The World Bank Rural Corridors and Biodiversity (P114294) REPORT NO.: RES37519 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF RURAL CORRIDORS AND BIODIVERSITY APPROVED ON APRIL 7, 2015 TO ARGENTINE REPUBLIC ENVIRONMENT, NATURAL RESOURCES & THE BLUE ECONOMY LATIN AMERICA AND CARIBBEAN Regional Vice President: Carlos Felipe Jaramillo Country Director: Jordan Z. Schwartz Regional Director: Anna Wellenstein Practice Manager: Valerie Hickey Task Team Leader(s): Pablo Francisco Herrera The World Bank Rural Corridors and Biodiversity (P114294) ABBREVIATIONS AND ACRONYMS APN Argentina’s National Parks Administration (Administración de Parques Nacionales) COFEMA Federal Council on the Environment IPP Indigenous Peoples Plan FY Fiscal Year GDP Gross Domestic Product GEF Global Environmental Facility GoA Government of Argentina PDO Project Development Objective/Global Environmental Objective PIU Project Implementation Unit SIFAP Federal System of Protected Areas WB World Bank BASIC DATA Product Information Project ID Financing Instrument P114294 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 07-Apr-2015 30-Nov-2020 Organizations Borrower Responsible Agency Dirección Nacional de Financiamiento con Organismos APN - Administracion de Parques Nacionales Internacionales de Crédito Project Development Objective (PDO) Original PDO The objective of the project is to increase the protection of vulnerable natural areas and conserve biological diversity within the Gran Chaco Ecosystem and the Patagonian Steppe and Coastal-Marine Ecosystems and, implement measures to enhance biodiversity resilience to climate change and protect forest carbon assets. The World Bank Rural Corridors and Biodiversity (P114294) OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A0233 26-May-2015 12-Jun-2015 09-Nov-2015 30-Nov-2020 6.29 4.42 1.87 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The Project Development Objective (PDO), which is identical to the Global Environmental Objective, is to increase the protection of vulnerable natural areas and conserve biological diversity within the Gran Chaco ecosystem and the Patagonian steppe and coastal-marine ecosystems, and implement measures to enhance biodiversity resilience to climate change and protect forest carbon assets. The PDO and project scope remain highly relevant, particularly considering the current country and sectoral context. 2. The COVID-19 outbreak has hit the Argentine economy at a moment of already significant macroeconomic instability and a highly uncertain outlook leading to additional pressures on natural resources. Macroeconomic volatility intensified since 2018, triggering inflation and a decline in real wages of 7.5 percent in 2019. The GDP fell 2.1 percent in 2019 and further contracted 4.8 percent in the first quarter of 2020, worsened by the COVID-19 pandemic since March 2020. According to the latest official estimates, one in three Argentines is poor, and one in twelve is extremely poor. Unemployment rates have increased from 11.9 percent in the second quarter of 2019 to 13.2 percent in the same period of 2020. In this context, Argentina is even more dependent on its valuable natural resources to produce revenues from the export of agricultural commodities. 3. The expansion and intensification of agriculture and commercial livestock pose higher pressure on the landscapes that provide vital ecosystem services and sustain the livelihoods of the poorest rural communities. Although since 2014 deforestation in Argentina diminished around 50 percent of the average annual deforestation before the Forest Law enacted in 2007, still 3.5 million hectares of forests were lost between 2007 and 2018. Out of which, 87 percent occurred in the Gran Chaco. Additionally, only in 2020, almost 770 thousand hectares of rural lands have been affected by fires caused mainly by humans, out of which around 60 percent affected the northern provinces. For these reasons, land use planning (e.g. through the development of biodiversity corridors) and the promotion of better productive management practices in the rural landscapes are crucial to respond to the country’s short-term needs, while still ensuring the viability of global public goods such as biodiversity and the conservation of forest carbon stocks. 4. Project implementation is Moderately Satisfactory. Initial implementation delays and the findings of a mid-term review led to a project restructuring in September 2018, after which the project performance and its progress towards the The World Bank Rural Corridors and Biodiversity (P114294) achievement of the PDO gradually improved. Project implementation is still deemed Moderately Satisfactory primarily due to minor issues related to the Project monitoring and evaluation, and deficiencies in the implementation of some social safeguards-related measures: i.e. the development of an indigenous peoples plan for the rural corridors. 