Document of
The World Bank
Report No: 18245PE
PROJECT APP]RAISALDOCUMENT
ONA
PROPOSED LOAN
IN THE AMOUNT OF U:S$38MILLION EQUIVALENT
T O THE
REPUB:LICOF PERU
F'ORAN
URBAN PROPERTY RIGHTS PROJECT
July 15, 1998
Poverty Reduction and Economic Manage]mentUnit
Bolivia, Paraguay, Peru Country Managernent Unit
Latin America and the Caribbean Region
CURRENCY EQUIVALENTS
(Exchange Rate Effective July 1998)
Currency Unit = Nuevo Sol (S/.)
S/.1.0 = US$0.34
US$1.00 = S/.2.98
FISCAL YEAR
January 1 - December31
ABBREVIATIONS AND ACRONYMS
AC
AAHH
CAS
COFOPRI
CRS
ERR
FRR
IBRD
ICB
IDA
IDB
IGN
ILD
INEI
LCS
LIB
MAG
NCB
NFP
NPV
PCD
PETT
PMS
PPD
QBS
QCBS
RP
RPI
RPU
SUNARP
TF
TOR
UUPP
Vice President:
Country Director
Sector Director
I'ask Manager
Advisory Committee
AsentamientosHumanos/HumanSettlements
Country Assistance Strategy
Comisi6n de la Formalizaci6n de la Propiedad Informal/Commission
for the Formalization of Informal Property
CustomerRelations and Services
Economic Rate of Reform
Financial Rate of Return
International Bank for Reconstruction and Development
International Competitive Bidding
International Development Association
Inter-American DevelopmentBank
National Geographic Institute
Instituto Libertad y Democracia/Instituteof Liberty and Democracy
Institute for Statistics and Information Technology
Least Cost Selection
Limited International Bidding
Ministry of Agriculture
National Competitive Bidding
National Formalization Plan
Net Present Value
Project Concept Document
Proyecto Especial de Titulaci6n de Tierras/Special Project for Rural
Land Titling
Process Management control System
Project Preparation Document
Quality Based Selection
Quality and Cost Based Selection
Registro Predial
Registry of Immovable Property /Registro de Propiedad Inmueble
Registry of Urban Property/Registro Predial Urbano
National Superintendencyof Public Registries
Trust Fund
Terms of Reference
Urbanizaciones Populares de Interes SociallHousingAssociations
Shahid Javed Burki
Isabel Guerrero
Guillermo Perry
Elena Panaritis
PERU
Urban Property Rights Project
TABLE OF CONTENTS
Project Financing Data
A. Project Development Objective........................................................
1. Project development objective.1
1
B. Strategic Context
..
1
1. Sector-relatedCAS goal supported by the project
.1
2. Main sector issues and Government strategy..................................................... ..
1
3. Sector issues to be addressed by the project and strategicchoices...............................2
C. Project Description Summary........................................................
3
1. Project components........................................................
3
2. Key policy and institutionalreforms supportedby the project.....................................4
3. Benefits and target population
.5
4. Institutionaland implementationarrangements....................................................... 6
D. Project Rationale..........................................................................................................
7
1. Project alternatives considered and reasons for rejection
.7
2. Major related projects financed by the Bank and/or other development agencies .7
3. Lessons learned and reflected in proposed project design............................................8
4. Indications of borrower commitmentand ownership............................................
8
5. Value added of Bank support in this project
.8
E. Summary Project Analyses .............................
..
9
1. Economic
..
9
2. Financial Assessment...............................
9
3. Technical Assessment
..
9
4. Institutional Assessment............................................................................................10
5. Social Assessment.............................
11
6. Environmental Assessment............................
.
12
7. ParticipatoryApproach
..
12
F. Sustainabilityand Risks
1. Sustainability.............................
2. Critical Risks
..
3. Possible Controversial Aspects
.
.
.12
..
12
13
14
G. Main Loan Conditions ............................
1. Effectivenessconditions.................................................................................
2. Other ............................
15
15
15
H. Readiness for Implementation............................
16
I. Compliance with Bank Policies.16
Annexes
Annex 1. Project Design Summary...................................................................................... 18
21
Annex 2. Project Description.............................................................
Annex 3. Estimated Project Costs............................................................
26
Annex 4. Cost Benefit Analysis Summary.............................................................
27
30
Project
Monitoring
Indicators
............................................................
Annex 5.
31
Table A5.1. Proposed Indicators.............................................................
Table A5.2. Input and RegistrationTargets ............................................................
32
Table A5.3. Recaudaci6n Proyectada............................................................
33
34
Annex 6. Summary of Social Assessment............................................................
Table A6.1. Total Informal Urban Lots and Project Target ......................................................35
38
Annex 7. User Fees............................................................
Table A7.1. Estructura Actual y Propuesta de Arancelespor Servicios Individuales ...
40
Table A7.2. Estimated Unit Cost of Titling and Registration...................................................41
Annex 8. GOP Letter of Sector Policy............................................................
42
Annex 9. Financial Summary.............................................................
46
Annex 10. Procurement and DisbursementArrangements...........................................................47
Table Al. Project Costs by ProcurementArrangements...........................................................48
49
Table A2. Consultant SelectionArrangements.............................................................
Table B. Thresholds for Procurement Methods and Prior Review.........................................49
50
Table C. Allocation of Loan Proceeds.............................................................
Annex 11. Project ProcessingBudget and Schedule............................................................
