document of the world bank report n°: 62277-uy · establishment of an agricultural information and...
TRANSCRIPT
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report N°: 62277-UY
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF
US$49.0 MILLION
TO THE
ORIENTAL REPUBLIC OF URUGUAY
FOR THE
SUSTAINABLE MANAGEMENT OF NATURAL RESOURCES AND CLIMATE CHANGE
PROJECT
October 17, 2011
Sustainable Development Department
Latin America and the Caribbean Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
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THE ORIENTAL REPUBLIC OF URUGUAY
FISCAL YEAR January 1–December 31
CURRENCY EQUIVALENTS
(Exchange Rate Effective September 26, 2011)
Currency Unit = Uruguayan Peso (UR$)
UR$19.52 = US$1
WEIGHTS AND MEASURES
Metric System
ABBREVIATIONS AND ACRONYMS
AAA
AF
BCU
Analytic and Advisory Activities
Adaptation Fund
Central Bank of Uruguay
BP Bank Procedures
BROU
CC
CGN
CONEAT
Bank of the Oriental Republic of Uruguay
Climate Change
General Accounting Office
National Commission for Agro-economic Soil Studies
CPS Country Partnership Strategy
CBD Convention on Biological Diversity
CQ
DA
DGDR
Consultant Qualifications
Designated Account
Rural Development Directorate
DINAMA
DINAGUA
DNH
DNM
National Environment Agency
National Water Directorate
National Hydrographic Directorate
National Meteorological Directorate
DPSIA
DSA
Directorate for Promotion of Information Systems
Soils and Water Division
EIA Environmental Impact Assessment
ERR Economic Rate of Return
FAO
FM
FMD
Food and Agriculture Organization
Financial Management
Foot and Mouth Disease
FMR Financial Management Reporting
GDP Gross Domestic Product
GEF
GHG
Global Environment Facility
Greenhouse Gas
iii
GIS Geographic Information System
GOU Government of the Oriental Republic of Uruguay
GPN
GRAS
IAO
General Procurement Notice
Agro-climate and Information Systems Group
Internal Audit Office
IBRD International Bank for Reconstruction and Development
ICB International Competitive Bidding
ICC Inter-ministerial Coordination Committee
IDA International Development Association
IDSS Information and Decision Support System
IFR Interim Financial Reports
INIA
IRI
National Institute of Agricultural Research
International Research Institute for Climate and Society
(Columbia University)
ISDS
ISP
Integrated Safeguards Data Sheet
Implementation Support Plan
LPT Local Preparation Team
M&E Monitoring and Evaluation
MDR Rural Development Committee
MGAP
MIEM
Ministry of Livestock, Agriculture and Fisheries
Ministry of Industry, Energy and Mining
MIS Management Information System
MTR Mid-Term Review
MVOTMA Ministry of Housing, Territorial Planning and
Environment
NBF Non Bank-Financed
NBS National Biodiversity Strategy
NCB
NDVI
National Competitive Bidding
Normalized Difference Vegetation Index
NGO
NPRCC
Non-Governmental Organization
National Plan for Response to Climate Change
NRM Natural Resources Management
O&M Operation and Maintenance
OECD Organization for Economic Cooperation and
Development
OP Operational Policy
OPP Office of Planning and Budget
OPYPA
ORAF
Office of Agricultural Planning and Policy (MGAP)
Operational Risk assessment Framework
PAEFA Foot and Mouth Disease Emergency Recovery Project
PCN Project Concept Note
PDO Project Development Objective
PMU Project Management Unit
PID Project Information Document
POA Annual Operating Plan
iv
PPR Integrated Natural Resources and Biodiversity
Management Project
PRENADER Natural Resources Management and Irrigation
Development Project
QBS Quality Based Selection
QCBS Quality and Cost Based Selection
RENARE
RFP
General Directorate for Renewable Natural Resources
Request for Proposals
RVP Regional Vice Presidency
SBD
SEPA
Standard Bidding Documents
Procurement Plan Execution System
SIL
SNIG
Specific Investment Loan
National Livestock Information System
Regional Vice President: Pamela Cox
Country Director: Penelope J. Brook
Sector Director:
Sector Manager:
Ede Jorge Ijjasz-Vasquez
Ethel Sennhauser
Task Team Leaders: Ayat Soliman/Michael Carroll
v
Table of Contents
I. Strategic Context ..................................................................................................................... 1
A. Country Context ............................................................................................................ 1
B. Sectoral and Institutional Context ................................................................................. 2
C. Higher Level Objectives to which the Project Contributes .......................................... 4
II. Project Development Objectives ............................................................................................. 5
1. Project Beneficiaries ..................................................................................................... 5
2. PDO Level Results Indicators ...................................................................................... 5
III. Project Description .................................................................................................................. 5
A. Project Components ...................................................................................................... 6
B. Project Financing .......................................................................................................... 9
1. Lending Instrument ....................................................................................................... 9
2. Project Financing Table ................................................................................................ 9
IV. Implementation ........................................................................................................................ 9
A. Institutional and Implementation Arrangements .......................................................... 9
B. Results Monitoring and Evaluation ............................................................................ 10
V. Key Risks and Mitigation Measures ..................................................................................... 11
VI. Appraisal Summary ............................................................................................................... 11
A. Economic and Financial Analysis ............................................................................... 11
B. Technical ..................................................................................................................... 12
C. Financial Management ................................................................................................ 13
D. Social (including Safeguards) ..................................................................................... 14
E. Environment (including safeguards) ........................................................................... 15
Annex 1: Results Framework and Monitoring.............................................................................. 16
Annex 2: Detailed Project Description ......................................................................................... 21
Annex 3: Implementation Arrangements ...................................................................................... 34
Annex 4: Operational Risk Assessment Framework (ORAF) ...................................................... 48
Annex 5: Implementation Support Plan ....................................................................................... 50
Annex 6: Team Composition ........................................................................................................ 52
Annex 7: Documents in the Project File ...................................................................................... 53
vi
PAD DATA SHEET
Uruguay
Sustainable Management of Natural Resources and Climate Change
PROJECT APPRAISAL DOCUMENT
Latin America and the Caribbean Region
LCSAR
Date: October 17, 2011
Country Director: Penelope J. Brook
Sector Director: Ede Jorge Ijjasz-
Vasquez
Sector Manager: Ethel Sennhauser
Team Leader(s): Ayat Soliman/Michael
Carroll
Project ID: P124181
Lending Instrument: SIL
Sector(s): General Agriculture, Fishing and Forestry
Theme(s): Climate Change (40%), Other
environment and natural resources management
(40%), Other Rural Development (20%)
EA Category: B
Project Financing Data:
Proposed terms: Flexible IBRD Variable Spread loan Level Repayment linked to commitment
with a15 years grace period and total payment period of 20.5 years with all conversion options.
[X ] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:
Source Total Amount (US$M)
Total Project Cost:
Cofinancing:
Borrower:
Total Bank Financing:
IBRD
IDA
New
Recommitted
55.00
6.00
49.00
Borrower: Oriental Republic of Uruguay
Responsible Agency: Ministry of Livestock, Agriculture and Fisheries - MGAP
Contact Person: Ing. Agr. Alicia Martins
Telephone No. 589-2-419-7340
Email: [email protected]
vii
Estimated Disbursements (Bank FY/US$ m)
FY 2012 2013 2014 2015 2016
Annual 9.0 12.2 12.0 9.8 6.0
Cumulative 9.0 21.2 33.2 43.0 49.0
Project Implementation Period: January 1, 2012-March 1, 2017
Expected effectiveness date: November 30, 2011
Expected closing date: March 1, 2017
Does the project depart from the CAS in content or other
significant respects?
○ Yes X No
If yes, please explain:
Does the project require any exceptions from Bank policies?
Have these been approved/endorsed (as appropriate by Bank
management?
Is approval for any policy exception sought from the Board?
○ Yes X No
○ Yes X No
○ Yes X No
If yes, please explain:
Does the project meet the Regional criteria for readiness for
implementation?
X Yes ○ No
If no, please explain:
Project Development objective
The objective of the project is to support Uruguay’s efforts to promote farmer adoption of
improved environmentally sustainable agricultural and livestock practices that are climate
smart.
viii
Project description
Part 1. Establishment of an Agricultural Information and Decision Support System
Establishment of an agricultural information and decision support system, to integrate, synthesize, and
generate critical and timely information in relation to natural resource management, short and medium
term climate forecast, as well as potential long term changes and impacts, including:
(a) facilitating the integration of dispersed agriculture, natural resource management and new
climate-related information in an online state-of-the-art platform tailored to the needs of
different users including farmers, advisory service providers, rural insurance and agricultural
research and policy institutions;
(b) improving the methodologies and spatial resolution of seasonal climate forecasts and
establishing climate early warning systems;
(c) improving real time monitoring of climate, vegetation and other variables relevant to
agriculture;
(d) simulating and evaluating the expected impacts of introducing different adaptation technologies
and policies;
(e) carrying out of training programs for, inter alia, staff of RENARE, INIA and DNM, farmers and
advisory service providers on the use of the agriculture information and decision support system
(f) providing feedback and recommendations to improve targeting of MGAP’s assistance to
farmers, in particular for the investments financed by subprojects
Part 2. On Farm Investments for Climate Smart Agriculture and Livestock Management
(a) Carrying out of Subprojects consisting of investments and technical assistance to: (i) reduce
farm vulnerability to extreme climatic events; (ii) improve farm productivity and sustainability;
(iii) increase the availability of water resources for irrigation and livestock consumption; (iv)
promote adoption of an integrated approach to natural resources management practices in
agriculture and livestock production systems, including improved water use efficiency and
generation of biodiversity benefits in natural pastures; and (v) promote the adoption of energy
efficiency measures and the generation of cost effective and clean biomass energy in the
agriculture sector.
(b) Provision of technical assistance to Beneficiaries for the preparation and implementation of
Subprojects.
(c) Carrying out of training programs for: (i) Beneficiaries, to enhance their capabilities to
implement natural resources management and climate change adaptation and mitigation
activities; and (ii) rural workers engaged in natural resources management activities.
Part 3. Capacity Building and Training
Strengthening the capacity of: (a) farmers (regardless of their farm’s size) and technical staff of
advisory service providers to adopt integrated natural resource and water management; and (b) MGAP,
focused on RENARE, to implement its natural resources management programs and climate change
strategy in the agricultural sector, including, inter alia:
(i) the development of MGAP’s web-based services related to land and water use,
conservation and management;
(ii) the updating of RENARE’s soil mapping and cartography;
ix
(iii) the provision of technical assistance to improve the Uruguay’s legal and policy framework
and strengthen RENARE’s operational capacity on water resources management and
grasslands;
(iv) the provision of technical assistance to MGAP’s staff in the dissemination of experiences,
organization of conferences and participation in international events related to climate
change.
Part 4. Project Management, Monitoring and Evaluation
(a) Supporting the operation of the PMU for the efficient coordination and management of the
Project.
(b) Supporting the operation of a monitoring and evaluation system for the Project.
(c) Coordinating and supervising the implementation of the project’s training activities.
(d) Supporting the design and implementation of a communication strategy to disseminate results
and lessons learned within the Borrower’s territory and other countries acceptable to the Bank.
Safeguard policies triggered?
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waterways (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
x Yes ○ No
x Yes ○ No
○ Yes x No
○ Yes x No
○ Yes x No
○ Yes x No
○ Yes x No
○ Yes x No
○ Yes x No
○ Yes x No
Conditions and Legal Covenants:
Financing Agreement
Reference
Description of
Condition/Covenant
Date Due
Schedule 2, II B 1 Accounting and Management
Information System
Twelve months after
effectiveness
Schedule 2, I E 1 Compliance with provisions
of Environmental and Social
Management Framework
(ESMF) and procedures
outlined in the Operational
Manual
N/A
1
I. Strategic Context
A. Country Context
1. Uruguay’s economy is enjoying steady growth and a quick recovery of domestic demand
and exports. Uruguay has managed to decrease its vulnerability after the 2001-2002 financial
crisis and become more resilient to global economic events than many other emerging market
economies through a combination of solid macroeconomic policies, greater exchange rate
flexibility, rising international reserves and improvements in the banking system. As a net food
exporter, Uruguay benefitted from rising agricultural prices, particularly during the second half
of 2010, although this was partly offset by a sharp increase in oil prices. Furthermore, high
global liquidity favored access to low-cost financing and large inflows of foreign investments,
while the greater geographic diversification of exports, associated to growing commercial ties
with other dynamic developing economies, has helped to insulate the economy from the
economic slow-down in developed countries. Nevertheless, significant risks remain, in
particular: (i) the size of public debt relative to the economy and its share that is denominated in
foreign currency, which remains an important vulnerability factor, despite important
improvements in Uruguay's debt profile over the past years; (ii) inflationary pressures,
appreciation of the currency and exposure to global and regional shocks, among them higher
commodity prices; and (iii) natural disasters and climate change, which have already generated
important fiscal implications and a major impact on rural incomes in recent years.
2. Largely as a result of a rebound in both domestic demand and exports, real Gross Domestic
Product (GDP) grew at an annual average rate of 5.5% during 2003-2010. While economic
activity slowed at the end of 2008 and during the first quarter of 2009, growth resumed in the
fourth quarter and reached 2.9% for the year. Helped by recovery in private consumption and
normal rainfall (following the drought of 2008-2009), 2010 GDP reached an impressive 8.5%,
representing the eighth consecutive year of economic expansion since the 2002 crisis, and
marking one of the longest growth periods in the country’s history. Similarly, there has been a
significant reduction in poverty, from 34.4 percent in 2006 to 18.6 percent in 2010. Prudent
macroeconomic policies, improvements in structural areas, but also favorable external economic
conditions, such as buoyant demand for its main export products and a booming regional
economy, have contributed to the strong economic performance.
3. With the view to consolidating the positive economic and social outcomes achieved so far,
the present administration has identified the following key priorities to deepen reform
achievements: (i) strengthening competitiveness through increased coverage and better quality of
infrastructure and a more conducive business environment; (ii) expanding the impact of social
service delivery, with emphasis on education; (iii) enhancing productivity and income and job
generation in the agri-food sector; (iv) protecting the environment and mitigating and adapting to
the effects of climate change; and (v) improving security of citizens.
2
B. Sectoral and Institutional Context
The Agricultural Sector 4. The Uruguayan agricultural sector will continue to be one of the major economic drivers of
the country. The sector, which includes crops, livestock, and forestry, is one of the major
contributors to GDP and employment. In 2009, the sector contributed 10% of Uruguay’s GDP
and represented 65% of exports. Agriculture also accounts for about 11% of total employment in
the country. In terms of growth, following a rapid recovery from the severe contraction during
the economic crisis of 2001 (compounded by the outbreak of Foot and Mouth Disease (FMD)),
the sector grew at an annual average rate of 7.6% between 2001 and 2007, higher than the
average growth rate of national GDP (4.1%) for the same period.
5. About 85% of Uruguay’s area is suitable for agricultural production. Of the total land area
in the country, 77% is pasture land suitable for livestock and agriculture production, 8% is
cultivated land and 9% is forest land (WDI, 2005). In general terms, Uruguay’s comparative
advantages are clearly in livestock production and in a variety of agricultural products for export
(soybeans, dairy, and forestry), as well as in industrial goods closely linked to these sectors.
