulation of hydrocarbon operations. While existing laws, such as the Law of Polpular Participation andthe Law of Decentralization, provide frameworks for processes of participation and decentralization, nomechanisms for implementing them have been put into practice.
Lack of financial sustainabilitv of the social and environmental management of the hydrocarbon sector -While multilateral and regional financial agencies and the donor community are providing some assistanceto GoB2 to address social and environmental impacts and increase local capacity, this assistance hasunderestimated the social and environmental consequences of the unexpected success of the reform andcapitalization of the hydrocarbon sector and the opening up of the large Brazilian gas market to exportsfrom Bolivia. As a result, the UMA, within the VMEH, has a small staff, but lacks adequate technical andhuman resources as well as an information base to fulfill the demand for enforcing compliance withregulations, particularly in oil and gas activities in the field.
2Under IDB Credit 929 important resources are directed mainly to regional and local government agencies and focused on theforestry sector.
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Lack of expertise, experience and validitv of local consultants to support regulation and mitigationactivities -. While there is a small pool of competent local consultants managed by the VMMARNDF,they are not properly trained and certified in the independent regulation and mitigation of social andenvironmental impacts of the hydrocarbon sector. Often times, local consultants who have not beencertified in their expertise are selected, or they are not selected in an open and transparent process. Inaddition, some consultants are called upon to provide expertise in areas for which they have not beentrained.
Lack of credible consultation process by oil companies and clear mechanisms for social compensation -Since the passage of the Law of National Service of Agrarian Reform (INRA) and the PopularParticipation Law in 1996, indigenous groups have become better organized at both the national andregional levels. Indigenous groups have taken independent initiatives in protecting themselves from impactsof oil company operations. Nonetheless, they have a tendency to negotiate with oil companies on a case bycase basis lacking national regulations to guide their effort and ensure consistent rules with whichcompanies should comply. At present, neither the oil companies nor the indigenous groups have a clearidea of what is being negotiated (access, right of way, entrance, potential damages, and compensation).Without a system of checks and balances in this process, dispersed and uncoordinated compensationactivities from oil companies will have little impact on long-term social and economic development of thesecommunities. The recently drafted Law of Petroleum Operations in Community Lands of Origin, whichwas developed by jointly by the VMEH and VAIPO and is currently under review, sets forth a generalframework for the assessment of social and environmental impacts and compensation measures.
Lack of systematic processes of participation and information sharing among stakeholders - The lack ofagreement on coordination and cooperation between national, regional and local government agencies andother stakeholders complicates the development of processes of participation and coordination. Nocommunication or consultation programs have been developed for the different stakeholders in order tosystematically inform them and receive feedback on issues related to the regulation and mitigation of socialand environmental impacts resulting from hydrocarbon sector activities such as exploration, production ortransport.
Lack of socio-environmental management strategy to resolve problems - The actual process of regulationand mitigation and of awarding licenses is done without necessarily focusing on key issues such as ensuringenough resources to address critical social and environmental issues adequately, verifying EIAs informationand implementation, and assessing compliance of oil companies with best social and environmentalpractices. IDB credit 598 is funding a social and environmental study (Plan de Acci6n Ambiental delSector de Hidrocarburos) which will provide an information base, a common map and a prioritization ofsocial and environmental actions. However, the IDB credit provides for very little capacity building of theUMA and does not address the resolution of the above-mentioned issues. The environmental licensing andreporting process is an increasing source of friction between oil companies, government agencies and greenNGOs. Furthermore, no mechanisms exist to encourage improved environmental actions on behalf of theoil companies.
Governnent Strategy
The successive governments in Bolivia have passed abundant new legislation. However, they have beenmuch less successful at building the institutions and mechanisms necessary to implement the reforms. TheGoB has created more than 300 municipalities through the Ley de Participacion Popular (PopularParticipation Law) and registered more than 13,000 self-defined peasant community organizations,indigenous peoples' community organizations, and neighborhood organizations (juntas vecinales) withrights to oversee government operations and fight corruption. While many communities are exercising thispower, the process will take many years to become institutionalized and effective. With the help of IDA' s
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Rural Communities Development Project (RCDP- Credit No.2772, closed 8/99) and the ParticipatoryRural Investment Project (PRIP - Credit No. 3065), 123 municipalities all over BIolivia (and several in theareas under oil and gas exploration) are carrying out processes of participatory municipal development.More than 100 municipalities have replicated these on their own or through the help of diverse entities.
Meanwhile, the lack of institutional development at the national, regional and local levels and continuingcorruption constrain private sector development and the full implementation of a roverty reductionstrategy. The government has recognized these problems and is placing particular attention to buildinginstitutional capacity for service delivery at all levels of government within the appropriate participatoryframework.
The 1992 Environmental Law called for the creation of a competent sectoral entity for the regulation ofenvironmental impacts in the sector. The recently completed Hydrocarbon Sector Reform andCapitalization Credit (Credit No. 2762 BO), financed by IDA, supported the consolidation of theEnvironmental Management Unit (JMA) within the VMEH to prevent, regulate and mitigateenviromnental impacts resulting from hydrocarbon sector activities and supported the initial consultants tothe UMA. A strategic environmental assessment carried out on the Bolivia-Brazil gas pipeline identifiedupstream activities as the most sensitive social and enviromnental issue for the hyclrocarbon sector inBolivia. The GoB has acknowledged that improved development through cleaner operations which complywith regulations and best practices is in their best interest.
The recently restructured IDB credit (Credit No. 598) is fnancing a strategic regional environmentalimpact assessment of oil and gas operations in Bolivia, and another restructured IDB credit (Credit No.929) is strengthening the capacity of the local prefectures and municipalities to enforce environmentalregulations dealing with all sectors but focusing primarily on the forestry sector. With the increase inhydrocarbon investment following the capitalization, and subsequently in social anid environmental impacts,the VMEH identified the need to strengthen its response by proposing to strengthen the sector's capacityfor monitoring of social and environmental impacts. In the context of the Project, the central government istaking the initiative to develop and institutionalize a sustainable and improved social and environmentalmanagement framework for the regulation of hydrocarbon operations.
Multilateral and bilateral aid to Bolivia for biodiversity conservation related to impacts from upstream gasoperations is significant, including Global Environmental Facility (GEF) projects, such as theSustainability of Bolivian Protected Areas Project currently under preparation, the German Aid Program(GTZ and KFW), and the United States Agency for International Development (USAID). In addition,under a Canadian International Development Agency (CIDA)/Energy Sector Management AssistanceProgram (ESMAP) program, IDA has supported a consensus-building process betwveen nationalgovernment agencies, oil companies, indigenous peoples' community organization representatives and non-governmental organizations which has led to an agreement on specific regulations of companies oiloperations in indigenous people community areas. This regulation, which provides for a process ofconsultation and participation with the indigenous people communities in hydrocarbon sector projectdevelopment and implementation, is presently under review.
3. Learning and development issues to be addressed by the project:
The GoB is characterized by a centralized decision-making culture. Even following the recently issuedDecentralization Law and the Popular Participation Law, national, regional and local governmentinstitutions remain weak. The decentralization process has distributed competencies among many actors,but the rules of coordination and communication between them have not been well-developed orestablished. Although advances have been made in social and rural programs, this lack of coordination and
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communication affects the integration of key stakeholders in decision-making, particularly on matters ofsocial and environmental regulation and mitigation.
A central issue to be addressed and from which significant lessons will be derived is related to the complexnature of institutional competencies as interpreted from existing laws. While the Ley Organica deMunicipalidades (Organic Law of Municipalities) gives municipal governments the competence for thepreservation of the environment, control of contamination, and maintenance of ecological equilibrium, theLey de Medio Ambiente (Environmental Law) establishes (Art. 74) on the other hand that the Ministry ofEnergy and Hydrocarbons, in coordination with the Vice Ministry of Environment, Natural Resources andForestry Development elaborates the specific, pertinent norms and according to Art. 28, they both remainin charge of the control, monitoring, and regulation of environmental impacts, mitigation and protectionplans. As a result there is no concrete mechanism that puts order to competencies of different levels ofgovernment and allows a working relationship between all stakeholders. In turn, there are no clear and wellestablished mechanisms and standards for participation.
The Project will apply a process of learning and innovation through pilot studies and analysis, informationsharing, inter-institutional coordination, and training to facilitate the consultation and development ofmechanisms for the institutionalization of stakeholder capacity to prevent, regulate and mitigate social andenvironmental impacts of the hydrocarbon sector. In addition, the Project tests an inter-institutionalstructure that allows for the participation of relevant stakeholders from the government and civil society atthe national and local levels to ensure representative stakeholder participation in project implementationactivities. As this process will be applied for the first time in Bolivia, it will require flexibility andadjustment as the Project progresses.
4. Learning and innovation expectations:
[ I Economic [x] Financial [x] Technical [x] Institutional[x] Social [x] Environmental [x] Participation [x] Other
(a) Financial expectations are to develop and implement financial mechanisms to ensure that institutionsdealing with regulation and mitigation of social environmental impacts would be sustainable and effective;
(b) Technical expectations are to: (i) develop methodologies and mechanisms for improved environmentalmanagement of the hydrocarbon sector; (ii) design systematic mechanisms for social compensation; (iii)promote and maintain international social and environmental best practices in hydrocarbon sector activities;and (iv) develop an information system that would allow a two-way flow of information betweenstakeholders and facilitate the consultation and collaboration processes;
(c) Institutional expectations are: (i) to develop a responsive participatory evaluation and monitoringsystem that would involve multiple institutional actors at the national and regional levels; (ii) to developand strengthen capacities of government institutions, local consultants and other stakeholders and toinstitutionalize the consultation and participation process; and, (iii) to enhance cross-sectoral inter-institutional coordination at central and regional levels. As a result of the Project operations, it may benecessary to review and adjust the present institutional arrangements, perhaps to rely more on localstakeholders for the regulation and mitigation work, thus minimizing the central State role to that ofplanning regulation and mitigation operations and ensuring compliance with norms and standards;
(d) Participation expectations are: (i) to develop and strengthen mechanisms for informed stakeholderparticipation in the regulation and mitigation process; (ii) to establish systematic consultation processesbetween oil companies and locally affected communities, including indigenous populations; (iii) to fosterthe processes of participatory municipal planning through appropriate studies, workshops and the CTRs;
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(e) Social and environmental expectations are the Project will provide the lessons and solutions to improvethe social and environmental management of hydrocarbon sector activities, resulting in the minimization offurther social conflicts and environmental impacts.
(f) Since this Project would be the first experience in the sector within the region, the lessons learned wouldhelp decide whether it could be replicated in other sectors and other countries of the region. Specifically,the Project could provide the basis for developing specific procedures for monitoring social andenvironmental impacts in other sectors such as mining, as well as a comprehensive framework forparticipatory monitoring of social and environmental impacts.
C: Project Description Summary
1. Project components: (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown)
; 00 0 00 00 EIndie IDA- % of IDA-Component Category Costs %wof 1inancing financing
(Iss millon) Total (US$ million)
Institutional Capacity Building 2.60 45 2.13 82Strengthening**Logistics and Physical 0.32 6 0.28 88CommnunicationInformation Base and Capacity Building 1.68 29 1.48 88Studies**Coordination and Project Management 1.20 20 0.91 76Monitoring**Total Project Costs 5.80 100 4.80 83
* Includes taxes** Indicative costs include physical and price contingencies of 10%.
2. Institutional and implementation arrangements:
Implementation Period: The Project will be implemented over a period of 36 months, beginning in July2000.
Implementation Arrangements: The Unidad de MedioAmbiente (Enviromnental Management Unit -UMA) of the Vice Ministerio de Energia e Hidrocarburos (Vice Ministry of Energy and Hydrocarbons -VMEH) as the responsible entity for monitoring and evaluation of social and environmental impacts in thehydrocarbon sector will irnplement the corresponding project sub-component within InstitutionalStrengthening and will provide technical guidance for the implementation of remaining components. Asatellite office of the UMA - Red de Monitoreo - will be established in Santa Cruz de la Sierra withenvironmental specialists to ensure improved regulation and mitigation on the ground.
A small Unidad de Coordinacion y Seguimiento del Proyecto (Project Coordination and Monitoring Unit- UCSP) will be established within the VMEH to provide administrative support for the project andconduct procurement and disbursement operations. The UCSP will operate with independent andtransparent management and financial systems and procurement and disbursement procedures. The UCSPwill be responsible for organizing consultation and training events, in coordination with the CCTI andCTRs, and it will support the work of the CCTI and act as a Secretariat to the CCICI. It will be headed bya Director and staffed with an accountant and procurement and administrative staff, to IDA's satisfaction.
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Prior to negotiations, the contents of the final Operations Manual, the Project Implementation Plan,including the detailed budget and draft Terms of Reference for project activities were discussed and agreedupon with IDA.