51
Annex 12. Documents in Project File............................................................
52
54
Annex 13. Statement of Loans and Credits............................................................
55
Annex 14. Country at a Glance.............................................................
Map
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL DEVELOPMENT ASSOCIATION
Latin America and the Caribbean Region
Bolivia, Paraguay, Peru
ProjectAppraisalDocument
P]ERU
UrbanPropertyRightsProject
Task TeamLeader/TaskManager: ElenaPanaritis
Date: July 15, 1998
DirectorManagementUnit: GuillermoPerry
DirectorCountryManagementUnit: Isabel Guerrero
ProjectID: 39086
Sector: Public SectorManagerment ProgramObjectiveCategory:PD
LendingInstrument:TechnicalAssistanceLoan
PTI:
[ ] Yes
[XI
No
ProjectFinancingData
[x I Loan
[] Guarantee
[] Credit
[] Other
[Specify]
For Loans/Credits/Others:
Amount(US$m/SDRm):US$38.0million
Proposedterms:
Grace period(years): 5
Years to maturity: 17
Commitmentfee: 0.75%
[]
[]
Multicurrency
StandardVariable
Financingplan (US$): US$66.3million
Source
Government
Beneficiaries
IBRD
Total
X
Singlecurrency,specify
Fixed
X
LIBOR-based
[
Local
24.3
4.0
27.7
56.0
Foreign
0.0
0.0
10.3
10.3
Total
24.3
4.0
38.0
66.3
Borrower: Republicof Peru
Guarantor:NA
Responsibleagency(ies):Comisi6nde Formalizaci6nde la PropiedadInformal(COFOPRI),RegistroPredialUrbano(RPU)
Estimated disbursements (Bank FY/US$M):
Annual
Cumulative
1999
2000
12.13
12.13
13.14
25.27
2001
2002
8.29
3.70
2003
0.74
33.55
37.26
38.00
Project implementationperiod:4 yearsExpectedeffectivenessdate: November30,1998Expectedclosingdate: June 30, 2003
Project
Appraisal
Document
Country:
Peru
Page: I
Project
Title:Urban
Property
Rights
A: Project Development Objective
1. Project developmentobjective and key perl'ormanceindicators (see Annex 1 for key
performance indicators and Annex 5 for project imonitoringindicators):
The principal objectiveof this project is to create a system assuring formal and sustainablerights to
real propertyin selected,predominantlypoor, settlementsin larger urban areas. Greater security of
ownership will enhance the welfare of the owners.
To this end, the project would support a national program for formalizing urban property rights
(issuing and registering titles). Through legal and institutional improvements,training, and the
development of long-term strategies, it would also strengthenthe organizationsresponsible for this
program.
B: Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project
(see Annex 1):
CAS document number: 16796PE Date of latest CAS discussion:July 22, 1997
The overridingobjective of the Bank's assistanceprogram for Peru continues to be to support the
Government's efforts to combat poverty. The Governmentrecognizes that growth, macroeconomic
stability, and the completion of economicreforms, while essential, are not in themselves sufficient
for poverty reduction. Poverty remains deep and widespread,with large disparities in incomes and in
access to economic opportunitiesacross regions, among social groups and between genders. As
indicated in the CAS, the Government's programnto integrate the poor into Peruvian society places
special emphasis on raising the quality and improvingthe access of the poor to: (a) education and
health services; (b) effective property ownership and full enjoymentof property rights; and (c) basic
infrastructure. To achieve these goals will require more attention to institutional strengtheningand
reform, which are inherently more complex and have not proceeded as rapidly as policy reform.
Several significantgaps also remain in the legal/regulatoryframework needed to stimulate private
investmenton which sustained growth will depend. With its central focus on property ownership,
attention to the legal and institutional context, and to the downstreamimpacts on private investment,
the project directly supports the Bank's Country Assistance Strategy.
2. Main sector issues and Governmentstrategiy:
Main sector issues. Informalityin urban Peru is the result of inadequate institutions (i.e. legal and
other rules of the game) and organizationalarrangements. Urban migration since the 1940s (further
impelled by the 1968 Agrarian Reform) radically altered the structure and size of cities, tuming Peru
from a country that was two-thirds rural to one that is two-thirds urban. The formal rules and
organizationswere not equipped or designed to absorb effectively this new reality. For over a
century, Peru has had a system to provide formal recognitionto real propertyrights. But this system
has only worked for a richer, mostly urban minority, and has done little for the poor majority. The
system has complex and demanding proceduresto establish ownership. Poorer and informal owners
cannot afford these or are simplyunable to comply with them. Government agencies are inefficient
and slow in issuing private titles to publicly owned land. Similarly,the courts have rarely been able
to resolve conflicts, facilitate mediation, or validate these titles, as the law requires. The traditional
Project
Appraisal
Document
Country:
Peru
Page: 2
Project
Title:Urban
Property
Rights
system is constituted by: the agencies responsiblefor issuing titles for example municipalities,courts
-which resolve disputes and issue first titles-, and the Registro de Propiedad Inmueble (RPI) -which
registers them-. The migrants and urban poor have responded by establishing informal human
settlements in defiance of the formal law. 1997 estimates measured around one million informal
urban properties, representing poor people's "dormant" assets whose real value in terms of re-sale,
investmentpotential, and access to credit was not being realized.
