FOR OFFICIAL USE ONLY Report No: ICR00005087 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-79760) ON A LOAN IN THE AMOUNT OF US$100 MILLION TO THE REPUBLIC OF PERU FOR A CATASTROPHE DEVELOPMENT POLICY LOAN DDO December 3, 2020 Urban, Resilience, and Land Global Practice Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) CURRENCY EQUIVALENTS (Exchange Rate Effective August 28, 2020) Currency Unit = Peruvian Nuevo Sol (PEN) US$1.00 = PEN 3.57 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ASA Advisory Services and Analytics ARCC Autoridad de Reconstrucción con Cambios (Authority for Reconstruction with Changes) BCRP Banco Central de Reserva del Perú (Central Bank of Peru) CAF Corporación Andina de Fomento - Banco de Desarrollo de América Latina (Development Bank of Latin America) CAPRA Probabilistic Risk Assessment Platform Cat DDO Catastrophe Deferred Drawdown Option CENEPRED Centro Nacional de Estimación, Prevención y Reducción del Riesgo de Desastres (National Center for the Estimation, Prevention, and Reduction of Disaster Risk) CEPLAN Centro Nacional de Planeamiento Estratégico (National Center for Strategic Planning) CISMID Centro Peruano Japonés de Investigaciones Sísmicas y Mitigación de Desastres (Peruvian- Japanese Center for Seismic Research and Disaster Mitigation) DPL Development Policy Loan DRM Disaster Risk Management EPS Entidades Prestadoras de Servicios de Saneamiento (Water and Sanitation Service Companies) FONDES Fondo Para Intervenciones ante la Ocurrencia de Desastres Naturales (Fund for Interventions in the Event of Natural Disasters) GDP Gross Domestic Product GoP Government of Peru HSI Hospital Safety Index IADB Inter-American Development Bank INEI Instituto Nacional de Estadística e Informática (National Institute of Statistics and Informatics) IPF Investment Project Financing IPRESS Instituciones Prestatarias de Servicios de Salud (Health service provider institutions) ISR Implementation Status and Results Report JICA Japan International Cooperation Agency MEF Ministerio de Economía y Finanzas (Ministry of Economy and Finance) Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) MINAGRI Ministerio de Agricultura y Riego (Ministry of Agriculture and Irrigation) MINEDU Ministerio de Educación (Ministry of Education) MINSA Ministerio de Salud (Ministry of Health) MVCS Ministerio de Vivienda, Construcción y Saneamiento (Ministry of Housing, Construction, and Sanitation) PCM Presidencia del Consejo de Ministros (Presidency of the Council of Ministers) PDO Program Development Objective PIP Public Investment Project PLANAGERD Plan Nacional de Gestión del Riesgo de Desastres (National Disaster Risk Management Plan) PNPAD Plan Nacional de Prevención y Atención de Desastres (National Plan for Disaster Prevention and Management) PREVAED Programa de Reducción de la Vulnerabilidad y Atención de Emergencias y Desastres (Strategic Budgetary Program on Disaster Vulnerability Reduction and Emergency Response) PRONIED Programa Nacional de Infraestructura Educativa (National School Infrastructure Program) PRONIS Programa Nacional de Inversiones en Salud (National Program for Investments in Health) SINADECI Sistema Nacional de Defensa Civil (National Civil Defense System) SINAGERD Sistema Nacional de Gestión del Riesgo de Desastres (National Disaster Risk Management System) SNIP Sistema Nacional de Inversión Pública (National Public Investment System) SUNASS Superintendencia Nacional de Servicios y Saneamiento (National Superintendence of Sanitation Services) Regional Vice President: Carlos Felipe Jaramillo Country Director: Marianne Fay Regional Director: Anna Wellenstein Practice Manager: David Sislen Task Team Leader(s): Diana Marcela Rubiano Vargas, Abigail C. Baca ICR Main Contributor: Laisa Daza Obando Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) TABLE OF CONTENTS DATA SHEET ......................................................................................................................... 1 I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES ............................................... 5 II. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES........................................ 12 III. OTHER OUTCOMES AND IMPACTS ............................................................................ 26 IV. BANK PERFORMANCE ............................................................................................... 26 V. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES .......................................... 28 VI. LESSONS AND NEXT PHASE ....................................................................................... 28 ANNEX 1. RESULTS FRAMEWORK ........................................................................................ 30 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES...... 38 ANNEX 3. BORROWER, CO-FINANCIERS, AND OTHER DEVELOPMENT PARTNERS’/STAKEHOLDERS’ COMMENTS ........................................................................... 40 ANNEX 4. SUPPORTING DOCUMENTS ................................................................................. 42 MAP ................................................................................................................................ 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) . . DATA SHEET BASIC INFORMATION Product Information Project ID Program Name P120860 Catastrophe Development Policy Loan DDO Country Financing Instrument Peru Development Policy Lending DPF Options Programmatic Regular Deferred Drawdown Option Catastrophic Deferred Drawdown Option No Yes Yes Crisis or Post Conflict Sub-National Lending Special Development Policy Lending No No No Organizations Borrower Implementing Agency Ministry of Economy and Finance Direccion de Credito Program Development Objective (PDO) Program Development Objective (PDO) The development objective of the proposed operation is to strengthen the Government’s capacity to mobilize resources in the case ofdisaster and to promote risk reduction. PROGRAM FINANCING DATA (USD) FINANCE_TBL Approved Amount Actual Disbursed World Bank Administered Financing 0 100,000,000 IBRD-79760 Page 1 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Total 100,000,000 0 KEY DATES Concept Review Decision Review Approval Effectiveness Original Closing Actual Closing 21-Apr-2010 23-Sep-2010 09-Dec-2010 20-Jan-2011 09-Dec-2013 09-Dec-2019 RATINGS SUMMARY Program Performance Overall Outcome Relevance of Prior Actions Achievement of Objectives (Efficacy) Satisfactory Satisfactory Satisfactory Bank Performance Satisfactory RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 21-Feb-2011 Satisfactory Satisfactory 0 02 05-Dec-2011 Satisfactory Satisfactory 0 03 22-Jun-2012 Satisfactory Satisfactory 0 04 30-Jan-2013 Satisfactory Moderately Satisfactory 0 05 21-Sep-2013 Satisfactory Satisfactory 0 06 04-Apr-2014 Satisfactory Satisfactory 0 07 18-Oct-2014 Satisfactory Satisfactory 0 08 29-May-2015 Satisfactory Satisfactory 0 09 04-Mar-2016 Satisfactory Satisfactory 0 10 08-Aug-2016 Satisfactory Satisfactory 0 11 31-Aug-2017 Satisfactory Moderately Satisfactory 0 12 06-Mar-2018 Satisfactory Moderately Satisfactory 0 13 17-Oct-2018 Satisfactory Moderately Satisfactory 0 Page 2 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) 14 08-Jun-2019 Satisfactory Moderately Satisfactory 0 SECTORS AND THEMES Sectors Mitigation Co- Adaptation Co- Major Sector/Sector (%) benefits (%) benefits (%) SECTOR0_TBL Public Administration 30 0.00 0.00 Central Government (Central Agencies) 30 0 0 SECTOR0_TBL Education 5 0.00 0.00 Other Education 5 0 0 SECTOR0_TBL Health 30 0.00 0.00 Health 30 0 0 SECTOR0_TBL Transportation 5 0.00 0.00 Other Transportation 5 0 0 SECTOR0_TBL Water, Sanitation and Waste Management 30 0.00 0.00 Other Water Supply, Sanitation and Waste 30 0 0 Management Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Finance 25 Finance for Development 25 Disaster Risk Finance 25 Urban and Rural Development 75 Disaster Risk Management 75 Disaster Response and Recovery 25 Disaster Risk Reduction 25 Disaster Preparedness 25 Page 3 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) ACCOUNTABILITY AND DECISION MAKING Role At Approval At ICR Regional Vice President: Pamela Cox Carlos Felipe Jaramillo Country Director: Carlos Felipe Jaramillo Marianne Fay Director: Laura Tuck Anna Wellenstein Practice Manager: Guangzhe Chen David N. Sislen Diana Marcela Rubiano Vargas, Task Team Leader(s): Jose C. Joaquin Toro Landivar Abigail C. Baca . Page 4 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) I. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES A. Context at Appraisal Macroeconomic Framework 1. Before the global economic crisis, Peru enjoyed a period of broad-based rapid economic growth. In 2008, Peru displayed one of the strongest growth performances in the Latin America and the Caribbean region, with rates accelerating from 6.4 percent in 2005 to 9.8 percent. Rising commodity prices fueled export growth, but the economic expansion from 2006 to 2008 was also based on buoyant domestic demand led by the private sector. Sound macroeconomic management during the boom years created the fiscal space needed for countercyclical policies to soften the impact of the global economic crisis. The authorities moved resources into a fiscal stabilization fund, whose balance increased from US$314 million in 2005 to US$1.8 billion in 2008 (to around 1.4 percent of gross domestic product [GDP]). The authorities also brought public debt down from 38 percent of GDP in 2005 to 24 percent in 2008. Public external debt decreased from 28 percent of GDP in 2005 to 15 percent in 2008. In parallel, the Central Bank of Peru (Banco Central de Reserva del Perú, BCRP) accumulated net international reserves, which increased from US$14 billion in 2005 to US$31 billion in 2008—close to five times the stock of short-term external debt and 11 months of goods and services imports. 2. In response to the economic slowdown, the authorities launched a two-year economic stimulus plan in 2009 amounting to US$4.8 billion (about 3.5 percent of GDP). The plan focused primarily on increased public expenditures and attempts to balance the need for a stimulus in the short term, which also reflected medium-term priorities. Infrastructure projects accounted for around 51 percent of planned expenditures. At the end of July 2010, the disbursement ratio of the total economic stimulus plan was around 94 percent. In 2010, as the economic recovery continued to gather pace, authorities began to withdraw the expansionary stance of fiscal and monetary policies. Economic growth reached 8 percent in the first half of 2010, fueled by domestic demand (which increased by 11.1 percent) and private investment (which increased by 28 percent). In response, the authorities announced a series of measures to control the pace of public spending. Ministries and agencies were asked to keep growth in public spending on goods and services for 2010 to less than 3 percent in nominal terms. This measure reversed the limit that was temporarily set for 2010 at 8 percent in real terms and was tougher than the normal limit envisaged under the Fiscal Responsibility and Transparency Law. In addition, new measures were put in place to limit the increase in public investment, which had grown by 26 percent in real terms in 2009. The BCRP raised the benchmark rate, which had been held at 1.25 percent through April 2010, to 3 percent by September 2010. The increase in interest rates was a preventive measure to preempt inflationary pressures in an environment of accelerating growth, despite the lack of substantial inflationary pressures. In the three months to end-August 2010, net international reserves increased by US$5.6 billion. 3. Notwithstanding the uncertainty about the near-term outlook, Peru’s macroeconomic policies were deemed adequate for the operation. Fiscal policy remained prudent, and the expansion of government expenditures in 2009 and 2010 did not threaten fiscal sustainability. In line with the temporary nature of the economic stimulus, the Government began to take actions to curb the expansionary stance of fiscal policy; this was particularly noteworthy in light of the presidential elections in April 2011. Similarly, monetary and exchange rate policies were also supportive of macroeconomic and fiscal stability. Page 5 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Sector Context 4. Geological and climate-related risks have posed major challenges to Peru’s efforts on sustainable and resilient development and poverty reduction. Peru ranked 20 among the world’s economies that are most vulnerable to multiple natural hazards.1 Peru lies in the ‘Pacific Ring of Fire’, a highly seismic region where about 80 percent of the world’s earthquakes occur. The high seismic hazard zones are concentrated along the coastal region, home to the nation’s capital, Lima. The country has a history of high geological activity and has suffered at least six major earthquakes (Lima 1940, Arequipa 1948, Ancash 1970, Nazca 1996, Arequipa 2001, and Pisco 2007) over the past century. Its location in the tropical west coast of South America also exposes the country to El Niño oscillations, which are typically characterized by prolonged torrential rains that primarily affect Peru’s northern coast.2 The El Niño events in 1982–1983 and 1997–1998 had devastating social and economic impacts on the country; the Development Bank of Latin America (Corporación Andina de Fomento - Banco de Desarrollo de América Latina, CAF) estimated that the 1997–1998 event produced losses equivalent to 4.5 percent of GDP. In 2010, 86 percent of Peru’s population of approximately 28 million lived in the coastal and mountainous regions, which also happen to be the areas most exposed to seismic, volcanic, flood, landslide, and frost hazards and the El Niño/La Niña phenomena. 5. Since 2004, Peru has taken significant steps to integrate disaster risk reduction into the country’s development and planning policies and processes. The National Agreement of 2004 defined 30 policies, and the 10th policy on poverty reduction highlighted the importance of promoting disaster risk management (DRM) through the allocation of resources for prevention, response, and reconstruction. The institutional reform of the National Civil Defense System (Sistema Nacional de Defensa Civil, SINADECI) was one of the priorities of the Government of Peru (GoP) in 2010.3 The National Plan for Disaster Prevention and Management4 (Plan Nacional para la Prevención y Atención de Desastres, PNPAD), approved in 2004, integrated the concept of prevention and replaced the National Civil Defense Plan which focused exclusively on emergency response. The PNPAD incorporated the concept of prevention in the development and planning processes and had six focus areas: (a) promote risk evaluations of adverse natural events; (b) strengthen prevention and risk reduction activities; (c) incorporate the concept of prevention in investment planning; (d) provide institutional strengthening; (e) ensure community participation in disaster prevention activities; and (f) optimize emergency response and disaster management. Despite this, implementation still focused on emergency response, except in a few sectors that incorporated the new DRM approaches. 6. The Ministry of Economy and Finance (Ministerio de Economía y Finanzas, MEF) has taken a lead role in incorporating risk reduction policies in the national public investment system (Sistema Nacional de Inversión Pública, SNIP). The SNIP was created in 2000 to ensure the optimal use of public resources for investment projects. In 2010, the Government created the Strategic Budgetary Program on Disaster Vulnerability Reduction and Emergency Response (Programa de Reducción de la Vulnerabilidad y Atención de Emergencias y Desastres, PREVAED; PP0068), using a results-based budgeting approach to allocate public resources for DRM to the sectors and subnational governments. The MEF improved the SNIP information system, particularly the classifiers related to risk reduction investments. In 2001, the GoP 1 World Bank. 2005. Natural Disaster Hotspots. Table 7.2: Countries at Relatively High Economic Risk from Multiple Hazards. 