$ Report No: RES00232 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Integrated Forest Landscape Management Project in Atalaya, Ucayali APPROVED ON 04-Jan-2019 TO Ministry of Economy and Finance Environment, Natural Resources & the Blue Economy Latin America And Caribbean Regional Vice President: Carlos Felipe Jaramillo Regional Director: Benoit Bosquet Country Director: Issam A. Abousleiman Practice Manager: Erwin De Nys Task Team Leader(s): Mizushi Satoh The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) ABBREVIATIONS AND ACRONYMS CIF Climate Investment Funds FIP Forest Investment Program GoP Government of Peru IDB Inter-American Development Bank IPF Investment Project Financing M&E Monitoring and Evaluation MINAM Ministry of the Environment (Spanish acronym) PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit PNCBMCC National Program for Forest Conservation for Climate Change Mitigation (Spanish acronym) SUNARP National Superintendence of Public Registries (Spanish acronym) WB World Bank The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name Integrated Forest Landscape Management Project in P163023 Atalaya, Ucayali Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Peru Approval Date Current Closing Date 04-Jan-2019 31-Aug-2024 Original EA Category Partial Assessment (B) (PAD Approval Package-04 Jan 2019) Organizations Borrower Responsible Agency Ministry of Economy and Finance Ministry of Environment and Natural Resources @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective The project objective is to strengthen sustainable management and use of forest landscapes in the Raimondi, Sepahua and Tahuanía districts of the Atalaya province. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Balance % Disbursed IBRD -- -- -- 0 i The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) IDA -- -- -- 0 Grants 12.20 9.44 2.76 77.39 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. PROJECT STATUS 1. The Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) was approved by the World Bank (WB) Board of Directors on January 24, 2019, and became effective on August 31, 2019. Implemented by the Ministry of Environment (MINAM, Spanish acronym), the project is a key component of the Forest Investment Program (FIP) financed by the Climate Investment Funds (CIF). Peru is one of 12 countries selected to receive support under the FIP to develop and implement strategies aimed at addressing the drivers of deforestation and forest degradation. The Project Development Objective (PDO) is to strengthen sustainable management and use of forest landscapes in the Raimondi, Sepahua, and Tahuanía districts of the Atalaya province. The FIP-Peru has been co-implemented with the Inter-American Development Bank (IDB), with each institution focusing on different geographic areas within the Peruvian Amazon to maximize impact through a complementary approach. 2. This restructuring paper seeks a Level 2 restructuring of the project, involving the following changes: (i) extension of the closing date; (ii) revisions of the results framework (i.e., clarification of definitions); (iii) implementation schedule; and (iv) schedule of the disbursement estimates. The restructuring is undertaken in fulfillment of the request from the Government of Peru (GoP) dated August 7, 2024. These changes are expected to improve the degree of achievement of the Project Development Objective (PDO) within the remaining life of the project. 3. The project is financed by a combination of a US$ 5.8 million grant and a US$ 6.4 million loan provided by CIF, totaling US$ 12.2 million. The total disbursement to date of US$ 9.45 million amounts to 65.0% of the grant and 88.8% of the loan portions respectively. Notwithstanding delays experienced in project implementation (see below), MINAM has made substantial progress over the last months, increasing the disbursement rate as well as completing the previously agreed conditions for the project restructuring. The following provides a summary of the progress made under each project component. 4. Status of Component 1: Institutional Strengthening for Forest Conservation (US$2.27 million FIP Grant financing). This component is divided into two subcomponents focused on strengthening institutional capacity and enabling sustainable forest management practices. Subcomponent 1.1 (Provision of Land Use Rights in Forest Landscapes and Promoting Community-Level Land-Use Planning) has successfully achieved its primary PDO indicator, surpassing the target of granting usage or ownership rights to 23 indigenous communities. By the end of July 2024, a total of 24 land titles for native communities have been granted and officially registered in the public registry (SUNARP).1 These titles are a foundational element in securing long-term sustainable forest management and empowering indigenous communities to effectively manage their forest resources. Under Subcomponent 1.2 (Strengthening Enabling Conditions for Forest Management), significant strides have been made in developing the necessary capacities and creating an enabling environment for effective community forest management. The project has facilitated the creation of 33 Life Plans, which serve as strategic frameworks for community land use and forest management.2 The reactivation of environmental committees has further strengthened local governance and environmental oversight. The establishment and operationalization of community forest monitoring committees have provided crucial support to local communities in their efforts to manage and protect their forest resources. 