6. Despite the overall gains in productivity attained in the past decade and the successful in-
roads into export markets, the livestock and crop sectors remain vulnerable both to external
shocks, such as price and demand fluctuations in foreign markets, and domestic shocks, such as
weather-related events or disease outbreaks. According to studies conducted by the Ministry of
Livestock, Agriculture and Fisheries (MGAP), the estimated value of direct and indirect
economic losses to the beef cattle industry during the 2008/2009 drought ranged between US$
0.75 and 1.0 billion (Paolino et al, OPYPA, 2010). This vulnerability seems to have particularly
negative effects on family producers, which represent 63% of the country’s total number of
farmers and just over 15% of total land suitable for agriculture and livestock production. Family
farms are not only more vulnerable, but they also lag behind larger-scale producers in terms of
productivity and economic opportunities. Scale and cost of production have changed
dramatically over the past years in Uruguay and increasing costs have squeezed production
margins and farm profitability.
The Agricultural Sector and Climate Change
7. In recent years, Uruguay’s agriculture has been seriously affected by increasing climate
variability. In the last ten years, the country has experienced extreme floods and droughts,
increasing both in intensity and frequency as compared to historical records. Repeated and severe
floods and droughts have had a strong negative impact on rural livelihoods and production. For
example, the 2008/2009 drought resulted in direct losses to the agricultural sector of over
US$340 million. Based on climate scenarios for the next 50 years1, the country is expected to
face: a) Increase in temperature––temperature is likely to increase by 0.3-0.50C by 2020, by 1-
2.50C by 2050 and by 3.4
0C by 2100; b) Increase in precipitation – the amount of rainfall is
expected to increase 12% to 112mm/month by 2020 and 57% to 157 mm/month) by 2100; and
1 WB Climate Change Knowledge Portal (http://climateknowledgeportal.worldbank.org), The World Bank Country Notes on
Climate Change Aspects in Agriculture (December 2009), and
http://www.energyandenvironment.undp.org/undp/indexAction.cfm?module=Library&action=GetFile&DocumentAttachmentID
=2374
3
c) Increased frequency and intensity of extreme weather events – rainfall, winds, storms, and hail
storms, but also drought periods, will all increase in number and intensity. Climate models also
project increased precipitation both in summer and winter, although there is considerable
disagreement across climate models on these seasonal projections.
8. Together with land-use change and forestry, the agricultural sector accounts for 50.2% of
the country’s GHG emissions. The livestock sector alone is responsible for more than 92% of
total methane emissions. Although Uruguay ranked 89th
in the world in terms the total GHG
emissions, it ranked 30th
in terms of per capita GHG emissions in 20052. Therefore, there is a
clear opportunity for GOU to adopt a low carbon growth agenda thus, fulfilling its commitment
to the United Nations Convention on Climate Change (UNFCCC) while continuing to enhance
the productivity and efficiency of agricultural sector.
9. Climate change is expected to have a substantial impact on Uruguay’s economy, and is
already occurring in the form of greater variability of rainfall events, leading to droughts and
flooding, and severely affecting agricultural production and rural livelihoods. For example, by
2020, land productivity (measured in US dollars per hectare) is expected to fall below 62% of the
current level in the case of commercial farms, and below 54% in the case of small family-owned
farms due to weather related events.
Agricultural Natural Resource Base
10. Around 30% of the country’s territory and more than 80% of the arable lands have been
affected by varying degrees of soil erosion. Many of the activities that make up the current
production systems present new environmental challenges that need to be addressed within a
context of sustainable development. A lack of profitability at the farm level could provoke an
inappropriate and eventually detrimental intensification in the use of natural resources, to the
extent that producers are forced to shorten their planning horizon and place emphasis on the
achievement of short-term solutions to cash-flow shortages. To be sustainable, the current
process of intensification and changes in land use calls for improved knowledge and information
on soils, and the development of modern soil management techniques.
11. Significant changes have also taken place in the way producers utilize and manage water
resources. In the early 1990s, the country experienced a substantial expansion of irrigated
agriculture (particularly rice), partially supported by the Bank-financed Natural Resources
Management and Irrigation Development Project, PRENADER, (Loan 3697-UY). As increased
producer resilience and adoption of climate-smart systems will most likely result in growing
pressure on available water resources, the expansion of irrigated crop and forage production
would have to be accompanied by improved efficiency of water use. Water management for
agricultural and livestock will require a broad range of initiatives, including consolidation of
irrigation investments, improved irrigation technologies, increased water supply in the livestock
sector, appropriate management of livestock-related effluents and the establishment of a more
systematic groundwater monitoring system.
12. Even though it is one of the smallest countries in South America, Uruguay boasts
ecosystem richness and biological diversity due to the confluence of the Amazonian and Chaco
2 Climate Analysis Indicators Tool (CAIT) Version 7.0. Washington, DC: World Resources Institute, 2010.
4
domains, with mosaic-like habitats dominated by grasslands. Natural grasslands cover more than
70% of Uruguay and constitute a significant portion of one of the last extensive temperate
grassland eco-regions in South America, as well as the main productive resource for the majority
of beef cattle farmers. As such, effective biodiversity conservation measures need to be
integrated with the landholder’s production practices.
The Agriculture Sector and Energy
13. One of the cornerstones of Uruguay’s National Policy on Energy is the diversification of
the energy matrix, both in terms of demand and supply. To reduce costs and dependence on
imported oil, the National Policy on Energy (2008-2030) seeks to promote the growth and
participation of domestic energy sources, in particular renewable energy. More specifically the
policy includes the ambitious short-term goal of producing 50% of the country’s primary
generation from renewable sources by 2015, while simultaneously lowering its carbon footprint.
14. Within this framework, MGAP and the Ministry of Industry, Energy and Mining
(Ministerio de Industria, Energía y Minas, MIEM) have identified the use of agriculture waste as
a source of renewable energy and a potential co-benefit between adaptation, mitigation, and
sustainable development. At least 30% of agro-industrial and urban waste could be used for
generating various forms of energy, thus transforming an environmental liability into an asset.
Because of its large agricultural sector, Uruguay has a significant number of activities (such as
feedlots, slaughterhouses, dairy farms and processors, pig and poultry farms, and other food
industries) that generate high volumes of organic waste.
Government Priorities and Programs
15. As a signatory to the UNFCCC, Uruguay developed and adopted the National Plan of
Response to Climate Change whose main objectives are to (i) coordinate institutional actions for
an efficient response to the challenges of climate change; (ii) provide an efficient and effective
information and decision making system to address climate change induced risk; (iii) introduce
adaptation and mitigation strategies in the production sectors to minimize their vulnerability,
protect biodiversity and the ecosystems, and promote an environmentally sustainable economic
development. Aligned with these objectives, to address the complex set of productive, climate-
related and agro-environmental challenges facing the agricultural sector, the current authorities
of MGAP launched a strategy to convert the challenges of climate change into an opportunity.
The major elements of this strategy include addressing short-term impacts of climate variability,
integrating adaptation and mitigation measures, promotion of climate-smart intensification
technologies and production systems, strengthening research programs on adaptation and overall
inclusive sectoral growth with a reduced environmental and carbon footprint. This would
contribute also to the enhancement of the country’s reputation as a “green” producer (Uruguay
Natural), a feature valued highly by trading partners, which are increasingly demanding
environmentally sustainable products.
C. Higher Level Objectives to which the Project Contributes
16. The project is fully consistent with the World Bank Group’s Country Partnership Strategy
2010-2015 (Report #55863-UY) discussed by the Executive Directors on August 18, 2010.
Specifically, the project contributes to the achievement of Pillar III, aimed at protecting the
5
environment, addressing climate change adaptation and mitigation in the sector, and
strengthening family agriculture.
II. Project Development Objectives
17. The development objective of the project is to support Uruguay’s efforts to promote farmer
adoption of improved environmentally sustainable agricultural and livestock practices that are
climate smart.
18. This objective would be achieved through the development and implementation of
instruments that would provide farmers with critical and timely information for the adoption of
improved on-farm natural resources management as well as technical and financial assistance to
promote investments in their production systems aimed at reducing risks and making them more
resilient to extreme climatic events.
1. Project Beneficiaries
19. Based on the current geographical distribution of the main production systems, the
proposed project would be implemented nation-wide, with emphasis in the northern and
north/central regions of the country. The project would benefit about 4,000 family and medium-
sized famers (see definition in Annex 2), by promoting investment in improved natural resources
management practices and environmentally sustainable agricultural and livestock production
systems that would improve their resilience to extreme climatic events. The project would also
provide training to an additional 7,500 farmers, including commercial famers and rural workers,
to enhance their capabilities to adapt to a climate change environment. In addition, the project
would provide training and institutional strengthening to farmers’ organizations and MGAP staff,
while all producers, regardless of their size, would have access to improved information systems
for decision-making processes and enhancing overall resilience to climate variability at the farm
level. It is expected that 16,000 producers, or about one-third of the total number of farmers in
the country, would make extensive use of the new information system.
2. PDO Level Results Indicators
20. Key Results
IDSS information generated and utilized for decision-making
Producers have adopted climate smart agricultural practices for sustainable management
of natural resources
Resilience of productive systems in farms receiving support has improved
III. Project Description
21. In a strategy that aims at producing triple wins for the country, MGAP’s leadership is
promoting an innovative approach to management of natural resources and reduced impact of
climate variability in agriculture while improving agricultural competitiveness. Without such
integrated approach, climate change and the anthropogenic impacts on the country’s natural
6
resources could result in accelerated degradation. In this context, MGAP has requested World
Bank assistance to prepare and implement the proposed project to contribute to its climate
change adaptation and mitigation priorities. The project intends to make agriculture in Uruguay
more productive and more sustainable as a key to achieve a “green growth” path. The proposed
components would support policies and actions that make the environment a potential source of
growth from efficiency, innovation, and resilience to climate variability and change. In addition,
the proposed project will support the deployment of a “Climate Smart Agriculture” approach,
which is a core component of such growth, by promoting agricultural systems that can enhance
productivity, improve sustainable development and resilience, and support low carbon growth,
representing one element of an integrated results-oriented approach that the Bank has developed
through its partnership with MGAP, as described below.
Table 1: Stages of Natural Resources Management and Climate Change Engagement in Uruguay
Foundations and Early
Support
(Before 2005)
Strengthening
(2005-2010)
Consolidation
(2011- )
Knowledge
&
Convening
Services
Irrigation Sub-sector
Review (1990)
AAA Uruguay The
Rural Sector and Natural
Resources (2002)
Joint FAO/WB TCP:
Proyecto de Manejo Integral
de Agua y Suelo; TCP-Uru-
0167 (Integrated Water and
Land Management Project)
(2004)
Uruguay Country
Note on Climate Change in
Agriculture (2009)
AAA Family
Agriculture Development (2010)
AAA: Low Carbon Growth
Strategies for the Uruguayan
Economy (2011)
AAA: Weather Index
Insurance to Cover Grassland
Production in Uruguay (2011)
Agriculture and CC events
during COP16 (Cancun)
Financial
Services Natural Resources
Management and Irrigation
Development Project
(PRENADER) (1995)
Foot and Mouth Disease
Emergency Project (PAEFA) (2001)
Additional Financing
Foot and Mouth Disease
Emergency Project (PROSA) (2006)
Integrated Natural
Resources and Biodiversity
Management Project (PPR) (2005)
GEF: Biodiversity
Conservation and
Management Project
(2005)
IBRD: Sustainable
Management of Natural
Resources and Climate Change Project (2011)
Adaptation Fund: Building
Resilience to Climate Change and
Variability in Vulnerable
Smallholders Project (under
preparation)
A. Project Components
22. The proposed project, with a total cost of US$55.0 million (including contingencies),
would be financed by a World Bank loan of US$49.0 million, and Government counterpart funds
of US$6.0 million. Project objectives would be achieved through the following four components:
23. Component 1 – Establishment of an Agricultural Information and Decision Support
System (IDSS) (Total cost $6.5 million of which $5.2 million would be financed by IBRD
7
and $1.3 million by GOU). Establishment of an agricultural information and decision support
system, to integrate, synthesize, and generate critical and timely information in relation to natural
resource management, short and medium term climate forecast, as well as potential long term
changes and impacts, including: (a) facilitating the integration of dispersed agriculture, natural
resource management and new climate-related information in an online state-of-the-art platform
tailored to the needs of different users including farmers, advisory service providers, rural
insurance and agricultural research and policy institutions; (b) improving the methodologies and
spatial resolution of seasonal climate forecasts and establishing climate early warning systems;
(c) improving real time monitoring of climate, vegetation and other variables relevant to
agriculture; (d) simulating and evaluating the expected impacts of introducing different
adaptation technologies and policies; (e) carrying out of training programs for, inter alia, staff of
RENARE, INIA and DNM, farmers and advisory service providers on the use of the agriculture
information and decision support system mentioned herein; and (f) providing feedback and
advice to improve targeting of MGAP’s assistance to farmers, in particular in respect of sub-
projects.
24. Key outcomes of this component are: a) a public integrated climate and agriculture
information and decision support system accessible to public and private users; b) expanded
overall sector information to enable MGAP to improve the targeting of its future programs,
including activities financed under Component 2 of the project; c) identification of
vulnerabilities and potential opportunities for natural resources management and agricultural
production systems due to climate variability; d) wider use of insurance to cover climatic risks;
and e) improved exchange of Uruguayan experience related to climate change mitigation and
adaptation measures with other countries, mainly through South-South exchanges.
25. Component 2 – On Farm Investments for “Climate-Smart” Agriculture and
Livestock Management (Total cost $32.2 million of which $30.9 million would be financed
by IBRD, and $1.3 million by GOU). This component would be implemented by MGAP’s
Rural Development Directorate (DGDR) and would finance carrying out of demand-driven
subprojects consisting of investments and technical assistance to: i) reduce farm vulnerability to
extreme climatic events; ii) improve farm productivity and sustainability; iii) increase the
availability of water resources for irrigation and livestock consumption; iv) promote adoption of
an integrated approach to natural resources management practices in agriculture and livestock
production systems, including improved water use efficiency and generation of biodiversity
benefits in natural pastures; and v) promote the adoption of energy efficiency measures and the
generation of cost effective and clean biomass energy in the agriculture sector. Investment
proposals would be submitted by individuals or groups of farmers, as well as by producers’
organizations. A comprehensive set of beneficiary and subproject eligibility criteria to screen
investment proposals is summarized in Annex 2, and included in the Project Operational Manual.
The component will also provide technical assistance to beneficiaries for the preparation and
implementation of subprojects, and to carry out training programs for: (i) beneficiaries, to
enhance their capabilities to implement natural resources management and climate change
adaptation and mitigation activities; and (ii) rural workers engaged in natural resources
management activities.
8
26. Key outcomes of this component are: (i) the adoption of integrated natural resources
management practices and adaptation measures, with particular emphasis on increased on-farm
availability of water and improved water resources management, to improve the long-term
sustainability of farmers’ production systems as well as their resilience to extreme climatic
events; and (ii) the implementation of pilot investments aimed at mitigating emissions and
increasing utilization of biomass for energy generation.
27. Component 3 – Capacity Building and Training (Total cost of $11.1 million, of which
$9.3 million would be financed by IBRD and $1.8 million by GOU). This component would
finance activities aimed at strengthening the capacity of (a) farmers (regardless of their farm
size) and technical staff of advisory service providers to adopt integrated natural resource and
water management practices, and (b) MGAP, specifically of its Natural Resources Directorate
(RENARE), to implement its natural resources management programs and climate change
strategy in the agricultural sector including: (i) the development of MGAP’s web-based services
related to land and water use, conservation and management; (ii) the updating of RENARE’s soil
mapping and cartography; (iii) the provision of technical assistance to improve the Uruguay’s
legal and policy framework and strengthen RENARE’s operational capacity on water resources
management and grasslands; and (iv) the provision of technical assistance to MGAP’s staff in the
dissemination of experiences, organization of conferences and participation in international
events related to climate change.