5. However, the PDO would not be fully achieved by its current closing date. The likelihood that the PDO and some intermediate results will be fully achieved before the current project closing date (November 30, 2020) has recently decreased and the PDO rating has been downgraded accordingly. This is mainly due to implementation delays caused by issues beyond the Project Implementation Unit (PIU)'s control. The Project went through two management changes at the provincial and national level; and lost key personnel in the PIU between 2018 and 2019. More recently, the COVID-19 pandemic led to mandatory and preventive social isolation measures in Argentina, which hampered the implementation of some Project activities as limitations have been imposed to access some of the sites where some works were being built; and face to face interaction with stakeholders (such as the beneficiary rural communities) has been discouraged. Administrative procedures in the public sector have also faced additional challenges and delays. Those aspects led to the slowdown in the execution of the planned activities; so, the issues mentioned are being addressed by strengthening the PIU with the appropriate profiles, and through the Project restructuring proposed in this document. 6. Despite the circumstances, the PIU has made noteworthy efforts and showed commitment to move forward with Project implementation, achieving significant progress in some activities and their related results where circumstances in the field allowed that. Two out of four PDO indicators have already been achieved, and the other two have experienced significant progress. PDO indicator #1 “Areas brought under enhanced biodiversity protection” has reached a value of 681.641 ha (77.3 percent of final goal achieved). PDO indicator #2 “People in targeted forest and adjacent communities with increased monetary or non-monetary benefits from forests (number)” throws 541 (45 percent of final goal achieved). PDO indicator #3 has been fully achieved, as the Project has elaborated a Common Action Plan for 2020-2022, which has been submitted to the Federal Council on the Environment (COFEMA) for review and endorsement. The target for PDO indicator #4 has already been exceeded with almost 10.7 million tons of Carbon (102.7 percent) protected in Chaco forests: 6.2 million tons through the creation and improvement of the management of Parque Nacional El Impenetrable; and 4.5 million tons through sustainable and demonstrative use subprojects. 7. The PIU has been recently strengthened to speed up project execution and disbursements. Individual consultants were hired to supplement the PIU’s capacities, such as a Sub-Coordinator with technical profile, a Procurement Specialist and a Monitoring and Evaluation Specialist. 8. To date, the Project has disbursed US$4.42M (70 percent of the total grant proceeds). 75 percent of the grant proceeds has already been executed or is committed through signed contracts. 9. The Project has not experienced any procurement or financial management issues in recent times, and the Project is in compliance with its environmental and social safeguards instruments. There are no pending audit reports and those submitted to the Bank were deemed satisfactory. The Grant’s audited financial statements as of December 31, 2019 have been submitted and found satisfactory for the Bank. The Project is still working on the development of an Indigenous Peoples Plan (IPP) for the rural corridors, and despite some delays, the PIU is preparing the consultation of such document with indigenous people’s representatives in the context of the COVID-19 restrictions. B. Rationale for Restructuring 10. On October 1st, the Government submitted a formal request to extend and make some minor adjustments to the Project. The proposed Project restructuring does not entail any changes to (i) the Grant and Project objectives, (ii) the scope or nature of project activities, (iii) the safeguards category, (iv) the implementation arrangements, (v) reallocation The World Bank Rural Corridors and Biodiversity (P114294) among disbursement categories. Therefore, it will not require GEF approval. This will be third Project Restructuring; the first, dated August 28, 2015, only involved the editorial corrections of the Trust Fund code in the Grant Agreement. The second, dated September 30, 2018, followed the Project mid-term review and adjusted the design to refocus implementation on the achievement of results. 11. The restructuring complies with the requirements of the World Bank’s Operational Policy OP/BP 10.00 on Investment Project Financing in that (a) the PDO continues to be achievable; (b) the Bank and the Recipient agree on actions that will be undertaken by the Recipient to improve Project performance and achieve the PDO; and (c) neither the grant in particular, nor the country (Argentina) in general, is subject to an ongoing suspension of disbursements. II. DESCRIPTION OF PROPOSED CHANGES 12. The changes introduced by the proposed restructuring include: (i) extension of closing date; (ii) adjustment of disbursement schedule; and (iii) minor changes to the results framework. The Overall Risk Rating (Systematic Operations Risk-Rating Tool) will also be changed to reflect recent developments and overall situation of Argentina. 13. Changes in the Closing Date. The Closing Date of the Grant will be extended by nine (9) months from November 30, 2020 to August 31, 2021. 