The project will establish a Consejo de Coordinaci6n Tecnico Interinstitutional (Inter-InstitutionalTechnical Coordinating Council - CCTI) at the national level with representatives from the Viceministry ofEnvironment, Natural Resources, and Forestry Development (VMMARNDF), Viceministry of IndigenousAffairs and Autochtonous Peoples (VAIPO), Viceministry of Strategic Planning and Popular Participation(VMPEPP), the Viceministry of Energy and Hydrocarbons (VMEH), the National Service of ProtectedAreas (SERNAP), and representation from the Confederaci6n Indigena del Oriente, Chaco y AmazoniaBoliviana (Indigenous Confederation of the Bolivian Orient, Chaco and Amazon - CIDOB), two non-governmental organizations (NGO), an academic institution, and the Cdmara Boliviana de Hidrocarburos(Bolivian Chamber of Hydrocarbons - CBH). The objective of the CCTI is to provide a space fortechnical analysis and interchange with regard to proposed training programs, information systems,procedures for consultation and participation and the scope of proposed studies, consultations, andworkshops. The CCTI will play a key role in analyzing the findings of the studies to develop and proposemodified regulations and an improved framework for social and environmental management. From time totime other actors, such as the Superintendencia de Hidrocarburos (Hydrocarbon Superintendence)3 orYPFB, municipalities and others will be called upon by the CCTI to participate in relevant technicaldiscussions.
In addition to the CCTI, Consejos Tecnicos Regionales (Regional Technical Councils - CTR) will beestablished in the four regions with hydrocarbon production - Santa Cruz, Chuquisaca, Cochabamba, andTarija - and will serve as regional entities of participation and consultation during project implementation.A diagnostic study and consultation will be carried out in collaboration with the CCTI within the firstquarter of the project to assess whether these regions are adequate and to determine participants in theCTRs. The CCTI will facilitate and ensure the effective participation of stakeholders in CTRs as well intraining and workshops. Representation on the CTRs may include prefectures, municipalities, indigenousand non-indigenous peoples' communities and other civil society institutions as identified by the CCTIthrough local consultation based on the above-mentioned diagnostic. Specifically, the CTRs will help todevelop mechanisms for local stakeholder feedback, participate in the technical review of proposed studies,information systems, consultation mechanisms and proposed training programs. CTRs will also beresponsible for facilitating systematic communication and consultation with grassroots organizations on thesame. During negotiations, representatives from the VMEH established the detailed steps to be taken priorto effectiveness for the establishment of the CCTI and CTRs.
Financial management. The Financial Management Specialist for Bolivia conducted a review in the UCSPof the accounting, controls over disbursements and resources, planning and budgeting as well as the levelof administrative staff. It was determined that the UCSP has in place accounting and internal controlsystems that accord with such accounting standards or agreed format and that reliably record and reportall assets and liabilities and financial transactions of the project including those transactions involving theuse of IDA funds; and provide sufficient financial information for managing and monitoring projectactivities. It was agreed that by June 30, 2000 the UCSP will complete establishment of its financialmanagement system in order to enable it to prepare quarterly Project Management Reports (PMRs).
Financial Audit Arrangements. An independent external auditing firm, satisfactory to IDA, will be hiredby credit effectiveness to carry out annual audits of the project. The Guidelines and Terms of Referencefor Audits of Projects with Financing by the World Bank in the Latin America and Caribbean Region
3The Hydrocarbon Superintendence has responsibility for regulation of hydrocarbon activities, but not specifically social andenvironmental regulations.
10
published May 1999 will be used by external auditors, in accordance with existing IDA procedures. Auditreports would be presented to IDA no later than six months after the closing date of the previous fiscalyear. The auditors will conduct an assessment of UCSP internal controls not later than six months aftercredit effectiveness.
3. Evaluation and monitoring arrangements:
Monitoring: The principal responsibility for monitoring and reporting progress against quantitativeindicators as agreed with IDA in the implementation plan under the Project will rest with the UCSP in LaPaz. Standardized monitoring forms, which include objectively verifiable indicators of projectperformance, are included in the project implementation plan to facilitate monitoring and situation analysis.In addition, project implementation reports will include copies of the minutes of CCTI and CTR meetingsand reports on the status of agreed actions from those meetings.
Evaluation: Three external evaluations will be contracted to independent consultants on an annual basis.The first one will include the evaluation of the performance indicators as well as project performance forthe first year of implementation. The second one will evaluate the performance benchmarks for the secondyear of implementation. The third evaluation will be carried out prior to project closing and will evaluateperformance indicators and overall project performance as an input to the project completion report. Theseconsultants will work with the CCTI, CTR and other stakeholders through participatory methods to carryout their evaluations. The evaluations, with the exception of the year two evaluation, will focus on: (a) theeffectiveness of the arrangements and mechanisms to foster participatory development among stakeholders,(b) the achievements of tasks fnanced by the Project; (c) the effectiveness of the administrativearrangements and mechanism, including contracting, procurement, disbursement, accounting, and auditing,and (d) the efficiency and sustainability of the financial and institutional arrangements developed forparticipatory regulation and mitigation. In addition, the independent reviewer will evaluate the impactindicators of social and environmental management and compliance, as detailed in the project operationsmanual. The results of the evaluation will be shared and discussed with the CCTI and the CTRs, and willbe used to re-direct project implementation, if necessary, and guide the preparation of follow-upinterventions.
D: Project Rationale:(This section is not to be completed in a LIL PAD)
E: Summary Project Analysis:
1. Economic:
The project has not been subjected to a conventional economic rate of return analysis since its immediateobjectives and outputs are primarily institutional. Nonetheless, the project will seekc to stimulate the use ofimproved technologies and practices by oil companies which will prove economically beneficial in the long-term and reduce the costs of mitigating damages resulting from adverse social and environmental impacts.
2. Financial: NPV=US$ Million; FRR= %
The LIL is a pilot project and full cost recovery is not a project objective. However, fiscal sustainability isan important consideration in the design of this project. Although the VMEH has committed itself toimproving the institutional framework for social and environmental management of the hydrocarbon sector,at present, the current level of public expenditure on enviromnent in general is low. As part of the studiesunder Component 3, the executing agency on conjunction with the CCTI and CTRs will assess the costs forthe institutionalization of improved social and environmental management and develop mechanisms forlong-term financial sustainability.
11
3. Technical:
Presently, there is little systematic knowledge regarding the social and environmental impacts resultingfrom sector activities, international best practices and systematic forms of social compensation andmitigation. The Project will support the development of a good practice manual to be used as a reference inassessing practices of oil companies in social and environmental aspects. Government agencies lack theresources and therefore the capacity to adequately regulate and mitigate impacts, while regional and localstakeholders are not provided with the technical capacity and regulatory mechanisms for field-basedmonitoring. A principal activity of the LIL is the development of training programs through consultationwith local communities, indigenous groups and civil society institutions to build capacity in the regulationand mitigation of social and environmental impacts of hydrocarbon sector activities.
4. Institutional:
A central issue to the design of the LIL is the lack of clarity and roles for effective regulation andmitigation of social and environmental impacts of hydrocarbon sector activities. Government agencies atthe central and regional levels have competing and overlapping responsibilities, while municipalities andlocal communities have presence in the field but lack the capacity and legal claim to regulate. Overall, theinstitutional framework for social and environmental management of the hydrocarbon sector is inadequateand lacks the financial and human resources to be sustainable. To address these issues, consultants will becontracted during implementation to help analyze the issues of compatibility and enforcement of laws,regulations, procedures and roles, and propose an improved institutional framework.
5. Social:
The key social issues to be addressed by the project relate to the social imnpacts of hydrocarbon sectoractivities on local indigenous and non-indigenous communities and the lack of clarity with regard toparticipation and consultation mechanisms. At present, hydrocarbon sector activities presently occur innine indigenous peoples' community areas and nine protected areas, yet no clear mechanisms exist tosystematically mitigate and compensate for social impacts. Since the passage of the Law of NationalService of Agrarian Reform (INRA) and the Popular Participation Law in 1996, indigenous peoples'community organizations in particular have become better organized at both the national and regionallevels, but they have tended to negotiate with oil companies on a case by case basis. A lack of a regulatoryframework exists to guide their effort and ensure consistent rules with which companies should comply.
More specifically, the project seeks to address the following social issues: (1) the lack of agreement amongstakeholders on proposed mitigation measures; (2) the lack of institutional regulations to clearly define theparticipation of the various stakeholders; (3) the need for the development of a sectoral participatory actionplan which incorporates all stakeholders; (4) the lack of methodologies and mechanisms for theidentification of potential social impacts to determine their effect/magnitude/severity on affectedpopulations; and (5) the subsequent need for a framework for compensation of affected groups, bothindigenous and non-indigenous.
Under a previous CIDA/ESMAP funded program, a process of consultation and collaboration between oilcompanies and an indigenous peoples' umbrella organization was successfully applied in reaching aconsensus over regulations of oil companies' operations in indigenous peoples' community areas. A newCIDA/ESMAP funded program initiated on April 1, 1999 is focusing some small resources on training ofindigenous people representatives from concession areas on hydrocarbon sector activities and regulations ofoil companies operations in indigenous people community areas. A first meeting was held in Santa Cruz onJuly 20-24, 1999 in which the indigenous people representatives identified the elements of the trainingprogram, indicators and criteria for selection of trainees. A second meeting was held on October 15, 1999to review the proposed training program. The Project intends to draw valuable lessons from these
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experiences in order to further assess training and communication needs and to comply with the regulationfor petroleum operations in communal lands of origin.
In addition, IDA credits (Rural Communities Development Project, Participatory Rural Investment Project,National Land Administration Project, Brazil Gas Sector Development Project) are currently providingresources for land titling and indigenous people development plans for many community areas fallingwithin the exploration and production acreage of oil companies, and thus will facilitate integration ofindigenous people communities in the consultation and collaboration process.
6.Environmental assessment: Environmental Category [ ] A [ ] B [x] C
In Bolivia there exists three groups of social and environmental liabilities or obligations in upstreamhydrocarbon operations, including within protected areas: (i) those inherited as liabilities by the capitalizedcompanies from YPFB as a result of the capitalization process and which the companies are committed todeal with; (ii) those which the capitalized companies have identified since the initiation of their operationsin the field and for which the State may be liable for; and (iii) those obligations resulting from the normalnew operations of all the oil companies. The second group of environmental liabilities is still underdiscussion between the government and the capitalized companies. Agreement needs to be reached betweenthe parties on the quality of the environmental audit carried out by the capitalized companies, priority ofmitigation actions on the liabilities identified in different areas and the sources and financing mechanism toimplement mitigation plans.
Multilateral and bilateral aid to Bolivia for biodiversity conservation related to impact from upstream gasoperations is significant, including GEF, GTZ, KFW, and USAID projects. Hovwever, the need to addressthe special environmental and social risks posed by oil and gas operations within protected areas is asimportant as for other areas.
A strategic environmental assessment carried out on the gas pipeline identified upstream activities as themost sensitive social and environmental issue for the hydrocarbon sector in Bolivia.. While numerousenvironmental actions are underway in the sector, significant gaps persist. Social and environmental actionplans and an Indigenous Peoples Development Plan along the Bolivia-Brazil natural gas pipeline route arebeing implemented as requirements for a Bank-IDB-CAF fnanced Bolivia-Brazil gas pipeline (Gas SectorDevelopment Project World Bank Loan in Brazil). In addition, a recently restructu;red IDB credit (CreditNo. 598) is financing a strategic regional environmental impact assessment of oil and gas operations inBolivia, and another restructured IDB credit (Credit No. 929) is strengthening the capacity of the localprefectures and municipalities to enforce environmental regulations dealing with all sectors, but focusingprimarily on the forestry sector.
Using a participatory approach, this project will help to strengthen the capacity of stakeholders to carry outregulation and mitigation of social and environmental impacts of hydrocarbon activities, whileinstitutionalizing systematic processes of consultation and participation. Project-supported clarification ofthe "rules of the game" for environmental and social assessment, mitigation, and compensationrequirements seek to provide a disincentive for companies with poor social and environmental practices tocontinue investing. In addition, it is expected that these improved "rules of the game" will, in the long run,reduce adverse environmental and related social impacts to a far greater extent by promoting increasedcompliance by oil companies with regulations and good practices. As no baseline data on environmentalimpacts is available for the sector, the Environmental Analysis for this project, to be carried out duringproject implementation, will examine the extent to which the project is producing improved environmentaland social results on the ground.
Numerous local groups and green NGOs have been consulted as part of project identification andpreparation. The Environmental Dialogues, a conference between the World Bank and stakeholders(national, regional and local government agencies, oil companies, indigenous people organizations
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representatives and non governmental organizations), was organized in Santa Cruz on April 21, 1999 tospecifically discuss hydrocarbon sector issues. The identification and preparation missions also metseparately with the National Chamber of Hydrocarbons which represents all oil companies working inBolivia, the Confederaci6n Indigena del Oriente, Chaco y Amazonia Boliviana (Indigenous Confederationof the Bolivian Eastern, Chaco and Amazon Regions - CIDOB), Capitania Indigena del Alto y Bajo Isozo(Indigenous Group representing the Upper and Lower Isozo - CABI), the Liga de Defensa del MedioAmbiente (Environmental Defense League - LIDEMA), the Foro Boliviano de Medio Ambiente yDesarrollo Econ6mico (Bolivian Forum for the Enviromnent and Economic Development -FOBOMADE), and Tr6pico. During the preparation mission, project team members also met withconsultants (Fundaci6n MEDMIN, Servicios Ambientales, Paraba Azul S.RL., Monitoreo S.RL.), theServicio Nacional de Areas Protegidas (National Service for Protected Areas - SERNAP), andrepresentatives from the municipal, prefecture and national level governments who have experience inevaluation and monitoring of hydrocarbon operations. Additionally, three stakeholder workshops were heldthroughout project preparation with over 40 different participants, including the above mentioned groups aswell as participants from the Superintendencia Forestal, GeoPlus, Conservation International - Bolivia,the World Wildlife Fund - Bolivia, the United States Agency for International Development (USAID) andProyecto KAA-IYA, among others. Project issues were also discussed during a meeting between local andinternational environmental NGOs and the World Bank's Vice President for Latin America and theCaribbean.