Government Strategy. The process of reform - of establishing a new system for formalizingproperty
- began in the late 1980swith a series of studies and participatory exercises carried out by a private
research institute, Instituto Libertad y Democracia (ILD). This work culminated in 1988 laws that
effected, on a pilot basis, an institutional reform to alleviate bottlenecks to property registration and
titling and the establishment of a new property registry,Registro Predial (RP). With the help of a
Japanese-financedWorld Bank grant, a pilot project applied the reforms in selected urban and rural
areas in 1992-1994with big success (more than 150,000properties registered until the end of 1993).
Subsequently,the Bank maintained a strong policy dialogue with the Government. In a note on real
property rights (part of the report, Peru: Policy Notes, July 21, 1995, 14824-PE),the Bank
characterized the new formalizationsystem as comprised of a new legal framework (i.e. the
institutional reform) recognizing community-sanctionedownership norms; a pro-active field
campaign approach which used the local communityto promote formalization, gather ownershiprelated information, and gain the benefits of titling whole areas at once; an inexpensive information
system using simplified procedures and based on universal parcel-based indexation; and the use of an
autonomousagency (RP) free to manage effectively. The note recommendedthat, through a national
program for property formalization,this system be progressivelyadopted for all informal urban and
rural areas, be given strong political backing, and be executedby an autonomous agency.
A Law to PromoteAccess to Formal Property "Ley de Promocion del Acceso a la PropiedadFormal"
(DecreeLaw 803) was passed in March, 1996,which, in essence, applied the new system to all of
Peru's informal urban settlements. (The Governmenthad already decided to handle rural areas
through a previouslyexisting IDB loan -- see section D.3.) This Law was to be implementedby a
new autonomousagency,Comisi6n de Formalizaci6n de la Propiedad Informal (COFOPRI). At the
same time, Registro Predial Urbano (RPU) was separated from RP (that part of RP dealing with rural
areas in the Department of Lima was separated, while the remaining rural part of RP now resides in
the national registry system). Having assumed the functions of about 14 separate agencies that
previouslyregulated the titling process, COFOPRI has the function of issuing titles on the basis of
legal and physical verification in the field. RPU, workingin close cooperation with COFOPRI,then
registers these titles engaging into a National FormalizationPlan (NFP).
Thus the proposed project, which supports the urban formalizationwork of COFOPRI and RPU, is
not the beginning of a reform process. Instead, the project continues a longer, decade-oldreform
process in which the Bank has been involved for some five years and which the Governmenthas now
fully "owned" for over two years. A Letter of Sector Policy (see Annex 8) expresses the
Government's commitmentto the NFP, the project and the underlying principles of formalization.
3. Sector issues to be addressed by the project and strategic choices:
The proposed project aims to apply the new property formalizationsystem on a large scale in urban
Peru. This system, reflecting the experience of the last decade, is underpinnedby three sets of
principles, which relate to the project's three components.
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Appraisal
Document
Country:Peru
Page: 3
Project
Title:Urban
Property
Rights
First, under the legal and institutionalframework: laws should adapt, where possible, to reality on
the ground (for instance, about proofs of ownership and solutions to new informalityproblems),
which requires a participatory/consultativeapproachto designingrules; procedures should be simple;
and property information in the new system is best administeredthrough a universal, parcel-based
system (and does not require expensive investmrentsin creating cadastres). Conflict resolution
mechanisms through developmentof arbitration and mediation, as well as land administrationand a
strategy to avoid further invasions, are addressed under this principle.
Second, under new organizationalarrangements:new, independenttitling (COFOPRI)and
registration (RPU) agencies overcome the resistance to change encounteredin Peru's traditional
system and channel strong political support for formalization.
Third, under a nationalformalizationprogram: area-wide titling (i.e. mass, rather than sporadic,
titling) generates, through communityparticipationand education, a demand for formalization,
reduces the unit cost of formalization,and rapidly generates a minimumcritical mass of
beneficiaries.
Strate2ic Choices. Within this frameworkof principles, strategic choices were largely limited to
issues of project scope and implementation. First, the proposed project only addresses informality in
urban areas, not rural areas. While the new formalizationsystem works equally effectively in urban
and rural areas, the Government asked the Bank only to work in the former since IDB already had a
project for rural areas. Second, to maintain a feasible agenda, the project will only be implemented
in eight urban areas (accountingfor an estimated 89 percent of all informal urban properties), chosen
according to a formula based on city size, density of informal settlements, and distance from
commercialcenters. Third, to scale up COFOPRI's staffingfor the National Formalization Plan, a
mixture of output-based shorter-termcontracting (for supply of base mapping, computer
programming, and process audits, for instance) and regular long-term contracting (for other
functions)is proposed. Fourth, to upgrade RPU' s data base at the national level, the project proposes
that each regional office has its own decentralizeddatabase, which can be remotely accessed. (This
solution is preferred to a centralized, on-line database, which would be more high-risk and highcost.)
C: Project Description Summary
1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost
breakdown):
-~~~~Comnn
rocuemet
2XKs sS 2 202=0yCategoy
1. UrbanPropertyMarketReformns:Supportfor a series
of legal,regulatory,and institutionalreformsto sustain and
Cs
i.
% ofX5Uh
Bank.
%of
Con .nfencie
s: Total
22;yFinac .an
1.16 1.74
0.93
2.45
deepen the existing market reforms.
1.1 Legal and Institutional Framework: introduces
mechanismsfor COFOPRIandRPU to definenew issuesin
the formalizationprocess anddevelopsustainablesolutions.
