The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) REPORT NO.: RES58448 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MEXICO DEDICATED GRANT MECHANISM FOR INDIGENOUS PEOPLES AND LOCAL COMMUNITIES APPROVED ON SEPTEMBER 15, 2017 TO RAINFOREST ALLIANCE ENVIRONMENT, NATURAL RESOURCES & THE BLUE ECONOMY LATIN AMERICA AND CARIBBEAN Regional Vice President: Carlos Felipe Jaramillo Country Director: Mark Roland Thomas Regional Director: Benoit Bosquet Practice Manager/Manager: Genevieve Connors Task Team Leader(s): Katharina Siegmann, Rosa Maria Martinez The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) ABBREVIATIONS AND ACRONYMS DGM – Mexico Dedicated Grant Mechanism GRM – Grievance Redress Mechanism IPLC – Indigenous Peoples and Local Communities NEA – National Executing Agency PCLs – Promotores Comunitarios Locales (Local Community Promoters) PDO – Project Development Objective PIU – Project’s Implementation Unit PM&E – Participatory Monitoring and Evaluation RA – Rainforest Alliance REDD+ – Reducing Emissions from Deforestation and Forest Degradation VIF – Ventana de Inclusión Financiera (Financial Inclusion Window) VIS – Ventana de Inclusión Social (Social Inclusion Window) The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) BASIC DATA Product Information Project ID Financing Instrument P151604 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 15-Sep-2017 31-Dec-2023 Organizations Borrower Responsible Agency Rainforest Alliance Project Development Objective (PDO) Original PDO The objective of the Project is to strengthen the capacity of forest-dependent people from Selected States to participate in local, national and international REDD+ related processes. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A5334 15-Sep-2017 06-Oct-2017 21-Dec-2017 31-Dec-2023 6.00 5.43 .57 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. This Restructuring Paper seeks the approval of the Country Director for a Level 2 Restructuring to i) extend the closing date of the Mexico Dedicated Grant Mechanism (DGM) for Indigenous Peoples and Local Communities (IPLC) Project (P151604) by 6 months through June 28, 2024); and ii) modify the End Target date of all indicators in the Results Framework accordingly. No other changes are proposed. The Recipient requested the extension in a letter dated November 14, 2023. This would be the fourth Restructuring of the Project which was originally approved by the Board on September 15, 2017, and is funded by a Strategic Climate Fund - Forest Investment Program (SCF/FIP) grant in the amount US$6 million (TF0A5334). The Project became effective on December 21, 2017 and is currently expected to close on December 31st, 2023. The Project is compliant with all legal covenants. 2. The Project Development Objective (PDO) is to strengthen the capacity of forest-dependent people in five states to participate in local, national, and international reducing emissions from deforestation and forest degradation (REDD+) related processes. The “Progress Towards Achievement of PDO” and “Overall Implementation Progress (IP)” have been consistently rated as satisfactory. Based on the results presented during the latest Implementation Supervision Mission (February 2023), the “Overall Safeguards rating” was upgraded to highly satisfactory. Disbursements reached US$5.43 million (90.53 percent) as of October 2023 and reflect a steady project implementation pace. The Project is implemented in the states of Oaxaca, Yucatán, Campeche, Quintana Roo, and Jalisco that account for a large share of Mexico’s Indigenous Peoples, and for the highest deforestation rates. Rainforest Alliance (RA) México was selected competitively to serve as the Project’s Implementation Unit (PIU) (also referred to as the National Executing Agency (NEA)) and project activities are designed and implemented by IPLC on a demand-driven base. 3. Following the March-2020 Mid-Term Review (MTR), the Project underwent a first level-2 restructuring (dated August 20, 2020) that included changes to the results framework, revisions to components and costs, and a reallocation among disbursement categories as a result of the identified need to strengthen technical assistance to subprojects preparation and implementation. Subsequently, in June 2021, a second level-2 restructuring was approved to include a 12-month extension of the Project’s Closing Date from August 1, 2022, to August 1, 2023, in response to the COVID-19 related delays in implementation. No further revisions were included in that restructuring. A third second-level restructuring was approved later to include a 5-month extension of the Project’s Closing Date from August 1, 2023 to December 31, 2023 to allow subprojects to receive more technical assistance and have more implementation time to account for the continuous impacts of COVID-19 as well as to increase the chances of sub-project sustainability after Project closing. 4. The Project comprises three components: 1) Financing Mechanisms for Community Forestry Management; 2) Capacity Building, Communication, and Advocacy; and 3) Management, Monitoring, and Evaluation. Under Component 1, 88 subprojects have been under implementation and 56 have been completed and achieved their objectives. In the upcoming months, the NEA will work closely with the 32 remaining subprojects to ensure their successful completion. Activities under Component 2 have almost reached closure, as the last 7 workshops were being planned and the activities implemented by the Local Community Promoters (PCLs) already finalized in June 2023. Reports on these workshops will The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) be received from Rainforest Alliance in early 2024 to be accounted for under the Results Framework. As of Component 3, the NEA has complied with fiduciary, procurement, and safeguards procedures and has a fully operational participatory monitoring and evaluation system. Additional data collection will be done in the upcoming months for Project closure and will serve for an early analysis for the upcoming Implementation Completion and Results Report of the Project. 