7. Participatory approach:
The Law of Administrative Decentralization decentralizes most of the national government operations andservices (those not devolved to the municipalities in the Law of Popular Participation) to the regionalprefectures. While the prefectures are arms of the national govermment, the municipalities are locallyautonomous. The primary beneficiaries and affected groups consist of the indigenous and non-indigenouspeoples' communities located in areas of oil operations, non governmental organizations and national,regional and local governments and agencies, as well as local consultants. They are involved as follows:
(a) Many indigenous and non-indigenous peoples' communities have been impacted in the past byhydrocarbon activities and as a result have organized themselves for better protection. They have beensuccessful in the past in influencing the operational regulations of some oil companies, but in isolatedcases. Indigenous and non-indigenous groups are important players by seeking active participation andintegration in: (i) the decision-making process of regulation and mitigation; (ii) the development ofindigenous people and community development plans; and, (iii) in ways to access more of the hydrocarbonsector rent. Locally affected comnmunities lack the capacity to promote within their organization thetraining of their members to become protagonists in the social and environmental management process;
(b) Both local and national level civil society organizations as well as international non governmentalorganizations play a major role by bringing attention to social and environmental impacts in thehydrocarbon sector and the perceived weaknesses of governmental and international financing agencies.National and local level organizations have been active and productive participants in the preparation of theproject. These stakeholders have proven to be better partners when consulted in a systematic manner andprovided training opportunities in the regulation and mitigation of social and environmental impacts ofhydrocarbon sector operations;
(c) There are government agencies which represent the policy making (VMEH, VMMARNDF, VAIPO,VMPEPP) and others with regulatory functions (UMA of the VMEH, Directorates of VMMARNDF andVAIPO) regarding the regulation of social and environmental impacts, and the licensing of companies inthe hydrocarbon sector. The VMMARNDF, in the case of the enviromnent, initiates and issues legislationand regulations and controls and monitors the application of the regulations. In the case of hydrocarbon
14
activities, VMEH is the responsible party at the central level for monitoring and regulating the upstreamimpacts. These agencies have in the past initiated consultation processes, but have limited capacity tointervene in the field and much less capacity to organize wide ranging consultation processes with allstakeholders, and as a result have influenced social and environmental matters in the hydrocarbon sectorhaphazardly and without full participation of stakeholders;
(d) Local consultants are mainly independent consultants, some of whom are speciialized in hydrocarbonenvironmental projects. They have not had a proactive role in the past and have tended to represent locallymore experienced foreign firms. Their role however could become important in iniluencing the consultationand cooperation with stakeholders as their capacity is improved through training in areas of expertise wherethey appear to be lacking.
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F: Sustainability and Risks
1. Sustainability:
(This section is not to be completed in a LIL PAD)
2. Critical Risks: (reflecting assumptions in the fourth column of Annex 1)
Risk Risk Rating Risk Minimization Measure
From Outputs to ObjectiveCourse corrections of Project may prove M Conduct beneficiary/stakeholderchallenging during project implementation; assessment & midterm review;
Government/stakeholders relationship do not S Establish CCTI to ensure transparency,maintain a spirit of dialogue and partnership; collaboration and participation between
all stakeholders.Government agencies do not collaborate on S Establish institutional framework whichcompatibilization of regulations and ensures the collaboration of therespective roles; competent government agencies and
incorporate conflict resolution measures.(CCTI)
Agreement on sustainability mechanisms not S Utilize stakeholder workshops forachieved between stakeholders; consensus building. Maintain ongoing
systematic consultation andparticipation throughout project.
From Components to OutputsStakeholders not willing to enter into M Ensure inclusion and participationconsultation and collaboration with through effective two way flow ofGovernment agencies; information, CCTI and CTRs;
Indigenous peoples community M (l)Maintain evenly distributed flow ofrepresentatives decision making process not information; (2)Training to provide forworking; conflict resolution and consensus
building; (3)Establish clear rules;
High turnover rate of trained civil servants S Sustainable fmancing mechanismand other stakeholders; established. High technical standards
maintained.
Results of the process are not S Maintain participation of policy makinginstitutionalized; entities in CCTI to ensure ownership in
proposed regulations and policychanges;
The GoB does not support a sustainable S Maintain open dialogue betweenfinancing mechanism for continued social and stakeholders, VMEH and VIPFE.environmental management of hydrocarbonsector.Overall Risk Rating SRisk Rating - H (High Risk), S (Substantial Risk), M (Moderate Risk), N (Negligible or Low Risk)
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3. Possible Controversial Aspects:
None are expected.
G: Main Credit Conditions
1. Conditions of Effectiveness
(i) the UCSP's financial management system acceptable to IDA is fully established;(ii) the Inter-institutional Technical Coordination Committee is fully operational; and,(iii) the independent auditors have been appointed.
2. Other
(i) UCSP and UMA are staffed by individuals with experience and qualifications and under termsof reference satisfactory to IDA;
(ii) independent external reviews are conducted every year;(iii) audit reports are produced not later than June 30 each year;(iv) a review of UCSP internal controls is carried out not later than 6 months after credit
effectiveness (as per DCA Section 4.03); and,(v) Project Management Reports to be produced starting not later than December 31, 2000 (as per
DCA Section 4.02).
H: Readiness for Implementation[ ] 1. a) The engineering documents for the first year's activities are complete and ready for the start
of project implementation.
[X] 1. b) Not applicable.
[X] 2. The procurement documents for the first six months' activities are complete and ready for thestart of project implementation; and a framework has been established for agreement on standard biddingdocuments that will be used for ongoing procurement throughout the life of the LIL.[XI 3. The LIL's Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.[ ] 4. The following items are lacking and are discussed under credit conditions.
I: Compliance with IDA Policies[x] 1. This project complies with all applicable IDA policies.[ I 2. The following exceptions to IDA policies are recommended for approval. The project complieswith all other applicable IDA policies.
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C~~Team Leader: ilippe Durand
, 4~~~~Sector Mansr/Director: Dann ziger
Opportunity Pillar Leader: Andrea Silverman
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Annex 1: Project Design Summary
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
Hierarcby of Key Performance Monitoring and Critical AssumptionsObjective : Indicators Evaluation __ _ _ _
Sector-related CAS Sector Indicators: Sector / Country (from Goal to WorldGoal: Reports: Bank Mission)Improve the framework for Mainstreamed 1. GoB to effectivelythe regulation and environmental and social implement structuralmitigation of social and safeguard measures in reforms and does notenvironmental impacts of hydrocarbon sector; postpone the necessaryhydrocarbon activities. fiscal year adjustment;
2. Achieving social andenvilronmental regulationenforcement withstakeholder participationresults in improved qualityof investments;
Follow-onDevelopmentObjective:The Project success willfacilitate the developmentof an efficient andtransparent role by the Statein the hydrocarbon sector.
Project Development Outcome / Impact Project Reports: (from Objective toObjective: Indicators: Goal)To improve the social and 1. An increasing number of 1. Project Coordination and 1. Operationalization ofenvironmental management oil companies adequately Monitoring Unit quarterly sector strategy based onof the hydrocarbon sector comply with regulations and reports; decentralization andactivities, such as follow internationally 2. Annual external participation;exploration, production and recognized environmental consultants evaluations 2. Broad support within thetransport. best practices; reports; government and civil
2. Sustainable financing 3. CCTI and CTRs periodic society for the process ofmechanism established and reports/beneficiary consuiltation andcapacity building achieved; assessments. collaboration with3. Stakeholders agree upon stakeholders;and test adapted roles of 3. Unanticipated exogenousinvolved institutions, factors affecting theprocedures for consultation hydrocarbon sector do notand system for information arise which altersharing; stakeholders' support of the4. Assessment regarding the consultation andreplicability of project collaboration process or canactivities in other countries be successfully mitigated;in the region carried out; 4. The regulations which oil
companies are expected tofollowv are consistent withinternationally recognizedgood environmental andsocial practices.
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Output from each Output Indicators: Project Reports: (from Outputs tocomponent: Objective)1. InstitutionalStrengthening1.1 Technical assistance in 1.1. I Regulation and 1. UCSP implementation 1. Course correctionsregulation and mitigation of mitigation requirements are progress reports (quarterly); undertaken during projectsocial and environmental developed and fully external independent implementation, whenimpacts; implemented by December reviewer evaluation reports required.
2001; (annual); CCTI and CTR1.1.2 Oil companies reports; stakeholder 2. Government/civil societyincreased quality workshops; IDA supervision relationship maintain acompliance with EIA missions. spirit of dialogue andstandards by Dec. 2002; partnership.
1.2.Training of governmentagency staflf civil society 1.2. VMEH, CCTL CTR 3. Government agenciesinstitutions, locally affected and other stakeholders collaborate on and supportcommunities and local reach agreement on the compatibilization ofconsultants in social and content and methodology of regulations and respectiveenvironmental regulation the training program by roles.and mitigation areas; December 2000.
4. Agreement reached1.3. Inter-institutional 1.3.1. CCTI and CTR meet between stakeholders onmeetings and coordination; with adequate sustainability mechanism.
representation on a regular1.4 Stakeholder workshops basis and provideare carried out with collaborative technicalgovernmental agency staff, feedback on TORs, studycivil society institutions and results and findings,local consultants to define training, and regulation andcontent and methodology of mitigation activities, etc.training, studies, includingtheir results, and the like. 1.4 Stakeholder feedback is
incorporated into training,studies and the like.
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Output from each Output Indicators: Project Reports: (from Outputs to
component: Objective)2.Logistics and 2. Portable laboratory, 2. UCSP implementationCommunication computing, communication progress reports (quarterly);Acquisition of necessary equipment and transport external independentequipment to establish logistics as well as reviewer evaluation reportssatellite UtA office in information system in place (annual); CCTI and CTRSanta Cruz (Vehicles, within 6 months of project reports; IDA supervisionPortable laboratory systems, effectiveness, missions;Computers, etc.) andimplementation ofinformation system.
3.Information Baseline 3.1 CCTI, CTRs and other 3. Implementation progressand Studies stakeholders provide reports (quarterly); externalProposed studies carried out recommendations on terms independent reviewer(See next section for of reference and results of evaluation reports (annual),details). studies and they are CCTI and CTR reports; IDA
adequately incorporated and supervision missions.agreed upon;3.2 Key results of studiesare disseminated anddiscussed amongstakeholders;3.3 3 participatory casestudies are carried out bythe end of 2001.
4.Administration, 4. UCSP, IDA staff and 4. UCSP implementationCoordination and independent annual progress reports (quarterly);Monitoring reviewers submit timely financial audit reports;
monitoring reports on independent reviewerquality of monitoring of evaluation reports (annual),
Effective implementation, Project activities and quality IDA supervision missions.coordination and monitoring of financial management ofof the administrative the Project.aspects of the Projectimplementation.
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Project Components/ Inputs: (budget for each Project Reports: (from Components toSub-components: component)4 Outputs)1.InstitutionalStrengthening: 1. US$ 2.6 million1.1 Technical assistance in 1.1 (US$1.3 million) Progress Reports Stakeholders willing toregulation, monitoring and (quarterly); enter into consultation andmitigation of social and collaboration with theenvironmental impacts; Disbursement reports government agencies.1.2.Training of government 1.2 (US$ 0.8 million) (quarterly).agency staff, civil society Indigenous and non-institutions and local indigenous peopleconsultants; communities' decision-1.3. Inter-institutional 1.3 (US$0.3 million) making process working.meetings;1.4 Stakeholder workshops. 1.4 (US$ 0.2 million) Low turnover rate of trained
2.Logistics and 2. US$ 0.3 million stakeholders.CommunicationsteodrsAcquisition of necessaryequipment to establish Results of the process aresatellite UMA office and institutionalized.disseminate information.
The GOB does support a3.Information Baseline 3. US$ 1.7 million sustainable financing
and Studies mechanism for continued3.1 Sstainable financi 3.1 (US$ 0.14 million) social and environmentalmechanisms; 3.2 (US$0.12 million) management of hydrocarbon3.2 Information,setrConsultation and 3.3 (US$ 0.I million)Participation Strategy;3.3 Compatibilization studyof regulations, procedures 3.4 -(US$ 0.3 million)roles and fuunctions;3.4 Social andenvironmental impacts, 3.5 (US$ 0.17 million)strategies and mechanisms;3.5 Improved social andenvironmental practices of 3.6 (US$ 0.46 million)oil companies; 37(S .2mlin3.6 Specific case studies; 3.7 (US$ 0.12 million)3.7 Contingency Plan 3.8 (US$ 0.13 million)Assessment; 38(S .3mlin
collection; 3.9 (US$ 0.15 million)3.9 Other studies.
