The World Bank Honduras Rural Competitiveness Project (P101209) REPORT NO.: RES42646 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF HONDURAS RURAL COMPETITIVENESS PROJECT APPROVED ON JUNE 17, 2008 TO REPUBLIC OF HONDURAS AGRICULTURE AND FOOD LATIN AMERICA AND CARIBBEAN Regional Vice President: Carlos Felipe Jaramillo Country Director: Andrea C. Guedes Regional Director: Anna Wellenstein Practice Manager/Manager: Preeti S. Ahuja Task Team Leader(s): Augusto Garcia, Ramon Ernesto Arias Moncada The World Bank Honduras Rural Competitiveness Project (P101209) I. BASIC DATA Product Information Project ID Financing Instrument P101209 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 17-Jun-2008 30-Nov-2020 Organizations Borrower Responsible Agency Secretaria de Agricultura y Ganaderia,Honduran Strategic Republic of Honduras Investment Office (INVEST-H) Project Development Objective (PDO) Original PDO The Project Development Objective of COMRURAL is to contribute to increased productivity and competitiveness among organized ruralsmall-scale producers through their participation in productive alliances. Current PDO The revised PDO is (a) to contribute to increased productivity and competitiveness among organized rural small-scale producers through their participation in productive alliances and (b) to enable the Government to respond promptly and effectively to an eligible emergency. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-60460 18-May-2017 14-Nov-2017 14-Aug-2018 30-Nov-2020 25.00 19.05 5.95 IDA-44650 17-Jun-2008 17-Sep-2008 28-May-2010 31-Dec-2018 22.95 20.90 0 The World Bank Honduras Rural Competitiveness Project (P101209) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES A. Project Status 1. The implementation of the Honduras Additional Financing (AF) for the Rural Competitiveness Project (COMRURAL; IDA-6046) is well underway. Progress towards the achievement of the Project Development Objective (PDO) and Implementation Progress were both rated as Satisfactory in the Implementation Status and Results Report dated June 26, 2020. Most PDO-level indicators -considering the cumulative investments of the original Credit (IDA 4465) and the AF- are being achieved or surpassed as 100 percent of Rural Producer Organizations (RPO) are working under an alliance approach 24 months after first disbursement (surpassing the end target of 80 percent), and 100 percent of RPOs are without a loan in arrears (surpassing the end target of 95 percent); while indicators for the increase in the value of gross sales of RPOs and increase in land and labor productivity by rural producers are achievable and expected to be assessed by the end of the Project. Similarly, most intermediate results indicators are being achieved or surpassed: (i) 259 business profiles have been prepared by RPOs, surpassing the end target of 235; (ii) 158 productive alliances have been under implementation, approaching the end target of 190; (iii) 11,678 direct project beneficiaries, surpassing the end target of 10,780; and (iv) 74 percent of targeted clients are satisfied with agricultural services, approaching the end target of 80 percent of targeted clients. B. Rationale for Restructuring 2. Since March 2019, the COVID-19 emergency and related measures implemented by the Government of Honduras (GoHN) have impacted the pace or Project implementation, delaying and jeopardizing the completion of the last batch of 35 business plans. The Project is receiving close implementation support from the Ministry of Agriculture and the Ministry of Finance (SEFIN) to accelerate the investments and support the economic reactivation. The GoHN has included COMRURAL in the country’s strategy for food security and reactivation of the agricultural sector amidst the COVID-19 emergency. The impact of the COVID-19 emergency on the Project is now heightened by the effect of the tropical storm Eta that hit Honduras in early November 2020. 3. The entire US$12.5 million available to co-finance business plans with the AF has been committed to 35 business plans that are well-advanced in implementation by 35 RPOs and require a few more months to be completed. For these business plans, the Project has leveraged US$10.4 million in private sector co-financing, and approximately US$5.0 million in beneficiary contributions, for a total investment of US$27.9 million. Additional COVID-19 biosecurity protocols and investments have been implemented for these business plans to continue to benefit 4,478 families (26 percent are women beneficiaries; 875 families belong to Indigenous Lenca and Afro-descendant communities). 4. To date, cumulative disbursements of COMRURAL total US$39.96 million, including US$19.05 million from the AF (76 percent of available funds). The current balance of the AF (US$5.95 million) will be fully executed as follows: (i) between November and December 2020, disburse US$2.2 million to procure bio sanitary supplies to respond to the health emergency caused by COVID-19, under the Immediate Response Mechanism (IRM) component that was activated in June 17, 2020; (ii) US$1.3 million for the provision of technical assistance to RPOs and for project The World Bank Honduras Rural Competitiveness Project (P101209) management; and (iii) discussions are underway on possibly allocating the remaining undisbursed balance to the IRM in response to the COVID-19 and Eta emergencies. C. Request to Extend the Project's Closing Date 5. This restructuring seeks to extend the closing date of the COMRURAL Project (IDA-6046) for seven months, from November 30, 2020 to June 30, 2021. The dates of indicators will be revised to June 30, 2021.On June 11, 2020 SEFIN requested an extension of the closing date of COMRURAL to complete implementation of the Project now that the confinement measures to prevent the spread of COVID-19 are being eased. Following a joint review of the request, SEFIN, the implementing agency (INVEST-H), and the World Bank are agreeable to a June 30, 2021 closing date extension that is based on the following action plan: (i) complete implementation of 35 business plans (US$12.5 million in ongoing matching grants), adjusting the Project Operations Manual to streamline business plan implementation within INVEST-H and RPOs, without swapping with COMRURAL II Project financing; (ii) full implementation of the ongoing prioritized activities for institutional strengthening; (iii) discussions are underway on possibly activating the IRM and allocate additional funding from the undisbursed balance to respond to COVID-19 and Eta emergencies. A future restructuring is expected to reflect the previously approved IRM allocation (dated June 17, 2020). 6. The Task Team confirms that (i) the PDO is achievable within the proposed extension of the closing date; (ii) the performance of the Recipient continues to be satisfactory; (iii) there are no outstanding audit reports or audit reports which are not satisfactory to the Bank; (iv) this is the first extension of the closing date of the COMRURAL Additional Financing Credit (seven months cumulatively); (v) the Bank and the Recipient agree on actions that will be undertaken by the Recipient to complete the Project; and (vi) neither this Credit nor any other operations in the country are currently subject to suspension of disbursements. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 31-Dec-2016, 29-Sep- IDA-44650 Closed 30-Nov-2015 2017, 31-Dec-2018, 18-Jun-2019 IDA-60460 Effective 30-Nov-2020 30-Jun-2021 30-Oct-2021 The World Bank Honduras Rural Competitiveness Project (P101209)