5. The Project has achieved all of its project development indicators (PDOs), however currently lacks behind achieving its targets under indicators related to the successful implementation and closure of subprojects (IRI 1.2) and beneficiaries participating in learning events (IRI 2.2). Both indicators are expected to be achieved during the extended implementation time, as the extension will provide the necessary time and instruments to support subprojects to successfully implement grant resources and close their activities. Status as Original Revised Baseline of Indicator Name Target Target for Comments (2017) Novemb Aug 2022 Aug 2023 er 2023 PDO Indicator 1: Targeted beneficiaries receiving sub-grants The indicator end date will be extended to June 0 50 90 94 and matching-grants through the 2024. project IR Indicator 1.1: Sub-grants and matching-grants provided to The indicator end date will be extended to June 0 60 90 89 targeted beneficiaries under the 2024. project The indicator end date will be extended to June IR Indicator 1.2: Percentage of sub- 2024. Target is still realistic given the gradual projects successfully completed and 0 75 75 64 closure of subprojects. However, the extension is achieving their objectives necessary for the indicator to achieve its target. PDO Indicator 2: Share of targeted Promotores Comunitarios Locales The indicator end date will be extended to June 0 80 80 86 with improved capacity supported by 2024. the project The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) The indicator end date will be extended to June IR Indicator 2.1: Promotores 2024. During the extension period additional Comunitarios Locales supported with 0 20 20 26 communication and learning events might take training under the project place. IR Indicator 2.2: Targeted The indicator end date will be extended to June beneficiaries that participated in 2024. Target is realistic given an ongoing effort to 0 50 30 23 REDD+ and ILM related knowledge systematize past events and carry out additional exchanges under the project during the extended period. . PDO Indicator 3: People in targeted forest and adjacent communities The indicator end date will be extended to June 0 2500 2500 4,398 with increased monetary or non- 2024. monetary benefits from forests IR Indicator 3.1: Percentage of grievances registered related to The indicator end date will be extended to June 0 100 100 100 delivery of project benefits that are 2024. actually addressed. PDO Indicator 4: Percentage of participants in the capacity development activities with The indicator end date will be extended to June 0 75 75 98 increased role in the FIP and other 2024. REDD+ processes at local, national or global levels. 6. Fiduciary and Safeguards performance. The Project does not have any outstanding audit reports. The last audit report covering the period from January to December 2022, was submitted with minor delays, and has been considered acceptable to the World Bank and the auditor did not report any finding. Ratings for Financial Management, Procurement, Monitoring and Evaluation and Project Management remain Satisfactory. Safeguards ratings have been Highly Satisfactory since March 2023. The Grievance Redress Mechanism (GRM) for the Project was established in March 2018 and is now constantly advertised and accessible in 25 localities. The GRM is prepared to respond to gender-based violence-related grievances and any person may access the system to file a complaint or query as needed. 7. The Environmental and Social Risks rating of the Project remains Moderate. The implementation of the Environmental and Social Management Plans under both financing windows is carried out adequately and the related compliance is Highly Satisfactory. All subprojects are subject to direct field supervision by the NEA. Continued training of the PCLs is maintained to monitor the subprojects and the implementation of the field monitoring system for compliance with the safeguards triggered in the Project. The proposed restructuring does not imply changes in the environmental and social risk classification, policies or related instruments of the Project. The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) 8. The impacts of COVID-19 are still hindering the implementation of the Mexico Dedicated Grant Mechanism. Subprojects under the Social Inclusion Window (VIS) started implementation in June 2021 due to previous COVID-19 restrictions and due to the need for face-to-face guidance and support. These subprojects still need enhanced technical support and guidance to establish project ownership among beneficiaries to ensure sustainability once the DGM is closed. Additionally, delays derived from the pandemic have significantly impacted the implementation capacity of IPLC, resulting in slow disbursements of grant proceeds. = 9. While the last restructuring was processed mostly based on COVID-19 related reasons, it did not account for the disproportionate delays that most VIS subprojects further suffered. The closure of Government offices during the pandemic also impeded VIS subproject beneficiaries to meet minimal administrative requirements needed to start their businesses. As VIS subprojects were paused during the pandemic, there has not been enough time to execute the totality of the designated grant resources. As a result, heir procurement and implementation plans had to be adjusted to account for the time lost during and after the pandemic. Six additional months to share experiences among beneficiaries would allow for the consolidation of fundamental entrepreneurial processes and to promote project appropriation and dissemination within the communities. 