4.Administration and 4. US$ 1.2 millionMonitoringEffective implementation,coordination and monitoringof the administrativeaspects of the Projectimplementation. _
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Annex la: Project Design Summary
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
Performance Indicators5
Key performance indicators forn part of Project Implementation Plan (PIP) and are divided intotwo groups: (i) performance indicators, related to on-site evaluation and monitoring carried out by theUMA; and (ii) implementation indicators, which assess implementation of key project activities involvingall stakeholders.
Group 1: Environmental Monitoring Performance IndicatorsPerformance Indicators PERFORMANCE ]BENCHMARKS
Baseline 2001 2002 2003
1. UMA Presence in the Field
I a. Percentage of Category I projects 20% 100% 100% 100%visitedlb. Percentage of Category II projects 5% 80% 100% 100%visited .
I c. Percentage of Category III projects N/A 80% 1 00% 100%visited
Id. Complaints attended N/A 100% 100% 100%
le. Projects visited prior to granting of N/A 30% 60% 100%Environmental License _ l _2. Control of compliance by UMA
2a. Percentage of mitigation measures N/A - l 95%implemented _
2b. Percentage of mitigation measures N/A _ - 95%observed that require corrections ormodifications
2c. Percentage of mitigation measure N/A * * 95%corrected or modified. _
2d. Percentage of additional mitigation N/A * * 95%measures required2e. Percentage of additional mitigation N/A 95%measures applied2f. Percentage of additional mitigation N/A * * 95%measures applied by oil companies3. On-site control of environmental N/A * * *impacts4. Environmental Quality
4a. Environmental quality compliance with N/A 30% 60%Xo 100%EIA standards .*To be defined by baseline study to be completed by December 2000. The baseline study and the supervision ofproject implementation will allow to adjust and simplify project performance indicators, if necessary.
All performance indicators will be subject to annual external review by independent reviewer.
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Complementary Provisions
1. Source and methodology: The source of all indicators is the following:
Indicator 1 is verified by UMA records and on-site evaluation and monitoring visits based on informationprovided through a standardized detailed monitoring form to be finalized by December 2000 and
included as an annex to the PIP.Indicator 2 is verified through on-site regulation and control visits to a sample of projects to determine
compliance with environmental standards established in the EIA or Enviromnental License (EL),
specifically the agreed upon mitigation measures.Indicator 3 is the control by UMA of impacts not identified in the EIA or EL.Indicator 4 is the environmental quality compliance with established EIA standards.
All environmental monitoring performance indicators are based on the results of laboratory results and field
visits. In order to determine the sample size for the evaluation of each indicator, information regarding the
number of hydrocarbon projects by category was compiled into the following table.
Documentation evaluated 1997- 2000
Envirorunental Fichv 54 |119 981 55 | 326|
EIA (CategoryI1) r3 l3 6 4 | 16EIA (Category II) 3 1 53 33 26 143
PASA (Category HI) 6 41 29 17 93
Environmental Manifiesto 3 33 49 16 101
Monitoring Reorts 65 301 227 138 731
TO"CAL, - - --; 1621 550] 442 256 1410(1) Through 27 of March, 2000
The defnition of Categories according to Article 15 of the Law of Prevention and Environmental Control is
as follows:Category I. Integrated Environmental Impact Assessment; according to the incidence of effects on the
ecosystem the study should include detailed analysis of all environmental, biological, physical,socio-economic, cultural, and legal factors with respect to each of its environmental components.
Category II: Specific Enviromnental Impact Assessment; according to the incidence of effects on thesome aspects of the ecosystem, the study should include detailed analysis of one or allenvironmental factors, as relevant.
Category III: Requires only Mitigation Measures and Environmental Monitoring Action Plan; accordingto the incidence of effects previously studied and identified in projects, projects include works oractivities that permit the definition of precise actions to prevent and mitigate adverse impacts.
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2. Definitions of Indicators:
Indicator 1: Presence of UMA in Field Monitoringla. Percentage of Category I projects visited.
Numerator: Number of Category I projects inspectedDenominator: 100% of Category I projects
lb. Percentage of Category II projects visited.Numerator: Number of Category II projects inspectedDenominator: (30% of new Category II projects) + (20% of existing Category IIprojects)
lc. Percentage of Category Im projects visited.Numerator: Number of Category III projects inspectedDenominator: (20% of new Category II projects) + (10% of existing Category IIprojects)
id. Complaints attended.Numerator: Number of complaints attended6
Denominator: 100% of complaints receivedle. Projects visited prior to granting of Environmental License.
Numerator: Number of projects visited prior to granting of Environmental LicenseDenominator: Total number of new Category I projects
Indicator 2: Control of compliance by UMA.2a. Percentage of mitigation measures implemented.
Numerator: Number of mitigation measures implementedDenominator: Number of mitigation measures proposed in the EIA
2b. Percentage of mitigation measures observed requiring correction or modification.Numerator: Number of mitigation measures observed requiring modificationDenominator: Number of mitigation measures proposed in the EIA
2c. Percentage of mitigation measures corrected or modified.Numerator: Number of additional mitigation measures correcited or modifiedDenominator: Number of additional mitigation measures observed
2d. Percentage of additional mitigation measures required.7Numerator: Number of additional mitigation measures requiredDenominator: Number of mitigation measures initially proposed in EIA
2e. Percentage of additional mitigation measures applied.Numerator: Number of additional mitigation measures appliedDenominator: Number of mitigation measures proposed in EIA
2f. Percentage of additional mitigation measures applied by the oil companies.Numerator: Number of additional mitigation measures applied by oil companiesDenominator: Number of mitigation measures proposed in EIA + Number of required
mitigation measures
6 Complaints may be attended through an on-site visit or through other means of verification in which thejustification for not conducting an on-site visit is presented." To assess the efficiency of the UMA in prevention.
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Indicator 3: On-site control of environmental impactsNumerator: Number of projects in which the UMA has evaluated and controlled forquantifiable environmental impacts8
Denominator: Total number of projects visited
Indicator 4: Environmental Quality4a. Environmental quality compliance with EIA standards.
Numerator: Number of projects in abandonment or restoration phase in compliancewith EIA standardsDenominator: Total number of projects in abandonment or restoration phase
8 The quantifiable environmental impacts are those subject to measurement, such as soil contamination, hectares ofdeforestation, and water quality.
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Grou 2: Im lementation Indicators
Performance Indicators PERFORMANCE BENCHMARKS
Baseline 2001 ,2002 20032000
1. Compliance by oil companies with Best N/A ** ** **Practices
2. Dissemination by the UMA of N/A 100% 100% 100%Environmental Impact Assessments (EIA) bythe UMA through a website9 and LaPaz andSanta Cruz offices.3. Satisfactory participation of concerned 30 90 90 30central government agency staff '°in trainingprogram.4. Satisfactory participation of concerned 15 40 20 N/Acentral government agency staff in stakeholderworkshops.5. Satisfactory participation of civil society N/A 120 90 90representatives in training program.
6. Satisfactory participation of civil society 12 32 16 N/Arepresentatives in stakeholder workshops.
7. Effective participation CCTI members in:(a) CCTI 40 80 40(b) Regional Workshops 40 280 80 N/A(b) National Workshops 70 105 105
8. CCTI and CTRs provide technical support to N/Aproject implementation
9. Preparation of a proposed framework to N/A 100% 100% 100%make compatible roles and regulations for Step I Step 2 Step 3improved social and environmentalmanagement of the hydrocarbon sector.
10. Preparation of a proposed mechanism for N/A 100% 100% 100%financial and institutional sustainability of Step 1 Step 2 Step 3hydrocarbon sector social and environmentalmanagement.
11. Number of stakeholder workshops 3 9 5 N/A
12. Completion and discussion of participatory 1 2 3 1case studies.
**As a result of the Best Practice Study the manuals including detailed checklists., methods and instrumentsfor control of best practice by oil companies will be developed during 2000-2001 and applied during 2002-2003.***To be defned as part of the internal operating procedure to be established by the CCTI and CTRs.
9 The executive summary of the EIA would be made available through the UMA website to be developed within thefirst 6 months of the project. A hard copy of the full EIA would continue to be available in the UMA and throughthe Santa Cruz office. The modes of availability are subject to change through the course of the project based onthe results of the consultation process and studies.10 Concerned government agency staff refers to representatives of the VMEH VMMARNDF, VAIPO, VMPPSP,and SERNAP.
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Complementarv Provisions
1. Source and methodologv: The source of all indicators is the following:
Indicator 1 is verified through on-site regulation and mitigation visits and analyses to a sample ofprojects as identified in the first set of performance indicators and carried out by the UMA.Best practices means the principal design and operational practices in order to minimizesocial and environment impacts of oil exploration, production and transport, as definedthrough international professional advice and agreed upon with oil companies operating inBolivia. Guidelines and best practice checklist will be developed through a study to becompleted by March 2001.
Indicator 2 as reported by UMA and verified by annual external review.
Indicator 3 - 6 is the cumulative number of actual participants, as per the records of the UCSP, inthe training program to be designed by consensus with UMA, the CCTI and other civilsociety representatives throughout the course of the project. As the program has not yetbeen defined, the numbers will be redefined following revisions of the PIP.
Indicator 7 is the participation in the CCTI and CTRs as per the records of the CCTI and UCSP.
Indicator 8 will be defined by the CCTI and CTRs and verified through CCTI, CTR and UCSPreports.
Indicator 9-10 will be verified through quarterly reports by UCSP and annual external reviews.
Indicator 11 is the cumulative number of actual participants, as per the records of the UCSP, inthe stakeholder workshops to be determined by consensus with UMA, CCTI and CTR throughoutthe course of the project.
Indicator 12 is the number of participatory case studies, as proposed under Component 3, carriedout with results disseminated to stakeholders each yea to be verified through quarterlyimplementation reports by the UCSP and assessed by the annual external review.
2. Definitions of Indicators:
Indicator 1: Oil company projects complying with Best Practices.Numerator: Number of sampled oil company projects complying with Best PracticeDenominator: Total sample number of projects
Indicator 2: Dissemination of ELAs by the UMA:Numerator: No. of EIAs made available to the publicDenominator: No. of ElAs received by the UMA
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Indicator 8: Preparation of a proposed firamework to establish compatibilized law(s), regulation(s)and/or institutional coordination for environmental and social regulation and mitigation ofhydrocarbon activities:
Step 1: Terns of reference for the analysis of existing regulations approved with analysisby the CCTI and study initiated.
Step 2: Study completed and discussion conducted between UMA, the CCTI, and throughregional stakeholder workshops on draft law(s), regulation(s) and/or institutionalframework.
Step 3: Submit for consideration and possible enactment draft proposal(s) stemming fromStep 2.
Indicator 9: Preparation of a proposed framework to establish a sustainable financial andinstitutional mechanism:
Step 1: Terms of reference for the analysis approved with analysis by the CCTI and studyinitiated.Step 2: Study completed and discussion conducted between UMA, the CCTI, and through
regional stakeholder workshops on mechanism for sustainable institutional andfnancing mechanism for regulation and mitigation of hyclrocarbon activities.
Step 3: Submit for consideration and possible enactment draft proposal stemming fromStep 2.
3. Adjustment to Baseline Data: The Performance Benchmarks are calculated on the basis ofbaseline data which was estimated at the time of negotiations. The results of studies, such as that of bestpractices, environmental monitoring mechanisms and procedures and the IDB-fnanced sectoral study, willindicate the need to adjust the baseline after the first year. Therefore, if at a future date the Borrowershows to the satisfaction of the Association that it is necessary to adjust the baseline data, thecorresponding Performance Benchmarks may be adjusted in such a manner as sha[l be acceptable to theAssociation. In addition, the performance benchmnark indicators will be reviewed with the Borrower andthe Association during the annual reviews.
4. Monitorine Standards: Hydrocarbon sector projects require on-site control of theimplementation of mitigation measures and environmental management, as well as to evaluate highlysensitive ecological and social areas. While detailed procedures and guides for monitoring, includingstandardized forms, will de designed as a result of project studies, the following standards have beenoutlined:
i Environmental management control carried out by companies.> Verification of the implementation of the mitigation measures proposed in Category I, II and II
projects.> Evaluation of the sufficiency and efficiency of implemented measures.> Identification of potential impacts not identified in EIAs or ELs.) Suggest improvements or changes in oil company practices or in mitigation measures.> In the case that inconsistencies or overlaps in the law are observed, suggest a Competent
Environmental Authority.> Verification of an adequate relationship between oil companies and local actors.> Development through the UMA in Santa Cruz of a relationship with local actors.
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Annex 2: Project Description
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
By Component:
Project Description
The Hydrocarbon Sector Social and Environmental Management Capacity Building Project, with a
total estimated cost of US$ 5.8 million over a three year period, seeks to improve the social and
environmental management of the hydrocarbon sector and consists of the following components :(i)
Institutional Strengthening, (ii) Logistics, (iii) Information Base and Studies, and (iv) Administration,Coordination and Monitoring. IDA financing amounts to US$ 4.8 million or 83% of total costs. In
addition to the agreements reached during ongoing dialogue with government agencies and civil societyrepresentatives, several consultant studies"1 funded under the CIDA/ESMAP program and another'2 being
funded by IDB credit 598 have provided important input in the definition of the following components.