1 Note that this is still subject to final verification. 2 Likewise, the life plans require final verification. Page 1 The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) 5. Component 2: Strengthening Sustainable Forest Landscape Management and Use (US$6.40 million FIP loan and US$1.64 million FIP grant financing). The success of this component is closely tied to the preparation and effective implementation of Community Business Plans, which are essential for promoting sustainable forest and land management practices and fostering small-scale businesses. These business plans are instrumental in achieving the project's results indicators and ensuring the disbursement of funds for on-the-ground activities. However, the preparation of these business plans has been one of the most delayed activities in the project, creating a significant bottleneck in the progress toward key outcomes. This delay has impacted the overall pace of achieving the project's indicators. Despite these challenges, the Project Implementation Unit (PIU) has made substantial progress in recent months. By the end of July 2024, a total of 13 business plans had been approved by the WB task team, surpassing the previously agreed key condition for project extension, which required the approval of 8 business plans. Additionally, the preparation of the remaining 38 business plans is well advanced, positioning the project for continued progress and successful implementation in the upcoming period. 6. Component 3: Project Management, Monitoring and Evaluation (US$1.89 FIP Grant financing). Under this component, major milestones were recently met, including (a) approval of the revised joint WB-IDB Operations Manual (June 4, 2024), and (b) approval of the incentives implementation manual (July 3, 2024), both of which were key conditions for project extension. Furthermore, the capacity of the PIU has been strengthened over the past months, including the hiring of a new PIU coordinator, an M&E specialist, financial management specialists, and several field-based staff. 7. Project Ratings. The ratings for progress toward achieving the PDO and overall implementation progress were downgraded to unsatisfactory in the most recent Implementation Support and Results Report (ISR) from July 2024, due to delays in meeting the conditions required for project restructuring. However, since all conditions have now been fulfilled, both ratings are expected to be upgraded to moderately unsatisfactory once the 1-year extension is finalized. Additionally, the action plan for further improving key project ratings during the extension period is detailed in the “Implementation Schedule” section below. The borrower’s successful execution of this action plan is anticipated to further enhance the project ratings. B. RATIONALE FOR RESTRUCTURING 8. Implementation delay. The FIP project has experienced an accumulated implementation delay of approximately two years compared to the original plan. The primary cause of this delay has been the frequent changes in the Peruvian government. Since the project was approved by the World Bank Board in January 2019, the Peruvian government has undergone five changes. Each governmental change has resulted in significant reshuffling of staff and project personnel within MINAM and its National Program for Forest Conservation for Climate Change Mitigation (PNCBMCC, Spanish acronym). These frequent staff turnovers have severely disrupted the project's continuity, leading to delays in progress and the overall implementation timeline. Furthermore, the project encountered additional challenges stemming from the complexities of working within the indigenous communities in the Amazon. The COVID-19 pandemic further exacerbated these delays by imposing restrictions on mobility and in-person meetings, which are crucial for engaging with local communities and stakeholders. These factors collectively contributed to the significant delays in the preparation and approval of critical Community Business Plans, which are central to the project’s objectives. Page 2 The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) 9. Strategic importance of the Amazon. The project represents one of the few projects under implementation in the Peruvian Amazon within WB’s portfolio. It is thus critically important for WB to maintain its engagement in the Amazon given the region's unparalleled biodiversity and its vital role in the global fight against climate change. The Amazon basin is home to immense biodiversity, representing one of the most biologically rich areas on the planet. Its forests play a crucial role in sequestering carbon, thereby contributing significantly to mitigating the effects of global climate change. The project is aligned with the objectives of the WB's recently launched Global Challenge Program, which emphasizes the need for sustainable management of natural resources and the protection of critical ecosystems like the Amazon. The success of this project not only supports biodiversity conservation but also strengthens the resilience of indigenous communities and their capacity to manage forest resources sustainably, contributing to both local and global environmental goals. 