1.2 InvestmentPromotion: recommendsmechanismsto
enhancethe marketuse of propertyrights.
* Consulting
0.34
0.51
0.27
0.71
0.28
0.42
0.22
0.58
Services
* Consulting
Services
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Project
Title:Urban
Property
Rights
0Comnonnent
PrcrOaemn¢Dt L~
fk
at
Category
Continuencies Total Finaggag Bank---(M-)
flnandnz
1.3 Socio-economic Monitoring: administers comprehensive * Consulting
0.54
0.81
0.44
1.16
household surveys, land value assessments, specific studies,
Services
and client surveys for COFOPRI and RPU.
_
2. National Organizations for Urban Property
(COFOPRI-RPU): Support for the strengthening and
expansion of the two key autonomous agencies responsible
for formalization, RPU and COFOPRI.
13.07
9.69
8.3
22.01
2.1 Strengthening of RPU Administration: Provides technical * Consulting
support to the new RPU offices in Arequipa, Piura, Chiclayo,
Services
Chimbote, Trujillo, Iquitos, and Huaraz for the development * Goods
of the appropriate operational infrastructure to meet the
objective of the National Formalization Plan.
5.17
7.7
3.42
9.00
2.2 Strengthening of COFOPRI Administration - Expansion
of COFOPRI Nationwide: Develops the operational
infrastructure, administrative manuals, management
information systems, computer systems audits, and
information system.
1.34
2.02
* Consulting
0.88
2.32
Services
* Goods
2.3 Institutional Development of COFOPRI and RPU:
* Consulting
Strengthens the institutional mechanisms needed to maximize Services
project benefits and support the continued functioning of
COFOPRI and RPU.
1.16
1.75
0.95
2.50
2.4 Human Resource Development: Develops a knowledge
management and human resource management strategy for
COFOPRI and RPU managers, registrars and technical staff.
* Consulting
1.27
1.91
1.04
2.74
2.5 Project Management:
* Consulting
4.13 6.23
52.06 78.56
2.07
28.71
5.45
75.55
0.83
0.36
0.94
51.62 77.73
28.35
74.61
38.00
100.00
Services
Services
3. Conversion of Existing Informal Property: Support for
the conversion of informal urban property in informal
settlements to formal and secure property rights, through
issuance and registry of titles.
3.1 Collection & Analysis of Ownership Related Information: * Consulting
includes the collection of demographic and economic data
Services
critical to the formalization process.
3.2 Implementation of National Formalization Plan: This
* Consulting
activity finances predominantly salaries of contracted
Services
employees to undertake the field work that will produce the
* Goods
targeted output to formalize at first about 960,000 properties. * Civil Works
TOTAL
0.44
_
66.30
10.0
2. Key policy and institutional reforms supported by the project:
The project is based on the new system of property formalizationcharacterizedby the legal and
institutional reforms described in section B.3 above. The project proposes to further develop the
policy reform process in two areas.
Project
Appraisal
Document
Country:Peru
Page: 5
Project
Title:Urban
Property
Rights
Legal and institutional framework: addressing solutions to new forms of informality that are
encountered; developing alternativeconflict resolution mechanisms (arbitration and mediation);
developing a land administration policy designed to prevent new land invasions; designing a
feedback mechanism to inform COFOPRIand RPU of changes in levels of transactions costs (and
customer satisfaction)associated with titling and use of the registry; and examiningpolicies in which
financial markets can be developed in relation to property.
New organizationalarrangements: addressing new policies under which COFOPRIand RPU can
remain effective and become well-establishedpublic agencies whose existence is not put at risk
when, for instance, the governmentchanges. This might be achievedthrough a more explicit
(contractual)relationshipwith the government,the establishmentof clear civil service rules,
measures to ensure public acceptance (consultationand service standards, for example), and greater
financial autonomy (through greater cost recovery).
3. Benefits and target population:
Benefits:
The formalizationprocess will have both economic and social benefits.
-
The key benefit is economic: greater security of ownership allows a more efficient use of
property (which is reflected in higher property values). Greater efficiency will come from
higher investmentin the property and/or the use of property in market transactions,
including land sales and/or the use of property as collateral for mortgages.
-
In terms of social benefits, property forrmalizationis an importantpart of a broader
formalizationprocess in which excluded populations gain access to greater protection,
public utilities, and servicesfrom the stal:e.By this token, formalizingproperty ownership
will help secure the position of women, vho enjoy equality in property rights with men
under the law.
Target Population:
The project will increase the quality of life of the families living on the properties targetedfor
formalization.This will cover an estimated four million people, around one quarter of the total
population. These people typicallylive in the range from just above to below the poverty line. The
National Formalization Plan covers informal urban settlementsas follows: Human Settlements
(AsentamientosHumanos - AAHH), HousingAssociations (Urbanizaciones Populares de Interes
Social - UUPP), and Cooperatives (Cooperativas/Asociacionesde Vivienda). Human Settlements
account for 72 percent of the target population and contain a high proportion of the urban poor and
the very poor. Poverty is greater in the Human Settlementsthan the Housing Associations and the
Cooperatives. Human Settlementsare systematicallylocated, according to the 1993 census (INEI),
in districts where poverty indicators, as measuredby the lack of "basic necessities" (education,
health, housing conditions, adequate employment,,housing services), are at their highest.
Human Settlementsare formed from the invasion of public lands. Typically, Housing Associations
and Cooperatives privately own land bought from the state, but individual properties are not titled.