Project Component 1 -US$2.6 million - Institutional Strengthening
1.1 Technical assistance for the regulation and mitigzation of social and environmental
impacts of hydrocarbon activities (US$ 1.3 million) entails contracting specialized consultants(Environmentalist, Social Scientist, Anthropologist, Ecologist, Petroleum Engineer, Agronomist, etc.) in the
UMA in La Paz and Santa Cruz de la Sierra (Red de Monitoreo) to ensure adequate prevention, regulation
and mitigation and in accordance with current regulations with Terms of Reference (TORs) agreed upon
with IDA.
1.2 Training of government agencies staff civil societv organizations. locally affected
communities and local consultants (US$ 0.8 million) consists of tailoring and testing training programs for
participants of different levels of knowledge and experience in social and environmental areas, focusing
primarily on the aspects of regulation and mitigation. While a tentative training plan and budget have been
developed, specific training programs will be designed and planned with the inputs from the Consejo de
Coordinaci6n Tccnico Interinstitutional (Inter-institutional Technical Coordinating Council - CCTI) inconsultation with the Consejos Tecnicos Regionales (Regional Technical Councils - CTR) and local
participants. Programs will be tailored to specific audiences (experts from the industry and government
agencies, civil society institutions (green NGOs), indigenous and non-indigenous communities and localconsultants). All relevant stakeholders will provide their input into these programs (training scope, content,
and methodology) and assess the success of these programs. As required, the training programs could be
modified to better address concerns of stakeholders as they arise. The system of councils and workshops as
mentioned below would be used to obtain input from stakeholders to better tailor the training programs.
1.3 Inter-institutional Coordination (US$ 0.3 million) consists of establishing the CCTI and
CTRs (See Para. 3 on main text) and implementing a series of workshops and seminars to facilitate theconsultation and participation process in several areas: (i) the compatibilization of regulations andoperational procedures; (ii) the definition of mechanisms for consultation and collaboration on specificsocial and environmental impact mitigation plans; (iii) the definition of an accessible, transparent and
11 Establishmhent of a Field Operations Group -Bolivia National Secretariat of Energy Environmental Unit. Alconsult.
December 1997Bolivian Environmental Approval process for New Hydrocarbon Projects-Review and Recommendations -E2 Environmental
Alliance Inc-December 1998The Disposal of Drilling Fluid Wastes- Alconsult- July 30, 1998
12 Plan Acci6n Ambiental Sector Hidrocarburos -Terminos de Referencia- Study funded by IDB Credit 598.
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timely information system; (iv) the definition of the content and requirements for the training process; and(v) the development of sustainable financing mechanisms for carrying out regulation and mitigation.
1.4 Consultation Workshops with Stakeholders (US$ 0.2 million) consists of workshops thatwill be carried out, under terms agreed upon by CCTI and CTRs in consultation vvith other stakeholdersfor: (i) consultation, feedback and collaboration on the specific studies, on their objectives, findings andrecommendations; (ii) planning, review and testing of processes to integrate stakeholders in decision-making and regulation and mitigation activities; and (iii) on other matters as determined necessary byconsensus of CCTI and CTRs.
Project Component 2 - US$0.3 million - Logistics and Communication
This component consists of the acquisition of essential equipment (vehicles, portable laboratories,computers, etc.) to facilitate the on-site regulation and mitigation work of government agencies,contributing to information sharing among all stakeholders. In addition, an information system/web-site willbe implemented. This system will make use of the information base being developed under IDB credit 598within the framework of the study Plan de Accion Ambiental Sector Hidrocarburos being carried underthe supervision of the UMA of VMEH and complement the management information system beingcompleted by consultants for the VMEH under a Japanese Grant Fund.
Project Component 3 - US$1.7 million - Information Baseline and Studies
This component forms a critical input to the institutional strengthening component and consists ofvarious studies. The project studies include: (i) analysis and development of a mechanism for thesustainable financing of an improved social and environmental regulatory framework; (ii) analysis anddevelopment of a strategy for the dissemination of public information and systematic mechanisms forconsultation and participation; (iii) analysis and development of proposal for compatibilized regulations,procedures, roles and functions; (iv) analysis and design of strategies, mechanisms, manuals andprocedures for social and environmental regulation and mitigation; (v) analysis of social and environmentalpractices of oil companies and development of best practice guidelines; (vi) carrying out of 7 specific casestudies, to be carried out by independent reviewers with participation from diverse actors involved in thesector that are based on present and past experiences in the hydrocarbon sector to identify social andenvironmental impacts and assess regulatory response; and (vii) assessment of hydrocarbon sectorcontingency plans.
Project Component 4 - US$1.2 million - Administration, Coordination and Monitoring
This component provides for: (i) the creation of an Unidad de Coordinaci6n y Seguimiento delProyecto (Project Coordination and Monitoring Unit - UCSP) responsible for the coordination andmonitoring of the administrative progress of the project, (ii) external consultants which, in addition tostakeholders, will provide an independent annual evaluation of progress achieved in relation to verifiableperformance indicators; and, (iii) external audits.
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Annex 2a: Project Implementation Summary
(See PIP for more details)Hydrocarbon Sector Social and Environmental Management Capacity Building Project
Component 1: Institutional Strengthening1. 1 Technical Assistance to UMA1.2 Training1.3 Interinsitutional Coordination (CCTI)1.4 Stakeholder Workshops
Component 2: Logistics and Communication1.1 Acquisition of equipment & information dissemination
Component 3: Studies1.1 Soc & Env Impacts, Mechanisms and Strategies1.2 Information, Consultation & Participation Strategy1.3 Assessment of Contingency Plans1.4 Compatibilization of Roles & Regs1.5 Institutional & Financial Sustainability
1.6 Oil Company Best Practice Study1.7 Regional Inforration Use & Collection1.8 Case Studies
Component 4: Administration & Coordination1.1 Project Coordination & Administration1.2 Extemal Evaluations ___11_11
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Annex 3: Estimated Project Costs
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
Local Foreign TotalProject Cost By Component US$ million
Institutional Strengthening 2.17 0.21 2.38Logistics and Communication 0.29 0 0.29Information Base and Studies 0.58 0.95 1.53Coordination and Monitoring 0.99 0.11 1.10
Total Baseline Cost 4.03 1.27 5.30Physical Contingencies 0.19 0.06 0.25Price Contingencies 0.19 0.06 0.25
Total Project Costs 4.41 1.39 5.80Total Financing Required 4.41 1.39 5.80
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Annex 4: Project Processing Budget and Schedule
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
Project Schedule Planned Actual
Time taken to prepare the project 3 10(months)
First IDA mission (identification) 05/21/1999 05/21/1999Appraisal mission departure 09/12/1999 09/28/1999Negotiations 09/20/1999 05/11/2000Planned Date of Effectiveness 01/02/2000 08/31/2000
Prepared by: Vice Ministry of Energy and Hydrocarbons
Preparation assistance: PPF
IDA staff who worked on the project included:
-- Name - .i_ tPhilippe Durand Energy SpecialistChakib Khelil Petroleum AdvisorJuan David Quintero Environmental EngineerEstanislao Gacitua Mario Social ScientistGeorge Ledec EcologistLee Anne Adams Operations AnalystRosa Maria Balcazar Civil Society SpecialistHannachi Morsli Procurement SpecialistOlga Bagci Procurement AssistantXiomara Morel Financial Management Specialist/
.___ Disbursement OfficerPaul Edwin Sisk Financial Management SpecialistDaria Goldstein and David Varela Legal Counsels
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Annex 5: Inter-Institutional Organizational Structure
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
FLEXIBLE COMPONENTSObjective rhe Prol-CSe reld C JonSboneW n.e.t 8eR thoe Whiinh Support th
.tipat. f Oolsiesty as .ell as goverm-nt actors Er,The development objective of the Hydrocarbon Sector Social and Environmental Management Capacity Building efer to: Conwponenl N.1 Instiotional Strengthening
Project is toimprove the social and environmental management ofthe hydrocarbon sector exploration, production Ebcorponent 1 T2 rTrning); SubSEroronent 1iand transport activities. aUkehoer U morksthop): Cononend N.3 Infonnation
VMEH INTER-INSTITUTIONAL COORDINATING COUNCIL (C.C.T.I.)
REPRESENTATIVES FROM GOVERNMENT AGENCIESCIVIL SOCIETY REPRESENTATIVES
UCSP VMMA I VAIPO I VMEH I SERNAP | VMPEPP CIDOB I NGOS I CBH I ACAD OTHER
WORKSHOPS WITH CIVIL SOCIETY ANDGOVERNMENT _ REGIONAL TECHNICAL COUNCILS (CTR):
_ ~~~~~C.G.A.P.
OBJECTIVES OF C.C.T.I. FUNCTIONS OF C.C.T.I. OBJECTIVES OF C.T.R.ESTABUSHA SPACE FOR TECOCAL DISCLSnoo ANALYSIS AM EXCHANGE TERAININ PROPOSES TorGr CoNMBrE TO THE PROJECTTHROUGHC TECHNALECI EXCAGE IN THE FEtrLE COPONENTES PERMITTHE CONSLaTAT1ONAND PARTICIPATION OF THE DIFFERENT REOIAOL ACTORS IOSSEwNATOO ff INFORMIATON PRDCErALRES FOR CNSULITATONAND PART,OPATtO THE SCOPEJOFTSOS AND rSLTO PROPOSE AND ESTABUSO CTER AFOR PROCSSES OF CONSULTATIONAND PAOJnCIPATTOO THE FRANfOKf OF THE PROJECTOF STLTES. CCroNIRSr TO THnE COORDNTION AND COWACNATION WITH CnOWUNTY atSt O13ANIZATIONS As PR0aE FEESDBACK TO THE een.ECNTRBUIE THFRLOH TtE PARnCIPATION OF CIVAL SOCIETY, T TE FEVELOPIIENT OF POUCY PROPOSALS AND FreouED DEVELOP ECHIRSIfS FOR lOFfAnoN FEErBACKSiTEGES FOR THE SEVELOPEWT OFP WIOLOQESAND PROCEDURES FELATED 0 THE SOCIAL ND EREAL COOSAJNAlSAND pRnrnE PaFOL UFP lOtE PROJECT OJECIVES, TOORSAND STUDIEs PARTICIPATE TOOI TECICAL SOLPORT TO THE FULEMBLE PROJECT COWFONENTS
GENIENT OFTn1E Hf FCON SECTOR CONCRUTE 10 THE DESSGF IER'LOENTAT1DN APD FUSION OF TRAIrNNG PRDGRAMS AND PORUC STUIiES. INFORTAnaNANDCOSUOCA1noN. TRmARwCONTR rfnETECENCAL FEEDBACK IN n1E MEM ANID IMENTATION OF SYSTEWS FOR TOE EVALLIATION AND INFORRANO FACILUTATE THE CONI.NCATONNAND COORDINATOrN OF COMAHNTY RBASEDIVIDNTORING.OF TOE SOCIAL ND ErRONM.ENrAL IMPACTS RESULTING FROM hYDROCARBON SECTOR ACTVNTIES. FACIUTATE TOE PARTICIPATIONRANID INCORPORATIONROF LOGAL. ACTORS IN TOE IWLEOEOA1ION OF TO ROOCAE IN TOE PRS ROF TOE PROJECT.FACIUTATE TE EFFECTIVE PARTtCPATION OF tTAEERE IN MONTORNw- ACTIATIES WITN THE EXSTMJ P_OOoit DE VLOFANG OECIWJsAW FOR SYSTENIATIC FEEDeACK.
S^EPPORT O EIMO REIO POTRPTO5AT PEIRITTO1E SIT3ESOTTEINN Off HUVAN AND TECErdAL CAPACITY INtnE WOEN FECESOAJOT IImIE FTHER FEEVAiJTI.EMAEE OF CIVL SOCETf WHDARE hDT OUECThT INWOLVEDRGO ALTC NC L O NISSLPPORT~EDEIIOFTFWNGPROGRMIH~TPFMTTHE ~ WOFFM ANDMCM CAPACIYIN~E N= mm.REGIONAL TECHNICAL COUNCILS:
MOINlONIIS OF SOCIAL AND ENIATONI&NTAL IEACT PROADE TECMICAL SLEPOKRTIN TOE FOFAATIORAN OPERATION OF TOE CTRSESTAOUSIHSTATEGEsFR STAKEHOLDER CONULTATIONAND PARTIPATIONIN TE JAELEIEWATAION OFTHE PROJECT TDERATE1YROTO TOETCCnEETOTACCC WTOAN(NTER ALRIWETOEOEFIEDO LOTHE ENTITIES FOR LOCAL CONSULTATION
COIJETH TE EFFECTVEANDOPORTUNE COWOINATION OF TOE PROJECTIRTOE FLE)USLE COWOEWIRS. FIRSTWEETNGJOFZTO-t CCnTIReAnEW TOE SCOPE ND CONTEStS OF THE FLEXBLE COONECNEOS OF TOE PROJECT. FUNCTIONS
PARTICIPATE IN TOE PROJECT BY PROADING OPINONS AND CONAMETS WITH REGTT07EREXLIBSLE CONPONENTS OF TOE PROJECT.n COLLABORATE IN TOEIR RESPECT REo GAATOERNG OPfIONS AND COI,ENTWITH FEAGOO TO TIE PROJECT
FUNCTIONS OF THE REPRESENTATIVES OF CCTI FACILITATE THE PARDCPATOO OF DIFFERENT STAKEHOLORS IN NTIOWORKSHOPS.
