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Document of The World Bank FOR OFFICIAL USE ONLY Report No: {PAD2532} INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT PAPER ON AN ADDITIONAL FINANCING IN THE AMOUNT OF US$42 MILLION AND RESTRUCTURING OF THE ORIGINAL LOAN 8099-UY TO THE REPÚBLICA ORIENTAL DEL URUGUAY FOR THE SUSTAINABLE MANAGEMENT OF NATURAL RESOURCES AND CLIMATE CHANGE PROJECT October 26, 2017 Agriculture Global Practice LATIN AMERICA AND CARIBBEAN This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

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Page 1: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: {PAD2532}

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

PROJECT PAPER

ON AN

ADDITIONAL FINANCING

IN THE AMOUNT OF US$42 MILLION

AND RESTRUCTURING OF THE ORIGINAL LOAN 8099-UY

TO THE

REPÚBLICA ORIENTAL DEL URUGUAY

FOR THE

SUSTAINABLE MANAGEMENT OF NATURAL RESOURCES

AND CLIMATE CHANGE PROJECT

October 26, 2017

Agriculture Global Practice

LATIN AMERICA AND CARIBBEAN

This document is being made publicly available prior to Board consideration. This does not

imply a presumed outcome. This document may be updated following Board consideration and

the updated document will be made publicly available in accordance with the Bank’s policy on

Access to Information.

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Page 2: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

CURRENCY EQUIVALENTS

(Exchange Rate Effective October 6, 2017)

Currency Unit = Uruguayan Peso (UR$)

29.18 UR$ = US$1

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AF Additional Financing

BP Bank Procedures

CC Climate Change

CONEAT National Commission for Agro-economic Soil Studies

CPS Country Partnership Strategy

DA Designated Account

DACC Sustainable Management of Natural Resources and Climate Change Project

DGDR Rural Development Directorate (MGAP)

DGNR Natural Resources Directorate (MGAP)

DINAMA National Environment Agency (MVOTMA)

DINAGUA National Water Directorate (MVOTMA)

EAAPs Productive Water Subprojects (Estrategias Asociativas de Agua para la

Producción)

EIA Environmental Impact Assessment

ERR Economic Rate of Return

ESMF Environmental and Social Management Framework

FAO Food and Agriculture Organization

FAGRO Faculty of Agriculture

FM Financial Management

GDP Gross Domestic Product

GHG Greenhouse Gas

GOU Government of the Oriental Republic of Uruguay

GPN General Procurement Notice

IBRD International Bank for Reconstruction and Development

IDA International Development Association

IDSS Information and Decision Support System

INIA National Institute of Agricultural Research

M&E Monitoring and Evaluation

MGAP Ministry of Livestock, Agriculture and Fisheries

MVOTMA Ministry of Housing, Territorial Planning and Environment

NRM Natural Resources Management

O&M Operation and Maintenance

Page 3: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

OP Operational Policy

OPP Office of Planning and Budget

OPYPA Office of Agricultural Planning and Policy (MGAP)

PDO Project Development Objective

PGFCC Family Livestock Management and Climate Change Project (Proyecto

Ganadero Familiares y Cambio Climático)

PMU Project Management Unit

PPR Integrated Natural Resources and Biodiversity Management Project

PRENADER Natural Resources Management and Irrigation Development Project

RENARE General Directorate for Renewable Natural Resources (MGAP) SISU Soil Information System for Uruguay (Sistema de Información de Suelos en

Uruguay)

SNIA National Agricultural Information and Decision Support System

SNIG National Livestock Information System

SMP Soil Management Plan

UTEC The Technological University of Uruguay

USCC Climate Change and Sustainability Unit (MGAP)

Vice President: Jorge Familiar

Country Director: Jesko S. Hentschel

Country Representative: Matilde Bordon

Senior Global Practice Director:

Practice Manager/Manager:

Juergen Voegele

Preeti S. Ahuja

Task Team Leaders: Remi Trier and Katie Kennedy Freeman

Page 4: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

URUGUAY

ADDITIONAL FINANCING –

SUSTAINABLE MANAGEMENT OF NATURAL RESOURCES

AND CLIMATE CHANGE PROJECT

CONTENTS

Project Paper Data Sheet 6

Project Paper 10

I. Introduction 10

II. Background, Lessons Learned and Rationale for AF 10

III. Proposed Changes 14

IV. Appraisal Summary 21

27

V. World Bank Grievance Redress

Annexes

Annex 1: Revised Results Framework and Monitoring Indicators 28

Annex 2: Detailed Description of Modified or New Project Activities 35

Annex 3: Revised Estimate of Project Costs 43

Annex 4: Revised Implementation Arrangements and Support 45

Annex 5: Economic and Financial Evaluation 46

Annex 6: Green House Gases Analysis 57

Page 5: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

ADDITIONAL FINANCINGDATA SHEET

Uruguay

AF- Sustainable Management of Natural Resources and Climate Change (P163444 )

LATIN AMERICA AND CARIBBEAN

Agriculture Global Practice

Basic Information – Parent

Parent Project ID: P124181 Original EA Category: B - Partial Assessment

Current Closing

Date: 30-Jun-2018

Basic Information – Additional Financing (AF)

Project ID: P163444 Additional Financing Type (from

AUS): Scale Up

Regional Vice

President: Jorge Familiar Proposed EA Category:

Country Director: Jesko S. Hentschel Expected Effectiveness Date: 26-Jan-2018

Senior Global

Practice Director: Juergen Voegele Expected Closing Date: 16-Nov-2021

Practice

Manager/Manager: Preeti S. Ahuja Report No: PAD2532

Team Leader(s): Remi Trier and Katie

Kennedy Freeman

Borrower

Organization Name Contact Title Telephone Email

ORIENTAL

REPUBLIC OF

URUGUAY

Mariella Maglia Coordinator

IFIs 59817122220

mariella.maglia@

mef.gub.uy

Project Financing Data - Parent (Sustainable Management of Natural Resources and Climate

Change-P124181 ) (in USD Million)

Key Dates

Project Ln/Cr

/TF Status

Approval

Date Signing Date Effectiveness Date

Original Closing

Date

Revised

Closing

Date

P124181 IBRD-

80990 Effective 17-Nov-2011 17-Jan-2012 24-Feb-2012 01-Mar-2017

30-Jun-

2018

Disbursements

Project Ln/Cr

/TF Status Currency Original Revised Cancelled Disbursed

Undisbu

rsed

%

Dis

bur

Page 6: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

sed

P124181 IBRD-

80990 Effective USD 49.00 49.00 0.00 36.56 12.44

74.

60

Project Financing Data - Additional Financing AF- Sustainable Management of Natural

Resources and Climate Change ( P163444 )(in USD Million)

[X] Loan [

]

Grant [

]

IDA Grant

[ ] Credit [

]

Guarantee [

]

Other

Total Project Cost: 47.20 Total Bank Financing: 42.00

Financing Gap: 0.00

Financing Source – Additional Financing (AF) Amount

Borrower 5.20

International Bank for Reconstruction and Development 42.00

Total 47.20

Policy Waivers

Does the project depart from the CAS in content or in other significant respects? No

Explanation

Does the project require any policy waiver(s)? No

Explanation

Bank Staff

Name Role Title Specialization Unit

Remi Charles

Andre Trier

Team Leader

(ADM

Responsible)

Sr Water Resources Spec. Irrigated Agriculture GFA04

Katie Kennedy

Freeman

Team Leader Senior Agriculture Economist Natural Resources

Management and

Agricultural Economics

GFA04

Martin Ariel

Sabbatella

Procurement

Specialist (ADM

Responsible)

Procurement Specialist Procurement GGO04

Luz Maria Meyer Financial

Management

Specialist

Financial Management

Specialist

Financial Management GGO22

Page 7: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

Angel Alberto

Yanosky

Environmental

Safeguards

Specialist

Consultant Natural Resources

Management and

Environmental

Management

GFA04

Lilian Pedersen Social Safeguards

Specialist

Consultant Resettlement Policies GEN04

Maria Pia

Cravero

Team Member Junior Counsel Lawyer LEGLE

José C. Janeiro Team Member WFAFO Disbursements WFALA

Ana Elisa Bucher Team Member Sr Climate Change Specialist Natural Resources

Management

Information Systems

GCCRA

Mario I. Mendez Team Member Program Assistant ACS GFA04

Extended Team

Name Title Location

Luis Loyola Irrigation Specialist Santiago, Chile

Locations

Country First Administrative

Division

Location Planned Actual Comments

Uruguay Departamento de Treinta y Tres

Uruguay Departamento de Tacuarembó

Uruguay Departamento de Soriano

Uruguay Departamento de San José

Uruguay Departamento de Salto

Uruguay Departamento de Rocha

Uruguay Departamento de Rivera

Uruguay Departamento de Río Negro

Uruguay Departamento de Paysandú

Uruguay Departamento de Montevideo

Uruguay Departamento de Maldonado

Uruguay Departamento de Lavalleja

Uruguay Departamento de Florida

Uruguay Departamento de Flores

Uruguay Departamento de Durazno

Uruguay Departamento de Colonia

Uruguay Departamento de Cerro Largo

Page 8: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

Uruguay Departamento de Canelones

Uruguay Departamento de Artigas

Institutional Data

Parent ( Sustainable Management of Natural Resources and Climate Change-P124181 )

Practice Area (Lead)

Agriculture

Contributing Practice Areas

Additional Financing AF- Sustainable Management of Natural Resources and Climate Change

(P163444 )

Practice Area (Lead)

Agriculture

Contributing Practice Areas

Consultants (Will be disclosed in the Monthly Operational Summary)

Consultants Required ? Consultants will be required

Page 9: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

I. Introduction

1. This Project Paper seeks the approval of the Executive Directors to provide an additional loan in

the amount of US$42M to the República Oriental del Uruguay for the Additional Financing (AF) of the

Sustainable Management of Natural Resources and Climate Change Project (P124181, IBRD-8099-UY).

This Project Paper also reflects a proposed restructuring comprising: (a) modification of the PDO; (b) the

triggering of two safeguard policies: O.P. 4.12 Involuntary Resettlement and O.P. 7.50 Projects on

International Waterways; (c) a reallocation of the proceeds of the original loan among disbursement

categories; and (d) a six-month extension of the closing date of the original loan from June 30, 2018 to

December 31, 2018. The closing date of the AF would be November 16, 2021.

2. The additional loan would help finance the costs associated with scaling-up successful activities

under the original loan, while simultaneously promoting and piloting innovative activities, including

those originating from the technical assistance provided by the World Bank Group under the initiatives

“Water for Uruguay” and “Uruguay Green Growth.” In particular, the AF proposes to: (i) invest in an

expansion of outreach of subprojects for farmers and ranchers, including a geographic expansion of

activities aiming at the reduction of effluent from dairy production in the Santa Lucia and other

prioritized river basins; (ii) include new activities to enhance the resilience of family farms, specifically

related to water management, irrigation and grasslands management; (iii) increase the outreach capacity

and interoperability of the National Agricultural Information and Decision Support System (SNIA); and

(iv) invest in capacity building, research capacity and associated infrastructure related to soil.

3. The AF is expected to expand the land area under sustainable landscape management practices

from 2.9 to 3.6 million hectares, representing respectively 44 and 54 percent of total arable land in

Uruguay1. The AF is expected to benefit directly at least an additional 3,900 farmers with individual

and/or collective subprojects and knowledge dissemination, and since the original loan has thus far

benefitted around 5,900 farmers, the total outreach of the project would cover 20 percent of all farmers in

Uruguay.

4. The 3,900 targeted beneficiaries of the AF are: 300 farmers engaged in dairy production in the

Santa Lucia River Basin, 2,000 cattle ranchers with improved livestock practices, 500 farmers who would

benefit from small-scale collective irrigation subprojects, 700 ranchers and farmers with improved access

to water for cattle and individual irrigation, and 400 ranchers who would benefit from insurance for

livestock production. The AF also is expected to have direct and indirect impacts on the agriculture sector

nationwide, resulting from the use of the National Agricultural Information and Decision Support System

(SNIA), from enhanced enforcement of the Soil Management Plan Management policy and from capacity

building activities for farmers’ organizations.

II. Background, Lessons Learned under the Original Loan and Rationale for the Additional

Financing in the amount of US$42 million

Background

1 Considering the arable soils with: (i) very high; (ii) high and; (ii) medium suitability for agriculture, representing a total of

6,627,000ha.

Page 10: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

5. The original loan of US$49M was approved on November 17, 2011, and became effective on

February 24, 2012, with a current closing date of June 30, 20182. The Project has been restructured three

times: (i) in July 2014 to trigger OP 4.09 (Pest Management) and revise the Project’s Results Framework;

(ii) in March 2015 to include Preparation Grants as an eligible cost under the Project to finance the

preparation of subprojects; and (iii) in October 2016 to extend the closing date from March, 01 2017 to

June, 30 2018.

6. The original loan has maintained a steady pace of implementation and disbursements. To date, a

total of US$36.56M (74.6 percent of the original loan) has been disbursed, and US$10M is fully

committed, primarily to field-level investments through open calls. The proposed restructuring would

extend the closing date of the original loan by 6 months to ensure a smooth transition between the

original loan and the AF and would provide additional time to complete ongoing investments and allow

for full disbursements of the original loan.

7. The original Project Development Objective (PDO) is to support Uruguay’s efforts to promote

farmer adoption of improved environmentally sustainable agricultural and livestock practices that are

climate smart. Progress towards achieving the PDO has been rated Satisfactory since June 2015.

Implementation Progress has been rated Moderately Satisfactory since October 2014, mainly due to

resource constraints on the Government side, which have also contributed to a 6-month disbursement lag.

The Project has already met the targets for the main PDO Indicators and most of the Intermediate Results

indicators, and is expected to meet the remaining Intermediate Results targets by the closing date.

8. The original loan has already achieved several significant results, including: (i) the launch of the

National Agricultural Information and Decision Support System (SNIA); (ii) the application of

sustainable land management practices to 2.9 million hectares; (iii) the funding of nearly 5,000 climate-

smart on-farm subprojects with individuals and producer groups; and (iv) technical assistance provided to

nearly 35,000 farmers.