28. Key outcomes of this component are: a) the development of modern cartographic
information integrated with climate and agriculture information and decision support systems
accessible to different users; b) the updating of the country’s soil use maps; c) the improvement
and integration of the existing GIS system in RENARE, as a critical element of the ISDS,
together with the cartography and soil information to be developed; d) the adoption of modern
methodologies for planning of land use at the farm level; e) the development of an improved
policy framework for water resources and grasslands management; and f) a comprehensive
training program for producers, and service providers on sustainable techniques for improved
soil and water management.
29. Component 4 – Project Management and M&E (Total cost of $4.1 million, of which
$3.6 million would be financed by IBRD and $1.2 million by GOU). This component would
provide the funds required for (a) supporting the operation of the PMU for the efficient
coordination and management of the project; (b) supporting the operation of the project’s
Monitoring and Evaluation (M&E) System; (c) coordinating and supervising the implementation
of the training activities described in Component 3; and (d) supporting the design and
implementation of a communication strategy to disseminate results and lessons learned within
the country and the region. The proposed project management team would be structured around
the resources of the existing Project Implementation Unit (UEP) established under the ongoing
Bank-financed Integrated Natural Resources and Biodiversity Management Project (Loan 7305-
UY, locally known as PPR) and key staff of MGAP.
9
B. Project Financing
1. Lending Instrument
30. The project would be financed by a Specific Investment Loan of US$49.0 million, and a
Government contribution from MGAP’s budgetary resources of US$6.0 million.
2. Project Financing Table
Table 2: Project Cost and Financing Table
Project Components
Project
Cost
IBRD
Financing
% of Bank
Financing
Government
Counterpart
1. Agricultural Information and
Decision Support System
2. On Farm Investments
3. Capacity Building
4. Project Management and M&E
Total Baseline Costs
Physical contingencies
Price contingencies
Total Project Costs
6.2
31.1
9.3
5.9
52.5
1.2
1.3
55.0
5.0
29.6
7.5
4.9
47.0
0.9
1.1
49.0
10.8
58.1
16.3
10.6
95.8
1.9
2.3
100.0
1.3
1.3
1.8
1.2
5.7
0.3
0.1
6.0 Note: Component amounts differ from those included in the description section due to contingency calculations
IV. Implementation
A. Institutional and Implementation Arrangements
31. The overall responsibility for the management of the Project would rest with the Ministry
of Livestock, Agriculture and Fisheries (Ministerio de Ganadería, Agricultura y Pesca, MGAP).
An Inter-ministerial Coordination Committee (ICC), led by the Minister of MGAP and
comprised of the Minister of Housing, Territorial Planning and Environment (Ministerio de
Vivienda, Ordenamiento Territorial y Medio Ambiente, MVOTMA), the Minister of Energy and
Mining (Ministerio de Industria, Energía y Minas, MIEM) and the Director of the Office of
Planning and Budget (Oficina de Planeamiento y Presupuesto, OPP), would be maintained to
define the policy framework related to climate change and climate variability within which
project implementation will take place. The representative of MVOTMA would be an official
from its National Environment Directorate (Dirección Nacional del Medio Ambiente, DINAMA).
32. For the overall management of the project, MGAP will be assisted by a Project
Management Unit (PMU), which would incorporate staff of the project unit of the ongoing PPR
project to draw on experience gained in the past five years. Both projects would overlap for at
least six months, further ensuring a smooth transition to the new operation. The PMU, which
would be located within MGAP’s General Secretary Directorate, would report directly to the
Minister, and would assume responsibility for the overall coordination of project activities and
carry out project management functions, including M&E, financial management, procurement,
and overall reporting to, and coordination with the Bank. The PMU would have one focal point
in each of the following MAGP’s units: Agricultural Information Systems Support Division
10
(Direction de Promoción de los Sistemas de Información Agropecuaria, DPSIA), to be created
within MGAP’s Director General’s Office to operate the IDSS, DGDR and RENARE, which
will be responsible for the implementation of Components 1, 2 and 3, respectively, under the
coordination of the PMU Director.
33. Regarding the subproject cycle for Component 2, the preparation and execution of
investment proposals to be financed under the project would be the responsibility of
beneficiaries. For this, eligible farmers (described in Annex 2 – Project beneficiaries) would
receive specialized technical assistance for both subproject preparation and implementation.
Beneficiaries would submit their proposals either to MGAPs regional offices or directly to
DGDR in Montevideo. Subprojects would be initially screened by MGAP’s Regional Offices
and would then be submitted to the project’s selection committee for evaluation. After final
evaluation, subprojects would be submitted to the PMU’s Selection Committee for final
approval. The maximum amounts to be financed by the project range from US$8,000 for
individual farmers to US$50,000 for groups of farmers or producer organizations. Minimum
beneficiary co-financing would be 20% of total subproject cost for family farmers and farmer
organizations, and 50% for medium-sized farmers.
B. Results Monitoring and Evaluation
34. The ongoing monitoring and evaluation system utilized by MGAP for the PPR Project
would be expanded during the first year of project execution to accommodate the M&E
requirements of the proposed project. The system, which would be managed by the PMU, would
use the performance and results indicators developed during preparation (included in Annex 1).
The baseline would be developed during the first year of the project. In the case of subprojects,
monitoring information would be complemented by an assessment of results and impact
generated, through the analysis of subproject samples, selected within eco-regions and
production systems. The overall assessment of project performance would be carried out at mid-
term and at the end of the project. The Mid Term Review (MTR), to be carried out in June-July
2014, would be the responsibility of the PMU assisted by independent consultants acceptable to
the Bank.
Sustainability
35. The innovative approach to integrated climate change and natural resources management
systems promoted by the project would contribute to improve farmers’ resilience to extreme
climatic events in the rural sector. In addition, the project would promote improved practices for
natural resources, providing information and support to service providers as well as drawing
special attention to viable farming and forestry/livestock practices that would contribute to
adaptation to climate variability and mitigation activities. In turn, it would establish the human
and institutional capacity to promote the adoption of production systems that are economically
and environmentally sustainable and that would reduce farmers’ vulnerability to climate change.
The main instrument to achieve these goals is the IDSS (Component 1). The IDSS is not
expected to face major sustainability issues, given that, once fully designed and functional, its
O&M should be adequately funded by MGAP, as is the case with the existing SNIG that
continues to be fully operational after more than 3 years since World Bank funding ended. In
addition, one of the main contributors to the IDSS is the GRAS managed by INIA, funded
primarily by the Uruguayan producers and exporters. Subproject sustainability is an inherent
11
feature of the design of the project, as investments to be supported would contribute to a win-
win-win strategy, in which overall income improvement would be a factor. This approach has
been successfully tested as part of the implementation of the PPR project, in which empirical
data and informal surveys suggests that the vast majority of subprojects has resulted in positive
results for the beneficiary, and continues to be adequately operated and maintained after five
years of implementation. Sustainability of subprojects would be further ensured by the demand-
driven nature of the project, and the requirement for beneficiaries to contribute at least 20% of
the cost of the subproject.
V. Key Risks and Mitigation Measures
36. The three main risks that emerged from the ORAF Matrix (see Annex 1), which could
affect the achievement of the PDO are:
Weak coordination among agencies: There is no precedence in coordination among the
three ministries at the project level. Risk mitigation measures: The three ministries have
already held several meetings at the ministerial level and have identified areas of mutual
benefits. The government has established a Coordinating Group which includes these
ministries (see section IV. A). Based on the current ministerial level direction and the
Coordinating Group, a technical level coordination mechanism would be developed for
project execution. Furthermore, the project includes institutional capacity building activities
to enhance coordination.
Commitment at the beneficiary level does not materialize: resulting in lower than
expected participation of beneficiaries in the project. Risk mitigation measures: Although the
farming community is fully aware of the consequences of climate variability following three
severe droughts in the past decade, the project provides not only information about climatic
variability but also provides information about best practices for farmers to adopt.
Furthermore, under Component 2, the project provides financial incentives for farmers to
mainstream climate risk in their investment decisions.
Climate change will likely exert additional stress at the farm level: With the forecasted
rise in temperatures, the number of extreme climatic events is expected to increase, thereby,
exerting additional stress to the country’s rural areas. Risk mitigation measures: The project
is aimed at helping farmers understand these extreme climatic events and be better prepared
in their investment decision. The project will provide not only best practice information but
also ways to reduce their carbon footprint. The information system to be developed will
provide pertinent weather forecasts and concrete scenarios of climate variability, especially
droughts.
VI. Appraisal Summary
A. Economic and Financial Analysis
37. The bulk of project resources would be devoted to promote on-farm investment aimed at
improving natural resources management in the main crop and livestock production systems,
thus making them more resilient to climate variability. However, it would not be possible to
carry out a traditional cost-benefit analysis of these investments, as an ex-ante determination of
12
costs and benefits of productive investments would not be feasible given the demand-driven
nature of activities to be executed under the project. Moreover, as only activities identified and
presented by potential beneficiaries would be considered, it would be impossible to determine a
priori the exact composition of the universe of investment subprojects that would be financed
under the project. Under these circumstances, economic return estimates were based on a sample
of investment subprojects most likely to be demanded by beneficiaries, which include
replications of some of the successful on-farm investments implemented under the PPR Project.
In the selected farm models, economic return calculations included the cost of incremental on-
farm productive investment and recurrent expenditures for the adoption of sustainable
agricultural production systems promoted under the project that would also increase farmers’
resilience to extreme climatic events. The analysis of the sample of illustrative subprojects
indicated that economic returns on investments are likely to exceed 18%.
38. A financial analysis was also carried out to assess the financial impact of productive
investments most likely to be demanded by farmers, along the same lines followed for the
economic analysis. The financial viability of these investments was analyzed using the same set
of farm models prepared for the economic analysis. As expected, given the level of financial
incentives provided, the selected farm model showed relatively high financial rates of return,
ranging between 25% and 42%.
39. Further supporting the analysis conducted, OPYPA’s estimates (see Paolino et al. 2010),
suggest that the direct losses of the agricultural sector as a result of the 2008/2009 drought
exceeded US$340 million. Therefore, even if only 10 percent of farmers were to become more
resilient as a result of project-financed adaptation measures, this would represent a benefit (in
terms of prevented losses) of more than US$30 million. Consequently, if past trends become the
norm, severe droughts can be expected every 4-5 years, therefore expected benefits as a result of
project activities can be assumed to exceed the US$30 million mentioned above.
B. Technical
40. The project is considered technically sound, given that:
The main elements that would contribute to a wider adoption improved natural resources
management practices and therefore reduce the vulnerability and increased long-term
sustainability of the main agricultural and livestock production systems, have been adequately
identified during project preparation and included in the implementation strategy of the project.
The integrated approach to management of natural resources in agriculture adopted by the
project would guarantee that climate change and the anthropogenic impacts would not result in
an accelerated deterioration of critical ecosystems of the country.
The implementation of project-financed pilot scale initiatives aimed at testing available
technologies for the adoption of energy efficiency measures and the cost effective utilization of
biomass for energy generation would promote a wider use of biomass energy among famers, thus
contributing to the mitigation of emissions in the agricultural sector.
The implementation of innovative public instruments to improve agricultural sector
information systems (the proposed ISDS), represents a pioneering approach to generation and
13
effective utilization of data for policy and decision makers, as well as an essential technical input
to enhance overall resilience to climate variability at the farm level.
Farmers’ participation in investment decision making process, the main technical aspects of
the matching grant scheme and the demand-driven approach that will characterize project
execution have been tested under the ongoing PPR Project.
The compliance of individual beneficiary subprojects with acceptable technical,
environmental and economic standards would be ensured through the participatory preparation
of subprojects, technical support for the identification, preparation and implementation of farmer
investments, and the establishment of detailed monitoring and evaluation instruments.
C. Financial Management
41. The Project Management Unit (PMU) will be in charge of project administration and will
undertake all financial management functions including budgeting, accounting and financial
reporting, internal controls, disbursements and documenting expenditures to the Bank and
external auditing arrangements. Financial Management (FM) risk is Low as no major risks have
been identified for the project. However, as the flow of funds may pose some complexity and
additional financial management constraints, the internal control framework becomes a key
element for managing and monitoring subprojects. Mitigation measures incorporated in project
design to address these risks comprise: a specific internal control framework applicable to
subprojects and included in the draft Project Manual; increased FM supervision during the start-
up period; and semiannual concurrent audit of subprojects under Component 2. FM
arrangements are detailed in Annex 3. Retroactive financing not exceeding US$2.0 million
would reimburse payments made up to one year before the date of signature of the Loan
Agreement for services and goods procured in accordance with Bank’s guidelines.
42. FM-related covenants include: (i) not later than six months after the end of each year, the
borrower shall furnish to the Bank annual audited financial statements; (ii) not later than 45 days
after the end of each calendar semester, the Borrower shall furnish to the Bank Semi-annual IFRs
which will be part of the progress reports of the project; and (iii) not later than 45 days after the
end of each calendar semester, the Borrower shall furnish to the Bank the concurrent audit report
of subprojects; (iv) not later than one year after project effectiveness date, MGAP will
implement an Integrated Accounting and Management System acceptable to the Bank.
Procurement
43. Procurement activities will be carried out by MGAP through the PMU, which would
incorporate staff of the project unit of the PPR project. An assessment of the Borrower’s capacity
was carried out by the team and a detailed action plan was prepared to address all risks
identified. The overall procurement risk has been rated as Moderate. The experience gained in
the implementation of the PPR project, and previously the Foot and Mouth Emergency Recovery
Project (Loan 7070-UY) suggest that the proposed PMU would have reasonable institutional
capacity to handle all aspects of procurement. While some weaknesses were identified with
respect to procurement processes carried out under the ongoing project, key staff in the PMU is
now experienced and familiar with Bank fiduciary requirements. Furthermore, the project will
replicate the main procurement procedures currently used (i.e., demand-driven, private
beneficiary executed subprojects with appropriate technical assistance, monitoring and
14
supervision arrangements), and additional procurement training and technical assistance for the
PMU is envisaged. A summary of the procurement capacity assessment and project procurement
arrangements is provided in Annex 3. The assessment identified a few factors that may
potentially affect project implementation and the proposed mitigation measures (Annex 4).
44. In addition to a limited amount of procurement (primarily goods and technical assistance),
the PMU and DGDR will be responsible for: (i) selecting eligible beneficiaries on the basis of
criteria acceptable to the Bank and specified in the Project Operational Manual; (ii) signing with
beneficiaries a standard project agreement approved by the Bank; (iii) providing or supervising
technical assistance to the beneficiaries for sub-project preparation and implementation; (iv)
supervising procurement carried out by the beneficiaries; and (v) acquiring and operating a MIS
with comprehensive procurement and financial information on the subprojects.
45. In general, demand-driven subprojects are expected to include small works and low cost
goods to be procured on the basis of standard simplified documentation in accordance with the
procedures set forth in Annex 3. Subprojects will also include technical assistance provided by
individual consultants to be selected on the basis of comparison of highly decentralized and
demand driven qualifications and experience of three qualified consultants, whenever possible.