COORONRD fTIn1E PROJECTACIFATES EN TEIR ESPEOTRE VCE SMNSW OR INSTTJION I ARE SUPPORT E DEVELCPENT OF PROJECT STOIESEOF TOEIR CONEETErEE TO "EPORTTFIE ADPANISTRATtORN AI FAUTA1E THE EXECLIMOFS THiE PROJECT. COLLASORTE IN11 THEGiERATOOR OF AN ACTRE PARTICIPATION OF EGWIoNL ACTORESPONSBLE, WHEN NECESOAS. FOR TOE ACTIMTIES DEVELOPED INIS NING. AN PARTICIPATO AD N NSLFPOR 1T THE PROJECTOfJECTAVES.CONsLTATON PROCESSES. FR HEIR ESPECTVE vCE AIISTOES O INTlUJttO IN TOE FSPOEWf PROPOSE INSTTOLENTS ANC MEFOROLOaiES DESTINED TO CONTRBAuE W THOF TOE PRaJECT IAERENENTf SOCIALAND ENIROIIENTAL SNIOITCHM IN TiE SECTORRESPOFNSBLE TO PROADE SLPPORT AND TOCICAL CORET TO TOE LOOP AN WEt IN TOE AREA OF PROPOSE STRATEGES FOR CONSULTATIOO ANC PAWnCIPATON IN TOE SOCIAL ANTHEIR COWRETSENE UOOP C ShEA WIICH VVtL WOFO TOE QUARTERLY REPORTS TO BE ElAVSOFATEDOI EOMRONNIEWALAOSESNI.ENT OF SECTOR PROJECTOSTO DIRECTOR f TOE UCSP AS REQAFED ET TOE BANK ACCOffNG TO THE CREDITAWOENW SULPPCRT THE ULSP N GENE_AL CCORIAoNTORANCD)FMATION FLCbYS
SLPPORT7TOE LOCP IN TOE PLO ANCD IFFUSION OF PROJECT INFffYAIION IN TOEIOR RESPECTIE ARFA C
CONIEISE
35
Annex 6: Procurement and Disbursement Arrangements
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
Procurement
1. Procurement Responsibility. The project implementation will require procurement of a limitedquantity of goods (about 8% of the project's total cost) but significant technical assistance services forstudies and other consultant assignments. VMEH' s UCSP, the project's coordinating and monitoring unit,will be responsible for the overall project procurement activity, including compliance with procedures andtimetables agreed with IDA. UCSP has already been staffed with a consultant manager with extensiveexperience in contract administration of IDA-financed projects.
2. The UCSP' s manager has organized a procurement team consisting of two staff that were selectedfrom the two recently completed IDA financed projects. The team is in place and is familiar with IDA' sprocurement guidelines, and it has been provided with clear working instructions closely reflecting IDA' sprocedures and outlining all procedural aspects of procurement under the project. The working instructionsare an integral part of the project's Operational Manual, which was reviewed and finalized during theCredit's negotiations. In addition, a procurement workshop, involving the procurement team, andgovernment and non-government agencies associated with the project, will be organized prior to theCredit's effectiveness. The workshop would focus on IDA' s procurement policy and procedures and theirapplication to the procurement arrangements planned for project implementation. Furthermore, UCSP' smanagement and other selected staff would benefit from attending the first available World Bank AdvancedProcurement of Consulting Services Course.
3. Procurement Plan. Key instruments for carrying out the project procurement by UCSP are the (i)detailed procurement plan for the project's goods, including contract packaging, applicable procedures andprocess scheduling; (ii) consultant selection process plan for the project's consultant services, includingcontract packaging, applicable procedures, shortlists, selection criteria, and so forth; and (iii) a draftproject Operational Manual, including procurement process. These documents were prepared during theappraisal mission and reviewed and finalized during negotiations. The procurement plan and consultantselection process plan will be updated periodically, every 6 months, and reviewed by IDA. The plansinclude the (i) list of contracts completed, under execution, under procurement, to be procured in theupcoming calendar semester and, tentatively in the subsequent semester; (ii) costs of completed and underexecution contracts, estimated costs for upcoming contracts; (iii) schedule of bidding; (iv) particularmethods of procurement of goods or selection of consultants; and (v) the draft terms of reference for allconsultant contracts to be recruited during the next 6 months.
4. Methods for IDA Financed Procurement. IDA financed procurement will be carried out inaccordance with the provisions stipulated in the Credit Agreement and IDA' s Guidelines for Procurement(published in January 1995, revised in January and August 1996, September 1997 and January 1999) forsupply of goods and IDA' s Guidelines for Selection and Employment of Consultants (published inJanuary 1997, revised in September 1997 and January 1999) for technical assistance and other consultantassignments. IDA' s Standard Bidding Documents and Standard Request for Proposals will be used forIDA financed goods consultant services respectively. The project's procurement arrangements aresummarized in Table A.
5. IDA Financed Goods and Associated Procedures. The proposed project would finance goods foran estimated total cost of about US$0.25 million and consisting of (i) vehicles (three) to facilitate on sitemonitoring and evaluation work; (ii) portable laboratories (about five) for environmental monitoring; (iii)computer hardware and software (about eleven of which five laptops); (iv) geographic information systems;
36
(v) office equipment and other miscellaneous items required for various consultant services; and (vi)training materials and public awareness literature and project documents such as l IAs and evaluationreports to facilitate information sharing of the project's consultation and participatory process.
6. Given the limited value and type of goods to be procured under the project, no foreign competition isexpected to be attracted by the bidding. No International Competitive Bidding procedure, therefore, hasbeen contemplated. Based on the project procurement packaging, the most efficient and economical way ofprocuring the goods to be financed by the Credit, would be under (i) National Competitive Bidding (NCB)procedure acceptable to IDA, for tenders estimated to cost the equivalent of US$50,000 or more; and (ii)International or National Shopping (ISINS) for tenders estimated to cost the equivalent of US$50,000 orless. Miscellaneous items in packages costing up to US$50,000 would be procured using local pricecomparison with quotations obtained in sealed proposals from at least three qualified suppliers. To theextent practicable, contracts for goods would be grouped in bid packages estimateid to cost the equivalent ofUS$100,000 or more. Foreign bidders will be allowed to participate under NCB.
7. IDA Financed Consultant Services and Associated Procedures. The proposed project wouldfinance consultant services and training, workshops and coordination for an estimated total cost of aboutUS$4.55 million and consisting of (i) institutional strengthening; (ii) coordination and monitoring; and (iii)specific project related training and workshops. The project training and workshops would involvegovernment and non-government organization personnel, local communities and indigenous peoples withthe objectives of facilitating their active participation and contribution to achieving the project's objectives.
8. The project's selection and employment of consultants will be carried out under arrangementsacceptable to IDA (Table Al), using IDA' s Standard Forms and Contracts. Consulting firms would berecruited for the project's studies, performance evaluation, training, workshops organization, and financialand procurement audits, under the Quality and Cost-Based Selection (QCBS) method for services costingthe equivalent of US$100,000) or more (for about US$1.50 million of which IDA would finance aboutUS$1.35 million) or under the Consultants Qualifications (CQ) method for services costing less than theequivalent of US$100,000 for about US$1.0 million of which IDA would finance about US$0.90 million.Individual consultants to assist in project administration and coordination, environment monitoring andprevention, case studies, and training would be recruited under procedures describeid in Chapter V of IDA's Guidelines for Selection and Employment of Consultants, (for about US$1.80 million of which IDAwould finance about US$1.55 million). Travel and per diem cost of participation in workshops, trainingand coordination meetings will be paid to eligible participants under unit costs defined in the Operationalmanual (for about US$0.75 million fmanced in totality by IDA).
9. Procurement Review. IDA' s procurement review will be in accordance with Appendix 1 of IDA' sGuidelines for Procurement and the provisions stipulated in the Credit Agreement. Procurementdocuments for the first two NCB tenders and the first two IS/NS tenders will be subject to IDA' s priorreview. Subsequent procurement documents for NCB tenders costing the equivalent of less thanUS$100,000 per contract, will be subject to IDA' s post review. Subsequent procurement documents forall IS and NS tenders will be subject to IDA's post review.
10. With regard to consultant services, prior to issuance of any requests for proposal, a complete planfor selection of consultants under the project has been prepared by UCSP. The plan was reviewed andaccepted by the appraisal mission and during negotiations and will be updated every six months. IDA' sreview of selection of consultants will be in accordance with Appendix 1 of IDA' s Guidelines for Selectionand Employment of Consultants and the provisions stipulated in the Credit Agreemnent. Consultantcontracts estimated to cost the equivalent of US$100,000, per contract, or more w:ill be subject to IDA' sprior review. The first two Consultant contracts procured under the Consultant Qualifications (CQ)method will be subject to IDA's prior review. Subsequent procurement documents under CQ will be
37
subject to IDA' s post review. For employment of individual consultants estimated to cost the equivalent ofUS$3 5,000 or more, the qualifications, experience, terms of reference and terms of employment of theconsultants will be provided to IDA for its prior review and the contracts will be awarded only after IDA' sconcurrence. Contracts for individual consultants estimated to cost less than the equivalent of US$35,000,will be subject to IDA' s post review. Consultant contract documents to be reviewed will include TORs,shortlists, evaluation reports, contract forms. Draft TORs for all contracts will be reviewed by IDA as partof the rolling procurement plan. A review process similar to individual consultants, will apply to trainingand workshops.
11. In addition to the regular tasks of prior and ex-post reviews, IDA may also carry out spot checks ofthe quality and consistency of its financed procurement work, with the objective of strengthening thefiduciary responsibilities.
12. Advertising. A General Procurement Notice for procurement of consultant services was publishedin the United Nations Development Business paper (No.524 of December 16, 1999). The Notice will beupdated annually for outstanding consultant services. In addition, detailed consultant services andassignments will be advertised by UCSP, as they become available, in at least one national newspaper of alarge circulation. Furthermore, UCSP may also advertise some of the project's studies in an internationalnewspaper or a technical magazine. UCSP may also seek "expressions of interest" by contactingembassies, professional organizations, or firms that it knows or that are registered in DACON (paragraph1.15 of IDA' s Guidelines for Selection and Employment of Consultants). In this case, the informationrequired would be minimum, limited to make ajudgement on the firm's suitability. Sufficient time (not lessthan 30 days) will be provided for responses, before preparing the short lists.
13. Since no ICB procedure would be followed and given the limited value of goods to be procuredunder the project, the publication of a General Procurement Notice for goods in the United NationsDevelopment Business paper, would not be required.
14. Methods for Non-IDA Financed Procurenent Project procurement not financed by IDA will becarried out in accordance with the Bolivian's procurement rules and regulations. Procurementarrangements under parallel financing, if any, would be the responsibility of the borrower and the co-financiers. However, IDA will ensure that the bidding process is properly coordinated by the borrower tomeet the agreed overall procurement plan and avoid project implementation delays.
15. Non-IDA Financed Components. Custom duties and taxes (as provided in the General Conditions,Section 5.08), local dealers' commissions and mark-ups (in accordance with OP 12.00), fuel and otheradministrative and operating costs of UCSP and UMA offices in La Paz and Santa Cruz, not associatedwith the consultant assignments, would not be financed by the Credit. These costs would be covered by thegovernment's budget and have been included in the project's total costs. The government's budget wouldalso fmance a gradually increasing share of the cost of UMA consultants in La Paz and Santa Cruz forconducting evaluation and monitoring tasks, as established in the Project Implementation Plan (annex onproject costs).
16. Procurement Records. Detailed procurement records, reflecting the project's supply of goods andconsultant services, including records of time taken to complete key steps in the process and procurementactivities related to supervision, review and audits, will be maintained by UCSP. These records will bemaintained for at least two years after the project's closing date. The records for goods will include publicnotices, bidding documents and addenda, bid opening information, bid evaluation reports, formal appealsby bidders and outcomes, signed contracts with related addenda and amendments, records on claims anddispute resolution, and any other useful information. The records for consultant services will include publicnotices for expression of interest, request for proposals and addenda, technical and financial reports, formal
38
appeals by consultants and outcomes, signed contracts, addenda and amendments., records on claimns anddispute resolution and any other useful information.
39
Annex 6, Table A: Project Costs by Procurement Arrangements
(in US$ million equivalent)
Procurement Method Total CostExpenditure Category (including
ICB NCB Other N.B.F Contingencies)
1. Goods 0.30 0.10 0.40(0.25) (0.25)
2. Consultant Services 5.40 5.40and Training (4.55) (4.55)Total 0.30 5.40 0.10 5.80
(0.25) - (4.55) (4.80)Notes: ICB: International Competitive Bidding; NCB: National Competitive Bidding; Other: includes National andInternational Shopping and Consultant selection methods described in Table Al; NBF: Not IDA-financed.Figures in parenthesis are the amounts to be financed by the IDA credit
Annex 6, Table Al: Consultant Selection and Training Arrangements(in US$ million equivalent)
Expenditure Selection Method Total CostCategory (including_________l_______ _______ ________ e_______ contingencies)
___________ QCBS QBS SFB LCS |C Other N.B.F.
A. Firms 1.50 0.40 1.90
(1.35) (0.35) (1.70)B. Individuals 2.10 2.10
________ ________ _____ ________ _______ (1.55) (1.55)C. Training 0.65 0.75 1.40
l _______ ________ _____ ________ (0.55) (0.75) (1.30)Total 1.50 1.05 2.85 5.40
(1.35) (0.90) (2.30) (4.55)Note. QCBS: Quality- and Cost-Based Selection; QBS: Quality-Based Selection; SFB: Selection under a FixedBudget; LCS: Least-Cost Selection; CQ: Selection Based on Consultants' Qualifications; Other: Selection ofindividual consultants (per Section V of Consultants Guidelines), and costs of participation in workshops,coordination meetings and training; NBF: Not IDA-financed.Figures in parenthesis are the amounts to be financed by the IDA credit.