The NFP has selected eight urban areas with 1.2 millionproperties in 1997 (89 percent of all urban
informal properties), a figure expected to grow to 1.4 million by 2001. By the start of the project,
some properties in these areas (mostly in Lima) will already have been formalized under the previous
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Project
Title:Urban
Property
Rights
activities of COFOPRI and RPU, and the project aims to formalize as many of the remaining
properties as possible.
The eight areas were selected using criteria taking account of the concentration of population in
Human Settlements,poverty levels, and the expectedrelative ease and benefits of formalization.
Reflecting the historical patterns of migration that have contributed to urban informality, around 60
percent of properties are located in other coastal areas (Chiclayo, Chimbote, Piura, and Trujillo), and
the rest in the mountains (Arequipa and Huaraz) and the Amazon (Iquitos).
4. Institutional and implementationarrangements:
a. Project ImplementingAgencies. The project will be carried out by COFOPRI and by RPU.
COFOPRIis responsible for the overall project management, and will handle the property
fornalization process. RPU will be in charge of documentation and registration of titles. As
autonomous agencies, both COFOPRI and RPU can hire staff under private, rather than public,
labor laws, an advantagefor implementation.
b. Organization. The close link between the mandate of the two implementingagencies and the
purposes of the project suggested that a separate Project Unit not be created. Instead, a joint
organizationalstructure has been defined and agreed. The Project General Director (who is also
the National Coordinator of Formalization)will be accountable for outcomes. The line managers
of the two agencies will delegate day to day responsibility for operations to the Project Manager,
who will have full authority to manage the project on their behalf. The Project Manager is
directly accountable to the Project General Director. A Project Management Committee, with
equal representationfrom COFOPRIand RPU, will oversee implementationand the attainmentof
project goals, and make any strategicdecisions needed. A Project AdvisoryCommittee will
provide regular counsel on legal and institutional reforms and on operational matters. An
OperationalManual satisfactory to the Bank will outline the project's implementationprocedures.
c. Implementation. The simplifiedtitling (COFOPRI)and registration (RPU) systems are operating
effectively,and under the project will be continued and expanded within Lima and to seven other
urban areas (Arequipa, Chiclayo, Chimbote, Huaraz, Iquitos, Piura, and Trujillo). In both RPU
and COFOPRI the system is based on work teams of 5-10 people each. Expansion will therefore
occur by multiplying the number of teams in the same system, rather than by having to transform
the system itself.
The Arequipaprogram has begun, and shows that COFOPRIand RPU are learning how to transfer
knowledge and procedures from Lima to other cities. Even though some critical steps (e.g. mapping)
may be done initially in Lima, training and exchange of staff between Arequipa and Lima are
building the capacity to title and register in Arequipa. This process will be repeated in the other
cities, with however greater emphasis on involvementof mayors and other local and regional
authorities. Generally, the neighborhoods to be formalizedin the future are likely to present more
special problems (mining concessions, private ownership,and cooperative associations,for example)
than has been the case in the districts formalizedthus far. Another adjustment to COFOPRI
procedures will therefore be the formation of specializedteams to deal with each of these problems.
Recruitmentis taking place, especially in COFOPRI,to meet the staffing requirementsof the
expandedprogram. Extensive training will be supported under the project, as part of a staffing
strategythat has been prepared for both agencies.
Page: 7
Project
Title: Urban
Property
Rights
Project
Appraisal
Document
Country:
Peru
D: Project Rationale
1. Project alternatives
considered and reasons for rejection:
The project design, emerging from several years of Peruvian and Bank experience, is built around the
three principles described in B.3 above. Inherent in this design is the rejection of alternative designs
that have been adopted in other titling programs, notably:
*
Legal and institutional framework: the pro ject chose an on-the-ground approach to ownership
verification, rather than a more expensive design relying more completely on technology.
*
New organizational arrangements: for a tirme (1994-96), RP was merged within
registry system RPI, but the project was predicated on an independent RP since
assurance that the simplified procedures that underpin the formalization reform
been preserved under such a merger. Self-sustainability was furthermore at risk
was no financial autonomy.
*
Project of different size: the Government wishes that this project will assist with the scale-up
of the formalization program in Lima to the national level. Alternatives for the scope and area
coverage of the project were therefore carelully considered. The option of eight urban areas
provided the best alternative in terms of coverage of informal settlements (89%), geographic
distribution, institutional capacity and the unit cost of formalization.
2. Major related projects
ongoing and planned):
inmanced by the Bank and/or other development
the traditional
there was no
would have
since there
agencies (completed,
Latst
upevison(Fom 50)
Imlmenttion
Bank-rmanced:
Thailand: Land Titling I
(Loan No. 4733)
atng
Development
Extendedsecure land ownership to a proportion
of the rural public and began rationalizationof
a complete national cadastre.
HS
HS
Thailand: Land Titling II (Loan No.
4780)
Extended secure, ownership to a greater
proportion of rural landholders. Completedthe
national cadastre,and developed more accurate
propertyvaluation and tax assessments.
HS
HS
Thailand: Land Titling m (Loan
No. 4803)
Further extended secure rural ownership and
developed the sustainableinstitutionalcapacity,
improved land administrationservice delivery
and developedan effective national property
valuationfunction.
Applied a propertyfoirmalizationsystem in
urban and rural Lima througha new active
registrationsystem.