The full assessment, including procurement procedures, instruments and thresholds, as well as
the specific staffing requirements of the PMU is included in Annex 3. The Procurement Plan
(PP) for the first 18 months of the project, dated September 27, 2011, was found acceptable by
the Bank. The PP will also be available in the project’s database and in the SEPA System. It will
be updated annually in agreement with the Bank, or as required to reflect actual project
implementation needs and improvements in institutional capacity.
D. Social (including Safeguards)
46. The project is not likely to have any adverse social impacts. Financial and technical
assistance would be provided on a nation-wide basis to family farmers to improve the
management of natural resources and adopt measures adapted to climate variability on their
lands. The implementation of subprojects is also likely to increase employment at the local level
since there could be an increased demand for labor for carrying out small works (i.e.,
infrastructure at the farm level), or for installing equipment. The project is built upon the
successful implementation of the PPR Project, and a period of at least six months of overlap
between the two projects is envisaged.
47. The social assessment has considered gender issues, avoidance of human resettlement
(which is not expected to occur) as well as land title and land tenure aspects. Indicators and
specific guidelines to address these matters have been included in the Project Operational
Manual. The M&E system will incorporate specific indicators (qualitative and quantitative) to
monitor progress on social and gender parameters. In order to further improve the scope of social
actions, MGAP recently established the Directorate of Rural Development (DGDR), aimed at
developing policies and programs targeted towards the most vulnerable sectors of the rural
population. DGDR will be responsible for the implementation of Component 2 of the project,
and its operation will be further strengthened with project support. During preparation, MGAP
held public meetings regarding the proposed project, attended primarily by stakeholders in the
agriculture and livestock sector. Consultations have revealed strong public support from the
15
agricultural sector and the general public, mainly due the successful implementation of the PPR
project, which generated a substantial demand from farmers and their organizations. Uruguay has
no indigenous population.
E. Environment (including Safeguards)
48. The proposed project is not expected to have any negative impact on the environment. The
three main components of the proposed project would provide a) improved information to
stakeholders in the agricultural sector; b) financial incentives, technical assistance and training to
farmers, and c) capacity building to the main government institutions for better natural
management of the land based on a territorial/landscape approach and with a clear focus on
adaptation to climate change.
49. Given the nature of the proposed project, project-financed interventions are expected to
have a strong positive impact on the environment as a result of better practices on natural
resource management being incorporated into the main production systems. The project would
ensure effective environmental screening of all subprojects proposed to be financed. If
determined necessary by the ESMF, the PMU shall make sure that Environmental Management
Plans are prepared and implemented by the beneficiaries for the carrying out of the subprojects
under Component 2 of the Project. Lessons learned from the previous project and the experience
gained by the MGAP have led to the introduction of a number of measures to deal with potential
shortfalls in the form of an agreed black-list or restrictive list, and included in the Project
Manual, specifying activities which are ineligible for funding. Subproject screening will be
conducted by specialized personnel within the PMU according to procedures specified in the
Operational Manual. A comprehensive Environmental and Social Management Framework
(ESMF), including a detailed analysis of all Bank safeguards and their relevance to the project
was developed by MGAP during project preparation, utilizing guidelines and procedures
developed and satisfactorily implemented by the PPR project. The ESMF was reviewed by the
Bank, and disclosed in-country on September 12, 2011 and through the InfoShop.
Table 3: Triggered Safeguard Policies
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment (OP/BP 4.01) [X] [ ]
Natural Habitats (OP/BP 4.04) [X ] [ ]
Pest Management (OP 4.09) [ ] [X]
Physical Cultural Property (OP/BP 4.11) [ ] [X]
Involuntary Resettlement (OP/BP 4.12) [ ] [X]
Indigenous Peoples (OP/BP 4.10) [ ] [X]
Forests (OP/BP 4.36) [ ] [X]
Safety of Dams (OP/BP 4.37) [ ] [X]
Projects on International Waterways (OP/BP 7.50) [ ] [X]
Projects in Disputed Areas (OP/BP 7.60) [ ] [X]
16
Annex 1: Results Framework and Monitoring
Uruguay: Sustainable Management of Natural Resources and Climate Change
Project Development Objective (PDO): The development objective of the project is to support GOU efforts to promote farmer adoption of improved environmentally sustainable
agricultural and livestock practices that are climate smart.
PDO Indicator Unit Baseline Target Values
Description Year 1 Year 2 Year 3 Year 4 Year 5
IDSS information generated and utilized
for decision-making
Number of users of
IDSS information 0 0 2,000 6,000 10,000 16,000
Number of and positive responses
to DIEA survey on IDSS use
Producers have adopted climate smart
agricultural practices for sustainable
management of natural resources
Area (000 ha), and
number of farms with
Project-promoted
practices
PPR
values 300 900 1,800 2,300 2,700
Coverage indicator that includes
the total area of farms benefitting
from subprojects and the Land
Use Plans
Resilience of productive systems in
farms receiving support has improved
Percentage increased
gross production
value
0 0 5 10 15 20 Percentage of production increase
17
Intermediate Results
Intermediate Results (Component 1)
Results Indicator Unit Baseli
ne
Target Values Description
Year 1 Year 2 Year 3 Year 4 Year 5
Integrated Information
System (IDSS)
Unified
Portal
accessible to
the public
0 100% 100% 100% 100% 100%
The new portal integrates the different existing systems
(SNIG, INIA-GRAS, SIG/RENARE) through compatible and
“user-friendly” formats
Specific information
products developed and
made available to
selected users
Four
products 0
25% per
product
50% per
product
75% per
product
100%
per
product
100%
per
product
The four specific information products are 1) improved
seasonal weather forecasts (higher resolution and frequency; 2)
early warning; 3) new and improved methods for monitoring
of soil use and vegetation (pastures and crops); 4) simulation
models of technological options. All to be developed at
national, eco-regional, state (Departamento) and farm level
Trained technical staff
of public and private
institutions
Total number
of trained
professionals
0 255
Staff from DNM and Agro-meteorology from INIA,
RENARE, and UDELAR is trained in methods to determine
and verify weather forecasts; INIA and RENARE staff is
trained to monitor crop and pasture condition. MGAP staff
trained in index-based agricultural insurance
Trained private users
Total
number of
trained users
0 800
Private users (lead farmers and service providers) trained in
the use of the IDSS for improved decision-making and
adoption of technologies
18
Intermediate Result (Component 2)
Results Indicator Unit Baseline Target Values
Description Year 1 Year 2 Year 3 Year 4 Year 5
Subprojects approved and
implemented
Number of
individual
subproject
beneficiaries
0 428 1140 1853 2423 2850
Financial support provided to family and
medium-size farmers in accordance to
the rules and procedures of the Project
Manual
Technical assistance provided to
farmers
Number of days
of TA 0 6,503 17,341 28,179 36,850 43,353
Number of days of service providers for
preparation and implementation of
subprojects
Subprojects with producer
organizations approved and
implemented
Number of
beneficiary
organizations
0 10 26 42 55 65
Financial support provided to eligible
organizations in accordance with the
rules and procedures of the Project
Manual
Technical assistance provided to
producer organizations
Number of days
of TA 0 1,748 4,661 7,575 9,905 11,653
Number of days of service providers for
preparation and implementation of
subprojects
Private sector professionals trained
and certified to provide technical
assistance
Number of
professionals 0 40 120 200 280 320
Number of professionals certified by
MGAP to provide advice to farmers and
producer organizations in NRM,
climate-smart agricultural systems and
practices, and rural development
19
Intermediate Result (Component 3)
Results Indicator Unit Baseline Target Values
Description Year 1 Year 2 Year 3 Year 4 Year 5
Updated Cartography (1:50,000)
available to the public domain 17 maps 0 25% 50% 75% 100% 100%
The 17 maps cover the Departments of
Treinta y Tres, Rocha, Tacuarembó, Rio
Negro, Colonia, Soriano, Cerro Largo,
Durazno, Paysandú, San José, Flores,
Florida, Salto, Rivera, Artigas,
Maldonado, Lavalleja
Manuals of best practices for
dryland crops and pasture
fertilization developed, approved
and disseminated
Number of
manuals 0 1 1 0 0 0
Soil use and management Plans
developed by farmers with over
1,000 has of crop area presented
in digital format compatible with
RENARE’s SIG
Percentage of
area 0 10 30 40 60 70
Cumulative percentage of crop area with Plans
developed
Monitoring of Soil use Plans by
RENARE
Percentage of
area 0 10 30 60 80 80
Cumulative percentage of crop area with
monitored Soil Use Plans
Private professionals trained and
certified in the preparation of
Soil Use Plans
Number 0 50 150 150 150 150
RENARE staff with
postgraduate degrees
Number of
scholarships 0 6 12 19 27 30
Regional RENARE offices
established
Number of
regional
offices
0 0 8 Office equipped and staffed
20
Intermediate Result (Component 4)
Results Indicator Unit Baseli
ne
Target Values Description
Year 1 Year 2 Year 3 Year 4 Year 5
Project activities are implemented in
accordance with the POA
Percentage of
POA execution 0 90 90 90 90 90
Percentage of approved budget
actually disbursed
Integrated M&E System developed and
implemented
Number of
Reports 0 1 2 2 2 2
Number of M&E reports
produced by PMU
Project beneficiaries and staff receive
training on themes related to project
objectives
Beneficiaries
trained 0 100 100 100 100 100
Percentage of annual goal
defined in the POA
Project activities are broadly communicated
and disseminated.
Events 0 100 100 100 100 100
Percentage of communication
and dissemination activities
defined in the POA
Women benefit directly from project
activities
Participating
women 0 25 25 25 25 25
Percentage of women
participating in activities from
all Project components
21
Annex 2: Detailed Project Description
Background and General Project Features
1. The Ministry of Livestock, Agriculture and Fisheries (Ministerio de Ganadería,
Agricultura y Pesca, MGAP) is in the process of developing and implementing a modern, well
targeted, integrated and inclusive “climate-smart” agricultural and rural development program
that would not only support efforts to achieve growth in the agricultural sector in general, but
would also promote the adoption of new technologies and sustainable agro-environmental
production practices among family farmers and medium-sized producers, thus contributing to the
final objective of increasing resilience to adverse impacts and achieving a more equitable and
sustainable development of the sector, in particular, and the country in general.
2. MGAP’s present policy aims at consolidating the integrated approach practiced in recent
years, which promoted sustainable use of natural resources while fostering comparative
advantages of the agricultural and food sector, particularly among medium-sized farmers and
family producers, which was partially supported by the ongoing Integrated Natural Resources
and Biodiversity Management Project (Proyecto Producción Responsable, PPR). At the same
time, Uruguay is a reliable exporter of beef to standard-sensitive markets and remains highly
responsive to increasingly rigorous international food safety and quality standards and thereby
maintaining competitiveness. In this context, the Government is also interested in developing a
comprehensive Agricultural Information System that could assist farmers’ in their decision
making process, by expanding the Bank-financed innovative livestock tracking system, which
now enables the individual tracking of all cattle in the country.
3. The GOU has launched a number of innovative programs and projects that contribute to the
country’s Biodiversity and Climate Change strategies while continuing to enhance the
productivity of the agricultural sector. As part of the Government National Response to Climate
Change Plan, which frames climate change adaptation and mitigation as an integrated agenda,
the ongoing PPR Project, (which is supported by the World Bank and the Global Environment
Facility (GEF), has been instrumental in motivating landholders to invest in better and more
diversified production systems, including integrated land and water management technologies as
an adaptation measure to withstand extreme weather conditions such as the periodic droughts
which the country has suffered in recent years.
4. The World Bank has recently completed an analytical study requested by MGAP on Family
Agriculture Development The report3 highlighted the need for an integrated and inclusive
agricultural development strategy, in which technical and financial assistance is specifically
targeted to family farmers to promote the adoption of new technologies and sustainable agro-
environmental production practices, thus strengthening their production systems and reducing
the comparatively higher vulnerabilities faced by the family farming sector.
3 World Bank (2010), Family Agricultural Development (AAA Report No. 55550-UY) delivered to the GoU on August 12,
2010
22
5. MGAP’s priorities also aim at consolidating the integrated approach practiced in recent
years, which promoted sustainable use of natural resources while fostering comparative
advantages of the agricultural and food sector. Within this framework, Uruguay has developed,
with World Bank assistance as part of the Foot and Mouth Disease Emergency Project, a modern
and reliable Livestock Information and Traceability System (Sistema Nacional de Información
Ganadera, SNIG). As a result, Uruguay has dramatically reduced its vulnerability to livestock
disease outbreaks - is currently a reliable exporter of beef to standard-sensitive markets and is the
only country in the region to achieve 100% individual tracking of cattle. Such instruments are
critical for remaining highly responsive to increasingly rigorous international food safety and
quality standards and thereby maintaining competitiveness.
6. The Government is interested not only in expanding the successful tracking system to other
livestock, but also to use the existing platform as the basis upon which to build a modern and
innovative Agricultural Information System, which would also provide critical and timely
information on climatic events and their potential impacts, which could be used by farmers as
early warnings in case of climate threats and for planning and decision-making on climate-
resilient investments and practices. An effective information system for creating climate
awareness is instrumental for the effectiveness of Government programs on the ground. There is
need for an easily accessible and integrated platform of information on climate and other factors
that affect production. Today this information is highly dispersed institutionally and hard to
access, interpret, and synthesize in a useful manner for decision making. Such platform can also
reduce a gap that is often perceived between research and actual needs of producers for technical
solutions. This would require technical and managerial capacity in the management of more
complex production systems. It also requires a high degree of coordination and distribution of
the information, for which the availability of technically qualified and trained human capital is
essential, as well as increased institutional support.
7. In terms of mitigation of the sector’s carbon footprint, MGAP’s strategy includes the
improvement of information related to the constraints and opportunities of the main agricultural
and livestock production systems, the promotion of renewable energy to reduce the consumption
of conventional energy sources, as well as technically and economically feasible investments in
capturing methane gas to produce clean biomass energy. Biomass energy is one of the potential
”triple win” investments as it reduces the agriculture sector’s carbon footprint while generating
clean and cost effective energy for farmers thereby reducing input costs of their production
processes.
8. The proposed project would assist Government in its efforts to promote farmer adoption of
improved environmentally sustainable agricultural and livestock practices that are climate smart.
In the absence of such an integrated approach, the impact of climate change and some
anthropogenic activities would lead to an accelerated degradation of the country’s critical
ecosystems and natural resources base. Within that context, the proposed project is expected to
further the success of the Integrated Natural Resources and Biodiversity Management Project
(PPR) and expand the government’s natural resources and climate change strategies within a
more inclusive rural development approach. To achieve its aims the project would develop
innovative instruments to promote on-farm investment in improved on-farm natural resources
management practices and environmentally sustainable agriculture and livestock production
23
systems that would reduce farmers’ risks and make them more resilient to climate variability,
while contributing to the implementation of climate change adaptation and mitigation measures
in the sector.
9. Consistent with the World Bank Group’s Country Partnership Strategy 2010-2015 (Report
#55863-UY) discussed by the Executive Directors on August 18, 2010, the project would
represent one element of an integrated results-oriented approach that would also include: (i)
Bank assistance to MGAP to access other possible sources of bilateral and multilateral financing
for climate change (such as the Adaptation Fund, for which Government, with Bank assistance,
has already submitted the respective applications); (ii) Bank analytical support in the form of an
AAA on “Low Carbon Growth Strategies for Agriculture and the Uruguayan Economy” and a
feasibility study for the “Introduction of NDVI/Weather Index Insurance to cover grassland
production in Uruguay”; and (iii) Bank technical assistance and collaboration with MGAP
regarding dissemination of experiences, organization of conferences, and participation in
international events related to climate change.