Lessons Learned

9. Several important lessons learned from the original loan have been incorporated into the design of

the AF, including:

- Implementation Capacity of the Ministry: The Project Implementation Unit (PIU) of the

MGAP supports the execution of all externally-financed agriculture projects in the country,

including projects financed by the World Bank, the Inter-American Development Bank and the

Global Environment Facility. This has proven to be a unique model: on the one hand, the PIU

functions with a high level of capacity, flexibility and experience. Hosting multiple projects

means the PIU has a clear overview of all externally-financed projects in the country and can

avoid overlap and maximize complementarities. However, the concentration of all project

management in a single PIU may occasionally lead to processing bottlenecks. The AF rates the

implementation capacity of the PIU as a substantial risk, especially in light of the need to

supervise a large number of subproject grants under this project, and will invest in further

strengthening capacity and expanding the team to address this challenge.

2 The original loan closing date of March 1, 2017, was extended by 15 months in October 2016 to June 30, 2018.

Page 11: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

- Soil Management Plans: Today, Uruguay enforces one of the most advanced soil protection

regimes for arable land in the world. In 1982, Uruguay passed a Soil and Water Conservation

Law (Law Nº 15.239) that established the background and technical rules for preservation of soils

and waters with agricultural purposes and the recovery of eroded soils. In light of this law, and of

the promulgation of the 2015 budget law (Law Nº 19.355), soil use and management plans

became a requirement for any farmer cultivating over 100ha of arable land. To date, 12,493 plans

have been presented, covering 1.88 million hectares and 96 percent of all crop producers over

100ha.

To date, Soil Management Plans have proven, through meticulous data collection and hundreds of

soil use and management plans, that Uruguay’s agriculture generates high levels of production

with less erosion potential for agriculture. It has also demonstrated Uruguay’s vast capacity for

implementing planning approaches with high degrees of success, largely due to the country’s size,

homogeneity and capacity for data collection (which may limit the ability for lessons to be scaled

to other countries). The AF will build on these successes and support the expansion of these

policies to the grassland systems and develop information systems to help remotely monitor their

compliance.

- National Agricultural Information and Decision Support System (SNIA): During the past

decade, the Sistema Nacional de Información Ganadera (SNIG) brought organization and

international market access to Uruguay’s cattle ranching system and, by association, to Uruguay

beef exports. Under the original loan, SNIA has intended to bring the same organization, best

practice, and data-rich decision making support to the agriculture sector. However, progress has

been slow. Challenges with interoperability between the Ministry’s databases (including SNIG)

and issues with system governance have slowed the development and implementation of SNIA,

which has led to slower than expected dissemination throughout the country.

The AF acknowledges the challenges related to SNIA to date, and has developed a plan for

integrating SNIA into the MGAP’s current operations. The interoperability proposed through the

AF will help ensure the buy-in of multiple groups, easing the issue of governance. The

dissemination plans will aim to reach technicians and farmers throughout the country, and

promote the use of the SNIA platform, enhancing its utility.

- Lessons learned from Technical Assistance provided by the WBG: During the last five years,

the WBG provided several TA that have contributed to the definition of agricultural policies and

project’s activities. Among them, the “Water for Uruguay” TA supported the MGAP in revising

of the Irrigation Bill, approved by the Senate and currently under discussion in the Chamber of

Deputies. This revision aimed at creating favorable conditions for the promotion and the

sustainable management of collectively-managed irrigation schemes (fiscal incentives, obligation

to have an Operation and Maintenance fee, etc.). In addition, the “Green Growth” TA generated

new knowledge on Nutrient Modelling for the Santa Lucia River Basin that will inform and

support the AF.

10. Financial Management was rated Satisfactory by the most recent implementation support mission

carried out in April 2017. Procurement has been rated Moderately Satisfactory for the last 3 years. The

Page 12: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

project has complied with all key loan covenants, including audits, financial management reporting

requirements, and environmental and social safeguards. The project has no overdue audits.

Page 13: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

Rationale for the Additional Financing

11. Alignment with Country and Bank agendas/priorities. The Project is consistent with the Country

Partnership Framework (CPF) for Uruguay FY16-FY20 (Report No. 97063-UY), which was discussed

by the Board of Executive Directors on December 21, 2015. The project contributes to CPF Pillar I -

building resilience to shocks, and especially to Objective 2 - increase the sustainability and efficient use

of resources. The project is also contributing to the achievement of agricultural targets under the

Nationally Determined Contributions (NDC), both on the adaptation3 and mitigation

4 agendas (cf. Annex

6 – GHG accounting).

12. Scaling-up the development effectiveness of the Sustainable Management of Natural Resources

and Climate Change Project. The Government is seeking to scale-up project approaches that have

demonstrated proof of concept and have directly contributed to the achievement of the Government’s

strategic vision for the sector. The AF would expand its interventions by, among others: (i) scaling-up

agro-environmental measures and investments to reduce and control the effluent load from dairy

production in the whole Santa Lucia River Basin, while the original loan covered only a pilot area, and

expanding this activity to other prioritized river basins that could be selected during implementation (e.g.

Laguna del Sauce); (ii) financing technologies that enhance the resilience of family farming to climate

variability and changes, by increasing access to irrigation, and to water and soil management in general,

at both individual and collective levels; and (iii) strengthening the capacity of the Ministry of Agriculture

in the implementation and monitoring of the Soil Management and Conservation Program, specifically

through the use of online tools and satellite imagery. The AF would also strengthen the National

Agricultural Information and Decision Support System (SNIA in Spanish, for Sistema Nacional de

Información Agropecuaria) and make it accessible to farmers nationwide, whereas under the original

loan the SNIA targeted policy makers and technical staff in the public and private sectors.

13. Piloting new technologies and proposing innovations in climate-smart practices. In addition to

scaling up successful activities, the AF proposes to incorporate new activities to pilot the potential of new

climate-smart investments. A call for proposals related to grasslands management will incorporate

international best practices on grazing and water / shade management for livestock, including forestation,

to increase livestock production efficiency and reduce GHG emissions. In addition, investments in the

SNIA will take national-level information and make it accessible and useful for family farmers, using a

variety of technologies, including SMS, special trainings, and online courses. Additional studies

examining the efficacy of watershed approaches, including tailored nutrient modeling in the Santa Lucia

River Basin, will provide a baseline and direction for future investments.

14. An AF, rather than a new operation, would better consolidate and scale up the current activities,

operational approach, and procedures and also allow for continuity in the ongoing project.

3 On adaptation, the project is promoting: (i) Design and implementation of adaptation measures in cattle production, including water

sources, feed and rangeland management measures; (ii) Development of soil use plans to reduce erosion; and (iii) Protection of surface and

underground water sources through the promotion of non-point sources pollution control (in the Santa Lucia River Basin for example). 4 On mitigation, the project is contributing to reducing emissions from beef production (which account for 78% of CH4 emissions and 63%

of N2O emission) by promoting climate-smart livestock practices to increase productivity and efficiency in beef and dairy production.

Page 14: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

III. Proposed Changes

Summary of Proposed Changes

The Additional Financing (AF) proposes to increase the development impact of the original loan, by expanding current

investments to enhance the resilience of family farming, such as small-scale irrigation and management of animal waste

in the country's watersheds, as well as by including new activities, such as the improvement of grazing areas. The AF

will build on activities executed under the original loan that have been shown to effectively promote farmer adoption of

improved environmentally sustainable and climate-smart agriculture and livestock practices.

Change in Implementing Agency Yes [ ] No [ X ]

Change in Project's Development Objectives Yes [ X ] No [ ]

Change in Results Framework Yes [ X ] No [ ]

Change in Safeguard Policies Triggered Yes [ X ] No [ ]

Change of EA category Yes [ ] No [ X ]

Other Changes to Safeguards Yes [ ] No [ X ]

Change in Legal Covenants Yes [ X ] No [ ]

Change in loan Closing Date(s) Yes [ X ] No [ ]

Cancellations Proposed Yes [ ] No [ X ]

Change in Disbursement Arrangements Yes [ ] No [ X ]

Reallocation between Disbursement Categories Yes [ X ] No [ ]

Change in Disbursement Estimates Yes [ ] No [ X ]

Change to Components and Cost Yes [ X ] No [ ]

Change in Institutional Arrangements Yes [ ] No [ X ]

Change in Financial Management Yes [ ] No [ X ]

Change in Procurement Yes [ X ] No [ ]

Change in Implementation Schedule Yes [ X ] No [ ]

Other Change(s) Yes [ ] No [ X ]

Development Objective/Results PHHHDO

Project’s Development Objectives

Original PDO

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.

Change in Project's Development Objectives PHHCPDO

Explanation:

The PDO has been changed to streamline the language and eliminate the imprecision of the term “environmentally

sustainable” to allow for more precise measurement of AF outcomes.

Page 15: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

Proposed New PDO - Additional Financing (AF)

The development objective of the project is to support Uruguay's efforts to promote farmer adoption of climate smart

agricultural and livestock practices, and improved natural resource management practices in project areas.

Change in Results Framework PHHCRF

Explanation:

Changes are proposed to improve the Results Framework and incorporate lessons learned from the original loan's

experience with data collection and analysis. The proposed changes will do several things: (1) add gender

disaggregation to some indicators, where previously there has been no disaggregation; (2) replace dichotomous

indicators that have already been met (for example, 'Information Decision Support System (IDSS/SNIA) functioning

has been met for several years; (3) modify the wording of several indicators so that it matches the wording of the

World Bank Corporate Results Indicators; (4) redefine some of the indicators to improve data collection and precision

of measurement; and (5) include an intermediate indicator related to the activities developed in the Santa Lucia River

Basin for the reduction of nutrient pollution.

Compliance PHHHCompl

Change in Safeguard Policies Triggered PHHCSPT

Explanation:

Given the increased focus on irrigation projects and improvement of water quality in Santa Lucia, the AF will trigger

OP 4.12 - Involuntary Resettlement, to cover the potential impacts of the collective irrigation subprojects (EAAPs) that

could generate issues of land loss (due to the construction of small water storage infrastructure) and/or right of way (for

water conveyance or electric line transmission). A Resettlement Policy Framework has been prepared by the Borrower

under the supervision of the safeguards specialist, consulted with the main stakeholders and disclosed on September

26, 2017 in the World Bank’s website and on the MGAP’s web site (http://www.mgap.gub.uy/institucional/dacc).

In light of activities related to small-scale irrigation development, OP 7.50 (Projects on International Waterways) is

triggered. The Project however falls under the exception from the requirement to notify other riparian countries

provided for in paragraph 7(c) of OP 7.50 since the water used by the Project’s beneficiaries will be withdrawn from

tributaries that run exclusively in one state and that state, Uruguay, is the lowest downstream riparian. The Project will

not cause appreciable harm to the other riparian countries. The exception to the notification requirements was approved

by the Regional Vice President on July 11, 2017.

Given the small scale of the irrigation investments, the Project will not trigger OP 4.37 (Safety of Dams).

Current and Proposed Safeguard Policies Triggered: Current (from Current

Parent ISDS)

Proposed (from Additional

Financing ISDS)

Environmental Assessment (OP) (BP 4.01) Yes Yes

Natural Habitats (OP) (BP 4.04) Yes Yes

Forests (OP) (BP 4.36) No No

Pest Management (OP 4.09) Yes Yes

Physical Cultural Resources (OP) (BP 4.11) No No

Indigenous Peoples (OP) (BP 4.10) No No

Involuntary Resettlement (OP) (BP 4.12) No Yes

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Safety of Dams (OP) (BP 4.37) No No

Projects on International Waterways (OP) (BP 7.50) No Yes

Projects in Disputed Areas (OP) (BP 7.60) No No

Covenants - Additional Financing (AF- Sustainable Management of Natural Resources and Climate Change -

P163444)

Source of

Funds

Finance

Agreement

Reference

Description of Covenants Date

Due Recurrent Frequency Action

IBRD Section I.B.5 of

Schedule 2

Hire experts with experience, qualifications

and terms of reference acceptable to the

Bank in accordance with Section 5.13 of

the General Conditions, for purposes of

assisting the PMU in the supervision of

Sub-projects, and as set forth in the

Operational Manual.

October

26,

2018

New

IBRD Section I.D.1of

Schedule 2

Carry out the Project in accordance with

the ESMF, the RPF, and the Operational

Manual.

CONTINUOUS New

IBRD Section I.D.4 of

Schedule 2

Ensure that the terms of reference for any

consultancy required under Part 2 (a), Part

3 (b) (iii) and Part 3(b) (v) (F) of the

Project shall be satisfactory to the Bank

and, to that end, such terms of reference

duly incorporate the requirements of the

Bank’ Safeguards Policies then in force, as

applied to the advice conveyed through

such technical assistance.

CONTINUOUS New

Covenants - Parent (Sustainable Management of Natural Resources and Climate

Change - P124181) PHHCAFPPrj

Ln/Cr/TF

Finance

Agreement

Reference

Description of

Covenants Date Due Status Recurrent Frequency Action

IBRD-80990 Section I.E.1

of Schedule 2

Carry out the Project in

accordance with the

ESMF, the RPF, and the

Operational Manual.

CONTINUOUS New

IBRD-80990 Section I.E.4

of Schedule 2

Ensure that the terms of

reference for any

consultancy required

under Part 2 (a), Part 3

(b) (iii) and Part 3 (b)(v)

(F) of the Project shall

be satisfactory to the

Bank and, to that end,

such terms of reference

duly incorporate the

CONTINUOUS New

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requirements of the

Bank’ Safeguards

Policies then in force, as

applied to the advice

conveyed through such

technical assistance.

IBRD-80990

Finance

Agreement:

Schedule 2,

Section II B 1

Accounting and

Management

Information System

Complied

with

Marked for

Deletion

IBRD-80990

Finance

Agreement:

Schedule 2,

Section I E 1

Compliance with

provisions of

Environmental and

Social Management

Framework and

procedures outlined in

the Operations Manual

Complied

with

Marked for

Deletion

Conditions

PHCondTbl

Source Of Fund Name Type

IBRD Operations Manual updated Effectiveness

Description of Condition

Operations Manual to be updated to reflect the new activities under AF.