10. WB-IDB Collaboration. As noted above, the FIP project in the Peruvian Amazon has been a joint effort between WB and IDB, both of which are deeply committed to the successful implementation of the project. Each institution focuses on different, yet complementary, geographic areas within the Amazon, partnering with local indigenous communities to advance sustainable forest management and conservation. While WB has concentrated its efforts in the Atalaya province, IDB has been implementing similar initiatives in other critical regions of the Amazon, such as the areas along the routes between Tarapoto-Yurimaguas and Puerto Maldonado-Iñapari. The collaboration ensures that the projects address the diverse needs and challenges across the Amazon region while fostering synergies in conservation and development outcomes. Importantly, IDB has already taken proactive steps to extend the duration of its project to January 2026, reflecting both banks' ongoing commitment to achieving the project's long-term goals and ensuring its success. 11. Importance of the business plans for the achievement of the PDO. The Business plans serve as the operational backbone for sustainable forest landscape management, directly contributing to the project's goals of reducing deforestation, enhancing carbon sequestration, and improving the livelihoods of indigenous communities. Through these plans, communities are empowered to manage forest resources sustainably, generate income, and improve food security, thereby supporting both environmental conservation and socioeconomic development. As of the end of July 2024, a total of 13 business plans were approved, with an additional 38 business plans in the advanced stages of preparation. Given the average implementation period of 18 months for these plans, it is imperative to proceed with the proposed two-step extension of the project (see below). This extension will ensure that there is sufficient time to fully implement the business plans, thereby securing the anticipated environmental and economic benefits that are essential for the project's success. II. DESCRIPTION OF PROPOSED CHANGES A. Results framework 12. While the Results Framework remains unchanged both in scope and targets through this proposed restructuring, clear definitions of two results indicators will be provided to facilitate M&E under the project as per Table 1. Page 3 The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) Table 1: Proposed definitions of select results indicators PDO indicators Original indicator Original definition Proposed definition 2. Indigenous communities with usage There is no definition provided in the The indicator measures the number of native or ownership rights (Number) Project Appraisal Document (PAD) communities that have completed the demarcation process and have received a (Baseline: 0; Target: 23) resolution from the regional government through which the legal physical titling of communal lands is finalized, safeguarding ancestral rights and the use of the territory Intermediate indicators Original indicator Original definition Proposed definition 1.2 Forest area under monitoring and There is no definition provided in the This indicator measures the area of forests surveillance (Hectare) PAD where monitoring and surveillance interventions/actions have been carried out (Baseline: 0; Target: 380,500) through the operation and coordination with Community Forest Monitoring and Control Committees and authorities involved in forest management B. Extension of the closing date 13. Project extension. The proposed restructuring involves a two-step extension process to ensure sufficient time for the completion and successful implementation of the project. The first step in this process, which is the focus of the current restructuring, involves extending the closing date by one year, from the original date of August 31, 2024 to August 31, 2025. This initial extension will provide the necessary time to advance the preparation and execution of the Community Business Plans and other critical activities. The second step, which will be addressed in a subsequent restructuring, will consider an additional 1-year extension, depending on the progress made. The was the approach agreed upon among key stakeholders including the Country Management Unit (CMU) and the Ministry of Economy and Finance (MEF). This phased approach allows for better alignment of project timelines with the anticipated implementation needs. C. Implementation schedule 14. Implementation schedule. The implementation schedule will be adjusted