40
Annex 6, Table B: Thresholds for Procurement Methods and Prior Review
Procurement item Contract Value Procurement ReviewThreshold (US$) Method
1. Goods More than $50, 000 NCB Prior review of first two NCB contractsirrespective of amount and, subsequently, priorreview for all contracts of more than US$100,000equivalent.
$50,000 or less IS /NS Prior review of first two ISINS contracts.
Post review, random sample, of NCB contracts ofUS$100,000 or less and IS/NS contracts otherthan the first two.Aggregate Prior Review (Goods): US$0.2 million
2. Consultants'Servicesand trainine More than $100,000 QCBS Prior Review of all contracts
2.1 Firins Aggregate Prior Review (QCBS): US$1.5 million2.1 Firms
$100,000 or less CQ Prior review of first two CQ contractsAggregate Prior Review (CQ): US$0.2million
Post review, randomrn sample, of CQ contracts otherthan the first two.
More than $35,000 IC Prior Review of each contract estimated to costmore than $35,000 equivalent.Aggregate Prior Review (IC): US$1.0 million
$35,000 or less IC Post review, random sample, on IC contractsestimated to cost US$35,000 or less.
Total value of contracts subject to prior review: US$2.9 million (60% of Credit amount)
17. Procurement Risk Assessment When the project's procurement assessrnent was conducted, therehad been no Country Procurement Review (CPAR) for Bolivia. A key aspect for defining the level of priorreview has been the procurement capacity assessment of UCSP. The assessment involved officials fromVMEH to complete data collection questionnaires about laws and regulations. W'ith regard to UCSP, IDA's mission worked only with the unit's manager who was the only UCSP staff that was appointed at the timeof the procurement assessment, collecting data, analyzing procurement performance under the previousIDA's Credit and reviewing how UCSP' s procurement will be organized. Based on this assessment, andtaken into account that Art. 15 of Bolivia's current procurement law stipulates thaLt the procurement policiesand procedures of the international financiers apply to their respective projects, the project's procurementrisk rating assessment is average.
Overall Procurement Risk Assessment:
HighAverageLow
18. Frequency of procurement supervision missions proposed: One every 6 months, includingspecial procurement supervision for post-review/audits.
41
19. ProcurementAudits. UCSP will provide IDA, no later than six months after the end of each year,procurement records audited by independent procurement experts, acceptable to IDA. The records will bein accordance with internationally accepted standards.
Annex 6, Table C: Allocation of Credit Proceeds
Expenditure Category Amount in SDR Financing Percentage
1. Goods 180,000 100% of foreign expenditures and 85%of local expenditures
2. Consultant Services 1,880,000 100%
3. Training and coordination 880,000 100%
4. Refunding of PPF 350,000
5. Unallocated 410,000
Total: 3,700,000
20. Disbursement. The proposed IDA credit would be disbursed over the project's implementationperiod, from January 2000 to June 2003, plus six months to disburse on outstanding commitments.Disbursements would be made against the following categories:
- Goods: consisting essentially of (i) vehicles; (ii) computer hardware and software; and (iii)training materials and public awareness, for which 100% of foreign expenditures and 85% of localexpenditure would be disbursed;
- Services: consisting essentially of (i) consultant services, including for audits; and (ii) individualconsultants for UMA and UCSP, for which 100% of foreign and local expenditures would bedisbursed; and,
- Training and coordination: consisting essentially of training, workshops and coordinationmeetings, for which 1 00% of foreign and local expenditures would be disbursed.
21. Accounting, Financial Reports, and Auditing. For the purposes of carrying out the project a SpecialAccounts will be opened and maintained in US Dollars at the Banco Central de Bolivia (Central Bank ofBolivia) on terms and conditions satisfactory to IDA. Deposits into the Special Account and thereplenishments, up to the Authorized Allocations set out in the Disbursement Letter, will be made initiallyon the basis of Applications for Withdrawals (Form 1903) accompanied with the supporting and otherdocumentation as specified in the Disbursement Handbook. Once the accounting and financialmanagement systems of the UCSP is deemed compliant with LACI requirements, and is certified as suchby IDA, a migration to a PMR-based type of disbursements may be implemented as described hereafter.
22. The Financial Management Specialist for Bolivia conducted a review in the UCSP of the accounting,controls over disbursements and resources, planning and budgeting as well as the level of administrativestaff. It was determined that the UCSP has in place accounting and internal control systems that accordwith such accounting standards or agreed format and that reliably record and report all assets and liabilities
42
and financial transactions of the project including those transactions involving the use of IDA funds; andprovide sufficient financial information for managing and monitoring project activities.
23. Migration to LA CI. It was agreed that by June 30, 2000 the UCSP will complete the action plan forthe strengthening of its financial management system in order to enable the it to prepare quarterly ProjectManagement Reports (PMRs) which they cannot do at present. Each of these reports would show: (i)actual sources and applications of funds for the project, both cumulatively and fo,r the period, and projectedsources and applications of funds for the project for the following six-months; (ii) list separatelyexpenditures financed out of the credit during the period covered by the report and expenditures proposedto be financed during the following six-month period; (iii) describe physical progress in projectimplementation, both cumulatively and for the period covered, and explain variances between the actualand previously forecast implementation targets; and (iv) set forth the status of procurement under theproject and expenditures under contracts financed from the credit, for the period covered.
24. Financial Audit Arrangements. An independent external auditing firm, satisfactory to IDA, will behired by credit effectiveness to carry out annual audits of the project. The Guidelines and Terms ofReference for Audits of Projects with Financing by the World Bank in the Latin America and CaribbeanRegion published May 1999 will used by external auditors, in accordance with existing IDA procedures.Audit reports would be presented to IDA no later than six months after the closing date of the previousfiscal year. Six months after effectiveness the external auditors should submit a report to IDA commentingon the internal controls of the UCSP.
43
Annex 7: Indigenous Peoples Development Strategy
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
Hydrocarbon activities have in the past had significant impacts on many indigenous peoples'community areas in Bolivia. As a result, indigenous groups have organized themselves for betterprotection. Indigenous communities have in some cases successfully influenced the operational regulationsof specific oil companies. Since the passage of the Law of National Service of Agrarian Reform (INRA)and the Popular Participation Law in 1996, indigenous peoples' community organizations have becomebetter organized at both the national and regional levels, but they have tended to negotiate with oilcompanies on a case by case basis. A lack of a regulatory framework exists to guide their effort and ensureconsistent rules with which companies should comply. At present neither the oil companies nor theindigenous groups have a clear idea of what is being negotiated (access, right of way, entrance, potentialdamages, compensation). Without a system of checks and balances, the process may degenerate creatingmore damage to the social and environmental framework, which will be difficult to mitigate later. Inaddition, dispersed and uncoordinated compensation activities from oil companies will have little impact onthe long-term economic and social development of these communities.
While the INRA Law also regulates land titling to the benefit of the indigenous peoples'communities, the latter lack the necessary resources to effect the transactions. Because some of thehydrocarbon activities take place on lands claimed by indigenous communities or in the process of beingtitled to indigenous communities (TCOs or Tierras Comunitarias de Origen), oil companies need to ensureindigenous communities would not be harmed and reach agreement with them on specific compensationmeasures.
Therefore, indigenous peoples will be important players in the Project through meaningfulconsultation and active participation in: (1) the evaluation of regulation and mitigation frameworks; (2) thedevelopment of adequate mechanisms for compensation and mitigation; and, (3) in the definition of aninformation system, which is both timely and appropriate.
As part of the social and environmental analysis for the Project, several workshops and studies willbe carried out during implementation to: (1) determine mechanisms to ensure that oil companies conductmeaningful consultation with the indigenous communities (Annex 1 - Study 3.5); (2) determinemechanisms and frameworks which incorporate the participation of indigenous peoples into sectorregulation and monitoring activities (Annex 1 - Studies 3.2 and 3.3); (3) develop and implementmechanisms for the identification of potential social impacts to determine their effect/magnitude/severity onaffected populations (Annex 1 -Study 3.4); and (4) incorporate the perspective and experience ofindigenous groups into case studies of sector activities (Annex 1 - Study 3.6). The social andenvironmental analyses should specifically seek to identify indigenous or traditional knowledge which canin turn provide input into project design.
The participation of indigenous peoples' communities in the Project will be crucial to it's success.For instance, the training sub-component (1.4) will include a specific strategy for the inclusion ofindigenous peoples which is tailored to their capacity needs as identified through the consultation process.This training will build upon the efforts of the current IDA supported CIDA/ESMAP program, which seeksto build consensus between national government agencies, oil companies, indigenous peoples' communityorganization representatives and non-governmental organizations. This process has led to an agreement onspecific regulations of companies oil operations in indigenous people community areas (Law ofHydrocarbon Operations in Community Lands of Origin). This regulation, which provides for a processof meaningful consultation and participation by the indigenous people communities in hydrocarbon sectorproject development and implementation, is a result of two years of consultations led by the VMEH andVAIPO and is currently under final review.
44
Annex 8: Hydrocarbon Sector Regulatory Process for Environmental Licensing
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
T *| ~~PROJECT PROMOTORl
FA, EEIA, MA, PPM-PASA
Not approved /\ lvf
4~~~''- <O~~(SC)
REPORTS
.4 Not approved FEC
CATEGOf,S lAt
FA: Environmental FichaEEIA: Environmental Inpact AssessmentMA: Environmental ManifestPPM- PASA: Mitigation and Prevention Program - Environmental Monitoring Action PlanOSC: Competent Sectoral Entity the UMA of the VMEHAAC: Competent Environmental Authority - VMARNDFVMEH: Vice Ministry of Energy and HydrocarbonsUMA: Environmental Management UnitVMARNDF: Vice Ministry of Environment, Natural Resources and Forestry Development
Environmental Licenses:DIA: Declaration of Environmental Impact for Category I and 11DAA: Declaration of Environmental Adequation for Enviromnental ManifestsCD: Certification of Dispensation for Category HI
45
Annex 9: Documents in the Project File*
Hydrocarbon Sector Social and Environmental Management Capacity Building Project
A. Project Implementation Plan and Other Key Project Documents
1. Project Implementation Plan - Plan de Implementaci6n Proyecto Piloto Aprendizaje e Innovaci6n,dated May 11, 2000.
2. Operational Manual, dated May 11, 2000.3. Procurement Plan.
B. IDA Staff Assessments
1. Aide Memoire, April 21, 1999 (LIL identification mission).2. Aide Memoire, June 14, 1999 (LIL preparation mission).3. Minutes, June 4, 1999. Stakeholder Workshop on the Environmental Management Capacity
Building of the Hydrocarbon Sector.4. Aide Memoire, October 14, 1999 (LIL appraisal mission).5. Minutes, October 8, 1999. Stakeholder Workshop on the Environmental Management Capacity
Building of the Hydrocarbon Sector.6. Back-to-Office Report, Maria Teresa Serra, Results of Environmental Workshops Organized in
Bolivia in April 1999.7. Back-to Office Report, Lee Anne Adams, Stakeholder Workshop, December 1999.8. Back to Office Report, Eleodoro Mayorga-Alba, Bolivian Energy Sumnmit and ESMAP Indigenous
Training Program, May 2000.
C. Other1. Establishment of a Field Operation Group- Bolivia- National Secretariat of Energy -Environmental
Unit-Alconsult-December 19972. Bolivian Environmental Approval Process for New Hydrocarbon Projects-Review and
Recommendations- E2 Environmental Alliance Inc.- December 19983. The Disposal of Drilling Fluid Wastes- Alconsult- July 30, 1998-4. Plan de Acci6n Ambiental -Sector Hidrocarburo- Trminos de Referencia- Study Funded by IDB-
Credit 598
*Including electronic files.