2 World Bank. 2010. Disaster Risk Management in Latin America and the Caribbean Region . GFDRR Country Notes Peru. 3 SINADECI was established by Decree Law 19338 in 1972 as part of the National Defense Strategy. 4 DS Nº 001-A-2004-DE-SG. Page 6 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) launched a national website to promote transparency of public finances, and the ‘disaster prevention’ category was included within the classifiers for investment projects. In 2009, this website was revised, and this category was changed to ‘disaster risk management and emergencies’. Since 2004, investments in vulnerability reduction projects increased (from almost PEN 20 million to PEN 50 million by 2009), with most registered investments for flood control related to El Niño/La Niña impacts. The MEF also took steps to implement financial protection mechanisms to protect against the impact of natural disasters. In 2009, Law No. 29290 on Public Sector Indebtedness authorized the MEF to access contingent credit lines. In 2010, in addition to this Catastrophe Deferred Drawdown Option (Cat DDO), the MEF obtained a contingency credit of US$300 million from CAF. 7. This operation was also prepared against the backdrop of the country recovering from the 2007 earthquake (8.0 Mw). With an epicenter about 150 km south of Lima, the earthquake’s impacts left 514 people dead and 1,090 injured and more than 39,700 buildings damaged or destroyed.5 The Government faced challenges during the reconstruction process led by the Fund for the Reconstruction of the South. The difficulties faced demonstrated the need to strengthen the Government’s institutional and financial capacity and the need to develop specific policies, establish coordination and financing mechanisms, and clarify institutional roles and responsibilities during the emergency, rehabilitation, and reconstruction phases. Rationale for Bank Assistance 8. The operation was in line with the World Bank’s Peru Country Partnership Strategy 2007–2011 (Report No. 37913-PE), which comprised three pillars: (a) economic growth (that is, maintaining macro stability and reducing vulnerabilities, accelerating growth, widening the growth base, and making growth sustainable); (b) social development (that is, meeting basic needs and promoting and developing a new social contract in education, health, and nutrition); and (c) modernization of the state (that is, modernizing state institutions). This operation was aligned with the first pillar and contributed to reducing vulnerabilities by providing immediate liquidity in the event of a disaster and enabling a fast response to address emergency needs while supporting efforts to advance policy reforms in DRM. The Development Policy Loan (DPL) with a Cat DDO, along with an active World Bank dialogue, provided an opportunity to engage the GoP and to promote an active risk reduction agenda in the medium and long term. 9. In 2009, Peru was also among the first countries to use the DPL with Cat DDO instrument as part of its financial protection strategy against the impact of disasters. The World Bank had introduced this instrument in 2008, and the GoP was part of the first generation of ‘DPL with a Cat DDO’ operations along with Colombia (2008), Costa Rica (2008), and Guatemala (2009). Original Program Development Objective(s) (PDO) (as approved) 10. The development objective of the operation was to strengthen the Government’s capacity to mobilize resources in the case of disaster and to promote risk reduction. 5 https://earthquake.usgs.gov/earthquakes/eventpage/usp000fjta/impact. Page 7 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Original Policy Areas/Pillars Supported by the Program (as approved) 11. In line with the PDO, this operation supported policy areas focused on incorporating risk reduction policies in investment planning, strengthening vulnerability reduction activities in priority sectors, and developing a risk financing strategy. The three policy areas were supported by the program. • Pillar 1: Risk Reduction Policies in Public Investment. Under this policy area, reforms supported the budgetary program for disaster risk reduction and emergency response by ensuring specific budget allocations each year. • Pillar 2: Vulnerability Reduction Actions in GoP Priority Sectors. Reforms in this area promoted actions to reduce vulnerability in two sectors: (a) health, particularly related to health infrastructure, and (b) water and sanitation, by supporting the water and sanitation service companies (Entidades Prestadoras de Servicios de Saneamiento, EPS). These sectors were affected by the 2007 earthquake and faced challenges during reconstruction and recovery of service delivery. • Pillar 3: Financial Protection Mechanisms against Disasters Resulting from Natural Events. Under this policy area, reforms supported the implementation of a financial protection strategy to better respond to and reduce the financial impact of disasters. This policy area also aimed to support the MEF in the development of guidelines for public investment projects (PIPs) in a post-disaster context. B. Significant Changes during Implementation 12. This section provides a summary of key institutional and policy changes related to DRM during implementation, including external factors which affected the pace of implementation. 13. In 2011, Law 29664 established the new National Disaster Risk Management System (Sistema Nacional de Gestión del Riesgo de Desastres, SINAGERD), which signaled the Government’s efforts to move from emergency response toward a comprehensive DRM system. This law mandates public institutions at all levels of government to include DRM considerations in their sectoral and planning processes to avoid the creation of new risks and reduce existing risks. In 2011, regulations for the law were also adopted (DS 048-2011-PCM) and established the DRM institutional framework as well as defined the roles and coordination mechanisms for all actors involved. A team under the Presidency of the Council of Ministers (Presidencia del Consejo de Ministros, PCM) was created to oversee the coordination of SINAGERD, and the National Center for the Estimation, Prevention, and Reduction of Disaster Risk (Centro Nacional de Estimación, Prevención y Reducción del Riesgo de Desastres, CENEPRED) was created to manage disaster risk information. The MEF was assigned the strategic role to define and implement a national financial protection strategy against disasters. In 2018, Law 30779 was approved and stipulated measures to strengthen SINAGERD, including a review and update of the National Policy on DRM and the operation of SINAGERD as a functional system, taking into account the design of transversal and intergovernmental strategies to effectively operate and build capacities at the three levels of government. In addition, sanctions for regional governors who fail to comply with their DRM functions were approved to incentivize subnational governments to carry out their respective duties. The process to update the DRM policy with the new regulations given by the National Center for Strategic Planning Page 8 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) (Centro Nacional de Planeamiento Estratégico, CEPLAN)6 started in 2019 and was completed in early 2020; it has been undergoing a review and is expected to be approved through Supreme Decree. With the unfolding of the COVID-19 pandemic since early March and the political crisis with changes in leadership PCM and cabinet positions), the final approval of the updated policy has been put on hold.7 Figure 1. Organizational Structure of SINAGERD Source: PCM. 2019. Manual de mecanismos de financiamiento para el SINAGERD. 14. The National Disaster Risk Management Plan (Plan Nacional de Gestión del Riesgo de Desastres, PLANAGERD) 2014–2021, which was approved in 2014, established the policy framework to comply with the mandates outlined under SINAGERD. PLANAGERD is a strategic document which outlines the efforts to reduce the vulnerability of the population and livelihoods to disaster and climate risks. Anchored around five strategic objectives, the plan establishes a comprehensive set of specific objectives and priority actions for the main DRM processes: risk identification, risk reduction, emergency response, post- disaster recovery, and institutional development. The plan also integrated the DRM budgetary program PREVAED to monitor and articulate the outputs with the objectives under the plan. In 2018, an implementation strategy was approved (RM 145-2018-PCM). The Vice-Ministry of Territorial Governance of the PCM was in charge of coordinating the implementation of this strategy with the participation of all sectors and the three levels of government. This was an important initiative to frame and articulate DRM actions being carried out by the various government entities. With PLANAGERD set to expire in 2021, a new plan to continue implementing DRM activities is expected to be developed, in line with the updated SINAGERD policy that is expected to be approved soon (following the regulations approved by CEPLAN). 15. As part of the World Bank’s DRM engagement, the Government signed a second Cat DDO for US$400 million in 2015. This second Cat DDO built on the dialogue and progress of this operation and 6https://issuu.com/ceplan/docs/guia_politicas_nacionales_v20180919. 7In July 2020, CEPLAN approved new guidelines for the preparation of indicators of national policies and strategic plans. Discussions are ongoing to see if the SINAGERD proposal must be updated to meet these new guidelines. https://www.gob.pe/institucion/ceplan/normas-legales/866949-resolucion-n-023-2020-ceplan-pcd. Page 9 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) supported the implementation of SINAGERD and included other key sectors, for example, education, housing, and flood protection. The objective was to strengthen the institutional and legal framework to contribute to the reduction of Peru’s fiscal and physical vulnerability to disasters and to advance reforms under three pillars: Pillar 1 - Improving efficiency in public resource allocations for DRM, focused on strengthening the financing mechanisms for the implementation of PLANAGERD and mainstreaming DRM policies into regional planning; Pillar 2 - Strengthening vulnerability reduction policies in infrastructure for the education and housing sectors and for flood protection measures, focused on consolidating and strengthening vulnerability reduction measures in infrastructure in the respective sectors; and Pillar 3 - Increasing capacity for post-disaster recovery and reconstruction, focused on the need to increase the Government’s capacity to coordinate, plan, and finance post-disaster reconstruction. In 2018, the Government requested a withdrawal of US$70 million for the El Niño Costero impacts described in paragraph 17; shortly thereafter, this operation closed and was rated Satisfactory.8 16. In 2016, the GoP established the fund for interventions in the event of natural disasters (Fondo Para Intervenciones ante la Ocurrencia de Desastres Naturales, FONDES) that was approved by Law 30458 to manage financial resources for post-disaster response, recovery, and reconstruction activities. In 2017, the Multisectoral Commission for FONDES was approved (DS 132-2017-EF); the decree included regulations and procedures to manage financial resources for post-disaster recovery and reconstruction activities as well as the types of interventions and investment projects that can be financed. The approval of FONDES and the establishment of the Multisectoral Commission were an important first step to have a mechanism in place with clearly defined roles, responsibilities, procedures, and criteria to channel resources to respond in post-disaster contexts. In 2020, the Government also approved a complementary provision (DS 040-2020-EF), which outlines an expedited process and a simplified procedure to address the financing requests through FONDES resources to provide an immediate response for areas declared to be in a state of emergency due to natural disasters.9 17. The GoP declared a national state of emergency on March 27, 2017, in response to the El Niño Costero event that caused landslides, flooding, and huaycos (flash floods) in the coastal regions of Peru. Heavy rains affected the country from December 2016 through March 2017. This event developed rapidly and had a severe impact in terms of loss of life and infrastructure across the country, with economic losses estimated at US$3.1 billion.10 In March, the Government issued several Declarations of Emergency in over 10 regions to implement immediate emergency actions, including a 45-day state of emergency in 34 districts in the six hardest-hit provinces of the Lima Region. This was followed by a declaration of a National State of Emergency on March 27, 2017, in Piura, the worst-affected region in the country. In May, the Government established the Authority for Reconstruction with Changes (ARCC), which formulated the Reconstruction Plan with estimated needs of PEN 25,655 million (US$7.8 billion). On February 8, 2018, the World Bank received the withdrawal request from the MEF and accepted Supreme Decree No. 014- 2018-PCM with the declaration of emergency signed by the President and published in the official gazette ‘El Peruano’, in fulfillment of the condition to withdraw funds. These funds were channeled through FONDES to respond to the recovery and reconstruction activities after El Niño. FONDES and other financial instruments are further discussed under Pillar 3 of this operation. 8 IEG Review Team. 2019. Peru CAT DDO II ICR. http://documents.worldbank.org/curated/en/218991556933212394/Peru-PE- CAT-DDO-II. 9 https://www.indeci.gob.pe/fondes/que-es-el-fondes/. 10 Ramírez, I. J., and F. Briones. 