Risk PHHHRISKS

Risk Category Rating (H, S, M, L)

1. Political and Governance Moderate

2. Macroeconomic Low

3. Sector Strategies and Policies Moderate

4. Technical Design of Project or Program Low

5. Institutional Capacity for Implementation and Sustainability Substantial

6. Fiduciary Moderate

7. Environment and Social Moderate

8. Stakeholders Low

9. Other Low

OVERALL Moderate

Page 18: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

Finance PHHHFin

Loan Closing Date - Additional Financing (AF- Sustainable Management of Natural Resources

and Climate Change - P163444)

Source of Funds Additional Financing Loan Closing Date

16-Nov-2021

Loan Closing Date(s) - Parent (Sustainable Management of Natural Resources and Climate

Change - P124181)

PHHCLCD

Explanation:

A change in the closing date of the original loan is proposed to ensure a smooth transition between the original loan

and the AF, as well as to provide several months of additional time to complete ongoing investments and allow for full

disbursements from the original loan.

Ln/Cr/TF Status Original Closing Date Current Closing

Date

Proposed Closing

Date

Previous Closing

Date(s)

IBRD-

80990 Effective 01-Mar-2017 30-Jun-2018 31-Dec-2018 01-Mar-2017

Allocations - Additional Financing (AF- Sustainable Management of Natural Resources and

Climate Change - P163444)

Source of

Fund Currency Category of Expenditure

Allocation Disbursement %(Type

Total)

Proposed Proposed

IBRD USD Good, Works, non-Consulting services

(other than under category 3) 1.61 80.00

IBRD USD Consulting services and training (other

than under category 3) 17.90 80.00

IBRD USD Preparation Grants and Subprojects

Grants 21.18 100.00

IBRD USD Operating costs 1.31 85.00

Total: 42.00

Page 19: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

Reallocation between Disbursement Categories PHHRBDC

Explanation:

The Additional Financing will reallocate US$2.5M of unallocated funds (category 5) of the original loan to Works,

Goods, Non-Consultant Services and/or Consultant Services under Sub-projects (category 3).

Ln/Cr/TF Currency Current Category of

Expenditure Allocation

Disbursement %(Type

Total)

Current Proposed Current Proposed

IBRD-

80990

USD

Good, non-consulting services (other

than under cat 3) 2,600,000.00 2,600,000.00 80.00 80.00

IBRD-

80990

Consulting services and training

(other than under cat 3) 17,000,000.00 17,000,000.00 80.00 80.00

IBRD-

80990

Preparation Grants and Sub-project

Grants 22,800,000.00 25,300,000.00 100.00 100.00

IBRD-

80990 Operating costs 4,100,000.00 4,100,000.00 85.00 85.00

IBRD-

80990 Unallocated 2,500,000.00 0.00 0.00 0.00

Total: 49,000,000.00 49,000,000.00

Page 20: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

Components PHHHCompo

Change to Components and Cost PHHCCC

Explanation:

While the Components of the AF will remain the same, a few modifications to the original Project description under

components 1, 2 and 3 are introduced to better reflect the nature of support provided by the Project and the AF will

increase the value of each component. Annex 2 includes a detailed description of the components and activities.

Current Component

Name

New Component names and

Comments

Current Cost

(US$M)

Proposed Cost

(US$M) Action

Establishment of an

Agricultural

Information and

Decision Support

System

Agricultural Information and

Decision Support System

US$5.1 million additional funds from

IBRD under the AF

5.00 10.10 Revised

On Farm Investments

for Climate Smart

Agriculture and

Livestock Management

Territorial Interventions and On

Farm Investments for Climate Smart

Agriculture and Livestock

Management

US$24.8 million additional funds from

IBRD under the AF and US$2 million of

contingencies reallocated to

subprojects of original loan

29.60 56.40 Revised

Capacity Building and

Training US$6.6 million additional funds from

IBRD under the AF 7.50 14.10 Revised

Project Management,

Monitoring and

Evaluation

US$5.5 million additional funds from

IBRD under the AF 4.90 10.40 Revised

Contingencies 2.00

Total: 49.00 91.00

Page 21: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

Other Change(s) PHHHOthC PHImplemeDel

Implementing Agency Name Type Action

Ministry of Livestock, Agriculture and Fisheries

(MGAP) Implementing Agency No Change

Change in Procurement PHHCProc

Explanation:

The AF will be implemented under the Procurement Regulations for IPF Borrowers, effective since July 1, 2016. The

Project Procurement Strategy for Development (PPSD) and a Procurement Plan were prepared by the Borrower before

the Decision Meeting, and approved by the Bank on October 5, 2017.

Change in Implementation Schedule

Explanation:

The restructuring includes a six -month extension of the closing date of the original loan from June 30, 2018, to

December 31, 2018. The closing date of the Additional Financing would be November 16, 2021.

IV. Appraisal Summary PHHHAppS

Economic and Financial Analysis PHHASEFA

Explanation:

With the scale-up of investments in irrigation subprojects, the enhancement of benefits under SNIA, and further

strengthening of OPYPA, the pattern of benefits generated by the Project has changed. In addition, with the injection of

the AF resources and Government counterpart financing, the costs of the Project have also changed. During the

preparation of the AF, the team updated the original financial and economic analysis using a cost-benefit methodology to

capture the new estimation of economic benefits from the Project. The analysis found an EIRR of 18 percent and a FIRR

of between 25-42 percent. However, these benefits are considered to be lower bounds of what the project might achieve,

specifically for the EIRR. The analysis recognized additional economic benefits (for example, those of the SNIA), but

describes them qualitatively in the analysis, and plans to quantify them during implementation and the Implementation

Completion and Results (ICR) stages. The costs considered were the AF, Government counterpart financing and

beneficiary contribution, and the benefits were analyzed from the perspective of direct, indirect and co-benefits. A full

description is included in Annex 5.

Technical Analysis PHHASTA

Explanation:

The framework of the four components will remain the same, but the AF will expand investments to scale-up activities

and include additional innovation (cf. Annex 2 for further details):

Component 1: Agricultural Information and Decision Support System

Activities under the AF will aim at: (i) integrating with full interoperability all the distinct information modules of the

Ministry of Livestock, Agriculture and Fisheries (MGAP), such as the existing traceability system for livestock - SNIG

(Sistema Nacional de Información Ganadera), the existing system of agrochemical use (Monitoreo de Aplicación), the

Soil Information System (Sistema de Información de Suelos de Uruguay - SISU), which are currently under construction,

the Soil Management Plan System (Sistema de Gestión de los Planes de Uso- SGPU), currently under construction,

among others; and (ii) enhancing communication about the services provided by the SNIA, establishing a management

system for the sustainability of the system, and ensuring coherence with Uruguayan initiative of Electronic Government.

These will be crucial for ensuring that family farmers throughout the country have access to the aggregated national-

level information for decision-making. Additional tools will be put into place to link small farmers with the SNIA,

Page 22: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

including specialized technology and tailored training.

The complete updated component description, considering the activities that will be supported by the AF and those that

were supported under the original loan, is as follows: Provision of support for strengthening SNIA 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:0

(a) facilitating the integration and consolidation, with full interoperability, 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 for establishing climate related early warning systems, including the

consolidation of tools developed for risk management and early warning systems by using information

on climate, soil, agrochemical, land uses and water layers;

(c) simulating and evaluating the expected impacts of introducing different adaptation technologies and

policies and contributing to the elaboration of forecasts of agricultural production;

(d) carrying out awareness campaigns, dissemination and communication activities and training programs

for, inter alia, staff of DGRN and INIA, farmers and advisory service providers, on the use and features

of the SNIA;

(e) providing feedback and advice to improve targeting of MGAP’s assistance to farmers, in particular in

respect of Sub-projects; and

(f) establishing a governance system for data sharing, decision making and risk management consistent with

the Electronic Government Initiative to ensure SNIA’s sustainability.

Component 2: Territorial Interventions and On Farm Investments for Climate Smart Agriculture and Livestock

Management

Investments under the AF would scale-up successfully piloted activities under the original loan aimed at: (i) reducing

diffused pollution load from dairy production in the Santa Lucia River Basin and other prioritized river basins that may

be selected during implementation (e.g. Laguna del Sauce); and (ii) increasing access to water for livestock and crops

(irrigation) in order to enhance resilience, through support to individual farmers and to Water Users organizations by

expanding the successful experience of the EAAPs (Estrategias Asociativas de Agua para la Producción). In addition,

based on international best practices and Uruguay’s leadership in environmental stewardship, the AF would undertake a

new activity to promote the establishment of integrated systems, combining grazing areas with rapid-growing trees

providing shade for livestock.

The complete updated component description, considering the activities that will be supported by the AF and those that

were supported under the original loan, is as follows:

(a) Provision of: (i) Preparation Grants; and (ii) technical assistance to Beneficiaries for the preparation and

implementation of Sub-projects.

(b) Provision of Subprojects grants financing for 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

Page 23: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

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; (v) reduce diffused pollution load from dairy production in the selected River Basins; (vi)

promote the adoption of energy efficiency measures and the generation of cost effective and clean

biomass energy in the agriculture sector; and (vi) promote the establishment of integrated systems for

the combination of grazing areas with rapid-growing trees.

(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.

Component 3: Capacity Building and Training

Activities under the AF: (i) add new support to the USCC (Unidad de Sostenibilidad y Cambios Climáticos) within the

OPYPA (Oficina de Programación y Política Agropecuaria) for the development of Adaptation and Mitigation analysis,

and for the development of Impact evaluation methods and tools to assess impacts of agricultural policies and project’s

activities; (ii) expand the original loan’s successful experiences with Soil Management Plans (SMP), including the geo-

referenced module for the management and monitoring of the SMPs, that the AF would integrate into the SNIA; (iii)

complement the inventory of soils at national level (SISU - Sistema de Información de Suelos en Uruguay) and include

the database (maps and analysis) in the SNIA; and (iv) strengthen the Soil Laboratory (rehabilitation). In addition, this

Component will further the work started under the Technical Assistance (TA) for Green Growth and TA for Water for

Uruguay and build national-level capacity for this type of highly-sophisticated modeling through targeted investments in

training and equipment.

The complete updated component description, considering the activities that will be supported by the AF and those that

were supported under the original loan, is as follows: 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 DGRN, to implement its natural resources management policies,

programs and climate change strategy in the agricultural sector, including, inter alia:

(a) the development of MGAP’s web-based services related to land and water use, conservation and

management;

(b) the updating of the Borrower’s soil mapping and cartography inventory;

(c) the provision of technical assistance to improve the Borrower’s legal and policy framework and strengthen

DGRN’s operational capacity for water resources management, soil management and grasslands;

(d) 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;

(e) the provision of support to DGRN to, inter alia: (A) expand the geographic reach of Soil Management Plans;

(B) design a geo-referenced module (Sistema de Gestión de los Planes de Usos) for the management and

monitoring of said plans with the purpose of integrating it into the SNIA; (C) expand the geographic reach of

the Borrower’s soil mapping and cartography inventory and include said inventory into the SNIA; (D)

rehabilitate the Borrower’s soil laboratory; (E) strengthen the Borrower’s capacity for the use of advanced

modeling technology through the provision of training and the purchase of equipment; and (F) carrying out

complementary studies and research on sustainable use of natural resource management; and

(f) the provision of support to strengthen OPYPA’s capacity on the evaluation of policies in the agricultural

Page 24: World Bank Document · Uruguay Departamento de Colonia Uruguay Departamento de Cerro Largo . Uruguay Departamento de Canelones Uruguay Departamento de Artigas Institutional Data Parent

sector and for natural resource management.

Component 4: Project Management, Monitoring and Evaluation

The AF will provide additional resources for Project Management and the M&E system until the closing of the project.

These changes will be made to incorporate lessons learned from the original loan and scale-up their impact. The changes

in Component 1 will be introduced to ensure that each of the distinct information systems currently operated by MGAP

is able to communicate with others and is leveraging all information. Changes in the way that communication is done

regarding the SNIA will also help to improve the interaction of farmers with the information system. Based on the

demand as shown under the original loan, and the increasing variability of rainfall, Component 2 will have a strong focus

on water (both quality and quantity) to enhance resilience of agricultural production (small-scale irrigation and water for

livestock) and reduce environmental impacts (in the Santa Lucia river basin and other river basins to be prioritized).

Changes under Component 3 will help to further expand the reach of the Soil Management Plan policy, strengthen

national research capacity, specifically as it relates to soil and improve the related infrastructure. A more detailed

presentation of components, planned activities and targets are included in Annex 2.

The original description of this component will not be modified. Said description is as follows:

(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 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.

Summary of Greenhouse Gases Accounting Analysis:

The activities under the AF will generate a carbon sink of 1.27 million tCO2-eq, largely via reduced agricultural

emissions, grassland improvements, and reduced livestock emissions. Emissions are initially projected to increase by

26 927 tCO2-eq due to the land use change (LUC) from planting trees in grassland areas as part of the sustainable

management practices. However, the planted trees eventually will constitute an emission sink that will be more than

sufficient to overcome the emissions generated from the LUC. The proposed investment to improve grasslands has a

removal contribution representing 30 percent of the total tCO2-eq equivalent removed by the Project. Investment in

irrigation will contribute directly to a 22 percent reduction of total tCO2-eq when compared to the without Project

scenario. The investments are interlinked, however, so activities supporting irrigation and grasslands improvement will

indirectly improve livestock management. As a result, investments supporting dairy and cattle raising will make a

significant contribution to reducing emissions in the livestock sector. These investments will improve productivity,

limiting the need to increase the number of animals and providing better diets when compared to the without Project

scenarios, thereby significantly reducing the emission of methane gases. As a result, approximately 48 percent of the

total reductions will be generated by the livestock sector. The detailed results of the GHG analysis are shown in Annex 6.

In addition to the benefits estimated in the GHG analysis, the AF will also have an important impact on the reduction of

GHG emissions through their beef and dairy exports to higher emitting markets. In 2015, Uruguayan beef exports

generated US$1.5 billion in revenue and comprised 16 percent of Uruguay’s exports. The process of producing beef in

Uruguay’s major markets – China and Europe – is significantly more carbon-intensive. In this way, the comparative

advantage of Uruguay’s low-carbon production of beef contributes to the off-set of GHG emissions in countries where

domestic production of beef would produce higher GHG emissions. A calculation to determine the AF’s contribution to

this off-set will be undertaken during project implementation, after specific sub-projects are selected.

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Climate Co-Benefits:

Extreme weather events and recurrence of low onset events such as consistent droughts are considered one of the main

risks facing agricultural producers in Uruguay, and small-scale producers are particularly vulnerable given their reliance

on rain-fed agricultural cycles for their livelihoods. Floods and droughts have a direct impact, affecting productivity,

profit and input pricing. Under a changing climate, these events are projected to increase in frequency and recurrence.