46
Annex 10: Statement of Loans and Credits
Closed 5Projects
Difference BetweenLast PSR Expected and Actual
BoardDate Supervision Rating bI Original Amount in US$ Millions Disbursements a)
Fiscal DvlpetIpeettoYear Active Projects Development Implementstion IBRD IDA Cancel. Undisb. Orig. Fnn Rev'd
1992 P006180 RD MAINT S S 0 80 0 10.35 8.41 8.51993 P006196 INTEGRATED CHILD DEV S S 0 50.7 20 14.21 35.31 13.961995 P006181 EDUCATION REFORM S S 0 40 0 15.65 8.92 4.291995 P006197 LAND ADMINISTRATION S S 0 20.4 0 2.83 -0.82 01996 P006186 ENV.IND.&MINING S S 0 11 0 7.81 5.53 0.251996 P006206 RURAL WTR & SANIT S S 0 20 0 4.55 3.8 5.361998 P055974 BO EL NINO EMERGENCY S S 0 25 0 11.47 7.01 1.631998 P006204 EDUCATION QUALITY S S 0 75 0 59.44 16.64 01998 P040110 FIN DECEN &ACCT S S 0 15 0 8.02 0.02 01998 P040085 PARTICIP RURAL INV. S S 0 62.8 0 47.35 -2.47 01998 P057396 REG REFORM TAC S S 0 20 0 16.72 2.45 01999 P055230 ABAPO-CAMIRI HIGHWAY S S 0 88 0 87 13.83 01999 P060392 HEALTH REFORM S S 0 25 0 20.6 2.6 01999 P062790 INST REF (OLD CIV S) S S 0 32 0 30.62 0 01999 P057030 REG REFORM ADJ CREDI S S 0 41.78 0 19.63 17.7 0
47
BOLIVIASTATEMENT OF IFC's
Held and Disbursed PortfolioAs of 4/30/00
(In US Dollars Millions)
Held Disbursed
FY Ag2roval Companv Loan Equity Ouasi Partic Loan Eguitv Ouasi Partic
1976/88/90/91/95/98 BISA 0 2 0 0 0 0.46 0 01991 Bermejo 0 5.9 0 0 0 5.03 0 0
1989/92/94/96 COMSUR 3 0 0.84 1.5 3 0 0.84 1.51999 Caja Los Andes 1.8 0 0 0 1.8 0 0 01991 Central Aguirre 0.28 0.35 0 0 0.28 0.35 0 01993 GENEX 0.22 0 0.63 0 0.22 0 0.63 01999 Illimani 15 1 0 0 0 0 0 01992 IntiRaymi 0 0 5 0 0 0 5 01996 Mercantil-BOL 8.57 0 0 0 8.57 0 0 0
0/89 Minera 0 0.4 0 0 0 0.4 0 01996 Telecel Bolivia 9.26 0 5 18.52 5.93 0 5 11.85
TotalPortfolio: 38.13 9.65 11.47 20.02 19.8 6.24 11.47 13.35
Approvals Pending CommitmentLoan Equity Ouasi Partic
2000 COMSURV 10000 0 0 01999 Electropaz 25000 0 0 01999 PEB 15000 0 15000 30000
Total Pending Commitment: 50000 0 15000 30000
48
Annex 11: Country at a Glance
Latin Lower-POVERTY and SOCIAL America middle-
Bolivia & Carib. income Development diamond-
1998
PoDulation. midovear (friilions) 7.9 502 908 Life expectancy
GNP oar caita (Atlas method. US$S 1.000 3.940 1.7t0
GNP (Atlas method. US$ biftbon) 7.9 1.978 1.567
Average annual growth, 1992-98
Pooulation (%) 2.4 1.6 1.1Laborforce (%) 2.6 2.3 1.5 GNP Gross
Most recentestimate(latestyear available, 1992-98) per . primarycapita -.mt1e-nt
Poverty (% of rooulation behow national oovelv alne) 67Urban oooulation (% of total Doooulationl 63 75 58
Life expectanac at birth (vears) 62 70 68Infant mortalitv (Der 1.000 lve births) 67 32 38
Child malnutrition (16 of children under 5J 9 8 - Access to safe waterAccess to sate water f% ofDoDu&lfionl 60 75 75
Illiterac (v16 of ootsulation ace 15t) 17 13 14
Gross primarv enrollment (6of school-area oDulhtion) 91 113 103 BotiviaMale 95 -. 105 Lower-midldle-qn.come group
Female 87 .. 100
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1977 19S7 1997 1998Economic ratios
GOP fUSS billierlsl ,. 4.3 8.0 8.6
Gross domestic investment/GDP .. 13.5 19.8 20.0Exports of goods and services/GDP .. 19.6 22.2 19.7 Trade
Gross domestic savings/GDP . 12.8 10.4
Gross national savings/GDP .. .. 12.9 12.1
Current account balance/GDP 9.. -. 3 -6.9 -7.9 A
Interest payments/GDP .. 1.8 2.2 1.9 Domesc Investment
Total debVlGDP ,. 134.2 66.3 62.7 Savings I
Total debt service/exports 23.9 33.5 31.1 34,2 IIJ
Present value of debt/GOP .. .. 49.6
Present value of deb/exports .. - 264.7D t~~~~~~~~~~~~~~ndebtedness
1977-87 1988-98 1997 1998 199943
(average annual growth)GDP -1.8 4.2 44 4.7 5.7 -Bolivia
GNP per capita 1,6 1.4 2.? 3.4 Lower-middle-income grnupExports of goods and serwces -3.8 7.0 -3.7 2.7 9.2
STRUCTURE of the ECONOMY
1977 1987 1997 1998 GroWth rates of output anid investment (%)
(16 of GDP) 40Agriculture .. 24.7 17.1 15.4
Industry .. .. 28.4 28.7 20
Manufactung .. .. 17.0 16.5Servicesturin .. .. 154.5 55. 9 °
Pnvate ronsumption .. 79.7 73.4 75.6 -20
Genera oovernment consumDtion .. 11.1 13.7 14.0 - GOGOI ; GDP
Imports of goods and services 24.0 29.0 28.9
(average annual growth) 197747 1988-98 1997 1998 Growth rates of exports and importsa
Agriculture .. .. .. 20
Industry .. .. .. .. 1s
Manufacturng . ..
Services . . .
Prvate consumption 0.3 3.3 473 2
General povemment consumption -5.0 3.2 2.4 5.2 r 0 5 00 90Gross domestic investment -2.2 9.5 33.4 19.6 - 3
Importsofgoodsandservices IA 6.7 13.3 10.1 -sEps 4mports
Gross national product .. 4.0 3.7 5.1
Note: 1998 data are preliminary estimates.
The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond vill
be incomplete.
49
Bolivia
PRICES and GOVERNMENT FINANCE1977 1987 1997 1998 Inflation I%)
Domestic prices(% change) 16
Consumer prces '10.7 0.7 4,4 12 . ,.
Implicit GDP deflator .. 14.6 6.8 7.7 s ,.
Government finance 4(% of GDP, Includes current grants) oCurrent revenue .. 15.7 21.3 23.0 93 54 95 96 97 9
Current budget balance - -1.4 1.5 1.8 "'BGDP deflator '*CPOverall surplus/deficit .. -7.6 -3.3 4.0
TRADE
1977 1987 1997 1998 Export and import levels (USS millions)(US$ millions)Totalexports(fob) .. 519 1,167 1,104 2900
Tin .. 69 81 66Zinc .. 256 200 159 2,000Manufactures 183 195 1,500
Total imports (ci .. 767 1,851 1,983 1,000Food . .. 168 198Fuel and energy . .. 349 154 50Capital goods 74 22~ 14 1 1
Exoort Dnce index (1995=100). 94 90 92 93 94 95 96 97 ssImoort orice index (1995=1C01 85 79 E Exports *iR ImpsTerms of trade (1995=100) .. .. 111 114
BALANCE of PAYMENTS
(US.6 millions) 1977 1987 1997 1998 Current account balance to GDP ratio I%)
Exports of goods and services 695 653 1,413 1,355 D7~Imports of goods and services 759 920 2,062 2,128Resource balance -64 -268 -649 -773
Net income -69 -259 -98 -120Net current transfers 15 121 199 217
Current account balanoe -118 -406 -548 -676 3.
Financing items (net) 180 365 651 804Changes in net reserves -62 41 -103 -128
Memo:Reserves indudina aold (US$ miilionsJ .. 425 1.190 1.193Conversion rate (DEC. locaiIUS$) 3.OOE-5 2.1 5 3 5.5
EXTERNAL DEBT and RESOURCE FLOWS1977 1987 1997 1998
(US$ millions) Cormposition of total debt, 1998 (USS millions)Total debt outstanding and disbursed 1,734 5,636 5,283 5 386
IBRD 52 270 41 26 429 26IDA 57 141 965 1,044 1044
Total debt service 168 223 465 491ilDRC 4 39 24 15IDA 1 2 10 13 209
Comrosition of net resource flowsOffcial grants 18 133 299Offcial creditors 120 151 220 140 1442Private creditors 225 18 -29 -29Foreign direct investment -1 36 591 600Portfolio equity 0 0 0 0 1775
Wodd Bank programCommitments 92 92 0 227 A - IBRD E - BilateralDisburseements 25 43 126 66 B- IDA D- Other multilateral F - PrivatePrincipal repayments 1 20 25 19 C-IMF G-Shot-termNetttovws 24 24 101 47Interest payments 4 21 12 t0Net transfers 21 2 89 37
Development Economics 9121/99
IBRD 30380
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PETROLEUM EXPLORATION AND EXPLOITATION AREAS= TRADITIONAL ZONES PROTECTED AREAS: DEPARTMENT CAPITALS
PETROLEUM CONTRACTED AREAS MANAGED NATIONAL CAPITAL
UNDER REDEFINITION DEPARTMENT BOUNDARIES
PROPOSED -*- INTERNATIONAL BOUNDARIES
[ Ii POTENTIAL
I ~ ~ ~ 68' 66 64' 62'
-10' I BRAZI L , P BRAZILPERU
S- - I6Lpa
PANDO JCobija 12° PACIFtC
-12° \ 97t 4- < ( ~ OCEAN
v v or,_x B R A Z I L J ARGENTINA
60'
?f ~~~~BENI
16'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4
PERU A' Trinidad < 't |
\La PAZ SRUZ '^^
88 zo- cot sPy W ./. ~~~~- Q-Poto
I-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0
-> POTOSI HUQUISAC PARAGUAY
0 5H0 100 150 200 250 300
KILOMETERS22'
-22'This -ep oas pPodscad by the Mop Degn unii of The World Book.The bo-sd-ies, -olor, -en 0nn6-0 -nd- on'oher snfornsoo
@ ARGENTINA qbJ on olhi np do ot krpy, on the prl F Th. Wold B-kaGs-ossp .on'jdgn.entonthe l-gals5>0>0sof any terrttory, or to.
68' k 66' 64° 62 endorson,on or ocoeptonoe of -suh boondbries
I I I I I | MA^Pf B M
IBRD 30383
BOLIVIALANDS OF COMMUNAL ORIGIN
PETROLEUM EXPLORATION AND EXPLOITATION AREASz TRADITIONAL ZONES COMMUNITY TERRITORIES OF ORIGIN: DEPARTMENT CAPITALS
| PETROLEUM CONTRACTED AREAS WITH SUPREME DECREE * NATIONAL CAPITALNEWCLAIMS DEPARTMENT BOUNDARIES
IMMOBILIZED - - INTERNATIONAL BOUNDARIES
68° 66, 64° 62°
-10° BRAZI L PERU BRAZIL
-. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~BOLIVIA
\Cobija12
1 2'
BRAZIL / ~~~~ARGENTINAL 0 A t 6 v ~~~~BRAZIL
60.
1A,
PERU l inido
o La Paz 1_O' ~~~~~~~~~. %s <3nschobamba T 1 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~16
18/ r,
>"<~~2tl i®Potasi *- f** / . 4 /~'
A~~~~ ¢.>'0 \ ' )200
4 C H I L E ! 09 < Tasi a g 60 s 0 50 100 150 200 250 300CHILE H I L E T KILOMETERS 22I
22~~~~~~~~~~~~~~~~~~~~~~~~~2
This ,,'p p,od~~ed by the Mo~p Desin Ueif of The world Soak.Th. bou dries, oldo, der,oiotDo ondny other inrnhotion
, I!^ ARGENTI sho son -this pdo not nn p,on 1te port of The. Word BonkOroo, any jogseto. h logo
1statf ooy eroy,oan
618' * 66' endorsemeot or auceyoance ofsurh boundaries.
MARCH 2000
IBRD 30381
BOLIVIA
INDIGENOUS AND AUTOCHTHONOUS PEOPLES® DEPARTMENT CAPITALS
NATIONAL CAPITAL
DEPARTMENT BOUNDARIES
-. - INTERNATIONAL BOUNDARIES
68' 66° 64' 62'
10' BRAZIL .. ~~~~~~~~~~~~~~~~~~~~~~~~ ~L.- BRAZILB RAZ I L .,',tA \ \ PERU
YAMINAHUA .BOLIVIA
MACHINERI , - BOIA
I2 -4. ~~~~~~~~~~~~~PACIFIC 0~HILEl '.~~
N*" ~~~~~~~~~~~~~~~~OCEAN11/ ARGENTINA
TORO\D<| | iL . -*BRAZIL. ARAONA Z-t
P E R U F 9 ' 6 0 '
w~~~~~~~~~~~~~~~~~
r 5'S eH - N A | ^f ;w + . J
" AAUAY
16'16' AFROBOLIVIANG
@(ECockaloamba
CSanta HCIruEz!b Taijai 0 0 10 15 200250 po
MARCH 20'0
PARAGUAY
QUEC14UA ~~~~~~~0 50 100 150 200 250 300
KILOMETERS 21
22'Tho opwo prodooed by the Mop Deiqn Unitof The Word Book.~~~~Theoodre, color, demnainonayotr lrotn
ARGENTINA A-~~~~~~~~~~~~~~~~~~~ooono thi snpdo nor imply, onepono he World Eenh
t68' 660 64' -2 eenst- -rocpto-ca -foh Ionio
MARCH 2000