10. The project would support the Government’s National Plan of Response to Climate Change
(NPRCC) and Biodiversity Strategy. In particular, the proposed project contributes to the
NPRCC by: (i) establishing a framework for an early warning system and best practice tools and
methodologies (Component 1); (ii) implementing demand-driven investments at the farm level to
increase the long-tem sustainability of agricultural and livestock production systems and increase
farmers’ resilience to extreme climatic events (Component 2); and (iii) strengthening the
institutional capacity of main government agencies involved in the implementation of the Plan
(Component 3). The project would contribute also to the GHG emission reduction strategy
envisaged in the National Plan by supporting investment in energy efficiency measures as well as
generation of cost effective and clean biomass energy. Furthermore, through the support to the
adoption of sustainable natural resources management and biodiversity conservation in natural
pastures, the proposed project also contributes to GOU’s Biodiversity Strategy.
11. In an environment characterized by the periodic occurrence of extreme climatic events,
famers would require timely information on future climatic events and their potential impacts to
assist them in their investment and production decision-making processes. By enhancing current
public information systems, the project is expected to provide critical information on climatic
events that could be used by decision makers and farmers to adopt climate resilient investments
and practices. Furthermore, the project would provide financial incentives to farmers and
livestock producers to encourage the adoption of a holistic approach to natural resources
management and promote investment in economically and environmentally viable production
systems that would reduce their vulnerability to extreme climatic events. Within this holistic
natural resources management strategy, increased availability of water resources and a more
efficient use of water at the farm level are seen as central to both farmers’ adaptation to future
climatic changes and the long term sustainability of their production systems. Under the
proposed integrated approach to natural resources management, the project aims at promoting
also a better understanding of potential measures to mitigate the impact of climate change on
agricultural production and providing incentives for investment in activities that would reduce
emissions and increase the utilization of biomass for energy generation. While, initially, these
24
investments would be on a pilot scale, they are expected to broaden the range of available
technologies and eliminate barriers to the adoption of practices.
12. A demand-driven strategy would be adopted for the implementation of project-supported
on-farm investments. Within this strategy, individual small- and medium-sized farmers as well as
groups of farmers would submit investment proposals to improve natural resources management
and implement on-farm adaptation and mitigation measures. Proposals approved by the project,
following agreed selection criteria, would then receive financial and technical support.
13. Based on the successful implementation of PPR and the current geographical distribution
of the main production systems, the proposed project would have a nation-wide execution, with
emphasis in the northern and north/central regions. Project execution would be supplemented by
activities to be financed by the Adaptation Fund Project (currently under preparation), which are
aimed at reducing vulnerability and building resilience to climate change and variability of
family producers engaged in livestock production systems in areas with high predominance of
native grassland ecosystems on shallow soils, with low water storage capacity. Consequently,
while the proposed project would have a nation-wide execution, activities financed by the
Adaptation Fund would be focused on family agriculture in selected areas within two specific
regions, which are characterized by high levels of vulnerability, namely the regions of Basalto
and the Lomadas del Este. However, for the implementation of its activities, the activities
supported by the project and the Adaptation Fund would use the same beneficiary eligibility and
selection criteria.
Project Beneficiaries
14. The Project would provide technical assistance and financial incentives, on a matching-
grant basis, to some 4,000 family producers and medium- sized famers to promote investment in
economically and environmentally sustainable agricultural and livestock production practices
that would improve their resilience to extreme climatic events. The project would provide also
training to some 6,000 farmers, including large famers, to enhance their capabilities to adapt to a
climate change environment. Training would be available also to about 1,500 rural workers
involved in natural resources management activities. In addition to training, farmers’
organizations would receive institutional strengthening to improve their capabilities to assist
their members with the preparation and implementation of measures aimed at adaptation to
extreme climatic events.
15. Additionally, all producers, regardless of their size, would benefit from the project-
financed Information and Decision Support System (IDSS) aimed at improving farmers’
investment and production decision-making processes and enhancing overall resilience to
climate variability at the farm level. It is expected that throughout the life of the project some
16,000 producers, or about one-third of the total number of farmers in the country, would make
extensive use of the IDSS and thus improve their investment decision making processes.
16. Finally, the project would provide also assistance to MGAP to strengthen its overall natural
resources management capabilities, through training of staff of RENARE, the creation of a
25
specialized grassland unit within RENARE, and the expansion of its Geographical Information
System, which would be integrated into MGAP’s new IDSS.
17. Producers eligible for project assistance would receive different levels and types of
assistance, particularly with regard to financial incentives, depending on farm size and financial
performance. However, the core of project resources would be directed towards both family
producers and medium-sized producers. Operational details, including type and size of
subprojects, the actual level of financial incentives for project-promoted on-farm investments,
co-financing arrangements, and implementation procedures were developed during project
preparation. Detailed guidelines for the implementation of this component have been included in
the project’s comprehensive Operational Manual. A summary of project support measures by
type of beneficiary are presented in the table below.
Table A2.1: Allocation of Project Support by Beneficiary
Beneficiaries Type of Project Support
Financial
assistance for on-
farm investments
Technical
Assistance
Training Institutional
Strengthening
Family producers x x x
Medium-sized producers x x x
Farmers’ organizations x x x x
Large producers x
Small Fishermen x x x
Rural laborers x
18. Family Producers. The Government has recently introduced the concept of family
agricultural producers, to define the main target population which is expected to benefit from
future MGAP special policies and programs aimed at promoting a more inclusive economic
development of the rural sector. A producer would be classified as “family producers” when the
following characteristics are met4:
i. Farm output is produced with the assistance of family labor and a maximum of 2 wage
laborers hired on a permanent basis or 500 man/days of temporary labor per annum.
ii. Farm size does not exceed 500 hectares (CONEAT 100)5.
iii. Farm production is the main source of income; or the farm should be the farmer’s full
time occupation.
iv. The farmer resides in the farm or in a place located 50 km, or less, from the farm.
19. On the basis of these general criteria, specific definitions of family producers were
developed for the main production systems, as indicated in the table below. Some 32,000
4 MGAP Decree (Resolución del MGAP), 29 July 2008
5 CONEAT is an indicator of soil quality prepared by National Commission for Agro-economic Soil Studies of
Uruguay (Comisión Nacional de Estudios Agro económicos de la Tierra), with 100 denoting the national average.
26
farmers, or about 63% of the total, are classified as family producers, who control about 15% of
the area under agriculture and livestock production.
20. Medium-sized and large sized- producers, as defined in the table below, which represent
about 25% and 12% of the total number of Uruguayan producers respectively, control nearly
85% of the total land available for crop and livestock production.
21. Eligibility criteria for project-financed incentives and support would be based on
parameters currently used by MGAP to classify producers into family producers, medium sized-
and large-sized producers, as indicated below.
Table A2.2: Project Beneficiaries
Production System Type of beneficiary
Family Producer Medium-sized
producer
Large-sized
producer
(No. of ha) (No. of ha) (No. of ha)
Beef and wool
production
≤ 500 501 to 1.250 > 1.250
Dairy production ≤ 150 151 to 400 > 400
Rainfed agriculture ≤ 150 151 to 400 > 400
Fruit production ≤10 11 to 20 > 20
Horticulture
Rainfed ≤ 15 15 to 30 > 30
Irrigated ≤ 6 6 to 12 > 12
Greenhouse ≤ 0.6 0.6 to 1.2 > 1.2
Source: Tommasino and Bruno (2005)
Project Description and Components
22. The project would provide technical and financial assistance (on a matching-grant basis) to
demand-driven investment subprojects aimed at introducing improved natural resources
management practices as well as reducing the vulnerability and increasing the long-term
sustainability of agricultural and livestock production, with particular emphasis on the needs of
medium- and small-sized farmers. The project would incorporate also specific support for the
development of innovative public instruments to improve information systems for investment
and production planning and decision making, as well as to enhance overall resilience to climate
variability at the farm level.
23. The proposed project, with a total cost of US$ 55.0 million, would be funded by a Bank
loan of US$49.0 million and Government counterpart funding of US$ 6.0 million. Project
objectives and implementation would be complemented by parallel financing from the
Adaptation Fund in the amount of US$ 10.0 million (Concept approved and full proposal
currently under preparation by MGAP).
27
24. The project objectives would be achieved through the following four components:
Component 1 – Establishment of an Agricultural Information and Decision Support
System (IDSS) (Total cost $6.5 million of which $5.2 million would be financed by IBRD
and $1.3 million by GOU). This component would finance the establishment of an agricultural
information and decision support system, to integrate, synthesize, and generate critical and
timely information in relation to natural resource management, short and medium term climate
forecast, as well as potential long term changes and impacts, including:
(a) facilitating the integration of dispersed agriculture, natural resource management and new
climate-related information in an online state-of-the-art platform tailored to the needs of
different users including farmers, advisory service providers, rural insurance and agricultural
research and policy institutions;
(b) improving the methodologies and spatial resolution of seasonal climate forecasts and
establishing climate early warning systems;
(c) improving real time monitoring of climate, vegetation and other variables relevant to
agriculture;
(d) simulating and evaluating the expected impacts of introducing different adaptation
technologies and policies;
(e) carrying out of training programs for, inter alia, staff of RENARE, INIA and DNM, farmers
and advisory service providers on the use of the agriculture information and decision support
system mentioned herein; and
(f) providing feedback and advice to improve targeting of MGAP’s assistance to farmers, in
particular in respect of Sub-projects.
25. This component will allow the generation of critical and timely information to predict
climatic events and their potential impacts, which would be used by decision makers and farmers
to adopt climate resilient investments and production practices. The aim of this component is to:
a) facilitate integration of dispersed agriculture, natural resource management and new climate-
related information in an online state-of-the-art platform tailored to the needs of different users
including farmers, advisory service providers and rural insurance/ rural credit organizations;
b) assess the adaptive capacity and potential risks of different production systems, using different
technologies and under different climate conditions; c) simulate and evaluate the expected
impacts of introducing different adaptation policies; and d) provide feedback and
recommendations to improve targeting of MGAP’s assistance to farmers, in particular for the
investments financed under Component 2.
26. The new Information and Decision Support System (IDSS), would be build around the
existing Livestock Information System (Sistema Nacional de Información Ganadera, SNIG),
28
INIA’s Information System (Grupo de Agroclima y Sistemas de Información, GRAS), and
RENARE’s GIS, and would provide critical information to public decision-makers, farmers,
advisory service providers, and rural insurance/rural credit organizations to assess climate related
risks and to evaluate the expected impacts of establishing different resilient investment and
production decisions.
27. Under this component, the project would finance:
a) Technical Assistance, including 20 staff/months of IT consultants for the design of
IDSS plus 3 staff/years to assist with the implementation and operation of the new system, which
would be provided by the International Research Institute for Climate and Society (IRI) of the
University of Columbia.
b) Hardware to update the existing SNIG and facilitate its integration with GRASS and
GIS systems.
c) Software to operate the integrated system and expand the scope of information
handled; and
d) Incremental costs of the new system’s operation and management.
28. Key outcomes of this component are: a) integrated climate and agriculture information and
decision support systems accessible to different users; b) expanded overall sector information to
enable MGAP to improve the targeting of its future programs, including activities financed under
Component 2 of the project; c) identification of vulnerabilities and potential opportunities for
natural resources management and agricultural production systems due to climate variability;
d) quantification of uncertainties in climate information to increase confidence in the use of that
information; e) identification of technologies and methodologies that enhance the outcomes of
on-farm investments and reduce vulnerabilities to extreme climatic events; f) wider use of
insurance to cover climatic risks; g) identification of climate smart interventions and best
practices, and h) improved exchange of Uruguayan experience related to climate change
mitigation and adaptation measures with other countries, mainly through South-South exchanges.
29. Component 2 –On Farm Investments for Climate-Smart Agriculture and Livestock
Management (Total cost $32.2 million of which $30.9 million would be financed by IBRD,
and $ 1.3 million by GOU). This component would finance:
(a) Carrying out of Subprojects consisting of investments and technical assistance to: (i)
reduce farm vulnerability to extreme climatic events; (ii) improve farm productivity and
sustainability; (iii) increase the availability of water resources for irrigation and livestock
consumption; (iv) promote adoption of an integrated approach to natural resources management
practices in agriculture and livestock production systems, including improved water use
efficiency and generation of biodiversity benefits in natural pastures; and (v) promote the
adoption of energy efficiency measures and the generation of cost effective and clean biomass
energy in the agriculture sector.
(b) Provision of technical assistance to Beneficiaries for the preparation and implementation
of Subprojects.
29
(c) Carrying out of training programs for: (i) Beneficiaries, to enhance their capabilities to
implement natural resources management and climate change adaptation and mitigation
activities; and (ii) rural workers engaged in natural resources management activities.
30. Given the demand-driven nature of subprojects presented by family producers and
medium-size farmers, initiatives with emphasis on on-farm investment proposals would:
a) reduce farm vulnerability to extreme climatic events; b) strengthen farm productivity and
sustainability; c) increase the availability of water resources for irrigation and animal
consumption; d) adopt an integrated approach to natural resources management practices in
agriculture and livestock production systems, including improved water use efficiency and
generation of biodiversity benefits in natural pastures; and e) promote the adoption of energy
efficiency measures as well as generation of cost effective and clean biomass energy in the
agriculture sector.
31. Within this component, the project would finance:
1) Eligible on-farm investment subprojects submitted by project beneficiaries, either as
individual producers or as producers’ organizations. Financial incentives, on a matching-grant
basis, would be provided by the project to family producers and medium- sized famers to
promote investment in improved natural resources management practices and economically and
environmentally sustainable production systems. Depending on the production system and
activity, investments supported by the project would include, among others:
i. Extensive livestock production system: investment in water supply for livestock; small
irrigation systems for the strategic production of forage crops; and fences to improve natural
pasture management.
ii. Dairy production: investment in water supply; irrigation systems for forage; technology to
improve water use efficiency; and waste water treatment systems.
iii. Crop production systems: investment in: (a) improved soil management in extensive
agriculture and irrigated crop production areas; (b) consolidation and expansion of existing
irrigation systems; (c) irrigation technology to improve irrigation water use efficiency; (d)
expansion of agricultural diversification into high value crops, such as vegetables and fruits; (e)
reduction in the use of agrochemicals; and (f) adoption of minimum or zero tillage.
iv. Biomass energy production: the project would support for the implementation of about 10
pilot projects, particularly in the dairy sector, aimed at testing available technologies for the cost
effective utilization of biomass for energy generation, as a means of promoting a wider use of
biomass energy among famers, and promote the adoption of energy efficiency measures, thus
contributing to the mitigation of emissions in the agricultural sector.
2) Technical assistance: project beneficiaries would receive financial support to contract
private technical assistance for the preparation and implementation of their investment
subprojects. Professionals providing technical assistance to project beneficiaries would be
trained and approved by the project to ensure that they adopt a holistic approach towards the
farm’s natural resources management and follow the general guidelines that would be generated
by Components 1 and 3.
3) Training: the project would finance training programs for: (a) farmers, regardless of
their size; (b) farmers’ organization, to enhance their capabilities to assist their membership in
30
the implementation of natural resources management and climate change adaptation and
mitigation activities; and (c) rural workers engaged in natural resources management activities.
32. Using the experience and the lessons learned from the PPR as a baseline, a set of clear
selection and eligibility criteria to screen demand-driven investment proposals that would benefit
from the project’s financial support were developed.