Project activities will yield potential climate co-benefits with the capacity to mitigate GHG emissions, while helping

farmers adapt to climate variability and climate change risks. It is estimated that the project has the potential to generate

important climate (adaptation and mitigation) co-benefits, by enhancing the provision of climate related information for

climate smart planning, increasing irrigation infrastructure, implementing sustainable management practices in grassland

livestock production systems, and treating and reusing effluent to fertilize pastures to enhance carbon sequestration and

soil quality. Climate co-benefits will come mainly from three sources: a) access to climate related information and

environmental indicators to enhance climate smart planning at the national level; b) crop production and irrigation

investments to install irrigation systems on 1,788 ha of crop land, including for maize, sorghum, forage and sugarcane,

which will increase crop efficiency and productivity, with the added co-benefit of reducing crop vulnerability to climate

change impacts (adaptation) and reducing the need for fertilizers (mitigation). c) Improvements in natural grasslands

livestock production systems will include the introduction of trees and reduction of stocking per ha on an area of

approximately 173,000 ha. Reduction of stocking per ha will allow more natural regeneration of grasslands, and

conversion of pasture lands to tree crops will result in a net carbon sink via natural grasslands improvements

(mitigation.) and provide areas of shade for livestock as an adaptation to severe heat waves; and d) livestock production

improvements will have a direct impact on livestock feeding and treatment of effluents. In addition to increasing

production efficiency, changes in livestock diet also have important co-benefits of reducing GHG emissions (mitigation),

while treatment and reduction of effluents help to improve the country’s water sources.

The original project was considered to have 98 percent climate change co-benefits, in terms of both adaptation and

mitigation, mainly due to components 1, 2 and 3. The AF was estimated at appraisal to have 52 percent Climate Change

co-benefits, largely attributed to components 1 and 2, which is a lower proportion than under the original loan as the AF

also includes an emphasis on water quality. While the final calculation will be confirmed at a later stage, taken together,

the original loan and AF were estimated at appraisal of the AF to generate climate change co-benefits in relation to

US$70 million, or 77 percent, of the total Bank financing for the project.

FY Total IDA/IBRD

Commitments ($M)

Total WB Climate

Funds ($M)

% Climate over

Commitments

Original Loan 12 49 48 98

Additional Financing 18 42 22 52

Total Bank Financing 91 70 77

Maximizing Financing for Development: The aim of the Project is to use public financing to overcome information-related market failures by demonstrating the

technical and economic viability of climate-smart technologies for agriculture and livestock, and then allowing the

private sector to take over. Demonstrated use of these technologies is expected to lead to the wider adoption through

investments by private firms and individuals. This methodology is aligned with the World Bank’s “cascade” model,

which emphasizes encouraging private sector participation in investments where feasible by improving the investment

environment and addressing key risks.

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Social Analysis PHHASSA

Explanation:

Social evaluation. Given the modifications to the Project design, it was necessary to update the Social Assessment to

reflect the altered characteristics of Project-supported interventions, including the socioeconomic and demographic

characteristics of the beneficiaries. Specific questions that were examined included the conditions of land tenure and

types of land ownership, as well as how to expand benefits to a larger group of farmers. Safeguards rating have been

Satisfactory for the last 3 years.

OP 4.12 Involuntary Resettlement. The AF will result in the project triggering OP 4.12 - Involuntary Resettlement,

to cover the potential impacts of the collective irrigation subprojects (EAAPs) that could potentially generate issues of

land loss (e.g. due to the construction of small water storage infrastructure) and/or right of way (e. g. for water

conveyance or electric line transmission). As subproject designs and locations have yet to be defined, a Resettlement

Policy Framework (RPF) has been prepared by the Borrower in order to outline general implementation procedures,

mitigation measures and monitoring procedures for resettlement under the project, including the procedures for

preparation and implementation of Resettlement Action Plans, when applicable. The RPF has been published in the

Borrower’s website on September 26, 2017, and on the Bank’s website on September 26, 2017. It includes a Grievance

Redress Mechanism to resolve the issues that may arise during the implementation of the project.

Citizen Engagement: The preparation of the AF has included extensive rounds of citizen consultations – focusing on

technical, social and environmental safeguards aspects of the Project. During preparation, the Government’s team held

technical consultations with current Project beneficiaries, while safeguards specialists held safeguards consultations on

the Resettlement Policy Framework with institutions and farmers’ organizations throughout the possible areas of

intervention. These consultations allowed farmers from different areas of the country to understand the proposed

design of the AF, as well as to provide input and feedback. Feedback from all the consultations was considered in the

Environmental / Social Assessment updates. The Project design incorporates several citizen engagement mechanisms

to be employed throughout implementation. Citizen satisfaction surveys will be used to determine the overall

satisfaction with the project’s service delivery and communications activities. Any dissatisfaction will be identified and

addressed by the project. Community oversight will be used at the state level to monitor the sub-projects. Information

about the project will be displayed publicly on the Ministry’s website, and the SNIA will be used for information

dissemination. The AF will rely on the original loan’s current grievance mechanism to allow citizens to ask questions,

or express problems or concerns. The project will address each of these in turn, and monitor the response rate and

quality.

Gender. In rural Uruguay women have less access than men to resources, particularly to productive assets such as

land, water, credit and agriculture inputs. This disparity helps account for the pronounced gap in poverty and

vulnerability. In rural Uruguay women are 20 percent poorer than their male counterparts (FAO 2011). Ownership

and control over assets such as land contribute to economic empowerment; they provide direct and indirect benefits to

individuals and households, including protection during emergencies and collateral for credit that can be used for

investment or consumption (IDB technical note No. IDB-TN-763, 2014). Income from labor of rural women in

Uruguay is 52 percent lower than that of men and while men have average land holdings of 81.7 ha, women hold an

average of only 18.2 ha (IDB technical note No. IDB-TN-763, 2014). 2011 FAO studies show that if rural women had

the same access to productive resources as men, they could increase yields on their farms by 20–30 percent.

The project will work to bridge the rural gender gaps in Uruguay, and work specifically by targeting female

beneficiaries through the unit of the family farm. Women play a unique role in family farms in Uruguay. Formally

defined in terms of size, income, and the residency location of the owner, family farms are an important unit for men

and women throughout Uruguay. Within these farms, women and men are equally susceptible to the impacts of

climate change, and reducing the vulnerability of family farms to the adverse impacts of climate change benefits the

entire family. The original loan focused heavily on the family farm unit, and as such, did not disaggregate indicators by

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gender, despite the fact that many of the project beneficiaries were woman. In development of its national adaptation

plans to climate change, the Government cited the observation of the Uruguayan Rural Women’s Association that the

“distribution of productive and domestic responsibilities between men and women is different, and that the

consequences of climate change are perceived also differently”. Since adaptation to climate change and variability is a

strategic priority for Uruguay and the Objective of the project, understanding the woman’s perspectives on climate

change and vulnerability is particularly critical for the project, the AF will carefully consider the differences in the way

that women are impacted by climate change, and hold targeted workshops and trainings to encourage women to

participate in the AF’s calls for proposal.

In order to address some of the gender gaps, the project will consider gender in a three-phased approach, including:

- Gender analysis. The project will deepen its gender analysis, as part of the social safeguards, to further

understand gender dynamics and roles in agriculture, and identify gender-based constraints.

- Gender actions. Based on the findings of the gender analysis, the project will develop a gender action plan.

Specific actions aiming to close the identified gap will be elaborated and promoted during the project

implementation. Such actions may include:

a. ensuring that women are included in consultations and decision-making processes;

b. ensuring that women participate in training activities (i.e. offered at times and in places that

accommodate women’s needs or constraints);

c. ensuring that production cost reductions and competitiveness increases, equally benefit female and

male beneficiaries;

d. integrating gender considerations into different tools and social safeguard guidelines.

- Mainstreaming gender into M&E. Gender will be mainstreamed into the project’s M&E and indicators will

be disaggregated where possible.

The AF will also place a continued emphasis on investments in family farms and an increased emphasis on women-run

enterprises. In addition, the results indicators will be changed to disaggregate the results by male and female

beneficiaries, helping to capture the important work that the project is doing with female beneficiaries throughout the

country, primarily through the family farm unit. It is expected that 20 to 25 percent of the farmers benefited by the

project will be women (cf. Result Framework for more details.)

Human resources in social issues. Given the new challenges of DACC-AF in social issues (application of new

safeguards, grievance redress mechanisms, and monitoring of new gender indicators in the Result Framework), it will

be necessary to hire a new staff member to support the project Implementation Unit (PIU) to oversee these issues. The

Terms of Reference for this role will specifically include experience supporting gender integration and monitoring

within projects, as well as capacity related to the monitoring and oversight of safeguards. The World Bank team, and

specifically the Safeguards Specialists, will provide support to the PIU in crafting the Terms of Reference and

overseeing the selection of a candidate with an appropriate skill-set.

Environmental Analysis PHHASEnvA

Explanation:

The improvement in the management of natural resources (soil, water and vegetation) is expected to expand the land

area under sustainable landscape management practices from 2.9 to 3.6 million hectares, representing respectively 44

and 54 percent of total arable land in Uruguay5, by promoting of sustainable management practices (subprojects) and

supporting the GoU in the enforcement on the policy of Soil Management Plan (SMP). This public policy requires

farmers to prepare multiyear cropping plans that guarantee a sustainable agronomic crop rotation and soil protection.

5 Considering the arable soils with: (i) very high; (ii) high and; (ii) medium suitability for agriculture, representing a total of

6,627,000ha.

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The SMP are elaborated by independent experts, approved by the public sector (Ministry of Agriculture) and

monitored thanks to modern tools (combining remote monitoring with field visits). The positive impacts of the project

and the public policies have been captured and evaluated in the MTR and the ISRs, and reflected in the satisfactory

environmental safeguard ratings. Safeguards rating have been Satisfactory for the last 3 years.

No significant changes are anticipated from the original loan regarding environmental impacts. The ESMF was

updated to reflect the expected impacts of the activities included in the AF, and disclosed on the World Bank’s website

on September 14, 2017, and in MGAP’s website on September 26, 2017. The primary potential negative environmental

and social impacts are essentially related to the civil works for the small-scale irrigation subprojects (called EAAPs).

Potential negative impacts of Component 2 could include: typical construction work impacts such as dust, noise, waste

generation, etc. Land-use changes in native grasslands and forestation for shelter and shade are not considered relevant

as no new native areas will be intervened, and tree covering will be minimal in close relationship to water access

points.

It is not expected that many and/or lengthy electricity distribution lines will be built as the network is already dense in

the rural areas. In case it is necessary, the project would include the construction of lines to provide energy to the

infrastructure associated with irrigation systems (e.g. pivots-sprinkled irrigation) and it will follow, to the extent

possible, the rural roads to minimize impacts on private properties. The potential electric lines will be triphasic and low

tension to feed pivots, pumps and provide energy for lights to some storage facilities. Given the nature of this project, its predecessor (the Integrated Natural Resource and Biodiversity Management

project, P070653) and the activities for the AF, no significant cumulative impacts are anticipated. Nevertheless, an

environmental cumulative impact assessment will be prepared by the Borrower during the first semester of project

implementation to understand the distribution, concentration and possible impact of water capture and storage in the

landscape.

Risk PHHASRisk

Explanation:

Given that the AF will finance similar activities as the original loan, it is expected that the risks will remain broadly the

same. The overall risk for the project remains Moderate, and the rating for Institutional Capacities for Implementation

is kept as Substantial.

The Project Implementation Unit (PIU) of the MGAP supports the execution of all donor-funded agriculture projects in

the country. This has proven to be a unique model: on the one hand, the PIU functions with a high level of capacity,

flexibility and experience, and hosting multiple projects means the PIU has a clear overview of all donor-financed

projects in the country and can avoid overlap and maximize complementarities. On the other hand, this can from time

to time lead to processing bottlenecks. The AF acknowledges the implementation capacity of the PIU as a substantial

risk, especially in light of the need to supervise a large number of subproject grants, and will invest in further

strengthening the PIU’s capacity in relation to subprojects supervision, audits and safeguards.

V. World Bank Grievance Redress

15. Communities and individuals who believe that they are adversely affected by a World Bank (WB)

supported project may submit complaints to existing project-level grievance redress mechanisms or the

WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly

reviewed in order to address project-related concerns. Project affected communities and individuals may

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submit their complaint to the WB’s independent Inspection Panel which determines whether harm

occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints

may be submitted at any time after concerns have been brought directly to the World Bank's attention,

and Bank Management has been given an opportunity to respond. For information on how to submit

complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit

http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank

Inspection Panel, please visit www.inspectionpanel.org.

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Annex 1: Revised Results Framework and Monitoring Indicators

Project

Name:

AF- Sustainable Management of Natural Resources and

Climate Change (P163444)

Project

Stage: Additional Financing Status: FINAL

Team

Leader(s): Remi Trier

Requesting

Unit: LCC7C Created by: Katie Kennedy Freeman on 02-Aug-2017

Product

Line: IBRD/IDA

Responsible

Unit: GFA04 Modified by: Remi Trier on 24-Sept-2017

Country: Uruguay Approval FY: 2018

Region: LATIN AMERICA AND

CARIBBEAN

Financing

Instrument: Investment Project Financing

Parent Project

ID: P124181

Parent Project

Name: Sustainable Management of Natural Resources and Climate Change (P124181)

.

Project Development Objectives

Original Project Development Objective - Parent:

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.

Proposed Project Development Objective - Additional Financing (AF):

The development objective of the project is to support Uruguay's efforts to promote farmer adoption of climate smart agricultural and livestock

practices, and improved natural resource management practices in project areas.

Results

Core sector indicators are considered: Yes Results reporting level: Project Level

.

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Project Development Objective Indicators

Status Indicator Name Corpo

rate Unit of Measure Baseline Actual(Current) End Target

Marked for

Deletion

Information Decision Support

System (IDSS) functioning

Yes/No Value No Yes Yes

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment Achieved. Replaced by the indicator on the Number of data

Products generated by the interoperability.