10. Delays in the implementation of the subprojects also impacted an orderly closure of the overall Project. Attempting to have a simultaneous full closure of the subprojects and the Project itself is impacting the PIU’s capacity to provide support to subprojects in gathering all necessary results evidence for their closure, while also carrying out the final Project evaluation. Therefore, an additional six-month period is needed so that the PIU can successfully provide further assistance to local groups to fully meet Project objectives and to ensure post-project sustainability. II. DESCRIPTION OF PROPOSED CHANGES As a response to these constraints, on November 14, 2023 the NEA formally requested an extension of the current Project’s closing date by six months until June 28, 2024, for a cumulative period of twenty-three months; along with the corresponding extension of the End Targets date. No additional changes to the results framework, components and costs, nor a reallocation among disbursement categories were requested. An action plan for the implementation of activities during the remaining period was presented and found acceptable by the Bank, expecting a 100% disbursement rate by the extended closing date and fully achieving the Project’s results indicators. Specifically, the action plan focuses on providing technical assistance to subprojects for their successful implementation and closure, which will enable the Project to achieve the not yet achieved indicators. While procurement procedures are challenging given the difficulty to comply with the Bank standards (for instance, the lack of access to online banking, the needed legal documents, and a wider variety of suppliers in the beneficiary communities that require a detailed review of each process and take longer than usual), the PIU’s team has (with Bank’s support) identified and implemented strategies to speed disbursements and ensure completion by the proposed closing date.. The disbursement estimates will be updated upon approval of this restructuring. The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 01-Aug-2023, 31- TF-A5334 Effective 01-Aug-2022 28-Jun-2024 28-Oct-2024 Dec-2023 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2018 516,921.09 516,921.09 2019 487,420.25 482,420.25 2020 800,207.41 800,207.41 2021 617,666.87 617,666.87 2022 1,107,830.34 1,107,830.34 2023 1,436,136.31 1,472,251.90 2024 1,033,817.73 1,002,702.14 . The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) . Results framework COUNTRY: Mexico Mexico Dedicated Grant Mechanism for IP and LC Project Development Objectives(s) The objective of the Project is to strengthen the capacity of forest-dependent people from Selected States to participate in local, national and international REDD+ related processes. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Strengthen capacity of forest-dependent people to participate in REDD+ related processes PDO Indicator 1: Targeted beneficiaries receiving sub-grants and 0.00 90.00 matching-grants through the project (Number) Action: This indicator has been Revised PDO Indicator 2: Share of targeted Promotores Comunitarios Locales with improved capacity supported by the project 0.00 80.00 (Percentage) Action: This indicator has been Revised PDO Indicator 3: People in targeted forest and adjacent communities with increased monetary or non-monetary benefits 0.00 2,500.00 from forests (Number) Action: This indicator has been Revised PDO Indicator 4: Percentage of participants in the capacity development activities with increased role in the FIP and other 0.00 75.00 REDD+ processes at local, national or global levels. (Percentage) Action: This indicator has been Revised The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target Component 1: Financing Mechanisms for Community Forestry Management IR Indicator 1.1: Sub-grants and matching-grants provided to 0.00 90.00 targeted beneficiaries under the project (Number) Action: This indicator has been Revised IR Indicator 1.2: Percentage of sub-projects successfully 0.00 75.00 completed and achieving their objectives. (Percentage) Action: This indicator has been Revised Component 2: Capacity Building, Communication, and Advocacy IR Indicator 2.1: Promotores Comunitarios Locales supported 0.00 20.00 with training under the project (Number) Action: This indicator has been Revised IR Indicator 2.2: Targeted beneficiaries that participated in REDD+ and ILM related knowledge exchanges under the project 0.00 30.00 (Number) Action: This indicator has been Revised Component 3: Management, monitoring, and evaluation IR Indicator 3.1: Percentage of grievances registered related to delivery of project benefits that are actually addressed. 0.00 100.00 (Percentage) Action: This indicator has been Revised IO Table SPACE The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604) The World Bank Mexico Dedicated Grant Mechanism for IP and LC (P151604)