2017. “Understanding the El Niño Costero of 2017: The Definition Problem and Challenges of Climate Forecasting and Disaster Responses.” Int J Disaster Risk Sci 8: 489. https://doi.org/10.1007/s13753-017-0151-8. Page 10 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) 18. In March 2018, then President Pedro Pablo Kuczynski resigned, and Martin Vizcarra and his administration were sworn in. The country was managing the impacts from the Odebrecht scandal, where several countries in the region were facing political and economic repercussions after the construction firm Odebrecht came under investigation on charges of bribery and corruption. This political crisis, as well as the Government’s focus on reconstruction efforts, caused some delays in implementation; however, as most technical staff remained in place, implementation continued at a slower pace. 19. During the last decade, the GoP has taken significant steps to consolidate a DRM program focused on reducing the country’s fiscal and physical vulnerability to disasters. The World Bank’s support through the two Cat DDO operations contributed to advancing important policy reforms. Figure 2 and Box 1 provide an overview of the DRM program and its achievements during the past decade. Figure 2. Timeline of the DRM Legal and Institutional Framework in Peru Note: INDECI = National Civil Defense Institute (Instituto Nacional de Defensa Civil). Box 1. Overview of the DRM Program and the Two Cat DDOs DRM program, policy reforms, and institutional development. Peru was among the first countries to use the Cat DDO instrument and has made substantial progress in advancing the DRM agenda. In 2010, this operation for US$100 million was approved to support policy reforms in three areas related to (a) the budgetary program for disaster risk reduction and emergency response; (b) vulnerability reduction actions in the priority sectors of health, water, and sanitation; and (c) implementation of the financial protection strategy. Throughout the life of this operation, the World Bank supported the Government’s efforts to strengthen the institutional and legal framework to promote risk reduction and take steps to reduce the country’s fiscal and physical vulnerability to disasters. These include establishing the results-based budgetary program for DRM, approving the DRM law and the DRM plan to implement the mandates under the law, developing a financial protection strategy against disasters with a range of instruments to improve the capacity to mobilize resources in the event of a disasters, Page 11 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) and working closely with sectors managing critical and essential infrastructure. Peru has achieved important milestones, which is widely recognized in the Latin America and the Caribbean region. Advancing policy reforms versus the need for immediate liquidity. During the past decade, the Government has remained committed to advance policy reforms and has convened key government entities as part of the policy matrix to implement these reforms and advance the DRM agenda at the national and sector levels. No requests were made for withdrawals under this first Cat DDO operation. As noted, the country has been working to develop a financial protection strategy against disasters, which is monitored under Pillar 3 of this operation. This Cat DDO was the first contingent loan under this strategy, and by loan closing the Government had a number of instruments it could draw from to respond to disasters—fiscal reserves from its fiscal stabilization fund (FONDES), contingent loans, and Catastrophe bonds—highlighting the country’s responsible management of these resources and its focus to advance reforms and increase targets during the renewals in 2013 and 2016. Complementarity between Cat DDO I and II. The Peru Second DPL with a CAT DDO (P149831) for US$400 million built on the first Cat DDO and expanded reforms along the following policy areas: (a) improve public resource allocation for DRM by aligning the budgetary program PREVAED-PP0068 and regional planning processes with the DRM system; (b) expand to other sectors managing infrastructure, include education and housing vulnerability reduction programs, and improve the design of flood protection plans at the subnational level; and (c) increase the Government’s capacity for post-disaster recovery and reconstruction. Both operations were complementary and supported policy reforms to further consolidate the DRM program at the national level while starting to support actions targeting the subnational level. II. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES 20. This operation, in the amount of US$100 million, was the first Cat DDO for Peru. It was approved on December 9, 2010, and closed on December 9, 2019. The operation was renewed in 2013 and again in 2016 to continue advancing on the policy areas supported by it. For the 2013 renewal, the World Bank found the macroeconomic framework to be satisfactory and that the Government had maintained its commitment to implement a comprehensive DRM program. Overall progress in the three policy areas was satisfactory, with six of the seven expected results fully achieved by June 2013. As documented in the renewal memo, the GoP and the World Bank therefore agreed to establish new targets to be achieved by September 30, 2016, for six of the seven expected results under the same areas of the policy matrix. The results indicators under health (the evaluation of hospitals using the Hospital Safety Index, [HSI]) were achieved, and no new target was set. For the 2016 renewal, the World Bank found that the macroeconomic framework continued to be satisfactory and that the Government maintained its commitment to implement a comprehensive DRM program. The GoP and the World Bank agreed to establish new targets for results to be achieved by September 30, 2019, under the same policy areas. Overall progress toward achieving the PDO in the three policy areas was satisfactory; of the six expected results being monitored, five were achieved. In the case of the result related to initiating structural retrofitting works of selected hospitals, to be achieved during this second renewal, the five hospitals initiated bidding for the retrofitting works between January and April 2020. The prior actions and expected results from these 10 years of the operation are presented in table 1. Table 1. Cat DDO Prior Actions and Expected Results Prior Actions Results Indicators (original and revised) Pillar 1. Risk Reduction Policies in Public Investment Prior Action 1: The MEF Results Indicator 1 designed and adopted a Original: National Budget (2012 and 2013) includes a specific budget allocation for Strategic Budgetary the PREVAED. Page 12 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Prior Actions Results Indicators (original and revised) Program for Disaster Vulnerability Reduction Baseline (2010): No budget allocated and Emergency Response (Programa Presupuestal Status (2013): Budget allocations were PEN 54.4 million (2011), PEN 138.9 million Estratégico de Reducción (2012), and PEN 708.7 million (2013). de Vulnerabilidad y Atención de Emergencias Revised (2013, 2016): National Budget (2014, 2015, 2016, 2017, 2018, 2019) por Desastres, PREVAED) includes a specific budget allocation for the PREVAED. under the results-based budgeting framework Status (2019): The budget allocations were PEN 820 million (2014), PEN 1,000 (Urgent Decree No. 024- million (2015), PEN 2,088 million (2016), PEN 748 million (2017), and PEN 875 2010 dated March 31, million (2018). For 2019, the budget allocation was PEN 1,349 million. 2010). Pillar 2. Vulnerability Reduction Actions in GoP Priority Sectors Prior Action 2: The Results Indicator 2 Ministry of Health adopted Original: 90% of MINSA hospitals evaluated with the Hospital Safety Index (HSI) the National Policy for Safe Hospitals in the Event of Baseline (2010): 12% of hospitals (8 in all) evaluated with HSI Disasters (Política Nacional de Hospitales Seguros ante Status (2013): 91% (46 units) of hospitals and institutes evaluated Desastres, DS N° 009-2010- SA dated April 24, 2010). This indicator was fully achieved in 2013 and no new target was set during the subsequent renewals. Results Indicator 3 Original: At least 20% completion of studies on structural vulnerability of MINSA hospitals that qualify for retrofitting Baseline (2010): One study of structural vulnerability in hospitals in 2010 Status (2013): 14 structural vulnerability studies initiated; this is 30% of MINSA hospitals that qualify for retrofitting. Revised (2013, 2016): Retrofitting works have been initiated in at least five hospitals which have finalized structural vulnerability studies. Status (2019): 15 structural vulnerability studies were completed by 2016. In 2017, MINSA signed an agreement with the Peruvian-Japanese Center for Seismic Research and Disaster Mitigation (Centro Peruano Japonés de Investigaciones Sísmicas y Mitigación de Desastres, CISMID) of the National Engineering University to elaborate technical files for retrofitting works in five hospitals in Lima. In early 2020, the five technical files with final engineering designs were completed by CISMID for the retrofitting works in these hospitals. The five hospitals are included in the public investment system and have been allocated an estimated US$24 million; works are expected to be completed only by March 2022 due to the delays in initiating the works due to the pandemic. Results Indicator 4 Original and renewals: All PIPs for new hospitals built after 2011 included risk analysis during the formulation phase. Baseline (2010): Not accounted in 2010 Page 13 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Prior Actions Results Indicators (original and revised) Status (2013): The sector has guidelines for the incorporation of risk analysis in new infrastructure projects. However, there were no new hospital projects reported. Revised (2013, 2016): Same expected target continued Status (2019): The National Safer Hospitals Policy was updated in 2017 and adopted by Supreme Decree and mandates all health facilities to integrate risk reduction. To ensure implementation of the policy in 2018 a multi-sectorial commission on safer hospitals was created by Ministerial Decree. In April 2019, it was announced by MINSA that 48 new health infrastructures would be built. Prior Action 3: The Results Indicator 5 SUNASS11 Board of Original: At least four water and sanitation service companies (EPS) adopted Directors approved a standard technical guidelines to incorporate disaster risk management in their resolution under the management framework developed by SUNASS. Regulation for Quality of Provision of Sanitation Baseline (2010): 0 EPS Services, including measures to be adopted in Status (2013): 5 EPS integrated DRM in their management frameworks. emergency situations (R.C.D. N° 011-2007- Revised (2013): Same expected target continued, and the National Water and SUNASS-CD-Annex 5 dated Sanitation Plan 2014–2021 includes disaster risk management considerations. February 2, 2007). Status (2016): 23 EPS have established contingent funds for DRM. The National Sanitation Plan 2014–2021 was being updated to incorporate the policies of the new government and approval was expected in the next few months. Revised (2016): At least 30 EPS have established contingent funds for disaster risk management in their new pricing structure. Baseline (2016): 23/50 EPS Status (2019): 41 EPS have established contingent funds for DRM. The tariff studies which include these contingent funds are valid for five years, and on average 2% of the annual income of the EPS is allocated for DRM activities. The Water and Sanitation National Plan 2017–2021 (approved DS N° 018-2017-VIVIENDA) includes policy guidelines and indicators to measure actions related to mitigating climate change and disaster risks in water and sanitation services. Pillar 3. Financial Protection Mechanisms against Disasters Resulting from Natural Events Prior Action 4: The Results Indicator 6 Parliament passed the Original: MEF mobilized a pool of financial instruments to better respond to and National Public Sector reduce the financial impacts of disasters. Borrowing Law (Law 29290 dated December 10, 2008), Baseline (2010): None which includes a Status (2013): The Directorate for Disaster Risk Management was created under MEF and contingent lines of credit were under preparation: CAF US$300 million, 11 Superintendencia Nacional de Servicios y Saneamiento SUNASS = National Superintendence of Sanitation Services. Page 14 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Prior Actions Results Indicators (original and revised) special chapter on the Japan International Cooperation Agency (JICA) US$300 million, and Inter-American attention to disasters and Development Bank (IADB) US$300 million. emergency situations, which allows the MEF to Revised (2013): MEF has issued the Risk Financing Strategy to be submitted to the start building its PCM under the SINAGERD Framework. mechanism for financial protection from disasters. Status (2016): MEF’s risk committee approved the Risk Financing Strategy, known as the ‘Financial Protection Strategy against Disasters’ and presented it to the PCM in 2016. Revised (2016): MEF continues to implement the Financial Protection Strategy against disasters, by mobilizing new financial instruments to reduce the fiscal impact of disasters, including insurance for public assets and risk transfer instruments. Baseline (2016): 0 instruments Status (2019): MEF has mobilized a new risk transfer instrument. In February 2018, Peru joined Chile, Colombia, and Mexico as part of the Pacific Alliance for a catastrophe bond issued by the World Bank (US$1.36 billion), in which Peru has US$200 million in risk insurance for earthquake risks for three years. Peru received a US$60 million payout after the 2019 earthquake (8 Mw), which was channeled to FONDES. Efforts are under way to develop a risk transfer instrument for hydrometeorological hazards. Results Indicator 7 Original: MEF revised its current framework for implementation of post-disaster public investments. Baseline: SNIP 2008 for emergency project. Status (2013): MEF issued guidelines for reconstruction project profiles under the SNIP framework (Annex 17 - Directorate Resolution 008-2012-EF/63.01). Revised (2013): MEF issued sector guidelines for post-disaster rehabilitation for infrastructure in water and sanitation, health, education sectors. Status (2016): MEF issued guidelines for post-disaster rehabilitation for infrastructure in water and sanitation but decided not to issue specific guidelines for other sectors. Revised (2016): Update the guidelines to include disaster risk management policies in public investment. Status (2019): In 2017, a new public investment system was approved (Invierte.pe), which required an update to all processes. The general guide to formulate and evaluate PIPs was approved in September 2019 and includes guidelines to integrate DRM considerations in the PIP formulation cycle. (MEF Directoral Resolution Nº 004-2019-EF/63.01) A. Relevance of Prior Actions Rating: Satisfactory Page 15 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) 21. The relevance of the prior actions in contributing to the achievement of the PDO is rated Satisfactory. These prior actions were clearly linked to the operation’s objective to strengthen the Government’s capacity to mobilize resources in the case of disasters and to promote risk reduction. Since the early 2000s, Peru (like other countries in the region) has been moving toward establishing a comprehensive DRM system and move away from just an emergency focus. The prior actions were particularly relevant, given the experience and challenges faced with the recovery and reconstruction process after the 2007 earthquake. The GoP identified the need to take ex ante measures to mitigate the impacts of natural hazard events. Establishing a comprehensive DRM system is a process which takes time and requires having in place an institutional structure, legal and policy framework, resources, and capacity to design, implement, and operationalize risk reduction policies and interventions at all levels of government (national, regional, and local). In this regard, policy reforms supported under this operation contributed to putting in place some of these key elements for this system by ensuring budgetary support for DRM activities, supporting specific sector reforms to mainstream DRM, and developing and implementing a financial protection strategy against disasters. Table 2 provides a summary of the prior actions and their contribution to the PDO. Table 2. Contributions to the PDO Prior Actions Contribution to PDO Pillar 1. Risk Prior Action 1: The MEF designed This prior action contributed to strengthening the Reduction Policies and adopted a Strategic Budgetary Government’s capacity to promote risk reduction. The in Public Program for Disaster Vulnerability adoption of this budgetary program under the results- Investment Reduction and Emergency based framework established a specific budget line Response (PREVAED) which required annual allocations from the public budget to finance DRM activities and investments. The PREVAED defined five priority sectors for specific interventions: health, education, transport, environment, and housing (including water and sanitation). Health and water and sanitation sectors were included in this operation as part of the next pillar. Pillar 2. Prior Action 2: The Ministry of These two prior actions focused on the health and Vulnerability Health adopted the National Policy water sectors and contributed to strengthening the Reduction Actions for Safe Hospitals in the Event of Government’s capacity to promote risk reduction. in GoP Priority Disasters MINSA’s adoption of a national policy for safer Sectors hospitals was key to ensuring that existing and new Prior Action 3: The SUNASS Board hospital infrastructure would integrate risk reduction of Directors approved a resolution considerations to ensure that these would be ready in under the Regulation for Quality of the event of a disaster. In terms of SUNASS, the Provision of Sanitation Services, approval of the resolution was an important step to including measures to be adopted ensure that EPS would be able to continue service in emergency situations provision in the event of an emergency/disaster. This regulation pushed EPS to develop and adopt contingency plans for emergency situations, including natural hazard events, and to integrate DRM in their operations. Pillar 3. Financial Prior Action 4: The Parliament This prior action contributed to strengthening the Protection passed the National Public Sector Government’s capacity to mobilize resources in the Mechanisms Borrowing Law, which includes a event of a disaster. The law allowed the MEF to begin against Disasters special chapter on attention to using new contingent financing instruments like the Page 16 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Prior Actions Contribution to PDO Resulting from disasters and emergency Cat DDOs to mobilize resources to mitigate the Natural Events situations, which allows the MEF to economic and fiscal impacts of disaster events. start building its mechanism for Allowing for the use of preplanned financing, as financial protection from disasters opposed to traditional ex post options, was the first step toward the design of a comprehensive strategy for financial protection against natural disasters and to the use of a range of financial instruments. B. Achievement of Objectives (Efficacy) Rating: Satisfactory 22. Achievement of the development objective of the operation to strengthen the Government’s capacity to mobilize resources in the case of disaster and to promote risk reduction is assessed by the extent to which the expected results under each of the three pillars were achieved. 