33. Once approved, financing from the Adaptation Fund would contribute an additional $7-10
million to expand the activities financed by this component, focusing on smaller farmers in two
specific regions which are characterized by high levels of vulnerability, namely the “Basalto”
and the “Lomadas del Este” regions. Beneficiaries of the Adaptation Fund would be selected
using the same eligibility and selection criteria as the ones used by the project. Depending on the
outcome of the Bank-financed Feasibility Study on Livestock Insurance, currently underway,
this component could also assist in the design of financial incentives to farmers to promote, a
wider use of insurance products to cover risks of extreme climatic events.
34. Key outcomes of this component would be: (i) the adoption of integrated natural resources
management practices and adaptation measures, with particular emphasis on increased on-farm
availability of water and improved water resources management, to improve the long-term
sustainability of farmers’ production systems as well as their resilience to extreme climatic
events; (ii) the implementation of investments in pilot activities aimed at mitigating emissions
and increasing utilization of biomass for energy generation, which would be expanded in the
event of the GEF project being approved; and (iii) by promoting investments that internalize the
extreme climatic variability, the project would minimize long term costs, enhance farm
productivity, and reduce overall vulnerability. Operational details for the implementation of this
component, including type and size of eligible subprojects, co-financing arrangements and
procedures have been included in the project’s comprehensive Operational Manual, presented by
MGAP as a condition for Loan Negotiations.
35. Component 3 –Capacity Building and Training (Total cost of $11.1 million, of which
$9.3 million would be financed by IBRD and $1.8 million by GOU). This component would
finance activities aimed at strengthening the capacity of: (a) farmers (regardless of their farm’s
size) and technical staff of the Borrower’s advisory service providers, to adopt integrated natural
resource and water management; and (b) MGAP, focused on RENARE, to implement its natural
resources management programs and climate change strategy in the agricultural sector,
including, inter alia:
(i) the development of MGAP’s web-based services related to land and water use,
conservation and management;
(ii) the updating of the country’s soil mapping and cartography;
(iii) the provision of technical assistance to improve the legal and policy framework and
strengthen RENARE’s operational capacity on water resources management and grasslands; and
(iv) the provision of technical assistance to MGAP’s staff in the dissemination of experiences,
organization of conferences and participation in international events related to climate change.
31
36. Under this component, strengthening of RENARE’s functions would be focused on:
1) Training of farmers and staff in natural resources management strategies, with
particularly reference to soil and water resources and natural pastures. Training activities would
include: (a) formal courses; (b) seminars; (c) workshops; and (f) demand driven training
opportunities. These activities would be partially implemented by the PMU, given the need for
the delivery of the training program to cut across the different components of the project and to
be fully coordinated among components,
2) Grasslands Management Framework: the project would finance short-term
consultants to improve RENARE’s legal and policy framework related to grasslands, and
provide on-the-job training to the staff that would assume future operation and management
responsibilities on grasslands.
3) Geographical Information System (GIS). The project would finance: (a) short-term
consultants to design the expansion of the existing GIS; (b) upgraded computing system and
software required for the expanded GIS, and (c) technical assistance for the operation of the
expanded GIS and its integration into MGAP’s new IDSS.
4) Soil and Water Laboratories. The project would provide new equipment and material
to upgrade RENARE’s soil and water laboratories, plus training to staff. Detailed upgrade
requirements were agreed at Appraisal.
5) Soil maps. Under this component, updated countrywide soil maps would be prepared
and published, including new maps with an updated CONEAT distribution of soils.
6) Land Use Plans. Under this component, technical assistance would be provided for the
preparation of a new instrument for farm-level Land Use Plans and upgrade RENARE’s program
of technology transfer and dissemination of soil and water conservation issues. The new Land
Use Plan is expected to provide general guidelines to farmers on sustainable land uses by main
geographical areas.
7) Water resources management framework. Technical assistance would be provided
to improve the current legal and policy framework and technical capacity for water resources
management.
37. Key outcomes of this component are: a) The development and utilization of modern
cartographic information integrated climate and agriculture information and decision support
systems accessible to different users; b) the updating of the country’s soil use maps; c) The
improvement and integration of the existing GIS system in RENARE, as a critical element of the
ISDS, together with the cartography and soil information to be developed; d) the adoption of
modern methodologies for planning of land use at the farm level; e) the development of an
improved policy framework for water resources management; and f) a comprehensive training
program for producers, and service providers on sustainable techniques for improved soil and
water management.
38. Component 4 – Project Management and M&E (Total cost of $4.1 million, of which
$3.6 million would be financed by IBRD and $1.2 million by GOU). This component will be
responsible for all fiduciary and administrative aspects of the project (general administration of
the project, financial management and procurement, and overall reporting). In addition, the
following functions would be implemented under this component:
32
(a) Supporting the effective coordination between components.
(b) The operation of a monitoring and evaluation (M&E) system for the Project.
(c) Coordinating and supervising the implementation of training activities under the Project.
(d) Supporting the design and implementation of a communication strategy to disseminate
results and lessons learned within the Borrower’s territory and in other countries acceptable to
the Bank.
39. The component would have the resources required for the successful coordination and
efficient management of the project, including the supervision of the entire subproject cycle, the
operation of the project’s Monitoring and Evaluation System, the organization of the training
program described in Component 3, and the design and implementation of a communication
strategy to disseminate results and lessons learned within the country and the region. Given the
positive experience of the ongoing Bank-financed PPR Project, the proposed project
management team would be build around the existing PMU of the PPR project and MGAP staff.
40. MGAP would establish a PMU, located within its General Secretary Division, but directly
linked to the Minister, to manage and coordinate project execution. The actual staff composition
of the PMU would include at least: (i) an agronomist/agro-economist as the PMU Director; who
would be assisted by (ii) an accountant and an assistant accountant, who would be responsible
for financial management of the project; (iii) a procurement specialist; (iv) a computer expert to
operate the Monitoring and Evaluation (M&E) System; (v) a training specialist; (vi) an
information specialist; and (vii) four support staff. Additionally, the PMU would have a
dedicated technical team in each of the following MAGP’s units: Agricultural Information
Systems Support Division (Dirección de Promoción de los Sistemas de Información
Agropecuaria, DPSIA) within MGAP’s Director General’s Office to house the IDSS; DGDR;
and RENARE who will be responsible for the implementation of Components 1, 2 and 3,
respectively, under the coordination of the PMU Director. The PMU would also include a lawyer
specialized in the legal framework guiding natural resources management and, in particular,
water resources management.
41. In addition to project management functions (general administration of the project,
including financial management and procurement, and the overall reporting and coordination
with the Bank would be implemented through 3 sub-components:
a) Monitoring and Evaluation: The current M&E System of the PPR Project would be
expanded to incorporate the monitoring and evaluation requirements of the proposed project,
including the set of indicators to be used. These indicators would include: (i) management
indicators; (ii) efficiency or project execution indicators, and (iii) impact indicators. Given the
demand-driven nature of the project and the strong stakeholder participation in the adoption of
sound practices in natural resources management, the project would employ an adaptive
management framework characterized by regular monitoring and concurrent evaluations, the
mid-term review and the final assessment. Regular monitoring would be the responsibility of the
PMU, which would prepare semi-annual reports on implementation progress. These reports
would include progress achieved vis-à-vis the Operational Manual’s timetable for the various
project activities, the Procurement Plan and schedule, and agreed Annual Operation Plans. The
outputs of the M&E System, as will be indicated in the Operational Manual, would be used to
assess the performance of the various project components and suggest improvements and
33
changes whenever necessary. An annual report would be prepared indicating project
achievements, experiences, problems and lessons learned during the year for discussions with
stakeholders on an annual basis. The overall assessment of project performance would be carried
out at mid-term and at the end of the project. The MTR, to be carried out in July 2014, would be
the responsibility of the PMU, with the assistance of independent consultants acceptable to the
Bank. The project would support a review workshop or Implementation Completion Report
stakeholder meeting, where all participating stakeholders (farmers, farmers associations,
academia, NGOs and governmental agencies) would review and assess the project’s findings and
develop a sustainability plan for project activities in the post-project period.
b) Training: The PMU would be responsible also for the implementation and
coordination of project-financed training activities that would be demanded and conducted under
the various components. A draft training plan would be included in the Project Manual.
c) Public Information, Communication and Dissemination: The project would finance
the design and implementation of a public information and dissemination program of potential
project activities, focused on the priority areas. The program would be aimed at the general
public, political leaders, beneficiaries and its associations as well as the media. Its main objective
would be to inform about the importance of conserving and maintaining the natural resources
and to create awareness on the impact of climate change on agriculture and livestock production.
34
Annex 3: Implementation Arrangements
1. Institutional and implementation arrangements
1. The overall responsibility for the management of the Project will rest with MGAP. An
Inter-ministerial Coordination Committee (ICC), lead by the Minister of Livestock, Agriculture
and Fishery and including the Minister of Housing, Territorial Planning and Environment
(Ministerio de Vivienda, Ordenamiento Territorial y Medio Ambiente, MVOTMA), and the
Director of the Office of Planning and Budget (Oficina de Planeamiento y Presupuesto, OPP),
will be maintained to define the policy framework related to climate change and climate
variability within which project implementation will take place. The representative of the
Minister of MVOTMA would be an official from its National Environment Division (Dirección
Nacional del Medio Ambiente, DINAMA).
2. During Project execution, MGAP shall operate and maintain a unit (the PMU) with
organizational structure, staff, functions and responsibilities satisfactory to the Bank for the
implementation, coordination and supervision of the Project. For the purpose of carrying out the
Project, the PMU shall be assisted by technical teams within RENARE, DPSIA and DGDR. Any
change of the PMU structure, staff, personnel, functions and responsibilities shall be effected
with the prior approval of the Bank. The PMU would include staff of the project unit of the PPR
project to incorporate the experience gained during implementation of that project. The PMU,
which would be located within MGAP’s General Secretary Division, but would report directly to
the Minister, would assume responsibility for the overall coordination of project activities and
carry out project management functions, including, M&E, financial management, procurement,
and overall reporting and coordination with the Bank. The head of the PMU would be assisted by
a Legal Advisor. Financial management and procurement would be handled by the
Administration and Finance Unit (Unidad de Adminstración y Finanzas). There would be a unit
specialized in monitoring financial and physical indicators of progress of project implementation
as well as in the evaluation of project impact (Unidad de Seguimiento y Evaluación). The
project-financed training programs for all three main components would be centrally coordinated
and implemented by the Training Unit (Unidad de Capacitación y Gestión del Conocimiento),
while information and dissemination of project activities would be handled through the
Communication Unit (Unidad de Comunicación y Difusión). The PMU would be supported by
consultants specialized in natural resources management and climate change adaptation and
mitigation measures, as needed. The organization chart of the PMU is shown below.
3. Under the overall coordination of the PMU Director, the main responsibility for the
implementation of Components 1, 2 and 3 would be assumed by dedicated technical teams of the
Agricultural Information Systems Support Division (Dirección de Promoción de los Sistemas de
Información Agropecuaria, DPSIA), to be created within MGAP’s Director General’s Office to
house the IDSS; DGDR; and RENARE respectively.
35
Figure A3.1: Proposed Implementation Structure
4. DGDR would be responsible for the implementation of the Component, as well as all
phases of the subproject cycle, i.e., promotion of project activities and objectives; preparation of
subprojects; evaluation of subprojects and pre-selection of those subprojects eligible for financial
support; and organization of technical assistance to farmers. Under DGDR’s current structure
(see organization chart below), the Department of Promotion and Territorial Management
(Departamento de Promoción y Gestión Territorial) would assist the Coordinator for
International Projects in the promotion of project on-farm investment activities, including
preparation and pre-evaluation of investment subprojects. This department would be also one of
the channels through which beneficiaries can submit their applications for project support. A
team of consultants would be hired to strengthen the department’s institutional capacity. In
addition, technical assistance to be provided to beneficiaries for sub-project preparation and
implementation would be organized by the Department of Rural Extension (Departamento de
Fomento y Extensión Rural). Monitoring and Evaluation of the activities implemented under
Component 2 would be under the responsibility of DGDR’s Coordinator for International
Projects, with the assistance of his Information, Monitoring and Evaluation Advisory Unit
(Asesoría de Información, Seguimiento y Evaluación), working in close collaboration with the
PMU’s Monitoring and Evaluation Unit.
PMU Director
Administration
and Finance Unit Training
Unit
Legal Advisory Unit
Accounting Procurement Treasury
General Secretary Division – UE 01
Communicatio
n Unit
Monitoring and
Evaluation Unit
36
Figure A3.2: DGDR’s Current Structure
5. MGAP shall make grants to Beneficiaries to partially finance sub-projects in accordance
with eligibility criteria and procedures satisfactory to the Bank, which shall include the
following:
(a) a pre-screening by DGDR of the eligibility of the beneficiaries submitting sub-project
proposals, with regard to criteria and procedures satisfactory to the Bank, as specified in the
Operational Manual.
(b) a review and approval by the Project’s selection committee of sub-project proposals, on the
basis of a detailed evaluation of MGAP’s Rural Development Directorate, applying eligibility
criteria and procedures acceptable to the Bank as specified in the Operational Manual, which
shall include the following:
(i) the maximum amount of the grant shall be: (i) eight thousand Dollars ($8,000)
equivalent for Family Producers and Medium Size Producers; and (ii) fifty thousand Dollars
($50,000) equivalent for groups of farmers and farmer organizations;
(ii) the grant shall only finance the purchase of equipment, works, goods, consultants’
services, Non-Consultant Services and/or Training;
(iii) grants shall not finance any activity included in the Negative List; and
(iv) the proposed sub-projects shall comply with the provisions of the project’s
Environmental and Social Management Framework.
6. Upon approval of a sub-project proposal, MGAP would make each grant available to the
pertinent beneficiary, under a sub-project agreement between MGAP and the beneficiary, on
terms and conditions satisfactory to the Bank.
7. During the first two years of the implementation of the Project and thereafter upon the
Bank's request, MGAP would: (i) carry out operational audits covering the implementation of
sub-projects during each calendar semester, with the scope and under terms and conditions
Decentralized Teams
Information,
General Director Monitoring & Evaluation
Technical Director Project
General Secretariat Rural Development Coordinator
Studies
Socio-economic & Environmental
Deputy Director
Administrative Unit Rural Finance Production, Marketing Promotion and Extension Decentralized Operations
and Value Chains
Rural Development
Marketing and Value Chains
Accounting & Administration Financing instruments Technical Assistance
Financial Analysis of Projects
Agricultural Production
Rural Extension
Risk Management
Legal Advisor
Comunications
Human Resources
Logistics
37
acceptable to the Bank; and (ii) not later than forty five days after each calendar semester,
furnish operational audit reports to the Bank.
8. The final selection of subprojects to be financed under this component would be the
responsibility of the Project Selection Committee, which would be headed by the director of
DGDR and would include the Focal Points of the three MAGP divisions responsible for the
implementation of Components 1, 2 and 3, namely DPSIA, DGDR and RENARE respectively.
Once the selection process has been completed, the Director of the PMU would process the
payment to project beneficiaries.
9. After the formal launching of the project, the PMU would implement the project
dissemination and promotion program, with the participation of the Regional Offices of MGAP
and the Rural Development Committees (Mesas de Desarrollo Rural, MDRs), located in each of
the 19 Geographical Departments of the country.