1- New Data products generated by the

interoperability of IDSS/SNIA

and made available to users

Number Value 0.00 21.00 30.00

Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Comment Component 1

2- New Farmers adopting improved

agricultural technology

Number Value 0.00 4,700.00 7,000.00

Date 17-Oct-2011 23-Aug-2017 16-Nov-2021

Comment Component 2

2a-New Farmers adopting improved

agricultural technology -

Female

Number Value 0.00 940.00 1,400.00

Sub Type

Supplemental

2b-New Farmers adopting improved

agricultural technology - male

Number Value 0.00 3,760.00 5,600.00

Sub Type

Supplemental

3- New Land area under sustainable

landscape management

practices

Hectare(Ha) Value 0.00 2,908,000.00 3,600,000.00

Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Comment: Components 2 and 3: Soil Management Plans & subprojects

4- New Number of people trained in

project objectives

Number Value 0.00 6,200.00 8,000.00

Date 17-Oct-2011 23-Aug-2017 16-Nov-2021

Comment Component 4: technical staff at MGAP and beyond, and

farmers (via formal events and e-learning)

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4a-New Number of people trained in

project objectives - Female

Number Value 0.00 1,240.00 2,000.00

Sub Type Date 17-Oct-2011 23-Aug-2017 16-Nov-2021

Breakdown Comment

4b-New Number of people trained in

project objectives - Male

Number Value 0.00 4,960.00 6,000.00

Sub Type Date 17-Oct-2011 23-Aug-2017 16-Nov-2021

Breakdown Comment

Marked for

Deletion

Land area where sustainable

land mgt. practices were

adopted as a result of project

Hectare(Ha) Value 0.00 2,908,000.00 2,700,000.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment Replaced by the corporate indicator 'Land Area under

Sustainable Landscape Management practices'

Marked for

Deletion

Number of people trained in

project objectives

Number Value 0.00 8,861.00 3,500.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment Replaced by the corporate indicator.

5- Revised Climate Change Adaptive

Capacity Index (%)6

Number Value 0.00 0.24 0.30

Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Comment

6 As defined after the Mid-Term Review of the original loan in the document “Indicador Sensibilidad y capacidad adaptiva”, prepared by the PIU in November

2014.

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Intermediate Results Indicators

Status Indicator Name Corpor

ate Unit of Measure Baseline Actual(Current) End Target

Marked for

Deletion

Data products developed for

IDSS and made available to

users

Number Value 0.00 21.00 20.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment Moved to the PDO indicators

1- New Monitoring of Soil

Management Plan

implementation - % of SMP

audited -

Percentage Value 0.00 10.00 40.00

Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Comment Component 3. Audited on the field. Cumulative indicator

2- New Area of country with soil maps

updated (1:40,000) - % -

Percentage Value 0.00 35.00 75.00

Date 17-Oct-2011 24-Sept-2017 16-Nov-2021

Comment Component 3

3- New Area provided with

new/improved irrigation or

drainage services

Hectare(Ha) Value 0.00 400.00 3,500.00

Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Comment Component 2.

Collective

(EAAPs) and

individual

subprojects

200ha of collective

irrigation + 200ha

of individual

irrigation

3,000ha of

collective

irrigation+ 500ha

of individual

irrigation

3a- New Area provided with new

irrigation or drainage services

Hectare(Ha) Value 0.00 280.00 2,450.00

Sub Type Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Breakdown Comment

3b- New Area provided with improved

irrigation or drainage services

Hectare(Ha) Value 0.00 120.00 1,050.00

Sub Type Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Breakdown Comment

Grievances registered related to

project benefits that are

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4- New addressed (%) Percentage Value 0.00 0.00 90.00

Date 17-Oct-2011 24-Sept-2017 16-Nov-2021

Comment Component 4

Marked for

Deletion

Number of institutions which

contribute information to the

IDSS

Number Value 0.00 37.00 23.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment

5- Revised Number of IDSS / SNIA Users

Number Value 0.00 3,700.00 5,000.00

Date 17-Oct-2011 24-Sept-2017 16-Nov-2021

Comment Component 1: registered users of the SNIA or modules

6- Revised Decisions made by the public

sector based on information

from the IDSS

Text Value 0 5 8

Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Comment Component 1. Decisions with ministerial decree

7- Revised Climate-smart on-farm

subprojects funded by project

Number Value 0.00 2,600.00 4,000.00

Date 17-Oct-2011 24-Sept-2017 16-Nov-2021

Comment Component 2

7a- Revised Climate smart on-farm

subprojects with producer

organizations funded by project

(PFI)

Number Value 0.00 114.00 170.00

Sub Type

Supplemental

Marked for

Deletion

Completion ratio of climate-

smart subprojects with

producers

Percentage Value 0.00 89.00 90.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment

Marked for

Deletion

Completion ratio of climate-

smart subprojects with

producer organizations

Percentage

Value

0.00

56.00

90.00

Sub Type

Supplemental

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Marked for

Deletion

Technical assistance provided

to producers (individuals)

Days Value 0.00 34,671.00 32,800.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment

Marked for

Deletion

Technical assistance provided

to producer organizations

Days Value 0.00 3,732.00 3,600.00

Sub Type

Supplemental

8- Revised Activities (combination of

technologies) promoting

sustainable natural resources

management

Number Value 0.00 6,757.00 8,500.00

Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Comment Component 2

Marked for

Deletion

Cartographic updated

(1:50,000) and made available

to general public

Yes/No Value No No Yes

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment

9- Revised Soil-Use Management Plans

for agricultural producers with

more than 100 ha under

cultivation monitored by

DGRN and presented in digital

format compatible with

DGRN's information

management system

Percentage Value 0.00 96.00 96.00

Date 17-Oct-2011 24- Sept-2017 16-Nov-2021

Comment:

achieved

Marked for

Deletion

Regional RENARE offices

established

Number Value 0.00 8.00 8.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment

Revised Potential surface area for

application of NRM models

developed by project

Hectare(Ha) Value 0.00 1,807,400.00 2,500,000.00

Date 17-Oct-2011 16-Sep-2016 16-Nov-2021

Comment

10- New Farmers benefitted with actions

% Value 0.00 25.00 40.00

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that contribute to reduce soil

and water pollution in

prioritized river basins (Santa

Lucia, Laguna del Sauce, etc.)

Date 17-Oct-2011 24-Sept-2017 16-Nov-2021

Comment: Component 2. %

of family and

medium farmers

25% for Santa

Lucia

40% for Santa

Lucia and other

selected river

basins

Marked for

Deletion

Integrated M&E System

developed and integrated

Number Value 0.00 20,487.00 18,000.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment

Marked for

Deletion

Project activities widely

communicated and

disseminated

Number Value 0.00 2,859.00 650.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment

Marked for

Deletion

Management support tools

developed by project

Number Value 0.00 22.00 21.00

Date 17-Oct-2011 20-Apr-2017 01-Mar-2017

Comment

.

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Annex 2: Detailed Description of modified or new project Activities

Component 1: Agricultural Information and Decision Support System (SNIA). (Total cost

of the project including AF: US$12.6 million, of which US$10.1 million financed by IBRD)

16. The SNIA is already operating with basic functions, including: (i) a data library (such as

a census, farmers’ registration and production statistics); (ii) a map library; and (iii) viewing

platforms. The SNIA has developed 21 submodules in the two last years. These submodules are

mainly related to agricultural production and climate information and have been used by the

MGAP to carry out analysis and provide inputs for policies and actions (inputs for insurance,

drought monitoring, elaboration and monitoring of Soil Management Plans, etc.). The AF

proposes to continue some of the original loan’s activities and invest in: (i) expanding the target

users of SNIA (from policy-makers and technical staff to farmers); and (ii) strengthening the

capacities of SNIA to contribute to decision-making and risk management (early warning for

climatic risks, basic information for agricultural insurance, etc.).

17. The AF will expand investments in three specific areas with the following objectives:

- To deepen the improvement of the SNIA to generate full interoperability with all the

existing MGAP information systems and, in the future, with external information systems

(INUMET, MVOTMA, etc.) by:

o Consolidating an information systems architecture and its associated data to

facilitate the full interoperability of distinct information modules operating within

the Ministry of Livestock, Agriculture and Fisheries (MGAP) such as: the existing

traceability system for livestock - SNIG (Sistema Nacional de Información

Ganadera), the existing system of agrochemical use (Monitoreo de Aplicación),

the Soil Information System (Sistema de Información de Suelos de Uruguay -

SISU), which are currently under construction, and the Soil Management Plan

System (Sistema de Gestión de los Planes de Uso- SGPU), which is also currently

under construction under Component 3 of the project, among others (cf. Figure 1);

o Advancing in the consolidation of a governance structure and the implementation

of policies, processes and standards compliant with the rules of Uruguayan E-

government that will ensure the sustainability of the SNIA.

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Figure 1: Snapshot of the main systems operating within MGAP and the interoperability that will

be achieved under the project (original and additional)

- To design and implement the SNIA as a tool for support to decision-making for

sustainable and climate smart planning, and for informing policies by:

o Consolidating the instruments generated in the framework incorporating

technologies that ensure efficient, timely and transparent use of information

resources, allowing the processing and analysis of large volumes of data.

o Consolidating the tools developed for risk management and Early Warning by

using information on climate, soil, agrochemicals and water layers.

- To design and implement awareness campaigns, dissemination and communication

actions to consolidate, promote and improve the various instruments that are generated

under the SNIA by:

o Implementing adequate mechanisms to maintain a two-way relationship with

other institution involved.

o Carrying out dissemination and training activities for MGAP users in order to

achieve appropriate use of available information services.

o Carrying out dissemination, training and communication activities with users

outside the MGAP, including technicians, producers and other relevant users, to

promote the use of the services available.

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Component 2: Territorial interventions and on Farm Investments for Climate Smart

Agriculture and Livestock Management (Total cost of the project including AF: US$59.3

million, of which US$56.4 million financed by IBRD)

18. The component will finance investment, technical assistance and training for farmers and

farmers’ organizations. These interventions will generate a greater capacity for mitigation and/or

adaptation to climate changes and climate variability and other co-benefits.

19. The component will apply non-reimbursable support mechanisms of up to 80% of the

amount of investment for family farmers, and 50% for medium-sized farmers, with a threshold of

US$ 16,000 per farmer depending on their degree of vulnerability degree.

20. For the specific call for proposal aiming at reducing effluent load in Santa Lucia River

Basin (and other prioritized river basins that may be selected during the project implementation),

the subsidy for medium-sized farmers has been increased from 50% to 80%, considering the

public interest in such investments (protection of the main water source for the water supply of

Montevideo).

21. In case of the collective small-scale irrigation schemes (EAAPs), the total grant cannot

exceed US$ 500,000 per subproject, taking into consideration the costs of some investments

(weirs, pivot, pipes). In the first batch of EAAPs subprojects, the subsidies provided by the

project represented 52% of the total investment (US$ 2.5 million out US$ 4.8 million). The

remaining 48% was financed by the beneficiaries.

22. The investments under Component 2 are demand-driven and generated by specific calls

for proposals (water for production, support to ranchers, reduction of pollution in Santa Lucia,

etc.). With the support of agricultural technicians and agronomists, the farmers submit proposals

for subprojects that are revised and assessed by an evaluation committee. A Committee

determines, for each call for proposals, the criteria used for the rating of the proposals and the

minimum total to be eligible. After implementation, a systematic on-field review is carried out to

verify compliance with the investments. The calls for proposals target family farmers and

medium-sized farmers with different subsidies as described below. All the details of the

subproject cycle are included in the Operation manual.

23. The project is granting the largest amounts to the most vulnerable producers and to

investments with greater externalities, according to the MGAP policy guidelines. The call for

proposals will continue to be widely disseminated to ensure transparency and equity in access to

project opportunities.

24. Farmers’ organizations that demonstrate competence in the transparent and efficient use

of resources, may be contracted by the DACC, on behalf of the farmers to provide services, be

responsible for procurement (in case of the EAAPs), manage payments and be accountable to the

project.

25. The promotion of the sustainable use of natural resources and enhancement of mitigation

capacity and adaptation to variability and CC will be achieved with the following sub-

components:

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Calls for proposals targeting environmental issues

26. The AF will finance the expansion of investments aiming at reducing diffused pollution

load from dairy production in the Santa Lucia River Basin. The original project had financed

325 subprojects (totaliing US$4.5 million) in the pilot area upstream of the intake for

Montevideo’s water supply (cf. the “Área Piloto” in Figure 2 below) as of the date of the AF’s

preparation (September 2017). It is expected that the original loan will benefit 500 farmers as of

its proposed closing date in December, 2018.

27. The AF will finance 300 to 400 additional demand-driven subprojects in the rest of the

Santa Lucia River Basin for an estimated US$ 4.0-5.5 million. The eligible investments consist

of storage infrastructure for effluents and equipment for more efficient and sustainable effluent

treatment and reuse in the different farm plots. It is expected that the effluents from dairy

production in the watershed will be reduced from 60 to 46 liters/cow/day.

Figure 2: Location of dairy farms within the Santa Lucia River Basin and its Pilot Area

Calls for proposals promoting access to water for livestock and irrigation

28. The AF will promote increased access to water for livestock and crops (irrigation) in

order to enhance resilience, through support to individual farmers and to Water Users

organizations by expanding the successful experience of the EAAPs (Estrategias Asociativas de

Agua para la Producción). Under the original project, 15 EAAP subprojects have been

elaborated across the country, benefitting 463 organized farmers with around 1,400 ha with new

irrigation and drainage services (cf. location in the Figure 3 below). The original project financed

US$ 2.5 million out of a total of US$ 4.7 million in investments (storage facility ponds, pivot,

modern gravity and drip on-farm irrigation equipment, pumps).

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29. The AF will finance 25 additional subprojects with a target of 1,600 to 1,800 ha

countrywide, covering different collective irrigation schemes with specific objectives: (i)

improvement of water efficiency and water savings in the production of sugarcane in the north of

the country (370ha); (ii) development of new areas and improvement of irrigation in existing

areas for cereals and forage production under pivot, mainly in areas handed over to the farmers

by the Instituto Nacional de Colonización (around 1,400 ha). The project will finance small

water storage infrastructures, modern on-farm irrigation (pivot and drip) and technical assistance

for operation, maintenance and management of irrigation equipment.

30. In addition to the support to collective irrigation development, the project will support

individual interventions that will increase access to water for crops and livestock (continuation of

the call for proposal “Agua para la Producción”). It is expected that the area under irrigation will

increase by 500ha with individual subprojects. In total, it is expected that the area under

irrigation will have increased by 3,500ha:

Around 3,000ha of collective irrigation: 1,430ha financed under the original project and

1,600ha with the AF;

Around 500ha of individual irrigation: 200ha financed under the original project and an

additional 300ha with the AF.