to align with the proposed two-step extension process, with a focus on the first extension period of 1 year and ensuring a structured and efficient progression of project activities. The first extension, prolonging the project closing date by one year to August 31, 2025, is designed to facilitate the advancement of pivotal project activities, with a pronounced focus on the preparation and execution of the Community Business Plans. More concretely, key actions during the first extension period will include the following: (a) Finalization and Approval of Business Plans: By the end of the first quarter (Q1) of the extension period, all remaining Community Business Plans are expected to be finalized and submitted for approval. This includes participatory processes involving indigenous communities to ensure that the plans are culturally appropriate and aligned with local needs. Page 4 The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) (b) Capacity Building Workshops: Concurrently, a series of capacity-building workshops will be conducted for community members and local stakeholders (Q1-Q2). These workshops aim to enhance skills in sustainable forest management, financial management, and business operations, thereby empowering communities to effectively implement their business plans. (c) Disbursement of Funds: Upon approval of the business plans, MINAM will expedite the disbursement of funds to the respective communities. This process is anticipated to commence by the second quarter (Q2), ensuring that financial resources are readily available for the initiation of business activities. (d) M&E plan: A robust M&E plan will be developed to track the progress of each business plan (Q1). This plan will include periodic site visits, progress reports, and feedback mechanisms to address challenges promptly. 15. Task team’s implementation support measures. To support the successful execution of this action plan, the WB task team, in close collaboration PIU, will undertake the following measures: (a) Regular Progress Reviews: Bi-monthly meetings will be held to review the status of project activities, assess compliance with the implementation schedule, and identify any emerging issues that require attention. (b) Resource Optimization: The task team will work with MINAM to allocate resources efficiently, ensuring that human, financial, and technical resources are deployed where they are most needed to accelerate implementation. (c) Stakeholder Engagement: Continuous engagement with local communities, indigenous organizations, and other stakeholders will be maintained to foster transparency, inclusivity, and responsiveness to community feedback. This proactive and structured approach is designed to navigate the project through the extended implementation period effectively. By intensifying monitoring and evaluation efforts, fostering stakeholder engagement, and ensuring diligent adherence to the adjusted timeline, the project is poised to overcome previous delays and achieve its intended outcomes within the extended timeframe. D. Disbursement Estimates 16. Disbursement estimates. As noted above, the total disbursement stands at US$9.45 million, representing 65.0% of the grant and 88.8% of the loan portions (overall aggregate of 77.5%), respectively. These figures indicate that the project is on track in terms of disbursement, with no significant concerns identified at this stage. Moving forward, the focus will be on ensuring that the disbursed funds are utilized effectively and in accordance with the project plans, with particular emphasis on benefiting the local communities as intended. To this end, the task team, in collaboration with MINAM, will closely monitor the expenditure of the remaining funds, ensuring that they are directed toward achieving the project objectives. The disbursement estimates have been adjusted to align with the envisioned two- step extension process, ensuring that the project has the financial flexibility to accommodate the extended implementation timeline. This adjustment will help to ensure that all project activities are adequately funded throughout the extended period, facilitating the successful completion of the project. Page 5 The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Results Yes Loan Closing Date Extension Yes Disbursements Estimates Yes Implementation Schedule Yes Development Objective No Loan Cancellations No Safeguard Policies Triggered No Reallocations No ISDS No Financial Management No MFD/PCE No Procurement No Risks No Institutional Arrangement No Legal Covenants No Conditions No Implementation Modalities No Disbursements Arrangements No DDO No Clients No Appraisal Summary No Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Is this project Private Capital Enabling (PCE)? Page 6 The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) LOANS Loan Closing Original Revised Proposed Proposed Deadline Loan/Credit/Trust Status Closing Closing(s) Closing for Withdrawal Fund Applications TF-A8845-001 Effective 31-Aug-2024 31-Aug-2024 31-Aug-2025 31-Dec-2025 TF-A8849-001 Effective 31-Aug-2024 31-Aug-2024 31-Aug-2025 