23. The results indicators and targets in the policy matrix were relevant and contributed to measuring achievement of the PDO. As noted earlier, this was the first Cat DDO in Peru and among the first generation of operations in the World Bank using this instrument. At the time of preparation of this Cat DDO in 2009, a policy matrix was designed and realistic targets were established, which could be implemented, monitored, and achieved within the three-year time frame of the operation. In hindsight, some results indicators and targets could have been more ambitious and focused more on measuring outcomes rather than on processes. The Government requested a renewal of the operation in both 2013 and 2016. Table 3 provides an illustrative overview of the evolution of the indicators and targets during the renewals. At the time of each renewal, the expected results were reviewed and discussed with the Government and new targets were set where progress had been achieved. This provided an opportunity to adjust and establish more ambitious targets, maintain the relevance of the Results Framework over the lengthy implementation period, and continue pushing policy reforms forward, in particular reforms under Pillars 2 and 3. Table 3. Evolution of Expected Results at the 2013 and 2016 Renewals Expected Results by September 2013 Expected Results by September 2016 Expected Results by September 2019 Pillar 1. Risk Reduction Policies in Public Investment RI1. National Budget (2012 and 2013) Same indicator continued Same indicator continued includes specific allocation for the RI1. National Budget (2014, 2015 and RI1. National Budget (2017, 2018, and PREVAED. 2016) includes specific allocations for 2019) includes specific allocations for the PREVAED. the PREVAED. Pillar 2. Vulnerability Reduction Actions in GoP Priority Sectors RI2. 90% of MINSA hospitals Target result achieved. No new No new target set. evaluated with the Hospital Safety target set. Index. RI3. At least 20% completion of New indicator established Same indicator continued studies on structural vulnerability of RI2. Retrofitting works have been RI2. Retrofitting works have been MINSA hospitals that qualify for initiated in at least five hospitals initiated in at least five hospitals retrofitting. which have finalized structural which have finalized structural vulnerability studies. vulnerability studies. Page 17 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Expected Results by September 2013 Expected Results by September 2016 Expected Results by September 2019 RI4. All PIPs for new hospitals built Same indicator continued Same indicator continued after 2011 included risk analysis RI3. All PIPs for new hospitals built RI3. All PIPs for new hospitals built during the formulation phase. after 2011 included risk analysis after 2011 included risk analysis during the formulation phase. during the formulation phase. RI5. At least four water and Same indicator continued and new New indicator established sanitation service companies (EPS) target established RI4. At least 30 of the EPS have adopted standard technical RI4. Same indicator on EPS. The established contingent funds for guidelines to incorporate risk Water and Sanitation National Plan disaster risk management in their management in their management 2014–2021 includes disaster risk new pricing structure. frameworks developed by SUNASS. reduction policies. Pillar 3. Financial Protection Mechanisms against Disasters Resulting from Natural Events RI6. MEF mobilized a pool of financial New indicator established New indicator established instruments to better respond to and RI5. MEF has issued the Risk RI5. MEF continues to implement the reduce the financial impact of Financing Strategy to be submitted to Financial Protection Strategy against disasters. the PCM under the SINAGERD disasters by mobilizing new financial Framework. instruments to reduce the fiscal impact of disasters, including insurance for public assets and risk transfer instruments. RI7. MEF revised its current New indicator established New indicator established framework for implementation of RI6. MEF issued sector guidelines for RI6. Update the guidelines to include post-disaster public investments. post-disaster rehabilitation for disaster risk management policies in infrastructure in three sectors: water public investments. and sanitation, education, and health. Note: RI = Results indicator. 24. The next section evaluates the extent to which the expected results supported by this operation contributed to achieving the PDO to strengthen the Government’s capacity to mobilize resources in the case of disasters and to promote risk reduction. Pillar 1. Risk Reduction Policies in Public Investment 25. Reforms in this policy area focused on strengthening the Government’s capacity to promote risk reduction by setting up a budgetary program to allocate public resources to mainstream DRM. There was one original expected result: National Budget (2012 and 2013) includes a specific budget allocation for the PREVAED. This expected result was continued for each renewal and new targets were set along the same lines: the National Budgets for 2014, 2015, 2016, 2017, 2018, and 2019 include a specific budget allocation for the PREVAED. 26. The PREVAED, also known as PP0068, was created in 2010 as the mechanism through which public resources can be channeled to sectors and subnational governments specifically for disaster risk reduction activities. Under this budgetary program, the Government aimed to address some of the challenges it faced, for example, dispersed information on investments, lack of an institutional planning process, and monitoring and evaluation mechanisms. The program receives annual allocations from the public budget and provides a mechanism through which the Government can monitor how and where resources are spent. The approval of SINAGERD in 2011 outlined the institutional framework and the Page 18 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Government’s roles and responsibilities in DRM, and PLANAGERD 2014–2021 outlined strategic objectives and priority actions to integrate DRM in the planning and investment process. The PREVAED was the first budgetary program focused on DRM and has evolved to be in line with the priorities defined in SINAGERD and to support the implementation of established targets in PLANAGERD. With the approval of PLANAGERD in 2014, a redesign was carried out in 2015 to align and articulate the objectives of the plan with the products in the budgetary program, which now has a multisectoral focus. It allocates funding for the three levels of government—12 ministries at national level, 26 regional governments, and more than 1,000 local level governments—along products and investments related to risk identification, estimation, prevention, and risk reduction as well as emergency response and rehabilitation processes. These are illustrated in figure 3. Figure 3. Articulation of PLANAGERD Objectives and the Budgetary Program PREVAED-PP 0068 Source: M. Priale. Report Perú Gasto público en GRD information from Viceministry of Territorial Governance - MEF (2019). Note: PP = Budgetary program; IOARR = Investments in optimization, marginal expansion, replacement, rehabilitation. 27. These dedicated public resources signaled the Government’s commitment to establish a comprehensive DRM program. The National Budgets from 2011 to 2019 have annually included specific budget allocations for the PREVAED. A larger share of the funding has tended to focus more on activities related to emergency preparedness and response and less on mitigation and rehabilitation works. The latter could also receive funding through other sectoral programs or dedicated reconstruction programs Page 19 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) (as is seen with the ARCC and the 2017 El Niño Costero).12 Figure 4 illustrates the PREVAED-PP0068 distribution by expenditure type. Budget allocations were also more significant in 2015 and 2017 due to the forecasts of potentially strong El Niño events, which affected the country in 2017. This budgetary program is an important instrument to finance and implement DRM activities. The MEF continues to monitor these investments and makes this information publicly available through its website ‘Consulta amigable’. Moving forward, there are opportunities to strengthen the program and improve its efficiency, particularly to support and incentivize more investments in risk reduction. Figure 4. PREVAED-PP0068 Distribution by Expenditure Type in Soles Source: Integrated Financial Administration System (SIAF) - MEF (2012–2020). Visited 06/03/2020. Report, M. Priale. Perú: Gasto público en Gestión de Riesgos por Desastres (GRD). Note: * For 2020, Modified Institutional Budget is used. 28. Based on the above discussion, the expected results under Pillar 1 were fully achieved. Pillar 2. Vulnerability Reduction Actions in GoP Priority Sectors 29. Reforms in this policy area focused on strengthening the Government’s capacity to promote risk reduction in priority sectors. There were four original expected results, with three under the health sector: (a) at least 20 percent completion of studies of structural vulnerability of MINSA hospitals that qualify for retrofitting; (b) 90 percent of MINSA hospitals evaluated with the Hospital Safety Index; (c) all PIPs for new hospitals built after 2011 included risk analysis during the formulation phase. The fourth was in the water and sanitation sector: At least four EPS adopted standard technical guidelines developed by SUNASS to incorporate DRM in their management framework. All expected results, except for (b), were continued under each renewal and new targets were set. 30. Health sector. Challenges remain in regulating and overseeing health service provision effectively. Peru has a fragmented decentralized health care system administered by five entities: MINSA, which 12Análisis de las políticas y estrategias financieras para la Gestión de Riesgo de Desastres en Perú. Report for Advisory Services and Analytics (ASA) Building the Resilience of Local Governments to Natural Disasters in Peru using a Territorial Approach (P171251). Page 20 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) provides health services for about 60 percent of the population; EsSalud (social health insurance system), which provides services for 30 percent of the population; and the Armed Forces, National Police, and the private sector, which together provide services to the remaining 10 percent. MINSA sets the national policy and has responsibility over the Lima Metropolitan Area, while regional governments are responsible at the subnational level. Health services in facilities owned by MINSA and regional governments are organized in three levels of care: the first level of care includes four types of health service provider institutions (Instituciones Prestatarias de Servicios de Salud, IPRESS), ranging from basic health posts (level I‐1) up to maternal/child health centers that offer 24‐hour service and attend normal deliveries (level I‐ 4); the second level of care includes three types of hospitals that offer the basic specialties and services (deliveries, surgery, diagnostic imaging, pathology, blood bank, rehabilitation, and hospitalization) and some offer intensive care services; and the third level of care includes hospitals with a higher concentration of technology, all medical specialties, and some subspecialties. Third‐level hospitals may also offer cancer treatment such as radiotherapy, hemodialysis, and other specialized services. 31. As of 2019, the public sector included 7,830 first‐level IPRESS and 175 second‐ and third‐level IPRESS (hospitals) nationwide.13 There has been slow progress by MINSA to advance reforms, given the challenging context in which it operates. Between 2000 and 2015 health spending rose from 2.3 percent to 3.2 percent of GDP (from US$123 to US$414 per capita), but the geographic, administrative, and infrastructure fragmentation of public health services still remains and needs to be addressed. In addition, reducing the seismic vulnerability of existing health infrastructure poses a complex challenge in a highly seismic country as Peru. In 2010, the health sector approved the National Safe Hospitals Policy, which included a broad framework for vulnerability reduction actions in health facilities to be implemented through the preparation of investment master plans.14 Activities to operationalize and implement the policy included (a) use of the Pan American Health Organization’s HSI to provide a snapshot of the probability that a hospital or health facility will maintain operations during and after an emergency situation,15 (b) carrying out of structural vulnerability studies, (c) structural retrofitting, (d) vulnerability reduction of nonstructural elements, (e) update of technical specifications for new infrastructure, and (f) contingency plans. The first National Safe Hospitals Policy and the corresponding action plan were valid from 2010 to 2015, and a new policy and action plan for 2017–2021 were updated and approved through Supreme Decree 027-2017-SA.16 Between 2016 and 2017, the country did not have an active national policy.17 32. As part of this operation, the lines of action related to reducing the vulnerability of existing and new health infrastructure were supported. In terms of existing health infrastructure and the indicator related to hospitals evaluated under the HSI, the target of 91 percent of MINSA hospitals evaluated was achieved as noted by the 2013 renewal memo which included 46 units (hospitals and institutes evaluated). There was limited documented information on the total number of health infrastructure considered for this indicator in the Program Document and Implementation Status and Results Reports (ISRs); the ISRs mostly reported on the progress of the evaluations by MINSA. Even though this indicator was not monitored after 2013, the health sector continued to make progress. By 2015 (as published in the 2017 13 Health Investment Project Financing (IPF) Peru Integrated Health Networks (P163255) Project Appraisal Document (Ministerial Resolution No. 546‐2011). 