Figure 3: Location of collective irrigation subprojects (EAAP) financed under original project

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Calls for proposals promoting better management of livestock production including improvement

of grazing areas

31. The AF would undertake a new activity to promote the establishment of integrated

systems, combining grazing areas with rapid-growing trees providing shade for grazing cattle, in

articulation with the actions and proposals that are being generating in the scope of REDD +.

This activity will draw on lessons learned under the Proyecto Ganadero Familiares y Cambio

Climático (PGFCC), funded by the Adaptation Fund, which benefitted 1,140 farmers

(US$ 6.5 million in investments complemented by US$ 1.5 million of Technical Assistance).

The AF will target 2,000 additional beneficiaries, promoting sustainable grazing areas

management and the incorporation of trees in the landscape. The results obtained by the PGFCC

showed an increase of 7.6 kg of meat/ha with the project related to the improvement of natural

pastures and ranching conditions (improved access to shade and water).

Agricultural Insurance

32. The development of agriculture insurance for livestock will continue to be a priority in

the AF. Access to agriculture insurance will enhance the resilience of farmers to climate related

impacts such as recurrent droughts and floods. The development of parametric or indexed

insurance will continue in the AF in articulation with producer organizations and insurance

companies with partial financial support to producers. In the original project, 178 ranchers have

benefitted under this pilot with support to the insurance premium during three dry seasons. The

target is to extend this pilot to 400 ranchers in the AF.

Component 3: Capacity Building and Training (Total cost of the project including AF:

US$17.5 million, of which US$14.1 million financed by IBRD)

33. Activities under this component will continue the original loan’s focus on building the

capacity of the DGRN (Dirección Nacional de Recursos Naturales) and will also add new

support to the USCC (Unidad de Sostenibilidad y Cambios Climáticos) within the OPYPA

(Oficina de Programación y Política Agropecuaria) to expand the original loan’s successful

experiences.

34. Support to the DGRN (Dirección Nacional de Recursos Naturales). The component

specifically proposes supporting the implementation of the DGRN’s Strategic Plan for the Use,

Management and Conservation of Natural Resources, with an emphasis on soils, waters and

natural pastures, to support the implementation and execution of medium and long term

environmental and climate smart public policies. The DGRN proposes to reach four public

policy products during the implementation of the DACC’s Additional Financing: 1) to support

the generation of information relevant to the adjustment of the regulatory framework; 2) to

consolidate the Soils Area by improving staff capacities, expanding the capacity to effectively

monitor Land Use and Management Plans, completing the new mapping at a scale of 1:40,000 of

the country's agricultural areas under SISU (Sistema de Información de Suelos en Uruguay) and

expanding and upgrading the Soil Laboratory; 3) to consolidate the Water Area to collaborate in

improving the quantity and quality of water available for production by improving the training of

personnel and include the SMP of irrigated agriculture in the monitoring system for the

management of all the SMPs; and 4) consolidate the management of grazing areas to promote

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productive uses of the same, with a view to increasing productivity and conservation in the

medium and long term.

35. The main activities to be undertaken include:

Development and enforcement of the monitoring system for the Soil Management

Plans. It would: (i) develop routines and protocols for the control by satellite images of

the compliance of SMP at the farm level; (ii) make available the Monitoring System of

SMP for public use, with the object of modeling productive systems; (iii) provide

support to the Technical Monitoring Committee in charge of integrating the Faculty of

Agronomy, INIA and DGRN, and develop a soil quality monitoring Plan within this

framework; and (iv) offer the monitoring tool of SMP to the rest of the Ministry with the

aim of transforming it into a platform for the management of plant resources and soils.

Integration of irrigation plans into the monitoring system of SMPs. This will include:

(i) development of routines and protocols for the control by satellite images of the

irrigated areas; (ii) training of DGRN technicians on irrigation issues; (iii) training of

private technicians in coordination with The Technological University of Uruguay

(UTEC), INIA and the Faculty of Agriculture at the University (FAGRO); (iv) promotion

of opportunities identified through basin surveys; (v) implementation of online

procedures in coordination with DINAGUA and; (vi) establishment of protocols for the

monitoring quantity and quality of water for productive use with DINAGUA.

Conducting studies and research such as: (i) broad basin studies integrating more than

one natural resource; (ii) mapping of soils, continuing the soil description tasks at a scale

of 1: 40,000; (iii) studies to review criteria with DINAGUA; (iii) grassland cartography;

(iv)studies / research on technological routes for the intensification of the productive use

of the natural field; (v) building capacities, through training and purchase of equipment,

in the use of advanced modelling technology as a continuation of activities implemented

through the “TA-Green Growth” (Modelling of effluent load) and the “TA-Water for

Uruguay” (Water allocation modelling); and (vi) studies on indicators of the state/use of

the natural field.

Completion of pending building materials in the Soil Laboratory, including: (i)

incorporation of new analytical determinations to be carried out by the Soil Laboratory

(physical properties, determinations of environmental interest and of interest for decision

making for production, etc.); (ii) implementation of a quality management system at the

Laboratory level and; (iii) consolidation of the Laboratory to support the Guidance and

Control System and, in particular, implementation of inter-laboratory rounds.

Integration of grassland mapping information: this would include monitoring and

comparing different indicators of state and natural field productivity. Such monitoring

will enhance the capacity of a range of stakeholders to plan and manage resources in a

climate smart way, by reducing GHG emissions and enhancing soil water, carbon pools

and productivity.

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Component 4: Project Management, Monitoring and Evaluation (Total cost of the project

including AF: US$12.8 million, of which US$10.4 million financed by IBRD)

36. This component aims to consolidate the institutional capacities to implement the projects

with external financing in an efficient way. The AF will add support to the Agricultural Policies

Evaluation Area that operates within the OPYPA orbit, for the design and implementation of the

Evaluation Plan for the projects executed in the orbit of the project Management Unit. This

includes the hiring of technical specialists in impact assessment and other quantitative or

qualitative techniques of policy evaluation, as well as conducting surveys and financing

consultancies and studies that are part of the Evaluation Plan.

37. The AF will use a management tool for each component (e.g. the Integral Management

System -SGI) to strengthen the M & E, ensuring transparency, efficiency, participation, quality

control for the information entered into the System, as well as other complementary tools or in

the transition. The M & E area must lead the analysis of the results with the participation of all

the actors and raise their findings in a way that contributes to take corrective measures and to

gather lessons learned.

38. The management cost of the project (component 4), including the support to the

communication unit of the MGAP, represents around 13% of the total implementation costs

which is within international standards and reflects the cost of reaching and building skills

among a large population of small farmers.

39. As a global staffing strategy of the project, the overall quantity of staff (individual

consultants) to be funded under the AF is expected to be reduced during the AF’s

implementation period, as up to 28 of the 45 staff dedicated to component 3 will continue to

work on the project but will be integrated as public servants in the Ministry of Agriculture during

the AF implementation period.

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Annex 3: Revised Estimate of project Costs

Table 1: Project Costs of the Additional Financing

Project Components AF Cost

(USD)

IBRD

financing

(USD)

% of Bank

Government

counterpart

(USD)

1. Agricultural Information and

Decision Support System 6.4 5.1 80% 1.3

2. Territorial Interventions and on

Farm Investments 25.7 24.8 97% 0.9

3. Capacity Building 8.2 6.6 80% 1.6

4. Project Management and M&E 6.9 5.5 80% 1.4

Total Project Costs 47.2 42.0 89% 5.2

Table 2: Project Costs of the original loan

Project Components

Original

Project

Cost (USD)

IBRD

financing

(USD)

% of Bank

Government

counterpart

(USD)

1. Agricultural Information and

Decision Support System 6.2 5.0 81% 1.3

2. Territorial Interventions and on

Farm Investments 31.1 29.6 95% 1.3

3. Capacity Building 9.3 7.5 81% 1.8

4. Project Management and M&E 5.9 4.9 83% 1.2

Physical contingencies 1.2 0.9 75% 0.3

Price contingencies 1.3 1.1 85% 0.1

Total Project Costs 55.0 49.0 89% 6.0

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Table 3: Total revised Project Costs before reallocation (original loan + additional

financing)

Project Components

Total

Project

Cost (USD)

IBRD

financing

(USD)

% of Bank

Government

counterpart

(USD)

1. Agricultural Information and

Decision Support System 12.6 10.1 80% 2.6

2. Territorial Interventions and on

Farm Investments 56.8 54.4 96% 2.2

3. Capacity Building 17.5 14.1 81% 3.4

4. Project Management and M&E 12.8 10.4 81% 2.6

Physical contingencies 1.2 0.9 75% 0.3

Price contingencies 1.3 1.1 85% 0.1

Total Project Costs 102.2 91.0 89% 11.2

Table 4: Total revised Project Costs after reallocation (original loan + additional financing)

Project Components Total

Project Cost (USD)

IBRD financing

(USD) % of Bank

Government counterpart

(USD)

1. Agricultural Information and Decision Support System

12.6 10.1 80% 2.5

2. On Farm Investments 59.3 56.4 95% 2.9

3. Capacity Building 17.5 14.1 81% 3.4

4. Project Management and M&E 12.8 10.4 81% 2.4

Physical contingencies

Price contingencies

Total Project Costs 102.2 91.0 89% 11.2

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Annex 4: Revised Implementation Arrangements and Support

40. Implementation Arrangements. The AF would be implemented using the same

arrangements as are being used under the original loan. The project would continue being

implemented by the MGAP through the PIU, which also has experience acquired as a result of

the successful implementation of previous Bank-financed programs, as well as a number of

operations financed by other multilateral development organizations. The PIU is properly staffed

with specialized professionals but requires strengthening on subprojects supervision and audit

and safeguards. In order to implement Component 2, the AF will build capacity in field-level

staff to support the implementation of on-farm investments. There is no specific need to

strengthen capacities within the PIU for the other components. During the appraisal mission, it

was agreed to revise the fiduciary arrangements for the subprojects in order to gain efficiency,

using the new opportunities offered by the revised Procurement Framework. Amongst other, it

was decided to use request for quotations for all investments in collective irrigation subprojects

(EAAPs) and direct selection for the investments at farm-level (inversiones prediales) based on

the statement on page 36 of the procurement framework in paragraph 6.9 c, which indicates that

this is possible when the investments are of “very low value and low risks”.

41. The Inter-ministerial coordination committee. This Committee, which during the

implementation of the original project was led by the Minister of MGAP, is now led by the

National Secretary of Environment, Water and Climate Change (Secretaría Nacional de

Ambiente, Agua y Cambio Climático”) created by Article 33 of Law No 19.355 (budget 2015-

2019).

42. Procurement Framework. The AF will be implemented under the Procurement

Regulations for IPF Borrowers, effective since July 1, 2016. A draft version of the Project

Procurement Project Strategy for Development (PPSD) and a Procurement Plan were prepared

by the Borrower before the Decision Meeting and approved by the Bank on October 5, 2017.

43. Disbursement arrangements. The disbursements for the AF would be implemented

under the same arrangements of the original loan.

44. Financial management internal controls. During the implementation of the original

project, the Financial Management Assessment pointed out that one of the major areas of

fiduciary risks was Component 2, which consists of several thousand individual and collective

demand-driven subprojects. Thus, it was recommended that the PIU reinforce controls at the

subproject level and identify a more cost-effective mechanism for the project’s needs than the

external operational audit required under the original Loan Agreement. Thus, internal control

arrangements to support the PIU on subproject supervision will be developed and it was agreed,

and included as a covenant, that the PIU will hire dedicated staff for the supervision and audit of

component 2’s subprojects no later than nine months after the Effective Date of the Loan

Agreement for the AF. The scope, terms and conditions of the activities expected, as well as

qualifications and terms of reference of the consultants acceptable to the Bank, would be

described in the Operational Manual. The project has no overdue audits.

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Annex 5: Economic and Financial Evaluation

Objective:

45. Based on the initial Cost / Benefit analysis conducted for the original loan, a revised

Cost/Benefit analysis was undertaken for the Additional Financing (AF), with the objective of

estimating the economic viability of the AF. The analysis took into account the direct economic

costs and benefits of the project, and it also incorporated some of the expected environmental co-

benefits. The main expected environmental co-benefits include: restoration of ecosystem services

in watersheds, soil conservation, and carbon sequestration [Grassland Alliance, REDD + Project,

Green Lab UC (2011)]. Where the benefits and co-benefits cannot be quantified, they are

described qualitatively.

Budget:

46. The budget of the AF describes the estimated cost by component and cost category,

disbursed over the 5 years of the project.

Table 1: Proposed Budget for the DACC Additional Financing (in US dollars)

47. The budget is based on estimates made by MGAP authorities during project preparation,

and given the flexibility of the project design, especially the fact that it allows for demand-driven

sub-projects, the assumptions may change during the implementation.

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Project Benefits by Component:

48. The project is expected to generate three types of benefits. First, direct benefits will be

derived from productive improvements in the beneficiary farms that can be completely

appropriated by the beneficiaries through the market system. Second, indirect benefits will derive

in the form of increased adaptive capacity to climate change and shocks. Third, environmental

co-benefits will be derived from the restitution of ecosystem services, understood as goods,

products or services provided or regulated by ecosystems for global benefit. The following

analysis quantifies all three of these benefit types: direct benefits, indirect benefits, and co-

benefits.

Component 1: Agricultural Information and Decision Support System (SNIA for its

Spanish acronym)

49. The main objectives of the SNIA are to provide information services, providing quality

data and information through improved visualization and consultation tools for integrated data

analysis and the provision of monitoring and alerting services. The investments to be supported

under Component 1 are divided into three main areas: a) support services for the construction of

interoperability, which will be consolidated in the IT area of MGAP; b) information services for

decision-making, design, implementation and evaluation of sectoral and territorial policies and

risk management; and c) awareness-building and dissemination of system to promote use. The

total cost of these activities is US$6.4 million.

50. The expected result of Component 1 is to provide a public good consisting of a

centralized information system and agro-climatic alerts for agricultural producers, with the aim

of improving decision-making. More informed productive and managerial decisions are expected

to allow for increases in agricultural productivity.