31-Dec-2025 DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Restructuring Implementation Start Date Operation Closing Date 04-Jan-2019 31-Aug-2024 Projected Date for Full Disbursement 02-Jan-2026 Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 04 Jan 2019) FY2019 183,061.00 0.00 0.00 FY2020 785,692.20 518,485.00 518,485.00 FY2021 1,199,713.80 1,062,960.37 1,062,960.37 FY2022 2,135,706.60 0.00 0.00 FY2023 3,481,770.20 2,523,543.19 2,523,543.19 FY2024 4,178,975.80 1,421,196.06 1,421,196.06 FY2025 235,080.40 5,715,894.43 3,915,894.43 FY2026 0.00 957,920.95 0.00 Page 7 The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) RESULTS COUNTRY: Peru Integrated Forest Landscape Management Project in Atalaya, Ucayali @#&OPS~Doctype~OPS^dynamics@restrannexpolicyandresult#doctemplate PDO Indicators by PDO Outcomes Strengthened sustainable forest landscape management and use Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year 0.00 Nov/2018 0.00 24-Jun-2024 0.00 21-Aug-2024 380,500.00 Aug/2025 Revise Land area under sustainable Comments on achieving targets A total of 13 business plans have been approved to date, and there is a pipeline of 38 additional plans at an landscape management practices advanced stage of preparation. Implementation of these plans is expected to increase the land area under (Hectare(Ha)) sustainable management. Revise Indigenous communities with 0.00 Nov/2018 24 24-Jun-2024 24 24-Jun-2024 23.00 Aug/2025 usage or ownership rights Comments on achieving targets Achieved during the period. Land titling requests for 24 communities have been accepted. In addition, two (Number) additional requests are being reviewed and finalized. Revise Land users adopting sustainable 0.00 Nov/2018 0.00 24-Jun-2024 0.00 24-Jun-2024 2,300.00 Aug/2025 land management practices as a Comments on achieving targets There has not been yet any register of lands users adopting sustainable land management practices as a result result of the project (direct of the project. Prior closing date, it is expected that the EGP will monitor progress on the implementation of beneficiaries disaggregated by "Planes de vida"-SLM related activities. gender) (Number) ReviseShare of target beneficiaries 0.00 Nov/2018 0.00 24-Jun-2024 0.00 24-Jun-2024 75.00 Aug/2025 satisfied with their participation in Comments on achieving targets While there are beneficiaries of the project, a satisfaction survey has not yet been conducted. forest and land-use decisions that affect them (disaggregated by gender) (Percentage) 0.00 Nov/2018 0.00 24-Jun-2024 0.00 24-Jun-2024 60.00 Aug/2025 Page 8 The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) Index of forest entrepreneurship Comments on achieving targets Revise While there are beneficiaries of the project, the index has not yet been measured. (Percentage) Intermediate Results Indicators by Components Institutional Strengthening for Forest Conservation Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Revise 0.00 Nov/2018 0.00 24-Jun-2024 0.00 24-Jun-2024 380,500.00 Aug/2025 Forest area under monitoring and surveillance (Hectare(Ha)) Comments on achieving targets A clear definition has been agreed upon, enabling the monitoring of this indicator going forward Revise 0.00 Nov/2018 33.00 24-Jun-2024 33.00 24-Jun-2024 30.00 Aug/2025 Life plans approved by comunity (Number) Comments on achieving targets A total of 33 life plans ("Planes de Vida") have been developed with and approved by participating communities. Revise Number of Community 0.00 Nov/2018 7 24-Jun-2024 7 24-Jun-2024 50.00 Aug/2025 Monitoring and Oversight Comments on achieving targets This is part of the business plans to be implemented shortly Committees established and operating (Number) Strengthening Sustainable Forest Landscape Management and Use Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year 0.00 Nov/2018 0.00 24-Jun-2024 0.00 24-Jun-2024 50.00 Aug/2025 Revise Number of incentive projects Comments on achieving targets In progress. A first batch of 13 business plans approved with communities and small forest users. The PIU has under implementation (Number) prepared a Manual for implementation of the incentives to ensure the correct, efficient and transparent use of funds. Revise Share of registered questions 0.00 Nov/2018 100 24-Jun-2024 100 24-Jun-2024 85.00 Aug/2025 and grievances, related to project Comments on achieving targets A GRM system is in place, working adequately. benefit delivery, that are addressed (Percentage) 0.00 Nov/2018 0.00 24-Jun-2024 0.00 24-Jun-2024 3,108,737.00 Aug/2025 Page 9 The World Bank Integrated Forest Landscape Management Project in Atalaya, Ucayali (P163023) Revise Net greenhouse gas emissions Comments on achieving targets Successful implementation of business plans is expected to result in reduction of GHG emissions (Tones/year) Revise Subprojects financed under the 0.00 Nov/2018 0.00 24-Jun-2024 0.00 24-Jun-2024 30.00 Aug/2025 incentive fund, submitted by Comments on achieving targets Part of the business plans to be implemented shortly associations which have at least 30% women sitting on their boards. (Percentage) Page 10