10. The preparation and execution of investment proposals to be financed by the project would
be the responsibility of beneficiaries, for which they would receive specialized technical
assistance, partly financed by the project. Beneficiaries would be able to submit their proposals
either to MGAPs regional offices or directly to the PMU in Montevideo. Subprojects will be
evaluated in the first instance at the local level by DGDR and submitted to the Project Evaluation
Committee for final evaluation and approval.
11. The Operational and Financial Flows are presented in Annex 3. The proposed flow of funds
may pose some complexity and additional financial management (FM) risk. Also, the internal
control framework becomes a key element for managing and monitoring subprojects under
Component 2. Mitigation measures incorporated in project design to address these risks
comprise: specific internal control framework applicable to subprojects, to be included in Project
Operational Manual; increased FM supervision during the start-up period; and semiannual
concurrent audit of subprojects under component 2. Details of procedures and implementation
arrangements are included in the draft Project Operational Manual.
12. The current weaknesses of RENARE, which were identified by the Institutional
Assessment carried out during preparation, would be addressed by the project as part of the
Capacity Building Component.
13. The proposed Project management structure is considered adequate for the needs of the
Project, as it has been designed based on the PPR Project, with an enhanced participatory and
decentralized structure to receive and evaluate the subprojects to be presented by the
beneficiaries. These arrangements are deemed to be operationally viable, as they take into full
consideration the experience and lessons learned through the implementation of the PPR Project.
2. Financial Management, Disbursements and Procurement
a. Financial Management
14. A Financial Management (FM) Assessment of the arrangements for the proposed Project
has been carried out in accordance with OP.BP 10.02 – Financial Management, and in line with
38
Bank specific guidelines6. The assessment conclusion indicates that the proposed FM
arrangements meet minimum Bank requirements. MGAP, acting through a Project Management
Unit (PMU), will be in charge of the overall FM functions of the Project. MGAP has significant
experience in fiduciary aspects for similar Bank-financed operations, which has been taken into
account for the FM assessment.
15. The risk assessment process aims at identifying FM risks so as to take appropriate
measures mitigating identified Project risks. This enables the Bank to make decisions on the
appropriate level of supervision intensity allocating FM resources in a manner consistent with
assessed risks. The overall FM risk of the Project has been assessed as Moderate due to the
overall adequate FM arrangements.
16. Budgeting Arrangements: The Borrower’s proposed budgeting arrangements for the
Project comprise the integrated financial information system (SIIF) applied by the General
Accounting Office (Contaduria General de la Nación- CGN) across the public sector, which will
control and record the transactions in the executing unit. It is acceptable to the Bank.
17. Accounting and Financial Reporting: The accounting system already in place at MGAP
for the ongoing project will be used to record project transactions during the start up period.
Subsequently, a specific accounting and management information system (MIS) would be
developed and implemented to support Project management, external reporting and the
preparation of the justification of funds to the Bank. All Project transactions will be processed in
the accounting and management system with the chart of accounts reflecting the Project
categories, components and source of funding, while supported by documentary evidence for the
related goods and services procured in line with the Bank guidelines for the Project. The
functional MIS acceptable to the Bank will be in place no later than one year after the loan
effectiveness date (dated covenant).
18. The Annual financial statements for the Project will be prepared by MGAP following the
Public Sector Accounting Standards of Uruguay; these rules are comprehensive and consistent
with international public standards. MGAP will also be in charge of the preparation of semi-
annual Interim Unaudited Financial Reports (IFRs) in a format satisfactory to the Bank, as
follows: (i) Sources and uses of funds: for each calendar semester and cumulative (uses by
category), uses of funds by component and beginning and ending cash balances; (ii) Physical
progress: Allocated budget and financial execution compared to physical progress and results
achieved.
19. Internal Control and Internal Auditing: The Internal Audit Office (Auditoria Interna de
la Nación) is responsible for internal audits of the Central Administration depending functionally
and financially on the Ministry of Economy and Finance (MEF). It has technical autonomy and
unlimited access to financial records. The IAO prepares an annual audit plan and periodically
progress against the plan is measured. To perform its audits, the IAO uses International
Organization of Supreme Audit Institutions (INTOSAI) standards. In addition, as set forth in
Uruguay’s National Constitution7, the Supreme Audit Institution (Tribunal de Cuentas de la
6 Financial Management Manual for World Bank-Financed Investment Operations; document issued by Operations Policy and Country Services
OPCFM on March 1, 2010. 7 Art. 211 literal B of the Uruguay’s National Constitution
39
Republica) is responsible for the ex-ante examination and approval of all expenditures and
payments of the public administration.
20. Internal control procedures have been incorporated into the draft Operational Manual
submitted to the Bank.
21. General flow of funds: The general arrangements are described in the following chart.
Figure A3.3: General Flow of Funds
22. Use of Funds: Utilization of funds by the project comprises payments to suppliers for
goods consultants and non-consultant services; goods, works and services for subprojects; and
operating costs. All uses of funds will be supported by external third party documentary evidence
for the related goods and services procured in line with Bank guidelines (supplier invoices,
contracts, etc.).
23. External Auditing: The Project annual financial statements will be audited under Terms of
Reference prepared in line with Bank Guidelines to be performed by independent auditor and
following auditing standards acceptable to the Bank. The audit report will be furnished to the
Bank, as soon as available, but in any case not later than six months after the end of each audited
year/period. It is expected that the financial audit be conducted by the Uruguayan Supreme Audit
Reimbursement for retroactive financing
Direct Payments Advances in USD
Direct Payments
Loan Account (WB)
Segregated DA
- BCU (USD)
Project Account BROU
(UR $)
-Goods, consultants and Non- consultant services
-Transfers to beneficiaries
Local Funding
40
Institution, Tribunal de Cuentas de la República (TCR). In addition financial audit, a semi
annual special opinion of the uses of funds at the subproject level (component 2) will be
required. The required audit opinions are presented in the table below.
Table A3.1: Audit Requirements
Audit Report Due Date
1) Project Specific Financial Statements June 30
2) Special Opinions
SOE
Designated Account
June 30
3) Concurrent audit at subproject level February 15 and
August 15
24. Supervision Plan: The initial supervision plan is presented in the table below. The FM
supervision scope will be adjusted by the assigned FMS according to fiduciary performance and
updated risk.
Table A3.2: Supervision Plan
Type Timing Mechanism Objective
On-
site
Visit
Twice a year during
the first year of
implementation.
Once a year onwards.
Integrated
supervision
missions.
R e v i e w c o n t r o l f r a m e w o r k
Review implantation of mitigating measures
Review Designated Account reconciliation
Update assigned risk.
Follow up on External Audit findings.
Transactions review as needed
IFRs Review Every six months Over the IFR Review IFRs information consistency
Concurrent
Audit Review
Every six months Over the Audit
Report received.
Raise issues disclosed in Audit Report
Financial Audit
Review
Once a year
Over the Audit
Report received.
Raise issues disclosed in Audit Report
25. Action Plan: Pending steps are presented in the table below.
Table A3.3: Action Plan
Action Responsible Entity Completion Date
1. Implement an Accounting and Management
Information System acceptable to the Bank
MGAP No later than one year after the loan
effectiveness date.
41
b. Disbursement arrangements: General disbursement arrangements are summarized as
follows:
Table A3.4: Disbursements Arrangements
Retroactive expenditures Eligible payments
Made up to one year before the date of signature of the Loan Agreement.
These expenditures will be paid in advance by the Borrower and should
not exceed US$2.0 million.
For items procured in accordance with applicable Bank procurement
procedures.
Other Disbursement Methods Direct payments to suppliers. The minimum application amount for direct
payment requests will be US$800,000
Advance to a segregated designated account in USD managed by MGAP,
in BCU, with a ceiling of US$ 5.0 million for outstanding advances.
Supporting documentation Statement of Expenditures (SOE)8,
Records (supplier contracts, invoices and receipts).
26. Disbursement arrangements under Component 2: Beneficiaries would receive advances
on the basis of eligible expenditures or expected expenditures supported by the specific
subproject plan. Each subproject plan will be approved by Project Selection Committee
following the criteria and procedures described in the Operational Manual. Disbursement
schedule will be defined in the financing agreement between the PMU and the particular
beneficiary and will serve as the basis for the disbursement of funds.
27. The Project will require access to the Bank’s Client Connection web page to get the
Withdrawal Form from the web and to perform on a periodic basis the reconciliation between its
bank account and resources received from the different sources.
8 The Borrower through MGAP shall retain all records (contracts, orders, invoices, bills, receipts and other documents) evidencing expenditures
under the Project until at least the later of: (i) one year after the Bank has received the audited Financial Statements covering the period during
which the last withdrawal from the Loan Account was made; and (ii) two years after the closing date. The Borrower and MGAP shall enable the Bank’s representatives to examine such records.
42
28. Loan proceeds will be disbursed against the following expenditure categories:
Table A.3.5: Disbursements per Expenditure Category
Expenditure Category
Amount of the Loan
Allocated (USD)
Percentage of Expenditures to be
financed (inclusive of Taxes)
1. Goods and Non-consultant Services 2,600,000 80
2. Consultant services and Training 17,000,000 80
3. Works, goods, Non-consultant Services
and/or Consultant Services under Subprojects
22,800,000 100 of amounts disbursed under the
corresponding grants
4. Operating Costs 4,100,000 85
5. Unallocated 2,500,000
TOTAL 49,000,000
c. Procurement
29. Procurement for the proposed project would be carried out in accordance with the World
Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated January 2011, the
"Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated
January 2011, and the provisions stipulated in the Legal Agreement.
30. To the extent possible, goods and non-consultant services will be grouped in packages
costing US$250,000 or more. Consultant services provided by firms will be grouped in packages
costing US$200,000 or more per contract. Goods and non-consulting services with estimated
values of US$250,000 and above; consultant services by firms costing US$200,000 and above;
consultancy services to be provided by individuals costing US$100,000 and above; and all
contracts awarded using of direct contracting for goods and non-consulting services; Single-
Source Selection for employment of firms and Sole Source for individuals will be subject to
prior review. The first two contracts for goods and services under each procurement method, and
the first two contracts for selection of consultant firms under each selection method will also be
subject to prior review regardless of amount.
31. Subprojects would be financed through small grants (maximum of US$ 8,000 for
individual beneficiaries and US$ 50,000 for groups of farmers or organizations) under
Component 2. Subprojects would include small works and low-cost goods, generally contracted
through shopping procedures, on the basis of the comparison of three valid offers. Consultants
for technical assistance will be hired following the simpler methods contemplated in the Bank’s
Guidelines for Selection of Consultants (i.e.: Selection Based in Consultants’ Qualifications).
When procurement of works and goods is carried out in rural or remote areas, contracts may be
awarded on the basis of the comparison of at least two valid offers; the PMU will keep a registry
of such exceptions in the management information system. Contracts estimated to cost less than
43
US$5,000 may be procured through commercial practices of the private sector on the basis of
competitive principles defined in the Operational Manual, or through direct contracting when
justified. In the case of consultants for technical assistance, contracts estimated to cost less than
US$5,000 will follow procedures which could be considered equivalent to simpler methods
contemplated in the Bank’s Guidelines for Selection of Consultants, as defined in the
Operational Manual. The Grant application would include a simplified procurement plan
including a list of the works, goods and services to be procured and an estimated cost and
implementation schedule. Grants would be publicly announced and awarded through open
competition on the basis of objective evaluation criteria to be specified in the call for
applications. The Operational Manual describes the overall subproject cycle in detail, including
implementation procedures. Grants will be subject to oversight by a concurrent technical-
financial-procurement audit.
32. A procurement assessment for the proposed project was carried out on May, 2011. The
assessment and the specific actions proposed in the Plan of Action were discussed with the
preparation team of MGAP and the recommended actions will be incorporated into project
implementation and funded through the loan, as required.
33. The objectives of the assessment were: (a) to evaluate the capability of the implementation
agencies and the adequacy of procurement and related systems in place to administer
procurement in general, and Bank-financed procurement in particular; (b) to assess the risks that
may negatively affect the ability of the agency to carry out procurement; (c) to develop an action
plan to mitigate potential risks; and (d) to propose a suitable Bank procurement supervision plan.
The risks and the action plan are detailed in Annex 4.
34. Over 50% of project costs, estimated at US$ 55.0 million, would finance subprojects
implemented by farmers, 6% would finance the purchase of goods, 25% would be utilized to
contract consultant services, while the remaining 19% would be allocated to operating costs and
non-consultant services.
35. Project management for preparation and implementation is the responsibility of MGAP.
Regarding procurement, MGAP will be responsible for: (a) carrying out all procurement under
components; and (b) the overall supervision and control of the procurement carried out by
farmers under component 2. Direct supervision of procurement carried out by farmers will be
carried out with assistance from the regional offices of MGAP. The staff of these offices will be
strengthened by the recruitment of a team of decentralized individual consultants, with
experience in the subproject cycle. The overall responsibilities to manage the Project, will be
delegated by MGAP to a PMU, which is expected to be staffed with technical and administrative
staff that has been involved in the implementation of previous Bank operations within MGAP,
and would be able to adequately fulfill the requirements of the project. In order to strengthen its
procurement capacity, the PMU would appoint a procurement specialist experienced in
conducting procurement under World Bank procedures, who would lead the PMU procurement
team. As Project implementation will be heavily decentralized, the procurement specialist will be
responsible for organizing the supervision of the procurement carried out by subprojects
beneficiaries, for providing guidance to the team of decentralized individual consultants and
regional offices, and for organizing training activities aimed to the subprojects’ beneficiaries. A
44
well designed management information system will also be required to prevent overloads and the
resulting delays in the processing, approval and implementation of subprojects.
36. The Borrower developed a draft Procurement Plan (PP) for the first 18 months of project
implementation which provides the basis for the procurement methods to be used. This plan was
agreed between the Borrower and the Bank on September 27, 2011 and would be available on
the PMU’s website after effectiveness. The Plan does not envisage any procurement
arrangements for goods and works requiring ICB, nor consulting assignments with short-lists of
international firms.
37. MGAP will enter the PP in the Bank’s publicly accessible Procurement Plan Execution
System (SEPA) no later than 30 days after Board Approval, and update the plan at least
biannually or as required to reflect the project’s needs. The Procurement Plan in SEPA will be
complemented and linked to a publicly accessible information system on subproject
implementation (including procurement). The Loan Agreement includes these requirements in
the section of Special Provisions.
38. Given that there are certain local procurement procedures that are not fully consistent with
the Bank Procurement and Consultant Guidelines, the Loan Agreement will include Special
Provisions to address these. The Operational Manual will include advertising requirements and
minimum timeframe for each procurement method (international competitive bidding, national
competitive bidding, shopping). In the event that the PMU’s capacity becomes challenged, the
Unit will recruit additional staff as needed. The Bank will also assess implementation progress
every six months and identify any issues that need to be resolved.
39. In addition to the prior review supervision to be carried out by the Bank, the capacity
assessment of the Implementing Agency has identified the need for annual supervision missions
to visit the field and carry out post review of procurement actions.
Risk Assessment and Action Plan
40. MGAP has shown efficiency in dealing with projects with similar complexity, and
consistent in the application of rules of procurement adhering to TOCAF and to Bank guidelines.
However, as mentioned above, the decentralized nature of the Project, together with potential
changes of the staff in PMU, and the current absence of a management system, contribute to a
Moderate level of risks, until all the recommendations in the Action Plan are implemented.