S
S
NA
NA
NA
NA
Peru: System for the Titling and
Registrationof Informal Property,
Pilot Project (1992-94);financed by
Japanese Trust Funds.
Other develioment agencies:
Inter-AmericanDevelopmentBank:
Peru: Land Titling Project (Loan
906/OC-PE)
Aim to register 1,100,000rural propertiesin 4
years. The executingagency is MAG through
PETT and the registry part is being carried out
by SUNARP.
IPM/ORatings:HS(ghly Satisfactory),
S (Satisfactory),
U (Unsatisfactory),
HU(HighlyUnsatisfactory)
_
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3. Lessons learned and reflected in proposed project design:
The policy and institutional framework on which project design is based was developed from Peru's
experience with the pilot project implementedfrom 1992 to 1994.The use of on-the-groundproofs
of ownership, rather than expensive cadastral systems, was tested in the Pilot. The project's legal
framework was created with the support of the owners/stakeholdersthrough a participatory approach
(see section E7). Thus it reflects the reality on the ground and ensures that the user will understand
and accept the formalizationmethods used by the government organizationsinvolved -RPU and
COFOPRI.
The design of the National Formalization Plan uses the experience of area-based campaigns from the
Pilot, as well as COFOPRI's own experience since 1996. (The IDB project in Peru, after several
years of implementation,is now also seeking to put more emphasis on a community-basedapproach
to establishing ownership and less on expensive mapping and cadastral investments.)
The component on effective organizationsreflects both the lessons learned in the Pilot about the
effectivenessof a new, independent agency (RegistroPredial) and the importance attached to
education in the Thailand projects. The organizationalfeatures of the project also reflect the lessons
of a 1992 Bank review of its rural titling projects (The WorldBank's Experience with Rural Land
Titling,Environment Division, No. 1992-35). In the past most of these projects performed poorry
because of lack of political support, conflicting bureaucraticpriorities, lack of institutional capacity
or support, and complex multiple objectives,with land titling only as a minor component.
Finally, there are two lessons on sequencing: First, the experience of other countries (mostly in
establishing property rights in rural areas) suggeststhat macroeconomicstabilization,then sectoral
reforms, to eliminate distortionsin property markets, are preconditions for an effective demand for
formalization. Second, investments in valuation systems for tax purposes should come later in the
sequence, (this has been the explicit approach in Thailand) at a time when beneficiaries, already
profiting from formalization,have gained enough trust in the state not to see formalizationas merely
a precursor to taxation and at a time when propertymarkets have been functioning long enough for
prices to be less distorted.
4. Indications of borrower commitmentand ownership.
The President has closely associated himself, in public appearances and statements, with the program
for formalizingone million urban properties by 2000. The Government's support for this National
FormalizationPlan (hence this project) is reflected in the Plan's success so far. COFOPRIcame into
being in mid-1996. By mid-1997 it had generated and issued over 100,000 registered properties. By
mid- 1998 it has issued another 200,000 registered properties. To accommodatethis activity,
COFOPRIhas grown from a staff of 20 at its inception to a staff of 359 today. COFOPRI's
campaignhas been accompanied by substantialpublicity, and surveys indicate that COFOPRIis well
placed among government agencies in public esteem.
5. Value added of Bank support in this project.
Through its support for the Pilot in 1992-94 and its subsequent policy dialogue, the Bank has served
as a catalyst in promoting property formalizationand developing technical and political strategiesto
do this. The Bank's continued presence, through the project, will serve to provide a guaranteeof the
technical quality of the National Formalization Plan.
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E: SummaryProject Analysis (Detailedassessments are in the project file, see Annex 12)
1. Economic (supported by Annex 4):
[x ] Cost-Benefit Analysis: NPV=US$1,704million;
[ ] Other (Specify)
ERR= % []Cost EffectivenessAnalysis:
The present value of the project's economicbenefits are in the order of $1.75 billion and the present
value of its costs is about $54 million. The total net present value, at about $1.70 billion, is very
large because of the enormous reduction in transactionscosts: in the traditional system, lot owners
must wait for years to get a clear title and also incur substantial out-of-pocketcosts (including court
costs). The gross benefits are reflected in a substantial capital gain. An econometric analysis
compared the price of titled with the price of untitled lots and concluded that titling increased the
price of lots by about $25 per square meter. The econometric analysiscontrolled for factors, other
than titling,that could influence the price of lots, such as the provision of infrastructure,in order to
isolate the influence of titling on the price of lots. Based on this analysis, we expect the benefits of
titling to be in the order of $25 per square meter, which for an average-sizelot, can be expectedto be
in the order of $2,500. Consideringthat the market price of an average lot is about $2,500, titling
alone is likely to double the value of the lots.