51. Productive decisions, like other economic decisions, are made in a frame of uncertainty.

Improving the quality of these decisions and limiting the degree of uncertainty requires the

generation and use of information that is expensive to obtain (not only in monetary terms, but

also in terms of the time required for collection, processing, and systematization). For this

reason, a public system that makes the information available to the producer in a way that is

centralized and cost-free is expected to result in improved management, reflected in better

productive achievements by individual farmers.

52. Potential users of SNIA are a very broad group comprising agricultural producers,

technicians, and policy makers, among others, but currently available information allowed

quantification of the expected benefits of Component 1 only in terms of the expected increase in

beef productivity. This benefit will be generated when livestock producers use SNIA information

to make better productive decisions. Methodologies have also been identified to quantify the

economic benefits of information systems for the applications of early warning systems and

enhancing farm productivity. Although these calculations were not incorporated into the current

analysis for SNIA, they will be considered in the final Implementation Completion Report

(ICR)’s economic analysis.

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53. Baseline survey data for the Family Cattle and Climate Change (GFCC) program were

used to calculate the benefit. This survey consulted 270 livestock producers about their use of

medium-term agro-climatic information ("forecasts for the coming months") to make decisions

regarding the management of their enterprise. The data show that 52% of the respondents use

this type of information for management purposes, and livestock producers who use this type of

information obtain higher productivity in terms of meat per hectare. The partial correlation of

the use of agro-climatic information and meat production was estimated based on simple

regressions, controlling for land quality, the landscape unit, and the use of other technologies and

management practices (differential grazing, temporary and early weaning). The correlation

between use of agro-climatic information and productivity ranged from 0.25 to 0.30 according to

the specification of each model (significant at the 10% level).

54. The survey results were extrapolated to the national level using data from the 2011

Agricultural Census. According to the Census, approximately 15,900 family farms are engaged

in beef cattle raising or sheep farming. The total area exploited by these producers is 1,280,000

hectares. The average production of meat per hectare is estimated at 80 kilos per hectare.

55. As shown by the GFCC survey, about one-half of livestock producers (48%) still do not

use medium-term agro-climatic information to make decisions. If the strengthening of the SNIA

allows 10% of these producers to start using such information, and assuming that as a result their

yields increase by 25%, meat production will increase by 640 tons per year. Recognizing that the

SNIA is a part of the complex of institutions that provide agro-climatic information, however, a

conservative approach was adopted for the current analysis, and only a share of the total effect

(25%) was attributed directly to SNIA.

Table 2: Estimated Benefits of SNIA

56. Additional benefits generated by the investments to be made under Component 1 are

expected to flow from better decisions made in public agencies based on information generated

by SNIA.

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57. Although these benefits are difficult to quantify and value, examples of public decisions

that are based in part on the information provided by SNIA are:

Development of Livestock Insurance

Diagnostic of the Santa Lucia River Basin

Climatic products (though online service INUMET)

Declaration of agricultural emergency in 2015

Component 2: Territorial interventions and on-farm investments for Climate Smart

Agriculture and Livestock Management

58. Component 2 will finance investments, technical assistance and training, among other

activities, with the objective of promoting integral development from an environmental, social

and economic point of view. These interventions are expected to generate greater capacity for

mitigation and / or adaptation to weather variability and climate change in family and medium

producers.

59. The emphasis of this Component will be on promoting investments and accompanying

technical assistance aimed at increasing the production and sustainable management of water

resources, biodiversity, soils and agricultural production. Component 2 will provide support to

agricultural producers in the form of financial resources to improve Natural Resource

Management (NRM) on farms, and accompanying trainings and technical assistance to improve

adaptive capacity to climatic events.

60. At least four types of intervention have been identified, and all are linked to the

sustainable and productive management of water, soil and natural resources. The NRM

dimension is intersected by livestock, dairy, agricultural and horticultural producers. The benefits

generated by the execution of Component 2 will be quantified from each of the projected

interventions.

Interventions for Water User Associations

61. The AF proposes to deepen the work undertaken by the DACC in the promotion of

associative experiences with irrigation technology. The small-scale irrigation subprojects

(EAAP) under the original loan comprised a portfolio of 15 projects representing US$2.5 million

to promote the use of irrigation and water in an associative way. These projects involved

460 producers linked to rural institutions. The AF plans to expand the scope of these sub-projects

by allocating an additional US$6.5 million to this type of intervention. The next open call for

sub-project proposals is expected to increase the ceilings per project and expand the set of

activities to be financed, and with this, is expected to reach 25 new projects (for an increased

irrigated area of around 2,000ha). The quantified benefits of this subcomponent are the increase

in agricultural and livestock production derived from irrigation.

62. For this purpose, a financial analysis was undertaken of a sample of the current 15

projects of the EAAP. A weighted average was calculated of the Internal Rate of Return (IRR) of

each project, with the same set of assumptions (time horizon, expected prices of agricultural

products, increases in physical production derived from irrigation, etc.). To obtain the benefits

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of the AF, it was assumed that the additional investment will have the same IRR as the current

EAAP. For this, it is assumed that the net benefit as a proportion of the additional investment and

the temporary distribution of these benefits is equal to EAAP.

Water Interventions for Dairy Production (APA dairy)

63. A key area of support that is aligned with the specific objectives of the AF, which in turn

are aligned with the strategic objectives of the Ministry, will be local interventions to improve

the distribution of water from troughs for animal production. The original loan implemented sub-

projects for "Water for Animal Production" (APA) reaching 1,750 producers, of which 620 were

dairy farmers and 1,130 were beef farmers, with a support of 3 million dollars for the former and

7 million for the latter.

64. The analysis assumed that this subcomponent will receive US$3.5 million for water

solutions on dairy farms and that the average cost per individual project will remain the same

(US$4,850 in dairy sub-projects). Based on these assumptions, 715 dairy producers would be

reached by the AF.

65. For the present ACB analysis, the results of the dairy APA impact assessment [MGAP-

AGEV (2017)] were used—specifically, the data referring to dairy projects. In APA impact

assessment, administrative data were used for the annual declarations of livestock stocks and

annual milk production of the National Livestock Information System (SNIG) between 2009 and

2015. The identification strategy was based on the ‘difference in differences’ (DIDs) method.

The APA impact assessment found that the implementation of the APA project resulted in an 8%

increase in dairy productivity per hectare and an increase in the total milk production of

participating producers of 7.9 million liters per year.

66. To estimate the benefits included in the present ACB analysis, it was assumed that this

increase in production would be achieved gradually during the first four years of the project. The

estimated effect based on the impact of the APA project, and considering the estimated number

of producers covered by APA 2, would be an additional production of 4.67 million liters from

the fourth year.

Table 3: Estimated Benefits of Increased Milk Production

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Interventions that contribute to the improvement of water quality

67. Within the framework of the original loan, the project launched a call aimed at dairy

producers in the Santa Lucia River Basin, with the aim of contributing to the improvement of

water quality. So far, the project has supported 325 farms with an investment of US$4.5 million

dollars and an average area per property of 150 hectares. The AF will provide additional

resources to extend these sub-projects to other dairy farmers in the country’s main watersheds.

The AF allocates an estimated US$5.125 million to the scale-up of these activities. This will

allow an additional coverage of 300 to 400 sub-projects with similar characteristics.

68. The cost assumptions for the current year were based on expert opinions from INALE,

MGAP, INIA and private experts. On average, beneficiaries are expected to irrigate 3% of the

area of their farm. Extension of the area to be irrigated depends on the balance of nutrients and

organic matter in the soil, characteristics of infiltration and water retention capacity, the

topography of the site and the size of the detour among other factors. This could imply an

increase of about 30% of the forage production in that area by eliminating the nutrient restriction

(fertilized irrigation) per conservative agricultural data, so that the beneficiary farms would be

more productive in forage and, consequently, increase milk production while reducing some

fertilization costs.

69. In addition, effluent management within watersheds contributes to the improvement of

water quality, implying an ecosystem service of significant economic and social value. To assess

this, it was assumed that dairy effluents contribute approximately 10% of the total contamination

of the Santa Lucía river basin (80% of the contamination is of a diffuse nature, linked to

agricultural activity, including effluents from dairy pens, with soil erosion being the most

important cause followed by dairy effluents, while cities and industries contribute the remaining

20%) [UdelaR (2013), MGAP]. The expected impact of this intervention is to reduce the

contribution of effluents from the farms that are discharged into the Santa Lucía river. The

investments and resulting adoption of proposed technologies will allow for the reduction of

effluents from an average of 60 liters per cow per day to an average of 46 liters per cow per day.

70. The co-benefits of this intervention were assessed based on the expected savings of

investments by the Planning Organization Responsible for the Provision of Drinking Water

(OSE) for water purification. The amount and expected duration of the investments required for

the purification process were considered for the analysis. The state has invested a considerable

amount of water treatment resources and has an investment plan of US$62 million for this basin

in the medium term according to the OSE. According to the OSE, the cost of treatment and

purification is greater the worse the quality of the raw water.

71. The analysis assumed a baseline of 60 liters of effluents per cow, with a total necessary

investment of US$62 million. Taking this baseline, and assuming a reduction of effluents to be

46 liters per cow and taking into account the proportion of farms in the basin that can be included

in the project (estimated to be 310 of 720 establishments), this requires an investment of

US$61.375 million, representing a savings of 0.625 million dollars.

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Livestock interventions on pasture land

72. MGAP and IBRD have a long history of supporting the development of livestock

producers and promoting the sustainable adoption of technology and good productive practices.

For the current analysis, the benefits linked to this project line were estimated based on the

experience gained with the Proyecto Ganadero Familiares y Cambio Climático (PGFCC).

73. The PGFCC project reached 1,140 beneficiaries in the two most vulnerable landscapes in

Uruguay, with investment support and technological promotion of US$6.5 million accompanied

by US$1.5 million in technical assistance. For the sake of simplicity, it was assumed that the

amount of investment and technical assistance per producer would be similar to that of the

PGFCC (US$7,300), that the characteristics of the beneficiary farms would be similar 210

hectares per producer), and that the territorial scope of the project will be extended to the total

area of Uruguay.

74. The AF will allocate $ 7.3 million in this intervention, which will allow it to reach an

estimated 1,000 to 1,100 new beneficiaries. A livestock breeding project based on natural pasture

land within the framework of current technical and technological proposals has great potential to

increase meat production per hectare over time. The opinions of ministerial specialists in animal

husbandry confirm this idea. Based on information from DICOSE and SNIG, as well as from the

baseline survey of the PGFCC project, this impact was estimated at 7.6 kg per hectare, which is a

conservative expectation according to ministry experts. The direct economic benefits of the

project amounted to 1,600 tons of meat per year or $ 2.7 million per year.

Table 4: Estimated Benefits of Increase Meat Production

75. The sustainable management of natural pasture land implies a greater amount of inter-

annual vegetation and consequently a greater capacity to incorporate organic matter into the soil.

One of the most important results expected from AF interventions is better management of

natural pastures and the management of, a larger area of pastures. This has implications for the

amount of greenhouse gases, carbon dioxide which can be avoided. This co-benefit is estimated

according to parameters provided by ministry experts. Given the sequestration favor in carbon

soil (20 grams per square meter), the implied factor of metric tons per hectare (.73) and the area

of livestock projects, the project intervention is expected to cover 173,000 ha. Therefore, it is

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expected that 63,420 metric tons of carbon dioxide gases will be avoided. This contribution was

valued at US$5 per ton according to values managed by the World Bank in REDD + projects.

Table 5: Estimated Benefits of GHG avoided

Component 3: Capacity Building for the Department of Natural Resources (DGRN)

76. Component 3 proposes the consolidation of a strategic plan for the use, management and

conservation of natural resources, with emphasis on soils, waters and natural pastures. It

proposes to support the implementation of medium and long-term related public policies.

Investments in Component 3 (with a budget of US$8.2 million, distributed across consultancies

and training, works, goods and operational expenses) will generate four products t over the life

of the AF, detailed below. The benefits were calculated specifically for the Consolidation of Soil

aspects, since the other areas will largely support the benefits in other Components.

Support for generating relevant information

77. The result of this subcomponent is the production of information that enables better

implementation of the other Components (as well as other MGAP programs). The value of this

sub-component is already included in the estimated value of other Components.

Consolidation of Soil

78. The funds allocated to this subcomponent will be used to improve staff capacities,

expanding the capacity to effectively monitor Land Use and Management Plans (PUMS),

completing the new mapping of country's agricultural areas and expanding and improving soil-

related services. The valuation of the benefits of this subcomponent is made from the PUMS.

The objective of these plans is to ensure the maintenance of the productive potential of soils in a

very long term horizon. The intervention is justified by the negative environmental externalities

that are generated by inadequate agricultural practices, which determine soil losses beyond the

tolerable limits. In addition to environmental effects, such inadequate practices lead in the long

run to a progressive decline in agricultural yields, which would affect the production and income

of producers of future generations.

79. The benefits were calculated for offsetting the unsustainable use of resources and the

improved soil composition. The calculated values are based on the relationship between erosion

and decline in agricultural yield via soil loss (loss of organic matter, loss of nutrients, loss of

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structure and physical properties). FAO (1993) brings together a set of studies that report

productivity losses in relation to the degree of erosion or soil loss. The ranges were from 16 to

34% [Schertz (1985)], 34% [May and Souza], between 38% and 52% with a loss of 10 cm

[Swaify and Dangler (1982)] and total loss at 20 cm [Spavorek (1990)], all for the same soil

types. The decline in agricultural productivity (at constant prices) is modeled on previous data

relating years of erosion and its impact on productivity.

80. Sustainable rotation models were constructed and presented in the PUMS, showing

sustainable levels of soil-loss. The "with project" scenario implies a sustainable agricultural

picture. Rotation “without project” (with erosion) is characterized by a crop rotation average of

the years prior to the application of the soil law. The current yields and the prices considered are

the same in the two scenarios.

Figure 1 and Table 6: Benefits of Soil Rotations

81. The model assumes that in the erosive scenario the productive potential declines over

time in a curved function as the erosion process progresses. Technical change acts as a force in

the opposite direction, sustaining the productive level; however, this would entail rising costs to

maintain a stable level of yields, which would reduce the economic margin. Therefore, the curve

can be interpreted as one of economic deterioration of the margins. The calculated deterioration

implies that at 20 years of soil loss, the yield falls to 90%, while in year 40 the yield will fall to

80%. Using a discount rate of 4%, the NPV would be US$174,000,808.