14. Change in Disbursement Estimates and Implementation Schedule. The Disbursement Estimates presented in this restructuring paper were revised and updated based on a detailed planning conducted by the PIU for the remaining Project implementation. A detailed timeline has been agreed upon for completion of the project implementation and for full Grant disbursement by the new proposed Closing Date. 15. Changes in the Results Framework. Proposed changes include modifications in the wording, scope and expected intermediate and final target values aiming to strengthen the monitoring and evaluation of the results indicators framework. Also, after the revision of the theory of change, one of the indicators (“People in targeted forest and adjacent communities with increased monetary or non-monetary benefits from forests”) was downgraded from PDO indicator to Intermediate Results Indicator. It was identified that the link of this indicator to the PDOs was not straightforward, although it is a significant indicator that is monitored at the corporate level and important for the portfolio of projects in Argentina. The restructuring involves the following specific changes in the Results Framework: The World Bank Rural Corridors and Biodiversity (P114294) Results Framework – Proposed Changes PDO (no changes). The objective of the project is to increase the protection of vulnerable natural areas and conserve biological diversity within the Gran Chaco Ecosystem and the Patagonian Steppe and Coastal-Marine Ecosystems and, implement measures to enhance biodiversity resilience to climate change and protect forest carbon assets. Original Indicators Proposed New Indicator Comments Change (If New or Revised) (Justification of Proposed Change) PDO Indicators 1. Areas brought under enhanced Revised 1. Areas brought under enhanced Replaced “protection” for “conservation”; biodiversity protection (ha) biodiversity conservation (ha) which is a broader and more inclusive concept (defined in the Project Operational Manual). 2. People in targeted forest and Dropped It was identified that the link of this adjacent communities with indicator to the PDOs is not increased monetary or non- straightforward, so it would be labeled as monetary benefits from forests (#) an intermediate indicator. New 5. Land area under sustainable Added since it is a relevant Corporate landscape management practices Results Indicator to which the Project (ha) contributes. New Area benefiting from biodiversity Created to reflect Project contribution to resilience measures (ha) PDO 3. Intermediate Results Indicators Component 1: Core Protected Areas 1.1. Increase of forests under Revised 1.1. Increase of forests under Changed to include only protection improved forms of protection and improved forms of protection (removed conservation) conservation (ha) (ha) 1.2. Increase of marine Revised 1.2. Increase of marine Changed to include only protection environments under improved environments under improved (removed conservation) forms of protection and forms of protection conservation Component 4: Management and M&E New People in targeted forest and This was originally a PDO indicator, but adjacent communities with now used as an intermediate indicator increased monetary or non- instead monetary benefits from forests (number)* Change in Overall Risk Rating (Systematic Operations Risk-Rating Tool) 16. The Macroeconomic Risk rating has been upgraded to High, given the current economic environment in Argentina, where there are many uncertainties and significant macroeconomic imbalances. An eventual devaluation of the local currency could adversely affect project implementation by bringing distortions to the markets where the Project The World Bank Rural Corridors and Biodiversity (P114294) looks for the goods and services it procures, and by making the financial projections and budget management more challenging. To mitigate this risk the World Bank will provide additional financial management support and will more closely monitor disbursements. 17. The “Institutional Capacity for Implementation and Sustainability” risk category has been downgraded to Moderate, given the strengthened capacity of the PIU resulting from the accumulated implementation experience, and the recent hiring of new staff: sub-coordinator, procurement specialist and a monitoring and evaluation specialist. 18. Other Risks are rated as Substantial. The current COVID-19 pandemic poses a substantial risk to the development of the works in the field. To mitigate this risk, the PIU and the World Bank will provide additional monitoring support and will more closely monitor the pandemic situation and its restrictions in the Chaco, Santiago del Estero, Chubut and Santa Cruz provinces, where the works are being carried out. 19. The overall risk to the achievement of the development objective and of any unintended consequences has been downgraded to Moderate. Considering the accumulated progress in the PDO indicator, the Project implementation and the additional time that would be granted to conclude it, it is considered unlikely that the other category risks assessed seriously endanger the achievement of the key results and objectives. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Loan Closing Date(s) ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ The World Bank Rural Corridors and Biodiversity (P114294) EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A0233 Effective 30-Nov-2020 31-Aug-2021 31-Dec-2021 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2015 0.00 0.00 2016 0.00 0.00 2017 0.00 708,597.76 2018 1,274,240.17 565,642.41 2019 2,567,613.31 1,379,818.48 2020 2,258,134.31 1,161,289.07 The World Bank Rural Corridors and Biodiversity (P114294) 2021 189,042.21 2,473,682.28 2022 0.00 0.00 OPS_DETAILEDCHANGES_SORT_TABLE SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance  Moderate  Moderate Macroeconomic  Moderate  High Sector Strategies and Policies  Moderate  Moderate Technical Design of Project or Program  Moderate  Moderate Institutional Capacity for Implementation and  Substantial  Moderate Sustainability Fiduciary  Moderate  Moderate Environment and Social  Substantial  Moderate Stakeholders  Substantial  Substantial Other  Substantial Overall  Substantial  Moderate . The World Bank Rural Corridors and Biodiversity (P114294) . Results framework COUNTRY: Argentina Rural Corridors and Biodiversity Project Development Objectives(s) The objective of the project is to increase the protection of vulnerable natural areas and conserve biological diversity within the Gran Chaco Ecosystem and the Patagonian Steppe and Coastal-Marine Ecosystems and, implement measures to enhance biodiversity resilience to climate change and protect forest carbon assets. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 To increase the protection of vulnerable natural areas and conserve biological diversity within the Areas brought under enhanced biodiversity conservation (ha) 0.00 67,000.00 260,903.00 379,021.00 655,624.00 (Hectare(Ha)) Rationale: Action: This indicator has been Replaced protection for conservation. Revised People in forest&adjacent community with monetary/non- 0.00 250.00 600.00 1,200.00 monetary benefit from forest (Number) Rationale: Action: This indicator has been It was identified that the link of this indicator to the PDOs is not straightforward, so it would be labeled as an intermediate indicator. Marked for Deletion The World Bank Rural Corridors and Biodiversity (P114294) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 People in forest and adjacent community with benefits from 0.00 600.00 forest-female (Number) Action: This indicator has been Marked for Deletion People in forest&adj. commy with benefit from forest-Ethnic 0.00 600.00 minority/indigenous (Number) Action: This indicator has been Marked for Deletion Land area under sustainable landscape management practices 0.00 36,000.00 83,675.00 226,376.00 (CRI, Hectare(Ha)) Rationale: Action: This indicator is New Added since it is a Corporate Results Indicator To implement measures to enhance biodiversity resilience to climate change Common Action Plan for corridors conservation between Federal and No No Yes Yes Provincial Authorities Adopted (Yes/No) Area benefiting from biodiversity resilience measures (ha) 0.00 5,513.00 (Hectare(Ha)) Rationale: Action: This indicator is New Created to reflect Project contribution to PDO 3 The World Bank Rural Corridors and Biodiversity (P114294) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 To protect forest carbon assets Tons C eq. (aboveground) protected in Chaco forests 0.00 10,400,000.00 (Number) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 Component 1: Core Protected Areas 1.1. Increase of forests under improved 0.00 67,000.00 128,000.00 128,000.00 forms of protection (ha) (Hectare(Ha)) Rationale: Action: This indicator has been Revised Changed to include only protection (removed conservation) 1.2 Increase of marine environments under improved forms of protection 0.00 52,811.00 52,811.00 106,422.00 (Hectare(Ha)) Rationale: Action: This indicator has been Revised Changed to include only protection (removed conservation) 1.4 Updated or Prepared Protected Areas- Management Plans that include 0.00 2.00 8.00 9.00 climate change mitigation and adaptation measures (Number) The World Bank Rural Corridors and Biodiversity (P114294) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 Component 2: Conservation Corridors in the Gran Chaco and the Patagonian Steppe and Coastal-Marine E 2.1 Framework for the implementation of Conservation Corridors endorsed by the No Yes Yes Yes Chaco and/or Santiago del Estero Provinces (Yes/No) 2.2 Rural Corridors Strategic Plans 0.00 2.00 3.00 3.00 prepared/updated (Number) 2.3 Proposal to expand conservation corridors to at least one new province of No Yes Yes the Chaco region developed (Yes/No) 2.4 New areas outside protected areas managed as biodiversity-friendly 0.00 36,000.00 83,675.00 226,376.00 (Hectare(Ha)) 2.5 Demonstration subprojects 0.00 3.00 completed (Number) 2.6 Sustainable Development Subprojects 0.00 8.00 17.00 Completed (Number) Component 3: Collaboration for Corridors’ Conservation 3.1 Provinces from the Project area that adhere to a unified and functional 0.00 10.00 18.00 Information system related to conservation corridors (Number) 3.8 Analytical and knowledge products that contribute to strategic planning and 0.00 0.00 1.00 3.00 the promotion of conservation corridors within the framework of SIFAP (Number) The World Bank Rural Corridors and Biodiversity (P114294) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3.9 Protected areas staff trained by the Project on protected areas management 0.00 200.00 200.00 planning and effectiveness evaluation (Number) Component 4: Management, Monitoring and Evaluation 4.1. Direct project beneficiaries 0.00 280.00 600.00 930.00 (number), of which female (Number) 4.4 Participants in consultation activities 0.00 300.00 during project implementation (Number) 4.5 Beneficiaries that feel project investments reflected their needs 0.00 40.00 40.00 70.00 (Percentage) 4.6 People in forest&adjacent community with monetary/non-monetary benefit 0.00 250.00 600.00 1,200.00 from forest (Number) Rationale: Action: This indicator is New This was originally a PDO indicator, but now used as an intermediate indicator instead. People in forest&adjacent community with benefits from forest-female 0.00 600.00 (Number) Action: This indicator is New People in forest&adjacent community with benefit from forest - Ethnic 0.00 600.00 minority/indigenous (Number) Action: This indicator is New The World Bank Rural Corridors and Biodiversity (P114294) IO Table SPACE