2. Financial Assessment (see Annex 9- Financial Summary): NPV=N.A.; FRR= N.A.
a. Fiscal and Financial Analysis. The project will deliver a service whose cost is intended to be
borne primarilyby the government. Project beneficiarieshave already paid the government
substantial amounts in the largely fruitlessefforts thus far to obtain titles. The Government,
therefore has decided to bear most of the project costs. It will also, however, collect user fees for
the issue of certain titles and their registration,broadlybased on capacity to pay (see Annex 7 for
details). These user fees are expected to finance about 6 percent of total project costs. In addition,
RPU will fully recover the costs of any transactions, such as mortgages, subsequent to the first
title-registrationprocess. The cost of the formalizationprocess per title is estimated at about
US$51, which is good by international standards. Measured in this way, the fiscal impact will
have a negative present value of US$38 million. Higher property tax revenues are expected with
propertyregistration, although this effect lies outside the project because it requires
improvementsin tax assessment,collection, and administration in addition to registration. When
realized, this result will considerablyimprove the long-term fiscal impact.
b. FinancialManagementAssessment. The planning, budgeting, accounting,and reporting systems
of COFOPRI and RPU satisfy government proceduresfor cash accountingand budget execution,
but do not meet the requirementsof sound project financial management. An action plan for
strengtheningproject financial managementhas therefore been designed. A central feature of the
action plan is the preparation of a Chart of Accounts for the project, including accounting
records, supporting documentation, and the design of integratedphysical-financialProgress
Reports. A consultant in Financial Monitoringhas been hired to help with executionof the
action plan. The main elements of the financialmanagement systems are expected to be in place
by loan effectiveness.
3. TechnicalAssessment:
The system of formalizationhas three main steps. The first step ("Process 0") is an inventoryof
existing settlement informationfrom different sources, includinglocal governments. This leads to a
diagnostic study of the readiness of an urban settleimentto be formalizedfrom the technical and legal
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standpoints. The second step ("Process 1") involves the establishment and registry of ownership
rights for the settlement as a whole. Through the production of urban planning tools such as
PerimeterPlans marking out the boundaries of the settlement, and Lot Plans with boundaries of
individualparcels in that settlement that have been established through computerized mapping, this
step culminates with the registry by RPU in the name of COFOPRI. In this process, land on which a
title cannot be given, such as zones of archeologicalvalue or flood plans, is identified and set aside if
it cannot be made habitable. Clouded or disputed claims and other legal problems are also defined.
The third step ("Process 2") has the most contact with the community,for in this step teams of
COFOPRIstaff hold meetings and knock on every door to ask for evidence of ownership or
occupationof the property. Lawyers are asked to verify, for a final time, the match between parcels
and owners. Mediation, as a disputeresolution, occurs during this step. A transfer of ownership
from COFOPRIto the individual is then registered by RPU, after which the title is delivered to the
owner.
Although the procedureshave been simplified,the legislative framework supporting formalization
has been found to be technicallysound and withinconstitutional boundaries safeguarding the right of
property in Peru. This was a principal conclusion of the legal assessment carried out as part of
project preparation. Concerningthe proposed mechanisms of dispute resolution, the assessment
recommendedthat in cases in which the rights of an applicant to a title are contested by an individual
who claims better rights to the same parcel of land, any decision reached at the administrativelevel
could also havee a judicial recourse.
The process of formalizingproperty through the use of the system developed by COFOPRI is
innovative and has already resulted in a large number of registrations. Several factors explain the
degree of success. First, the new system is designed with the very clear objective of creating
property rights that can be used in the market as a result of institutional reforms that decrease
transactioncosts. The system was designed using a participatorymethodology that uses community
informationto draft legislation and design the formalizationprocess, including the dispute resolution
mechanismwhich is built into the process, and uses the communityto inform property owners of the
costs ,andbenefits of formalization. Second, technologyis used judiciously, in a system that relies
heavily on labor-intensiveprocesses (informationcampaigns, collection of property information and
mediation in the field.) Third, there is a realization that the poor quality of the original ownership
data COFOPRIreceives from the municipalitiesmeans that it would be hazardous to move linearly
from the beginning to the end of the process without checkpoints along the way. Of the 11 principal
actions in the process, at least three involve verification of informationalready obtained, over and
above the normal supervision of each activity. RPU also verifies informationobtained from
COFOPRIwhen it receives the Perimeter and Lot plans at the end of process 2. Fourth, information
does not have to be secured at one time only, but can often be obtained at a later stage so that the
whole process is not halted. Finally, the contract with the community is usually collaborative. Flyers
and posters explain the process thoroughly, and more than one chance is given for residents to come
forward with evidence of ownership. The design of the project has built upon this experience to
scale up the formalization activities.
4. InstitutionalAssessment
RPU and COFOPRIhave satisfactorily carried out the first phase of the land title formalization
program. Each implementingagency will be supported within the project so that their internal
structures,procedures, and human resources can successfullymeet the challenges of an expanded
program.
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RPU, created in 1988, registersproperty titles under a new legal framework which allows it to bypass
rigidities in the traditional system decreasing transactioncosts. Especially in the last two years, RPU
has devised effective ways to deal with peak loads, verify informationreceived from COFOPRI and
register mortgages and other property-basedtransactions after the title itself is registered. Thus far
RPU has registered 463,700 properties and 250,000 titles using the new simplifiedprocesses, mostly
in Lima. COFOPRI,responsible for the titling process, began operations in June 1996. It now has
359 employees, and titles about 10,000urban properties per month. This rapid growth has meant that
COFOPRI's production and results have sometimes outpaced its management systems. This
situation has now improved, with the issuanceof a Manual and Regulation of organization and
procedures. Both agencies have thus far received budgetincreases roughly commensuratewith their
expanding activities.
Strengthening of management and proceduresas offices are established outside Lima, outreach to the
communities, appropriatefinancing, and harmonizationwith the traditional machineryof the
Government are among the main issues facing these institutionsover the next several years.