14 Ministerial Resolution No. 386–2010/MINSA dated May 13, 2010. 15 https://www.paho.org/disasters/index.php?option=com_content&view=article&id=964:safety-index&Itemid=912&lang=en. 16 http://bvs.minsa.gob.pe/local/MINSA/4325.pdf. 17 https://gestion.pe/peru/politica/contraloria-alerta-al-minsa-hechos-ponen-riesgos-politica-hospitales-seguros-226187- noticia/. Page 21 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) National Safe Hospitals Policy), 162 of 175 MINSA hospitals (93 percent) had been evaluated using this index. 33. A total of 15 structural vulnerability studies were completed by 2016. MINSA signed an agreement in 2017 with CISMID of the National Engineering University to elaborate technical files (final engineering designs) for retrofitting works in five hospitals in Lima (Dos de Mayo, Hipólito Unanue, Cayetano Heredia, Arzobispo Loayza, and Maria Auxiliadora). Two of these hospitals (Arzobispo Loayza and Dos de Mayo) were determined to be cultural heritage and required further coordination with the Ministry of Culture to preserve the historic buildings. In early 2020, the five technical files were completed by CISMID and have been included in the public investment system (Invierte.pe) with a total budget allocation estimated at US$24 million.18 The works are expected to be completed by March 2022, because of COVID-19-related delays in initiating the civil works. Even though the implementation of reforms has been slow, the sector has taken important steps to promote risk reduction in hospitals which are essential public infrastructure. 34. All PIPs after 2011 were required to include a risk analysis during the formulation phase. The MEF approved the General Directive for the National Public Investment System (SNIP) and its annexes by Directorial Resolution 003-2011-EF/68.01.19 MEF published a compilation of the complete SNIP regulations and updates in august 2015. 20 The annexes of this compilation include guidance to formulate and evaluate PIPs, and in particular annexes 05, 07, 09 provides considerations to integrate risk analysis and DRM in all sectors including health. In 2014, the National Program for Investments in Health (Programa Nacional de Inversiones en Salud, PRONIS) was created under MINSA (approved through Supreme Decree 035-2014-SA) to be responsible for formulating, preparing, and executing PIPs. PRONIS also has the responsibility to coordinate with local and regional governments within the framework of signed agreements and to provide technical assistance at different stages of the projects. In 2017 the approval of the updated National Policy for Safer Hospitals and action plan 2017-2021 provides the main guiding instrument and requires all health facilities to integrate disaster risk management and risk reduction. In 2018 to ensure the implementation of this policy a Multi-sectorial Commission on Safer Hospitals against Disasters was created by Ministerial Decree 176-2018-MINSA.21 In April 2019, it was announced that 48 new health infrastructures (two specialized institutes, four regional hospitals, 14 provincial hospitals, 18 health centers, and 10 health posts) would be constructed along the country.22 35. Based on the above discussion, the expected results in the health sector (that is, achievement of the targets of the three indicators) under Pillar 2 were mostly achieved. 36. Water and sanitation sector. The Government prioritized actions for this sector, given the impact of past disasters and the disruption in the provision of these basic services. In 2007, SUNASS approved a regulation for the Quality of Provision of Sanitation Services, which mandated EPS to develop plans to respond to emergency situations, including disasters caused by natural events. As of October 2019, 42 of 18 https://ofi5.mef.gob.pe/invierte/formato/verProyectoCU/2457883; https://ofi5.mef.gob.pe/invierte/formato/verProyectoCU/2457882; https://ofi5.mef.gob.pe/invierte/formato/verProyectoCU/2457881; https://ofi5.mef.gob.pe/invierte/formato/verProyectoCU/2457876; https://ofi5.mef.gob.pe/invierte/formato/verProyectoCU/2457879. 19 ttp://www.mef.gob.pe/contenidos/inv_publica/docs/normas/normasv/snip/a2012/dic/3erDirectivaGeneraldelSNIP2011.pdf 20https://www.mef.gob.pe/contenidos/inv_publica/docs/normas/normasv/COMPENDIO/COMPENDIO_DE_NORMATIVIDAD_D EL-SNIP.pdf 21 https://www.gob.pe/institucion/minsa/normas-legales/187546-176-2018-minsa 22 https://www.gob.pe/institucion/minsa/noticias/27642-minsa-implementara-85-establecimientos-de-salud-en-todo-el-pais. Page 22 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) the 50 EPS had set aside funds to implement DRM and climate change adaptation actions, at an estimated US$119 million.23 SUNASS provides technical assistance to the EPS located in Lima and the regions through its 24 subnational offices. The tariff studies which include these funds are valid for five years, and on average 2 percent of the annual income of the EPS is allocated for DRM activities. SUNASS also has an indicator on DRM, which it monitors and focuses on EPS to undertake the following activities: (a) establish an Emergency Committee, (b) present a plan for mitigation measures, (c) present an emergency plan, and (d) support the dissemination of the emergency plan. Based on the 2019 regulatory benchmark, only 16 of the 50 EPS had fulfilled all four activities. One of the challenges identified is that even though the EPS plans integrate DRM, there is variety in terms of scope and methodologies used as well as challenges in their implementation.24 In the context of COVID-19, the Decreto de Urgencia 036-2020 was approved in April; it allowed the freeing up of the use of funds and reserves for expenses of the operation and maintenance of sanitation systems in the framework of the sanitary emergency caused by the pandemic.25 37. In addition, to continue to advance efforts in this sector, it was agreed in the 2013 renewal to include a target related to the inclusion of DRM considerations in the Water and Sanitation Plan. This effort was led by the Ministry of Housing, Construction, and Sanitation (Ministerio de Vivienda, Construcción y Saneamiento, MVCS) and the Water and Sanitation National Plan 2017–2021 was approved. The plan includes policy guidelines and indicators to measure actions related to mitigating climate change and disaster risks in water and sanitation services. In February 2020, MVCS also approved (through Ministerial Resolution RM-036-2020-VIVIENDA) two guidance notes on the formulation of a preliminary diagnostic of disaster risk in the sanitation services. The note on risk assessments in sanitation services further supported EPS in integrating DRM in its processes and activities.26 38. Based on the above discussion, the expected result in the water and sanitation sector (that is, achievement of the indicator target) exceeded the target under Pillar 2 and was fully achieved. Pillar 3. Financial Protection Mechanisms against Disasters Resulting from Natural Events 39. Reforms in this policy area focused on strengthening the Government’s capacity to mobilize resources in the event of a disaster. Two results were originally expected: (a) the MEF mobilized a pool of financial instruments to better respond to and reduce the financial impact of disasters and (b) the MEF revised its current framework for implementation of post-disaster public investments. Both these expected results were continued under each renewal and new targets were set on the same lines. 40. Past disasters have shown the need to strengthen the Government’s use of financial protection mechanisms against disasters as well as the institutional capacity to plan and manage post-disaster reconstruction. Under the SINAGERD law, the MEF is responsible for identifying and evaluating mechanisms to ensure that Peru has the financial capacity to manage major disasters and the reconstruction phases as well as mechanisms for DRM. The MEF has made substantial progress in this 23 https://www.sunass.gob.pe/websunass/index.php/noticias/item/1883-42-empresas-de-agua-poseen-191-millones-de- dolares-en-reservas-para-la-gestion-de-riesgos-de-desastres. 24 Informe sobre Resiliencia del Sector Agua y Saneamiento del Perú ante Desastres Naturales report for the ASA Building the Resilience of Local Governments to Natural Disasters in Peru using a Territorial Approach (P171251). 25 https://www.sunass.gob.pe/websunass/index.php/noticias/item/1976-sunass-supervisa-uso-de-fondos-de-inversion-de- empresas-de-agua-para-garantizar-continuidad-del-servicio-durante-emergencia. 26 https://www.gob.pe/institucion/vivienda/informes-publicaciones/437271-proyecto-de-resolucion-ministerial-que-aprueba- la-guia-para-la-formulacion-del-diagnostico-preliminar-del-riesgo-de-desastres-en-los-servicios-de-saneamiento-ocasionados- por-peligros-originados-por-fenomenos-naturales-y-la-guia-para-la. Page 23 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) regard. By 2013, the MEF had created the Directorate for Disaster Risk Management and three contingency loans were under preparation (CAF for US$300 million, JICA for US$100 million, and IADB for US$300 million). At the time of the second renewal in 2016, the MEF had approved and published the Financial Protection Strategy against Disasters and had contingent credit lines to respond to the impact of disasters of almost US$1.2 billion (this included both Cat DDO operations for a total of US$500 million).27 Figure 5 provides an overview of the financial protection strategy and the range of instruments the Government is able to mobilize. In 2018, the Government signed the first catastrophe bond issued by the World Bank, as part of the Pacific Alliance, which provided insurance protection of US$200 million against earthquake losses. It was also the first time the Pacific Alliance—Chile, Colombia, and Peru— accessed the capital markets to obtain insurance for natural disasters. In May 2019, after the earthquake (8.0 Mw) in the Amazonas region in the northeast area of country, a partial payout of US$60 million was made and the funds were reportedly transferred to FONDES.28 The Pacific Alliance is now developing a risk transfer instrument to cover hydrometeorological hazards. Figure 5. Overview of Peru’s Financial Protection Strategy against Disasters Source: MEF. 2016. Financial Protection Strategy against Disasters. 41. The challenges faced by the GoP in the past due to the impact of natural hazard events highlighted the need to develop specific policies, coordination, and financing mechanisms and to clarify roles and responsibilities during the emergency, rehabilitation, and reconstruction phases. At the time of the approval of this operation, the MEF identified two lines of action related to public investments: (a) update procedures for post-disaster investments in the SNIP regulation and (b) conduct a broader diagnostic of the existing framework to implement post-disaster investments. As part of this operation, the MEF reviewed its approach to the implementation of post-disaster public investments. By 2013, the MEF had issued guidelines for reconstruction project profiles under the SNIP. By 2016, the MEF had issued guidelines for post-disaster rehabilitation of infrastructure in the water and sanitation sector. In 2017, a 27 The contingent lines of credit include both Cat DDOs from the World Bank for a total of US$500 million, CAF US$300 million, IADB US$300 million, JICA US$83 million. Source: MEF. 2016. Peru: A Comprehensive Strategy for Financial Protection against Natural Disasters. 28 https://www.artemis.bm/news/peru-cat-bond-pay-out-of-60m-for-earthquake-confirmed/. Page 24 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) new public investment system (Invierte.pe) was approved and required updates to all processes for the formulation of PIPs. In 2019, through MEF Directorial Resolution Nº 004-2019-EF/63.01, the General Guidelines to identify, formulate, and evaluate investment projects were approved. Annex 2: Disaster Risk Management outlines this process in the formulation phase and in the evaluation of investment projects. This annex includes guidelines to integrate DRM during the PIP formulation cycle, including the technical analysis required. These guidelines do not specifically address reconstruction aspects. 42. The creation of FONDES in 2016 and its operationalization in 2017 demonstrated progress in strengthening the GoP’s institutional and financial capacity to respond to disasters by having a mechanism in place to channel resources for emergency, recovery, and reconstruction efforts. FONDES has been important for more transparent and efficient management of financial resources. Law 30458 which established FONDES also allocated an estimated US$91 million to create the fund. In 2017, the Government budget allocated US$15 million and later added US$400 million through Emergency Decree 004-2017 to respond to El Niño Costero. Challenges, however, remain to advance the reconstruction process in affected areas after the 2017 El Niño Costero. In 2018, DS 094-2018-PCM approved Law No. 30556, which included provisions for national government intervention in the event of a disaster and created the ARCC to lead the reconstruction efforts.29 The reconstruction process has faced substantial delays in implementation; by the end of 2019, the ARCC had executed about 47 percent of its total budget of about US$5.6 billion.30 Given the need to execute investments, the Government defined ‘Reconstruction Intervention through Investments’ which do not constitute a regular PIP and do not go through the SNIP. Instead, these are approved based on the completion of the ‘Unique Reconstruction Format’ and are added to the investment project database. The implementation of the reconstruction process through these parallel processes, which also bypass some of the existing systems, is a missed opportunity to integrate lessons learned and improve the existing processes for future implementation of public post-disaster investments. 43. Based on the above discussion, the expected results under Pillar 3 (that is, achievement of the targets of the two indicator targets) were fully achieved. C. Overall Outcome Rating and Justification Rating: Satisfactory 44. Overall, based on the ratings of the relevance of the prior actions and achievement of the objectives (efficacy), the outcome of this operation is rated Satisfactory. The prior actions were linked to the objectives of the Cat DDO and are aligned with the Government’s priorities. The operation has achieved the program’s objective and most of the expected results. Challenges remain in continuing to implement and operationalize a comprehensive DRM program in the country, but substantial progress has been achieved during the past decade. 29 http://www.rcc.gob.pe/wp-content/uploads/2018/12/8.