41. The agreed Action Plan includes: (i), a project operational manual (presented at
Negotiations)including a Procurement section with a description of procurement procedures, the
institutional responsibilities for carrying out procurement, the applicable guidelines, the
procurement plan, list and samples of bidding documents, outline for TORs, as well as forms for
evaluation of proposals, (ii) a Project monitoring and evaluation system developed during the
first year of Project implementation; and (iii) if needed, additional qualified procurement staff
would be hired in order to maintain the quality of service standards. During periodic
supervisions, the Bank team will assess the workload and service standards in management of
subprojects and bidding processes, and will provide feedback and recommendations to MGAP.
45
42. The overall project risk for procurement is Moderate.
3. Environmental and Social (including safeguards)
43. The project is not likely to have any adverse social or environmental impacts. The project
will provide financial and technical assistance on a nation-wide basis to family farmers to
improve the management of natural resources and adopt measures adapted to climate variability
in their lands. Financial support for the implementation of subprojects will be limited to small
and medium family farmers, while other project interventions such as training will include all
producers and rural workers. The implementation of subprojects is also likely to increase
employment at the local level since there could be an increased demand for labor for carrying out
small works (i.e., infrastructure at the farm level), or for installing equipment financed by the
project. The project is built upon the successful implementation the ongoing PPR project, and
there will be a period of at least six months in which both projects will overlap.
44. The social assessment has considered gender issues, avoidance of human resettlement
(which is not expected occur) as well as land title and land tenure aspects. The Loan Agreement
includes a specific provision to ensure that no project activities would cause involuntary
resettlement. Indicators and specific guidelines to address these matters have been included in
the Project Operational Manual. The M&E system will incorporate specific indicators
(qualitative and quantitative) to monitor progress on social and gender parameters. In order to
further improve the scope and efficiency of social actions in rural areas, MGAP has recently
established the Directorate of Rural Development (DGDR), aimed at developing policies and
programs targeted towards the most vulnerable sectors of the rural population. DGDR will be
responsible for the implementation of Component 2 of the project, and its operation will be
further strengthened with project support.
45. Key project stakeholders are Uruguay’s family and medium farmers. The main project
features, including eligibility criteria, investments to be supported and restricted, and
screening/mitigation mechanisms were presented and extensively discussed with individual
farmers, area- and production-based farmer organizations, service providers, as well as social
entities (NGOs, Mesas de Desarrollo Rural) through an extensive consultation process, mainly
supported by the network established by MGAP’s Directorate of Rural Development (DGDR)
and the highly decentralized structure of the PPR project. The feedback obtained was duly
processed, incorporated into project design, and reflected in the Project Manual.
46. Consultations also revealed strong public support from the agricultural sector and the
general public, mainly due the successful implementation of the PPR project, which supported
the implementation of more than 3,700 subprojects and generated a substantial demand from
farmers and their organizations.
47. The proposed project is not expected to have any negative impact on the environment.
Given the nature of the proposed project, most project-financed interventions are expected to be
small investments at the farm level, with a substantial positive impact on the environment as a
result of better practices on natural resource management being incorporated into the main
production systems, especially on-farm soil and water management. In addition, the project
would provide improved information to stakeholders in the agricultural sector and capacity
46
building to the main government institutions for better natural management with a clear focus on
adaptation to climate change while reducing emission of GHGs. Project-financed interventions
are expected to have a strong positive impact on the environment as a result of better practices on
natural resource management being incorporated into the main production systems, especially
water management to face climate variability and maintain or improve sources of income for the
rural areas.
48. The project would ensure effective environmental screening of all subprojects proposed to
be financed. Lessons learned from the previous project and the experience gained by the MGAP
have led to the introduction of a number of measures to deal with potential shortfalls in the form
an agreed black-list or restrictive list, and included in the Project Operational Manual, specifying
activities which are ineligible for funding. If determined necessary by the ESMF, the PMU shall
make sure that Environmental Management Plans are prepared and implemented by the
beneficiaries for the carrying out of the subprojects under Component 2 of the Project. Technical
assistance would further guarantee adequate environmental screening by a multi-disciplinary
team. Subproject screening will be conducted by specially trained personnel within the PMU
according to procedures to be specified in the Operational Manual. Depending on the specific
characteristics of the subprojects, the PMU would seek advice from different institutions
involved in the project within and outside MGAP (RENARE, DNH, DSA, DINAMA,
DINAGUA, etc.). Based on previous experience, the Departments of MGAP involved in the
implementation of this project are fully qualified to handle the project’s environmental
requirements. Furthermore, MGAP also maintains good working relations and joint planning
capacity with the country’s environmental authority DINAMA, further strengthened as a result
of the implementation of biodiversity-related actions in the context of the ongoing Bank-financed
PPR project.
49. A comprehensive Environmental and Social Management Framework (ESMF), including a
detailed analysis of all Bank safeguards and their relevance to the project was prepared by
MGAP during project preparation, utilizing guidelines and procedures developed and
satisfactorily implemented by the ongoing NRM project (PPR). In addition, the ESMF includes a
detailed assessment of environmental and social aspects related the project, reflected in specific
sections of the detailed Project Operational Manual, providing environmental screening
procedures, provisions to address exceptional cases that could involve unforeseen safeguard
issues, a restrictive list of investments not financed by the project, training activities, and an
M&E system that includes indicators and targets relevant to safeguards. The ESMF was
reviewed by the Bank, and disclosed in-country on September 12, 2011 and through the
InfoShop.
50. Safeguards other than Environmental Assessment (OP/BP 4.01) and Natural Habitats
(OP/BP 4.04) are not triggered. Although the project will neither fund activities related to
extractive activities in native forest management nor reforestation activities, the safeguard on
Natural Habitats is triggered in a preventive way since the project seeks to integrate management
of natural grasslands specifically as part of the activities of Component 2, as well as foster other
types of management that may have impacts on these habitats. The screening of sub-projects
prior to approval would avoid any impact on natural habitats, especially on native pasture lands
of good quality while improvement of degraded pasture lands would be promoted. Monitoring
47
and evaluation measures will seek to document the positive outcomes expected for biodiversity
and natural habitats. Any exception to the subproject criteria specified in the Manual regarding
natural habitats would be presented to the Bank for review prior to MGAP approval.
51. Safeguards on Pest Management (OP/BP 4.09) are not triggered as sub-projects would not
support any activity that would involve use of agro-chemicals except for reducing their use. This
has been specified in the Manual and would be verified as part of the subproject screening
process. In addition, the overall risks associated with the use of chemicals, including the disposal
of containers, will be mitigated through training of beneficiaries and public awareness campaigns
for safe and optimal pesticide use. The project is not expected to affect physical cultural
resources (OP/BP 4.11) as the eligibility criteria for potential sub-projects will exclude activities
that could affect them. The ongoing project has financed over 1,000 subprojects involving small
works throughout the country and no cultural resources were excavated. In the unlikely case of
any discovery during project implementation (e.g. excavations for small on-farm reservoirs),
activities will be stopped and the relevant authorities would be engaged for the evaluation of the
artifacts. No activities related to dams, as defined in OP/BP 4.37, or that could affect
international waterways or located in disputed areas are envisaged. Project interventions will not
affect indigenous peoples (OP/BP 4.10), as there is no indigenous population in Uruguay.
4. Monitoring & Evaluation
52. The PMU will assume the responsibility for the operation of the project’s M&E System.
MGAP is designing a proposal for the new M&E System, which will be based largely on the
M&E System currently being used by the PPR Project, duly expanded to incorporate the
monitoring and evaluation requirements of the new project, including those identified as part of
the FM assessment. The M&E system as well as the set of indicators to be used by this System
has been included in Annex1. In addition to those related to the PDO, indicators would include
(i) management indicators; (ii) efficiency or project execution indicators, and (iii) impact
indicators.
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Annex 4: Operational Risk Assessment Framework (ORAF)
URUGUAY
Sustainable Management of Natural Resources and Climate Change
Project Development Objective(s)
To support the efforts of GOU to promote farmer adoption of improved environmentally sustainable agricultural and livestock practices that are climate
smart.
PDO Level Results
Indicators:
1. Climate change induced vulnerabilities, as well as potential opportunities are identified for livestock management and
agricultural production systems.
2. Existing MGAP information systems have been upgraded and integrated into a new and broader Information and Decision Support System for planning and decision making by public and private stakeholders in the sectors. 3. Technologies and practices that enhance the outcomes of on-farm investments and reduce vulnerabilities to extreme climatic events are identified. 4. Farmers invest on-farm climate smart technologies that lead to reduced risk and improved management of natural resources.
Risk Category
Risk Rating Risk Description Proposed Mitigation Measures
Project Stakeholder Risks
Low Commitment at the beneficiary level does not
materialize
Project preparation confirmed that the generation and
dissemination of information would follow the
successful model developed by the ongoing project in
terms of TA, training, and communication, in order to
ensure adequate participation of stakeholders
Implementing Agency Risks
Low Weak FM and procurement capacity Full adoption of recommendations from FM and
procurement assessments, combined with adequate
design of institutional and implementation
49
arrangements (taking into account the lessons learned
from the ongoing project), provide assurance that the
flow of funds and the decision-making process will
not represent a major limitation to project
implementation
Project Risks
Design
Low Climate-related stress at farm level The integration of actions from the three project
components (in particular the establishment of the
ISDS) should provide adequate information for
increased resilience of production systems to climate
variability
Social and Environmental
Low The project’s environmental risks would trigger
environmental assessment (OP 4.01) and Natural
Habitats (OP 4.04). Adequate compliance of
subprojects to environmental and natural habitat
considerations would be mostly limited to small-
scale on-farm investments.
The preparation of a comprehensive social and
environmental assessment by the implementing
agency, combined with the comprehensive coverage
of safeguard issues in the Project Manual should
mitigate any risk of non compliance by beneficiaries
Program and Donor
Low MGAP is the recipient of a series of sources of
potential funding and expertise that would further
strengthen the project’s impact, if adequately
coordinated
The specific unit within the Minister’s cabinet that led
the preparation process has been charged with the
responsibility of coordinating all sources of
international cooperation to MGAP, including an
Adaptation Fund initiative that would complement the
project.
Delivery Quality
Low Adequate monitoring and evaluation is key to
obtaining reliable measures of project progress and
the achievement of development objectives
A comprehensive physical and financial M&E system
(supported by a detailed baseline, impact case studies,
and concurrent subproject audits) will be established
in the PMU during the first year of implementation
Overall Risk Rating at
Preparation
Overall Risk Rating During
Implementation Comments
Low Low
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Annex 5: Implementation Support Plan
I. Support to Implementation
1. The strategy for the implementation support (IS) draws on the risk profile of the project (i.e.,
ORAF, Annex 4) and aims to enhance the client’s quality delivery of the proposed project
interventions, as well as supporting the results-oriented approach described in para 23. As such,
the ISP focuses on: (i) risk mitigation measures defined in the ORAF; (ii) collaboration with
MGAP on the identification of global sources of information opportunities for collaboration and
(iii) standard Bank supervision, including technical, institutional, safeguards (environment,
social) and fiduciary aspects (financial management and procurement).
2. Semi-annual Bank full supervision missions complemented with short follow-up technical
missions, (including field visits to investments financed under Component 2) would concentrate
in the follows areas:
Strategic: Supervision missions would meet with MGAP authorities to: (i) review project
activities; (ii) re-confirm strategic alignment of the project’s multi-sectoral aspects, in particular
the integration of activities from the different components; and (iii) discuss progress in cross-
cutting issues such as M&E, training, communication, dissemination of project results and
experiences, and linkage with similar initiatives regionally and word-wide.
Technical: Supervision would concentrate on the implementation of the subproject cycle
with regard to Component 2, as well as ensuring the project’s ability to provide quality
management of project’s interventions, both centrally in Montevideo and throughout its regional
offices. Randomized field visits would serve to verify compliance with the Project Operational
Manual and contribute to adjustments to project design, as needed, given results on the ground.
Thematic specialists would complement the permanent Bank supervision team, through short-
term cross-support of Bank staff and, as warranted, targeted engagement of external technical
experts.
Safeguards. Support provided during preparation would continue throughout project
implementation, mainly with regards to the monitoring of implementation of subprojects.
Fiduciary: The Bank would provide timely support through periodic supervision during
project implementation. These specialists would: (i) assist PMU and DGDR staff in conducting
procurement under subprojects, in compliance with the Procurement and Anti-Corruption
Guidelines and the Project Operational Manual; and (ii) work with MGAP and PMU in
enhancing their overall financial management and procurement capacity to improve and facilitate
project implementation. Supervision of the project’s financial management arrangements would
be conducted semi-annually and, as needed, in response to client needs. Procurement supervision
would also be carried out semi-annually during regularly-scheduled Bank supervision.
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II. Skills Mix Required
Table A5.1: Skills Mix Required
Skills Needed
# Staff Weeks per
FY
#Trips per
FY
Comments
Task Team Leader 8 2 HQ-based
NRM and Operations Specialist 6 2 HQ-based
Financial Management Specialist 2 1 CMU-based
Procurement Specialist 2 1 CMU-based
Environmental Specialist 3 2 Consultant
Social Specialist 3 1 CMU-based
Climate Change Specialist 2 1 HQ-based
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Annex 6: Team Composition
World Bank staff and consultants who worked on the project:
Name
Title
Unit
Ayat Soliman Sr. RD Specialist – Task Team Leader LCSAR
Michael Carroll NRM Specialist - Consultant LCSAR
Svetlana Edmeades Sr. Ag. Economist – Climate Change LCSAR
Edgardo Floto Consultant LCSAR
Alberto Yanosky Consultant LCSAR
Ana Bucher Climate Change Specialist ENV Daniel Nolasco Consultant LCSAR
Carlos Pastor Consultant FAO Fabiola Altimari Sr. Counsel LEGLA Victor Ordonez Finance Officer CTRFC Natalia Bavio Sr. FM Specialist LCSFM Ricardo Lugea Sr. Procurement Specialist LCSPT Maria del Mar Polo Costs and Financial Analysis FAO Luiz Correa Noronha Consultant LCSAR Jeannette Ramirez Operations Specialist LCSAR Liliana Vendeuvre Team Assistant LCSAR
53
Annex 7: Documents in the Project File
MGAP/Local Preparation Group (2011), Proyecto de manejo sostenible de los recursos
naturales y de adaptación al cambio climático. Documento de evaluación del proyecto,
(Montevideo, Uruguay: MGAP).
MGAP/Local Preparation Group (2011), Marco lógico del proyecto, (Montevideo, Uruguay:
MGAP)
MGAP/Local Preparation Group (2011), Costos del Proyecto, (Montevideo, Uruguay: MGAP)
MGAP/Local Preparation Group (2011), Arreglos institucionales y operacionales para la
implementación del proyecto, (Montevideo, Uruguay: MGAP).
MGAP/Local Preparation Group (2011), Evaluación Social del Proyecto, (Montevideo,
Uruguay: MGAP)
MGAP/Local Preparation Group (2011), Evaluación Ambiental del Proyecto, (Montevideo,
Uruguay: MGAP)
Paolino, Carlos, María Methol and Domingo Quintans (2010), “Estimación del impacto de una
eventual sequía en la ganadería nacional y bases para el diseño de políticas de seguro”,
Anuario OPYPA 2010 (Montevideo: MGAP/OPYPA)
Tommasino, Humberto and Yanil Bruno (2005), “Algunos elementos para la definición de
productores familiares, medios y grandes”, OPYPA Anuario 2005, (Montevideo:
MGAP/OPYPA)
World Bank (2010), Uruguay Family Agriculture Development, (Washington, DC: World
Bank Report No. 55550-UY)