Consolidation of the Water area

82. The objective of this subcomponent is to collaborate in improving the quantity and

quality of water available for production and as a tool to reduce the vulnerability of production

systems to variability and climate change, improving the training of personnel and using the

System of the Management of Plans of Use (SGPU) for the management and control of irrigated

y = 2E-05x2 - 0.0061x + 1.0111

0%

20%

40%

60%

80%

100%

120%

0 50 100 150 200

Y

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systems. The benefits of this component are expressed through the interventions related to water

availability described in Component 2.

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Consolidation of the Natural Pasture area

83. This subcomponent, like the previous ones, tries to promote technologies that preserve

natural pastures, while increasing the productivity. This subcomponent will support grassland

mapping and its integration with other geographic data platforms. The benefits of this

subcomponent are included in the provision of information and coordination of natural field-

based livestock interventions included in Component 2.

Component 4: Project Management and Evaluation and Monitoring

84. The Project Implementation Unit (PIU) Component has a supporting role in the project.

Its main objective is to consolidate the institutional capacities to execute the subprojects with

external financing in an efficient way. The PMU's effectiveness in reducing the costs of

executing subprojects with external financing depends on the number of projects it manages. At

present, most of the budget of the PMU is financed by the original loan. In the AF, the goal is

that the operational costs of the PIU will be increasingly shared by other donors. Conceptually,

the PIU has an institutional role supporting the other three components, and is considered

necessary for the effective realization of all the benefits presented in this analysis.

Economic Evaluation:

85. In this section the indicators of project feasibility are analyzed from the point of view of

the Uruguayan economy as a whole (Net Present Value (NPV) and Economic Internal Rate of

Return (EIRR).

86. The economic discount rate of the project was set at 4.7%, according to the financial cost

of capital, which arises from weighing the estimated average rate of the loan with the discount

rate for investment projects with public funds recommended by SNIP-OPP (7.5%). The

proportions used in the weighting correspond to the contribution of the WB and the Uruguayan

state in financing the project (80% and 20%, respectively).

87. The relevant time horizon for the Project, given the type of investments and benefits

considered and the amortization structure, was set at 20 years. Streams of discounted costs and

benefits calculated based on these assumptions are summarized in Table 6.

88. The NPV and EIRR were calculated for two scenarios. For the Base Scenario, a

conservative approach was adopted including as benefits of the project only the benefits

generated under Component 2, since Components 1 and 3 will be focused on the production of

public goods and the quantification of such benefits constitutes a challenge. However, the costs

considered for the calculations were the total costs of the project (all Components). In this

scenario, the project generates economically attractive returns, since the EIRR (12.7%) exceeds

the reference rate and the NPV is positive at US$30.23 million (Table 6).

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Table 6: NPV and EIRR in base scenario and with all components

89. For the second scenario, a full project analysis was carried out incorporating all of the

expected benefits, including those associated with the public goods to be generated under

Components 1 and 3. Including the benefits from all components, the NPV and EIRR increase to

US$44.07 million and 17.5% respectively. However, this is still a conservative estimate, as the

benefits from Components 1 and 3 have not been fully monetized. Additional economic benefits

from the public goods created by these Components will be considered during project

implementation and included in the ICR evaluation of the project.

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Annex 6: Green House Gases Analysis

Background and Methodology

90. In its 2012 Environment Strategy, the World Bank adopted a corporate mandate to

conduct greenhouse gas (GHG) emissions accounting for investment lending. The quantification

of GHG emission is an important step in managing and ultimately reducing GHG emission, and

is becoming a common practice for many international financial institutions. The World Bank

adopted the Ex-Ante Carbon-balance Tool (EX-ACT), which was developed by the Food and

Agriculture Organization of the United Nations (FAO) in 2010 to assess the impact of

agricultural investment lending on GHG emission and carbon sequestration. EX-ACT allows the

assessment of a project’s net carbon-balance, defined as the net balance of CO2 equivalent GHG

that were emitted or sequestered as a result of project implementation compared to a without

project scenario. EX-ACT estimates the carbon stock changes (emissions or sinks), expressed in

equivalent tons of CO2 per hectare and year.

91. The Sustainable Management of Natural Resources and Climate Change Project (DACC)

was approved by the Board on November 30, 2011 and became effective on February 24, 2012.

The objective of the project is to support the efforts of the Government of Uruguay (GOU) in

promoting farmer adoption of improved environmentally sustainable and climate smart

agricultural and livestock practices. The original loan has achieved several significant results

including: the application of sustainable land management practices applied to nearly 3 million

hectares of land, funding of nearly 5,000 climate-smart on-farm projects with individuals and

producer groups and technical assistance provided to nearly 35,000 farmers. The AF aims to

support the GOU to scale up approaches that have demonstrated proof of concept and have

directly contributed to the achievement of the government’s strategic vision for the sector. The

AF would specifically support investments to: (i) reduce diffused pollution load from dairy

production in the Santa Lucia River Basin; (ii) increase access to water for livestock and dairy

productions, and (iii) support irrigation investments for crop production. In addition, the AF

would undertake a new activity to promote the establishment of integrated natural grassland

management systems, combining grazing areas with rapid-growing trees providing shade for the

grazing cattle.

The Ex-ACT tool was used to assess the Greenhouse Gas (GHG) impacts associated with the

investment activities contemplated in the AF.

Application of EX-ACT

92. Project boundaries. The GHG accounting considers the investment support to the

following activities 1) construction of irrigation infrastructure over 1,788 ha used for a

combination of annual and perennial crop production; 2) implementation of sustainable

management practices in grassland livestock production systems in approximately 173,000 ha;

3) improvements in animal drinking water infrastructure in 713 dairy establishments; and

4) treatment and reuse of effluent to fertilize pasture in 310 dairy production systems (tambos).

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93. Data source. The main sources of data used to carry out the analysis include information

generated in the Economic and Financial Analysis as well as data provided by the Ministry of

Livestock, Agriculture and Fisheries (MGAP). The specific inputs to EX-ACT are detailed at the

end of the report.

94. Basic assumptions. Uruguay has a warm temperate climate and moist regime. The

dominant soil type is Low Activity Clay (LAC) soil. The implementation of the AF phase is 4

years and the capitalization phase is assumed to be 16 years, thus the analysis period is set for a

total of 20 years. The “without project scenario” is assumed not to differ from the “initial

scenario”. This default assumption is deemed reasonable as changes in agricultural activity

crucially depend on the technology available, which in this case will be a contribution of the

project. The analysis further assumes the dynamics of change to be linear over the duration of the

project. Existing production techniques are assumed to be replaced by the introduction of

sustainable and climate smart agricultural practices over the project area.

95. Crop production and irrigation investments. A significant share of cultivated land in

Uruguay is dedicated to meet the animal feed needs in the country. The project will support the

uptake of irrigation in crop production to improve yields. This will be identified in Ex-Act as

adoption of “improved water management.” The total area and crops to be supported with

irrigations systems are as follows:

Crop Area

(Ha)

Land use change

expected

Maize 274 no

Sorghum 106

Forage 1035

Sugarcane 372

Total Area (ha) 1,788

96. The irrigation investment will cover an area of 1,788 ha of agricultural land, of which

most are under perennial crop production.

97. Natural grasslands improvements. One of the main economic activities in the country

is extensive cattle rearing. According to literature, there are more than 13 million ha under

permanent pasture, almost 83% of the agricultural area. To this end, the project will support

investment to promote the adoption of sustainable management and better practices in natural

grassland livestock production systems. This will help improve productivity of livestock raising

activities while improving the state of grasslands. A potential outcome is a positive adjustment

on the animal stocking per ha thus reducing the pressure on natural grasslands. The project will

support investment in an area of 173,000 ha.

98. The sustainable grassland management package will include the introduction of trees in

the surrounding areas to provide shade for animals. In this analysis, it is assumed that 1% (1,730

has) of the area will be associated with tree plantations. This implies a land use change from

grassland to perennial-tree crop and a source of GHG emissions.

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99. Livestock production improvements. The project investments supported by the project

will have a direct impact on improving animal feeding. Firstly, the sustainable management of

grassland will improve pasture quality and quantity. Secondly, the use of treated effluents

generated from the water quality technologies in dairy production will be used to meet needs for

water and fertilize in fodder production.

100. The improvements of productivity in cattle raising in the “with project scenario” will be

attained through gains in efficiency that result from the proposed investments rather than from

increasing the heard. Thus, the “with project” scenario will attain the same level of production

with a smaller heard than the “without project scenario”. The productivity with project is

expected to increase by 7.6 kg of beef per ha per year. Therefore, to produce the same quantity of

beef, the without project scenario will require only 200,000 heads of livestock whereas the “with

project scenario” will require 190,000 heads.

101. In the case of dairy production the productivity of milk with investment projects is

expected to reach 8%, however previous investment have indicated that upward productivity

respond to both increases in heard as well as product yield. As a result, the heard will increase

around 6% or 4,710 heads in the “with project” scenario when compare to the “without project”

scenario.

Agricultural inputs. The type of irrigation systems that will be deployed by the project are:

Pivot 782 has

Surface 227 has

Drip 779 has

102. The irrigation systems deployed by the project will be associated with so-called

‘fertirrigation’ technologies. According to the literature, fertirrigation is more efficient than

conventional fertilization, some values indicating 24% reductions in fertilizers usage with

fertirrigation. The analysis assumes a 15% reduction in fertilizers as a result of efficiency gains

from the application of fertirrigation technology. The electricity consumption associated with the

irrigation system is 266 MW per year.

103. It is expected that treated effluents from the dairy production systems will be used to

fertilize pasture production in the farm. This could be used in 3% of the farm area and will

displace the use of agrochemicals. Given that the project will support 310 dairy production farms

each with an average of 150 has, the treated effluents will be used to fertilize and irrigate a total

of 1,395 ha of pasture.

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104. A summary of expected fertilizer inputs in tons per year for the two scenarios is

presented below:

Input7 Without project (tons per year) With project (tons per year)

Nitrogen 329 161

Phosphorous 95 46

Potassium 355 184

Table 1: Analysis in EX-ACT organized by activity and sector.

Activities and project scenarios Total

Annual crop management - IRRIGATION (ha)

Without project scenario 0

Project scenario: climate smart agriculture

practice- irrigation 274

Perennial crops (ha) from Land Use Change

Without project scenario 0

Project scenario: Converted to perennials (trees) 1,730

Perennial Crops Management - irrigation (ha)

Without project scenario 0

Project scenario (Sorghum/Forage/Sugarcane) 1,514

Perennial Crops Management – use of effluents from dairy in pasture production (ha)

Without project scenario 0

Project scenario (Pasture) 1,395

Grassland

From moderately degraded to “improved without inputs only management”

Coefficient for sequestration set to 0.73 tons of CO2 per ha

Area with project 171270 ha

Livestock (number)

Without project scenario 270,000

Dairy cattle 70,000

Beef cattle 200,000

Project scenario 264,710

Dairy cattle 74,710

Fertilizer recommendations for Maize, Sorghum, Forage crops are 100, 30 and 100 kg per ha of N, P and K

respectively. In the case of sugarcane, NPK recommendations are 130, 30 and 200 kg per ha respectively.

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Beef cattle 190,000

Results

105. Net carbon balance. The net carbon balance quantifies GHGs emitted or sequestered as

a result of the project compared to the “without project” scenario. Over the analysis period of 20

years, the project constitutes a carbon sink of 1.27 million tCO2-eq. This is largely due to

avoided emissions in agriculture, grassland improvements and livestock.

106. Carbon sources and sinks. The main emission source was the initial 26 927 tCO2-eq

from the land use change (LUC) from planting trees in grassland areas as part of the sustainable

management system. However, the trees eventually generate an emission sink that is more than

sufficient to overcome the emissions generated from the LUC. The proposed investment to

improve grasslands has a removal contribution representing 30% of the total tCO2-eq equivalent

removed by the project. Investment in irrigation will directly contribute to a 22% reduction of

total tCO2-eq when compared to the “without project” scenario. However, note that investments

are interlinked so that activities supporting irrigation and grasslands improvement will indirectly

improve livestock management as well. As a result, investments supporting dairy and cattle

raising will result in a significant contribution to emission reductions in the livestock sector.

These investments will improve productivity, thereby limiting the need to increase the number of

animals and provide better diets when compared to the without project scenarios thereby

significantly reducing the emission of methane gases. As a result, approximately 48% of the total

reductions are attributed to the livestock sector.

107. Sensitivity analysis. The Exact tool calculates an uncertainty level of approximately

35%. This analysis was run using mostly tier 1 coefficients which in some cases may provide

over or underestimated values. In the case of grassland, a tier 2 coefficient was used based on

country expert knowledge. The project assumes that under the project scenario there will be no

increases in livestock herds but rather a potential reduction. In case this assumption doesn´t hold,

higher carbon emissions may be generated than estimated in this analysis.

-30%

-48%

-22%

Contributions of emision reduction per investment activity

Grasslands

Livestock

Irrigated agriculture

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Table 2: Results of the ex-ante GHG analysis in tCO2-eq

Share per GHG source of the Balance Results per year

Project activities

Without

project

scenario

Project scenario Balance CO2,

Biomass

CO2,

Soil Other N2O CH4

BAU

scenario scenario Balance

Land use change 0 26,927 26,927 26,927 0 0 0 0 1,346 1,346

Improvement in annual crops 493 -4,973 -5,466 0 -5,466 0 0 25 -249 -273

Improvement in perennial crops -40,712 -288,362 -247,650 -226,457 -21,193 0 0 -2,036 -14,418 -12,382

Grassland 0 -402,777 -402,777 0 -402,777 0 0 0 -20,139 -20,139

Livestock 10,431,003 9,819,555 -611,448 -99,615 -511,833 521,550 490,978 -30,572

irrigation systems, energy and

agricultural inputs 67,476 37,772 -29,704

-

16,005 -13,768 0 3,374 1,889 -1,485

Total 10,458,260 9,188,142 -1,270,117 -199,530 -429,436

-

10,275 -108,793 -511,833 521,889 458,899 -62,990

per hectare 59 52 -7 -1.2 -2.4 -0.1 -0.6 -2.9

per hectare per year 3.0 2.6 -0.4 -0.1 -0.1 0.0 0.0 -0.1 3.0 2.6 -0.4

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