-Decreto-Supremo-N%C2%AF-094-2018-PCM.pdf. 30 https://andina.pe/ingles/noticia-peru-investment-in-reconstruction-to-total-264-billion-by-years-end-776938.aspx. Page 25 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) III. OTHER OUTCOMES AND IMPACTS A. Poverty, Gender, and Social Impacts 45. This operation did not support prior actions directly related to poverty, gender, and social aspects. However, in line with this operation’s objective and policy reforms, positive impacts are expected given the strong links between poverty and vulnerability to natural disasters. The Government’s public budget allocation for the PREVAED makes available resources for emergency response and for investments for risk reduction, which aim to contribute to reducing the vulnerability of the population, particularly for low-income and the most vulnerable groups (such as women, children, and the elderly) that tend to be disproportionately affected by shocks. Policy reforms to support vulnerability reduction actions in key sectors, such as health and water and sanitation, are important to contribute to reducing service disruption. At the national level, the financial protection strategy enables the Government to quickly mobilize resources to respond to the emergency and post-disaster recovery and reconstruction. B. Environmental, Forests, and Natural Resource Aspects 46. This operation did not support prior actions directly related to environmental, forests, and natural resource aspects. C. Institutional Change/Strengthening 47. This operation and the ongoing DRM engagement since 2010, including the second Cat DDO, have been instrumental in supporting policy reforms in DRM. They contributed to strengthening institutional capacity and efforts to move toward a more comprehensive DRM system. This operation was also the first contingent credit line under the Government’s financial protection strategy. D. Other Unintended Outcomes and Impacts 48. The operation did not have significant unintended outcomes or impacts. IV. BANK PERFORMANCE Rating: Satisfactory 49. The preparation of this operation was consistent with, and contributed to, the Government’s priorities and efforts to advance the DRM agenda. The World Bank worked closely with the MEF and relevant sectors to prepare the operation (which was the World Bank’s third Cat DDO operation) and define the policy matrix. The strength and relevance of the analytical underpinnings were adequate and based on available information at the time. This included key documents, such as the study for the institutional strengthening of SINADECI (which was a diagnostic of the structure, legal framework and opportunities to strengthen the DRM system), the World Bank report on catastrophe risk financing in developing countries (which provided the theoretical framework), and a study which drew lessons from the Colombian experience on institutional strengthening and risk financing strategies of the national DRM program. Risks identified in the Program Document (that is, macroeconomic, political, and social) and mitigation measures were adequate. The political and social risks identified were related to potential reforms to the existing DRM system and potential new agencies being created, which was partly mitigated Page 26 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) by the MEF’s leadership and multisector coordination of this operation. Elections in 2010 and potential changes in government were also considered to potentially affect priorities in DRM; the project aimed to address this by promoting workshops and dialogue with stakeholders engaged on the topic. The World Bank team worked closely with the IADB, which was preparing a US$25 million operation to strengthen and modernize the regulatory, institutional, and public policy framework for integrated DRM, to ensure that the operations complemented each other. 50. The implementation capacity of the Government to advance the DRM agenda at the national level was adequately assessed by the World Bank, which facilitated the implementation of this operation. The World Bank provided key technical support to ensure that the technical assistance activities were carried out in line with policy reforms included in the policy matrix. Grant-funded technical assistance activities under implementation during 2010–2013 included (a) Integration of Disaster Risk Information in Peru’s Planning System (P121854); (b) Switzerland State Secretariat for Economic Affairs SECO-World Bank Trust Fund for disaster risk financing and insurance for middle-income countries (TF010712) under the Peru Sovereign Disaster Risk Financing Project (P128841), which was instrumental in supporting the MEF to develop the risk financing strategy ‘Financial Protection Strategy Against Disasters’ (published in 2016) and supporting the US$200 million catastrophe bond for earthquakes in 2018 (which Peru acquired as part of the Pacific Alliance), and the Public-Private Partnership Guidelines which include a chapter on insurance requirements (published in 2019); and (c) seismic probabilistic risk assessment of public schools and hospitals in Lima and Callao under the Probabilistic Risk Assessment Platform (CAPRA) program (TF095953). As part of CAPRA, the World Bank also supported the public water and sanitation services utility company in Lima (Servicio de Agua Potable y Alcantarillado de Lima, SEDAPAL) through technical workshops on conducting risk assessments. Between 2013 and 2016, the World Bank also provided advisory services to the education sector and in particular on school infrastructure as part of the Peru RAS School Infrastructure Baseline (P150434) and the Peru School Infrastructure Programmatic Approach (P152216), which were important to strengthen the dialogue and support the inclusion of disaster risk reduction in school infrastructure investments and interventions. This work informed the dialogue with the ministry on developing a vulnerability reduction program for school infrastructure and the adoption of the first national school infrastructure plan in 2017. Annex 4 includes a summary and additional information on the scope of these technical assistance activities. 51. The World Bank conducted regular implementation support missions (semiannually) to assess progress on the expected results and toward the achievement of the development objective. After the approval of the second Cat DDO, the team carried out joint supervision missions for both Cat DDO operations, with signed Aide-Memoires by the MEF counterpart and ISRs submitted to World Bank management. During these missions, the team also followed up on the technical assistance activities mentioned above to advance the dialogue with key sectors and identify opportunities for further World Bank engagement. During El Niño Costero (which affected the country in March 2017), at the request of the Government, the World Bank provided technical advice and prepared a policy note for the PCM on institutional arrangements for post-disaster rehabilitation and reconstruction; this included institutional models to manage post-disaster reconstruction, international experiences, and lessons learned. 52. The World Bank identified the macroeconomic, political, and social risks for the operation, including the political risks and challenges to governance and institutional capacity in the context of the elections. While government commitment and implementation were satisfactory overall, institutional capacity risks materialized partly during implementation, particularly with MINSA. Weak monitoring of results and limited participation in some of the supervision missions resulted in data gaps and Page 27 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) inconsistencies in reporting progress on the health-related indicators. Incentivizing MINSA to deliver results proved to be challenging. As noted earlier, amid the Odebrecht scandal in 2018 and after the 2017 Niño costero impacts, the president elected in 2016 resigned. The new administration has faced challenges, and changes across government continue. Since 2016, there have been six Ministers of Economy and Finance and eight Ministers of Health; there have also been other cabinet-level and senior management changes. The World Bank has worked closely with the counterparts to maintain communications with the MEF and the sectors participating in this operation to ensure implementation and continuity of the program. V. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES 53. The program outcomes are likely to be sustained, but there are some risks. The Government is currently managing the COVID-19 pandemic and its social, financial, and economic impacts. COVID-19 has brought to the forefront many of the structural problems in Peru, including high levels of inequality, the large informal sector, and decades of underinvestment in key sectors such as health, education, and water and sanitation. The GoP is taking unprecedented measures across the board to address this pandemic, including a financial response package estimated at 12 percent of GDP. It has established a web portal (https://www.gob.pe/coronavirus) to make information available to the public. The key sectors supported by this operation—health and water and sanitation—remain relevant and the services they provide are critical. The resilience agenda is at the forefront globally and DRM is an important topic for countries exposed to natural hazard events. As noted, the Government is in the process of approving the updated SINAGERD policy through Supreme Decree and will need to prepare a new DRM plan in line with the law, as the current DRM plan (PLANAGERD) is set to expire in 2021. Hence, efforts are under way to continue advancing the DRM agenda in the country. During meetings in early 2020, the Government was also exploring a renewal of the earthquake catastrophe bond and new risk transfer coverage for hydrometeorological events as part of the Pacific Alliance for market placement in 2021. Given the economic impact of the pandemic, there is a risk that funding may need to be shifted to key priority areas as the country’s economy recovers. VI. LESSONS AND NEXT PHASE A. Lessons Learned 54. The Cat DDO is a unique instrument that offers countries long-term support to advance policy reforms that strengthen the DRM agenda spanning multiple administrations. Through this Cat DDO and the second Cat DDO, the World Bank accompanied transformative reforms which have put risk reduction in the Government’s agenda and strengthened the institutional and legal framework as well as the financial capacity to respond to disasters. The country has remained committed to move toward a more comprehensive DRM system and achieved key milestones, for example, established the PREVAED budgetary program in 2010, approved SINAGERD (DRM law) in 2011 and PLANAGERD (DRM plan) in 2014, developed the financial protection strategy against disasters in 2016, and established FONDES in 2017. It also brought to table various sectors including health, education, housing, and water and Sanitation sectors to integrate risk reduction in their activities. The Cat DDO enabled the World Bank to be a key partner in working with the GoP for over a decade to push for DRM reforms and monitor their impacts. Page 28 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) 55. The value of a Cat DDO is much more than offering liquidity to respond to a crisis. This operation has helped Peru advance DRM reforms over the past decade, even though no disbursements were made. For middle-income countries like Peru, one of the fastest-growing economies in the region with deep reserves and strong access to financial markets, the Cat DDO instrument has served to advance key reforms and the DRM program. This operation also provided an opportunity to engage the MEF and key sectors which have a role in strengthening vulnerability reduction policies. The Government’s financial protection strategy against disasters includes a range of instruments from which the GoP can choose to respond to disasters; these include the fiscal stabilization fund, FONDES, sovereign bonds, contingent loans (this Cat DDO was the first contingent loan), and catastrophe bonds. 56. Expected results and targets of Cat DDOs should focus on monitoring and measuring progress in policy reforms, with renewals providing opportunities to make the necessary adjustments to the Results Framework. Peru was among the first countries to use this instrument, with a policy matrix and targets that could be implemented, monitored, and achieved within the three-year time frame of the operation. The renewals in 2013 and 2016 pushed the DRM agenda forward through refinements to the targets. In hindsight, it is evident that retrofitting works initiated in hospitals were inappropriate for a DPL, as the focus of DPLs with Cat DDOs is on advancing policy reforms. Other World Bank instruments such as an IPF or a Program-for-Results would have been more appropriate to support the civil works agenda in the health sector. 57. For complex DRM topics such as strengthening the use of risk information and risk reduction and response capacity to inform decision-making, Cat DDOs should focus on results at the subnational levels. Peru has made progress at the national level in defining DRM policies, plans, and programs; however, it will also need to increase capacity at subnational levels to implement risk reduction investments and interventions. While this operation was focused on the national level, the second Cat DDO included the approval of regional DRM plans. However, this did not fully engage the regional and local governments, which are at the forefront of responding to emergencies and recovery efforts. The delays in the reconstruction of affected areas after the 2017 El Niño Costero highlight the challenges that remain at the subnational level. Using the Cat DDO platform to build technical capacity at the subnational level can contribute to operationalizing the national policies and priorities on the frontlines of DRM. Next Phase 58. There is a strong rationale for continuing the World Bank’s DRM engagement in Peru, given the challenges faced due to the COVID-19 pandemic as well as increasing climate change-related hazards. New analytical work from the World Bank (P171251) aims to build evidence and provide policy recommendations to the GoP to increase the resilience of local governments to seismic and hydrometeorological disaster impacts (particularly floods and droughts) in key sectors. A new Cat DDO could support the country in consolidating the reforms introduced under Cat DDOs I and II by including other sectors and the subnational level and leverage lessons from DRM to increase resilience to future pandemics. The World Bank will explore this with the GoP after the 2021 presidential election. Page 29 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) ANNEX 1. RESULTS FRAMEWORK . RESULTS INDICATORS Pillar: Pillar 1. Risk Reduction Policies in Public Investment Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion National Budget includes an Text No budget allocated National Budget The budget allocations were PEN 820 annual specific allocation for includes a specific million (2014), PEN 1,000 million the Budgetary Program for budget allocation for the (2015), PEN 2,088 million (2016), PEN Disaster Vulnerability PREVAED 748 million (2017), and PEN 875 Reduction and Emergency million (2018). For 2019, the budget Response (PREVAED) allocation was PEN 1,349 million. 09-Dec-2010 09-Dec-2019 09-Dec-2019 Comments (achievements against targets): Original: National Budget (2012 and 2013) includes a specific budget allocation for the PREVAED. Baseline (2010): No budget allocated Status (2013): Budget allocations were PEN 54.4 million (2011), PEN 138.9 million (2012), and PEN 708.7 million (2013). Revised (2013, 2016): National Budget (2014, 2015, 2016, 2017, 2018, 2019) includes a specific budget allocation for the PREVAED. Status (2019): The budget allocations were PEN 820 million (2014), PEN 1,000 million (2015), PEN 2,088 million (2016), PEN 748 million (2017), and PEN 875 million (2018). For 2019, the budget allocation was PEN 1,349 million. Page 30 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Pillar: Pillar 2. Vulnerability Reduction Actions in GoP Priority Sectors Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion MINSA hospitals evaluated with Percentage 12.00 90.00 91.00 the Hospital Safety Index 31-Dec-2010 09-Dec-2013 09-Dec-2013 Comments (achievements against targets): Original: 90% of MINSA hospitals evaluated with the Hospital Safety Index Baseline (2010): 12% of hospitals (8 in all) evaluated with HSI Status (2013): 91% (46 units) of hospitals and institutes evaluated This indicator was fully achieved in 2013 and no new target was set during the subsequent renewals. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Retrofitting works have Text 1 study of structural Retrofitting works have 15 structural vulnerability studies initiated in at least five vulnerability in hospitals in initiated in at least five completed and in 2017 MINSA signed hospitals which have finalized 2010 hospitals which have an agreement with CISMID to structural vulnerability studies finalized structural elaborate technical files for vulnerability studies retrofitting works in 5 hospitals in Lima. No retrofitting works have started. 31-Dec-2010 09-Dec-2019 09-Dec-2019 Page 31 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Comments (achievements against targets): Original: At least 20% completion of studies of structural vulnerability of MINSA hospitals that qualify for retrofitting Baseline (2010): One study of structural vulnerability in hospitals in 2010 Status (2013): 14 structural vulnerability studies initiated; this is 30% of MINSA hospitals that qualify for retrofitting. Revised (2013, 2016): Retrofitting works have been initiated in at least five hospitals which have finalized structural vulnerability studies. Status (2019): 15 structural vulnerability studies were completed by 2016. In 2017, MINSA signed an agreement with the Peruvian-Japanese Center for Seismic Research and Disaster Mitigation (Centro Peruano Japonés de Investigaciones Sísmicas y Mitigación de Desastres, CISMID) of the National Engineering University to elaborate technical files for retrofitting works in five hospitals in Lima. In early 2020, the five technical files with final engineering designs were completed by CISMID for the retrofitting works in these hospitals. The five hospitals are included in the public investment system and have been allocated an estimated US$24 million; works are expected to be completed only by March 2022 due to the delays in initiating the works due to the pandemic. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Risk Analysis is included in all Text Not accounted in 2010 All PIPs for new The National Safer Hospitals Policy Public Investment Projects hospitals built after was updated in 2017 and adopted by (PIPs) for new hospitals 2011 include risk Supreme Decree and mandates all analysis during the health facilities to integrate risk formulation phase reduction. To ensure implementation of the policy in 2018 a multi-sectorial commission on safer hospitals was created by Ministerial Decree. In April 2019, it was announced by MINSA that 48 new health infrastructures would be built. Page 32 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) 30-Dec-2010 09-Dec-2019 09-Dec-2019 Comments (achievements against targets): Original and Renewals: All PIPs for new hospitals built after 2011 include risk analysis during the formulation phase Baseline (2010): Not accounted in 2010 Status (2013): The sector has guidelines for the incorporation of risk analysis into new infrastructure projects. No new hospital projects reported. Revised (2013, 2016): Same expected target continued. Status (2019): The National Safer Hospitals Policy was updated in 2017 and adopted by Supreme Decree and mandates all health facilities to integrate risk reduction. To ensure implementation of the policy in 2018 a multi-sectorial commission on safer hospitals was created by Ministerial Decree. In April 2019, it was announced by MINSA that 48 new health infrastructures would be built. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion At least 30 of the EPS have Number 0.00 30.00 41.00 established contingent funds for disaster risk management in 30-Dec-2010 09-Dec-2019 09-Dec-2019 their new pricing structure Comments (achievements against targets): Original: At least four water and sanitation service companies (EPS) adopted standard technical guidelines to incorporate disaster risk management in their management framework developed by SUNASS. Baseline (2010): 0 EPS Page 33 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Status (2013): 5 EPS integrated DRM in their management frameworks. Revised (2013): Same expected target continued, and the National Water and Sanitation Plan 2014–2021 includes disaster risk management considerations. Status (2016): 23 EPS have established contingent funds for DRM. The National Sanitation Plan 2014–2021 was being updated to incorporate the policies of the new government and approval was expected in the next few months. Revised (2016): At least 30 EPS have established contingent funds for disaster risk management in their new pricing structure. Baseline (2016): 23/50 EPS Status (2019): 41 EPS have established contingent funds for DRM. The tariff studies which include these contingent funds are valid for five years, and on average 2% of the annual income of the EPS is allocated for DRM activities. The Water and Sanitation National Plan 2017–2021 (approved DS N° 018-2017- VIVIENDA) includes policy guidelines and indicators to measure actions related to mitigating climate change and disaster risks in water and sanitation services. Pillar: Pillar 3. Financial protection mechanisms against disasters resulting from natural events Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion MEF continues to implement Text None MEF continues to MEF has mobilized a new risk transfer the Financial Protection implement the Financial instrument. In February 2018, Peru Strategy against disasters Protection Strategy joined Chile, Colombia, and Mexico as mobilizing new financial against disasters part of the Pacific Alliance for a instruments to reduce the fiscal mobilizing new financial catastrophe bond issued by the impact of disasters, including instruments World Bank (US$1.36 billion), in insurance for public assets and which Peru has US$200 million in risk insurance for earthquake risks for three years. Peru received a US$60 million payout after the 2019 Page 34 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) earthquake (8 Mw), which was channeled to FONDES. Efforts are under way to develop a risk transfer instrument for hydrometeorological hazards. 30-Dec-2010 09-Dec-2019 09-Dec-2019 Comments (achievements against targets): Original: MEF mobilized a pool of financial instruments to better respond to and reduce the financial impacts of disasters. Baseline (2010): None Status (2013): The Directorate for Disaster Risk Management was created under MEF and contingent lines of credit were under preparation: CAF US$300 million, Japan International Cooperation Agency (JICA) US$300 million, and Inter-American Development Bank (IADB) US$300 million. Revised (2013): MEF has issued the Risk Financing Strategy to be submitted to the PCM under the SINAGERD Framework. Status (2016): MEF’s risk committee approved the Risk Financing Strategy, known as the ‘Financial Protection Strategy against Disasters’ and presented it to the PCM in 2016. < br /> Revised (2016): MEF continues to implement the Financial Protection Strategy against disasters, by mobilizing new financial instruments to reduce the fiscal impact of disasters, including insurance for public assets and risk transfer instruments. Baseline (2016): 0 instruments Status (2019): MEF has mobilized a new risk transfer instrument. In February 2018, Peru joined Chile, Colombia, and Mexico as part of the Pacific Alliance for a catastrophe bond issued by the World Bank (US$1.36 billion), in which Peru has US$200 million in risk insurance for earthquake risks for three years. Peru received a US$60 million payout after the 2019 earthquake (8 Mw), which was channeled to FONDES. Efforts are under way to develop a risk transfer instrument for hydrometeorological hazards. Page 35 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Update the guidelines to Text The National Public Update the guidelines to In 2017, a new public investment include disaster risk Investment System (SNIP) include disaster risk system was approved (Invierte.pe), management policies in public 2008 includes emergency management policies in which required an update to all investment projects public investment processes. The general guide to formulate and evaluate PIPs was approved in September 2019 and includes guidelines to integrate DRM considerations in the PIP formulation cycle. (MEF Directoral Resolution Nº 004-2019-EF/63.01) 30-Dec-2010 09-Dec-2019 09-Dec-2019 Comments (achievements against targets): Original: MEF revised its current framework for implementation of post-disaster public investments. Baseline: SNIP 2008 for emergency project. Status (2013): MEF issued guidelines for reconstruction project profiles under the SNIP framework (Annex 17 - Directorate Resolution 008-2012-EF/63.01). Revised (2013): MEF issued sector guidelines for post-disaster rehabilitation for infrastructure in water and sanitation, health, education sectors. Status (2016): MEF issued guidelines for post-disaster rehabilitation for infrastructure in water and sanitation but decided not to issue specific guidelines for other sectors. Revised (2016): Update the guidelines to include disaster risk management policies in public investment. Status (2019): In 2017, a new public investment system was approved (Invierte.pe), which required an update to all processes. The general guide to formulate and evaluate PIPs was approved in September 2019 and includes guidelines to integrate DRM considerations in the PIP formulation cycle. (MEF Directoral Resolution Nº 004-2019-EF/63.01) Page 36 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) . Page 37 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES A. TASK TEAM MEMBERS Name Role Preparation Supervision/ICR Abigail C. Baca, Diana Marcela Rubiano Vargas Task Team Leader(s) Selene del Rocio La Vera Procurement Specialist(s) Nelly Ikeda Financial Management Specialist Catarina Isabel Portelo Counsel Laisa Daza Obando Team Member Maria Carolina Rogelis Prada Team Member Flavia Dias Braga Polles Team Member . B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY10 21.656 108,085.78 FY11 26.119 143,203.36 Total 47.78 251,289.14 Supervision/ICR FY11 8.147 48,646.00 FY12 13.342 147,996.36 FY13 11.782 118,761.74 FY14 24.158 134,301.09 Page 38 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) FY15 21.608 83,648.61 FY16 12.750 58,716.79 FY17 12.789 72,349.75 FY18 8.519 53,936.41 FY19 7.425 59,659.68 FY20 17.849 185,849.33 Total 138.37 963,865.76 . Page 39 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) ANNEX 3. BORROWER, CO-FINANCIERS, AND OTHER DEVELOPMENT PARTNERS’/STAKEHOLDERS’ COMMENTS The GoP submitted their comments to the ICR in the attached letter a translation and a copy of the Spanish version is presented below, the official letter is also available in the Project Files. Lima, 01 December 2020 OFICIO No. 0624-2020-EF/52.04 Subject: Report on the completion of the implementation and result of the contingent loan under the CAT DDO modality, called “Development Policy Loan for Disaster Risk Management”. Reference: Email from 06.11.20 It is my pleasure to address you regarding the document in reference, by which the International Bank for Reconstruction and Development (IBRD) requests comments to the document called "Implementation Completion Report” for the loan granted by its representatives for US$ 100 million for the Development of Policies for Catastrophes (CAT DDO). In this regard, the aforementioned document indicates that overall, it is considered that the results of the aforementioned operation is satisfactory, indicating that the operation has reached the objective of the Program and most of the expected results. In this regard, this General Directorate coincides with the concept indicated in the preceding paragraph. Notwithstanding this, we request to consider in the report the following wording regarding the result of the evaluation of the fourth indicator31 : “The safer hospitals policy was adopted by Supreme Decree No. 027-2017 the same which approves the National Policy for Safer Hospitals against Disasters action plan 2017-2021, which contains the main guiding instrument for disaster risk management in health facilities. It is also established that this policy is of mandatory application in health facilities of public entities attached to the Ministry of Health”. The expression considers that which was presented by the Ministry of Health during the World Bank supervision mission carried out in March 2019 in line with indicator 4. Without further ado, I take the opportunity to express my highest consideration. Sincerely, DIGITALLY SIGNED DOCUMENT JOSÉ ANDRÉS OLIVARES CANCHARI DIRECTOR GENERAL GENERAL DIRECTORATE OF THE PUBLIC TREASURY 31 Indicator 4: Original and renewals: All PIPs for new hospitals built after 2011 included risk analysis during the formulation phase, corresponding to Pillar 2 - Vulnerability Reduction Actions in Priority Sectors of the Government of Peru. Page 40 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Page 41 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) ANNEX 4. SUPPORTING DOCUMENTS • World Bank. 2010. Disaster Risk Management in Latin America and the Caribbean Region. GFDRR Country Notes Peru. • Banco Mundial. 2020. Informe sobre Resiliencia del Sector Agua y Saneamiento del Perú ante Desastres Naturales. Report for Peru ASA (P171251). • Banco Mundial. 2020. Informe sobre Resiliencia del Sector Salud del Perú ante Desastres Naturales. Report for Peru ASA (P171251). • Miguel Priale. 2020. Análisis de las políticas y estrategias financieras para la Gestión de Riesgo de Desastres en Perú. Report for Peru ASA (P171251). • IEG Review Team. 2019. Peru ICR CAT DDO II. http://documents.worldbank.org/curated/en/218991556933212394/Peru-PE-CAT-DDO-II • Ramírez, I. J., and F. Briones. 2017. “Understanding the El Niño Costero of 2017: The Definition Problem and Challenges of Climate Forecasting and Disaster Responses.” Int J Disaster Risk Sci 8: 489. https://doi.org/10.1007/s13753-017-0151-8 • PLANAGERD Estrategia de Implementación (2018) http://www.pcm.gob.pe/wp- content/uploads/2018/07/TEXTO-ESTRATEGIA-IMPLEMENTACION-PLANAGERD.pdf • MEF Consulta Amigable https://www.mef.gob.pe/es/seguimiento-de-la-ejecucion-presupuestal- consulta-amigable • WHO Peru country page https://www.who.int/workforcealliance/countries/per/en/ • USGS 2007 Earthquake https://earthquake.usgs.gov/earthquakes/eventpage/usp000fjta/impact • CEPLAN Resolucion (2020) https://www.gob.pe/institucion/ceplan/normas-legales/866949- resolucion-n-023-2020-ceplan-pcd • PAHI Hospital Safety Index https://www.paho.org/disasters/index.php?option=com_content&view=article&id=964:safety- index&Itemid=912&lang=en • National Safe Hospital Policy (2017) http://bvs.minsa.gob.pe/local/MINSA/4325.pdf • MINSA https://gestion.pe/peru/politica/contraloria-alerta-al-minsa-hechos-ponen-riesgos-politica- hospitales-seguros-226187-noticia/ • MINSA - PRONIES https://www.gob.pe/pronis; https://www.pronis.gob.pe/institucional/nosotros/ • MINSA https://www.gob.pe/institucion/minsa/noticias/27642-minsa-implementara-85- establecimientos-de-salud-en-todo-el-pais Page 42 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) • SUNASS https://www.sunass.gob.pe/websunass/index.php/noticias/item/1883-42-empresas-de- agua-poseen-191-millones-de-dolares-en-reservas-para-la-gestion-de-riesgos-de-desastres • SUNASS https://www.sunass.gob.pe/websunass/index.php/noticias/item/1976-sunass-supervisa- uso-de-fondos-de-inversion-de-empresas-de-agua-para-garantizar-continuidad-del-servicio-durante- emergencia • INDECI - FONDES https://www.indeci.gob.pe/fondes/que-es-el-fondes/ • Ley 30458 https://www.indeci.gob.pe/wp-content/uploads/2018/09/ley-que-regula-diversas- medidas-para-financiar-la-ejecucion-ley-n-30458-1392949-1.pdf • DS 132-207 Comision Multisectorial del FONDES https://www.indeci.gob.pe/wp- content/uploads/2018/09/DS_Nro_132-2017_Comision_Multisectorial.pdf • INDECI https://www.indeci.gob.pe/wp-content/uploads/2020/03/3RA-DISPOSICI%C3%93N- COMPLEMENTARIA.pdf • INDECI https://www.indeci.gob.pe/wp-content/uploads/2018/09/201707241356501.pdf • Ley 30556 https://busquedas.elperuano.pe/normaslegales/ley-que-aprueba-disposiciones-de- caracter-extraordinario-par-ley-n-30556-1514994-1/ Page 43 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Summary of Technical Assistance Activities Technical Assistance Activities Integration of Disaster Risk Component 1: Integration of Disaster Risk Assessment Products in the SNIP Management Information System. This activity Information in Peru’s supported the integration of disaster risk assessment results developed in the framework of the Spanish Fund for Latin Planning System (P121854) America and the Caribbean (SFLAC) grant in the investment system and public investment management information system. Completion FY11 These results contributed to better information in the risk analysis studies during the formulation processes of PIPs. Component 2: Training of Public Officials in Integrating Risk Analysis Techniques in Project Formulation. The training sessions (one-day to five-day courses) included theoretical and methodological concepts on probabilistic and deterministic disaster risk modeling and the use of disaster risk information in the public investment formulation process. Each course package included an introduction with the specific objectives, structure, and methodology of the course; training materials (documents, presentations, templates, and so on) in both digital and printed formats; an evaluation form from the participants’ perspective; and teaching notes. Training sessions were held in at least 6 regions of Peru to build the capacity of officials working on PIP formulation and specific strategic budgetary interventions in DRM. Component 3: Integration of Disaster Risk Information on the Strategic Budgetary Program. This activity supported the integration of disaster risk information in the Strategic Budgetary Program on Disaster Vulnerability Reduction and Emergency Response. The incorporation of risk analysis in PIPs and the development of vulnerability reduction investments in key strategic sectors in Peru contributed to the definition of specific interventions of the strategic program. The strategic program was focused on financing through the National Budget and vulnerability reduction interventions. The key strategic sectors considered for the three years were health, education, housing, agriculture, and environment. Component 4: Audit. One audit per year. Peru Sovereign Disaster Risk SECO-World Bank Trust Fund for middle-income countries disaster risk financing and insurance TF010712. The purpose of the Financing Project (P128841) proposed project was to increase the capacity of the public and private stakeholders in the financial protection of the state Completion FY15 against natural disasters to meet post-disaster funding needs without compromising fiscal balances and development objectives. More specifically, it aimed at improving the perception and understanding of the economic and fiscal impact of natural disasters and the institutional capacity to devise and implement cost-effective financial strategies for the fiscal protection of the state against natural disasters. Key outputs of the proposed program were threefold: (a) economic and fiscal catastrophe risk profiles of the selected countries; (b) national strategy for the fiscal protection of the state against natural disasters; and (c) prototype catastrophe risk financing instruments (for example, contingent credit facility, catastrophe risk insurance, and catastrophe bond) in selected countries. The key activities to be implemented were as follows: catastrophe risk modeling (advanced), assessment of economic and fiscal impact of natural disasters, review of fiscal management of natural disasters, review of catastrophe risk insurance regulatory framework, and capacity transfer and training on sovereign disaster risk financing strategy. CAPRA program (TF095953) The objective of CAPRA was to enhance the capacity of targeted sectors in the Latin America and the Caribbean region to Completion FY14 develop and mainstream disaster risk information into their programs and policies by providing knowledge products, tools, and services. Building on previous and concurrent regional disaster risk assessment activities, the program focused on targeted public infrastructure sectors, including water and sanitation, transport, and urban and periodically expanded to Page 44 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Technical Assistance Activities other sectors. In Peru, in coordination with the MEF, the World Bank defined two technical assistance activities related to the process of training, qualification, and exercise in probabilistic modeling of disaster risk by using the software tools developed within the CAPRA platform to support the following activities: (1) preparation of the National Seismic Hazard Map of Peru and (2) seismic probabilistic risk assessment of public schools and hospitals in Lima and Callao. The Geophysical Institute of Peru, through its Directorate of Seismology, was the coordinating entity of Activity 1. The Pontifical Catholic University of Peru through its Engineering Department was the unit responsible and leader for the execution of Activity 2. The project had training components in probabilistic modeling of disaster risk using the CAPRA platform. The study was divided into two parts: one corresponding to public school premises and the other to the public hospital infrastructure of the city of Lima. As part of CAPRA, the World Bank also supported the public water and sanitation services utility company SEDAPAL Lima through technical workshops on conducting risk assessments. Peru RAS School This programmatic approach that supported a series of activities which were integrated into a main deliverable was a proposal Infrastructure Baseline for a national school infrastructure plan, which included (a) the mainstreaming DRM in Peru’s education sector and (b) water, (P150434) sanitation, and hygiene aspects. This was supported in collaboration by the World Bank’s Water, Sanitation, and Hygiene team. Peru School Infrastructure The technical and advisory services provided to the Ministry of Education (Ministerio de Educación, MINEDU) were important Programmatic Approach to strengthen the dialogue and support the inclusion of disaster risk reduction into school infrastructure investments and (P152216) interventions. In 2017, MINEDU approved the first National School Infrastructure Plan 2025, a key instrument to guide policy Completion FY17 and investments, which includes a seismic vulnerability reduction program. MINEDU has continued to prioritize investments in school infrastructure and through DIGEIE and PRONIED has worked toward addressing the school infrastructure needs. Building the Resilience of The objective is to build evidence and provide policy recommendations to the GoP to increase the resilience of local Local Governments to governments to seismic and hydrometeorological disaster impacts (particularly floods and droughts) across key sectors. It has Natural Disasters in Peru four components: (a) Development of Risk Profiles. This component will use existing geographic information to produce risk Using a Territorial Approach profiles at the subnational/territorial level to identify hotspots to show potential impacts of seismic and hydrometeorological (P171251) events, focusing on earthquakes and floods (including huaycos). Following techniques highlighted in the Lifelines publications, Completion FY20 it will look at disruption of core infrastructure services caused by disaster impacts such as damage to the transportation, energy, water, and sanitation networks. Such disruptions are harmful to firms, which threatens the productivity and competitiveness of the country, and to household welfare, which jeopardizes social development gains; (b) Institutional Assessments by Sector. This component will undertake institutional assessments per sector to determine key vulnerabilities and capacity issues in qualitative terms and develop recommendations. The analysis will focus on the energy, health, transport, agriculture, water, environment, social protection, and urban sectors and will include an assessment of the governance arrangements and institutional capacities needed for sound DRM. This analysis will identify improvements to social and productive infrastructure as well as align with human and natural capital measures that together offer increased resilience against natural disasters, (c) Subnational Case Studies and Fieldwork to Review Local Institutional Capacity. It will carry out case studies and fieldwork in two different locations to analyze capacity constraints for disaster preparation and response at the local government level, (d) Synthesis Report and Policy Recommendations. The component will develop a synthesis report to integrate findings and policy recommendations from each component. Page 45 of 49 Official Use The World Bank Catastrophe Development Policy Loan DDO (P120860) Policy and Results Matrix Peru Second DPL with Cat DDO (P149831) Objective Prior Actions Results Indicators to 2018 Pillar 1 - Improving efficiency in public resource allocations for DRM Strengthen the financing mechanisms for Prior Action 1: The GoP has taken measures to improve resource (i) Annual budgetary performance the implementation of PLANAGERD at all allocations for Disaster Risk Management by (i) integrating the report of PLANAGERD implementation levels of Government existing DRM budgetary program (BP068) into the new DRM policy under the results-based budgeting framework and (ii) enabling the inclusion of disaster risk information programs into regional development planning [Baseline 2014: None; Target 2018: Legal Evidence: (i) Supreme Decree Nº 034-2014-PCM approving the Annual budgetary performance reports PLANAGERD 2014–2021 (May 12, 2014), (ii) 2015 National Budget published for 2016 and 2017] Law N° 30281 (December 4, 2014) Annex 8: Allocations for the Target value achieved: 2016 and 2017 Budgetary Program (BP068), and (iii) CENEPRED Administrative annual budgetary performance reports Resolution (Resolución Jefatural) Nº 044-2014-CENEPRED/J (May 23, published 2014) approving the guidelines for the incorporation of DRM in the Regional Development Plans (ii) Number of Regional Governments Coordination: Secretariat for Disaster Risk Management of the PCM that have approved regional plans for and CENEPRED the prevention and reduction of disaster risk [Baseline 2014: 0 / Target 2018: 15/25] Target value achieved: 15 regional plans approved Pillar 2 - Strengthening vulnerability reduction policies in infrastructure for education and housing sectors and flood protection measures Increase the capacity of the education Prior Action 2: The GoP integrates seismic risk reduction Share of seismic risk reduction in school sector to implement disaster risk reduction considerations for existing and new infrastructure into the National infrastructure in the Lima Metropolitan policies in school infrastructure School Infrastructure Program (PRONIED) Area as a result of PRONIED implementation Legal Evidence: Supreme Decree N° 004-2014-MINEDU establishing the National School Infrastructure Program (PRONIED) [Baseline: Risk Indicator (RI) = 20.3‰ for a portfolio of 1,969 school facilities in Coordination: MINEDU Lima Metropolitan Area); Target 2018: 10% reduction] Target value achieved: 10% seismic risk reduction Page 46 of 49 The World Bank Catastrophe Development Policy Loan DDO (P120860) Objective Prior Actions Results Indicators to 2018 Increase the capacity of the housing sector Prior Action 3: The GoP has established the financing mechanism for Share of eligible low-income households to support and facilitate the seismic a pilot program to reduce seismic vulnerability of low income housing covered by the Grant for Protection of vulnerability reduction of the low-income Vulnerable Housing to Seismic Risk housing Legal Evidence: (i) Law 30191 - Prevention, Mitigation and Attention program to Disasters (May 9, 2014) and (ii) Ministerial Resolution Nº 172-2014- Vivienda approving the operational rules for the ‘Grant for the [Baseline 2014: 0; Target 2018: 80% of Protection of Vulnerable Housing to Seismic Risk’ 8,303 eligible households] Coordination: MVCS Target value achieved: 65% (4,235 grants) of 6,512 eligible household Increase the institutional capacity to define Prior Action 4: The Government of Peru has taken measures to Number of studies for flood risk and implement flood protection policies improve the design of flood protection programs at national and prevention and mitigation in subnational level by (i) expanding the mandate of the National Water watersheds approved Authority to conduct hydraulic studies that support the design of regional - local flood protection programs and (ii) defining specific [Baseline 2014: 0; Target 2018: 4] minimum standards for the preparation of pre-investment studies for Target value achieved: 5 studies flood protection public investment projects under the SNIP approved framework Legal Evidence: (i) Supreme Decree Nº 006-2014-MINAGRI (May 23, 2014) and (ii) MEF Directorial Resolution Nº 006-2014-EF/63.01 (September 3, 2014) Coordination: National Water Authority - Ministry of Agriculture and Irrigation (Ministerio de Agricultura y Riego, MINAGRI) Pillar 3 - Increasing the Government’s capacity for post-disaster recovery and reconstruction Strengthen the institutional capacity to Prior Action 5: The GoP has taken measures to improve post-disaster (i) Number of National Government effectively plan and implement post- recovery and reconstruction processes by (i) establishing the sectors that approve sector guidelines disaster rehabilitation and reconstruction regulatory and institutional framework for reconstruction and (ii) for the post-disaster reconstruction processes and guarantee the operational defining MEF’s internal coordination mechanism to finance process continuity of the Government rehabilitation and reconstruction processes [Baseline 2014: None; Target 2018: 6] Legal Evidence: (i) Supreme Decree Nº 034-2014-PCM approving the Target value achieved: 6 sectors with PLANAGERD 2014–2021 and (ii) MEF Ministerial Resolution Nº 034- approved guidelines 2015-EF/10 (January 22, 2015) that defines internal coordination mechanism to finance rehabilitation and reconstruction processes Page 47 of 49 The World Bank Catastrophe Development Policy Loan DDO (P120860) Objective Prior Actions Results Indicators to 2018 Coordination: CENEPRED, Secretariat for Disaster Risk Management - (ii) Number of National Government PCM and MEF agencies that have operational continuity plans approved against disasters [Baseline 2014: 1; Target 2018:37] Target value achieved: 20 government agencies with approved plans (iii) Policies and procedures for financing post-disaster rehabilitation and reconstruction processes [Baseline 2014: None; Target 2018: An Operation Manual approved] Target value achieved: Procedures approved through DS 132-2017-EF which established the multisectoral commission for FONDES which includes an annex with procedures to manage resources for recovery and reconstruction Page 48 of 49 The World Bank Catastrophe Development Policy Loan DDO (P120860) MAP Page 49 of 49