COFOPRI was created with a specific purpose to be accomplishedin a prescribed time, whereas the
activities of RPU would continue for the indefinite future. COFOPRI,as it gains more experience
nationwide, could play an importantrole in urban land management,but this must be done in
collaboration with local governmentsand the private sector. A long-term strategy for RPU is
underway, defining the other products of RPU after formalizationand its life with the other public
registry (RPI). Another study under component 1 iisalso under way that will define by mid-term of
the project the long-term future of COFOPRI. Regarding COFOPRIthe study will define what
functions will be maintained under what organizationalstructure and configuration. A timetablewith
an action plan for implementingthe study results will also be a result of the study.
5. Social Assessment: (Summary of the social assessment see Annex 6)
Security of ownership is a central concern of the informal urban population given the very weak
presence of the state in these settlements. To compensatethese communities have a considerable
cohesionand self-government. In brief, the settlementprocess typically involved organized
invasions, usually comprisingpeople from the same region. Informal communities evolved from this
process, with strong links to the region of origin but tenuous ones to the city itself. As these
communities have matured and a second generationhas come of age, regional ties have gradually
weakened. Neighborhoodorganizationsprovide scimecommunity-fundedservices, resolve disputes,
and administerproperty rights. In parallel to these organizations,urban settlementshave also seen
the growth of voluntary functional groups (commrunitykitchens, mothers' clubs, parents'
associations, sports clubs, etc.), normally run by women and often providing a safety net to poorer
people.
Property formalization is expected to affect communitiesin different ways. In some cases,
completion of the title-registry process has weakened the neighborhoodorganization. In other cases
it has encouraged the provision of communitysocial services. What is critical is that property
formalizationis part of a broader process of modernization,in which formerly "excluded" people
enter into a closer relationshipwith central and local government. Associations formedprimarily for
ownership protection will have the challenge of evolving into organizationsto promote civic
commitment,provide services, or mobilize resources. An objective of the Social and Economic
Monitoring sub-componentof the project is precisely to track the impacts of property formalization
on local communities.
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6. EnvironmentalAssessment:
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EnvironmentalCategory
[]A
[ ]B
[X ] C
This proposed project is not dealing with environmental issues as described and identified by the
Bank's policy. No involuntary resettlement takes place under the project. The project includes the
preparation of a study to evaluate and define possible adjudicationpolicies in existing urban
expansion areas already zoned.
7. ParticipatoryApproach:
Participatorytechniques have been essential to this project, both in the design of the new system of
property administrationand in the day-to-dayimplementation of the formalization process. Between
1986 and 1988, when the first regulations for the recognition and titling of human settlementswere
being drafted, there was a broad public debate which involved grassrootsorganizations, the
govemment, and interested citizens. The legal framework for the new system - Laws 495 and 496,
which admitted customary proofs of ownership in the definitionof property rights - emerged from
this. A similar approach was used in the preparation of Law 803 in 1996. The legal framework
requires a participatory approach to the formalizationprocess, in the belief that, without this,
institutionalreform would not be effective. This process is an "active" one, in the sense that
COFOPRIand RPU go to the beneficiaries, not vice versa. In processes 0 and 1 (see E.3), central
government agencies involved in urban land use and municipalitiesprovide information and
contributeto solving problems, while communityleaders and organizationsprovide feedback on the
obstacles to formalization and propose solutions. In Process 2, community leaders facilitate the
formalizationprogram by helping organize the community meetings, which precede COFOPRI's
door-to-doorcollection of ownership information.
F: Sustainabilityand Risks
1. Sustainability:
The project will address the sustainabilityof the new property system in two respects.
First, the developmentof markets based on newly formalizedproperties will be sustainedby
measures that encourage the continuing low transactions costs of formalizationand the high-quality
of registered titles, thus promoting the public acceptability (i.e. legitimacy) of the new system. This
should occur through several channels:
*
Mass titling, on an expanding geographic basis, which will create a critical mass of market
participants.
*
Continuing legal and institutional reforms in the formalizationprocess and reforms in
financial markets.
*
Feedback through quality-assuranceand monitoring (client surveys) systems.
Second, the project will strengthenCOFOPRI and RPU. In particular, a strategy for the long-term
sustainabilityof RPU (in part through increasing financial autonomy) will be designed and
implemented.
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2. Critical Risks (reflecting assumptionsin ihe fourth column of Annex 1):
Annex 1, cell "fromOutputsto Objective"
Benefitsto ownersare reducedas propertyowners
becomefrustratedwith their abilityto gain accessto
formalfinancialmarkets.
Vestedinterestsrelatedto the traditionalproperty
titlingand registrysystemresist the reforms.
Moderate
An increasingsupply of formalcreditis
likelyas new firms providingfinancial
servicesenter the "lower"end of the
market.There is alreadysuch evidence.
Furthermore,sub-component1.2 will
addressimpedimentsto the introduction
of new financialservicesand propose
policy changesin these areas.
Moderate-to- "Ownership"of the reformsis already
High
widespreadamongbeneficiariesand
increaseswith each title-award
ceremony.This will tendto further
insulateany opposition,as will
continuedstrongGovernmentsupport
for the reforms.
Loss of politicalsupport.
Low-toModerate
So rated becausethe potentialchangein
administrationfollowingelectionsin
mid-2000poses an uncertainty.RPU
and COFOPRIare likelyto maintain
supportas long as they meet their
targets.(By the time of the election,
RPU shouldhaveregisteredin excess
of one millionproperties,morethan
half of these underthe project.)
COFOPRI/ RPU ceaseto be autonomousand
independent.
Low-toModerate
This risk is low whileformalization
maintainspoliticalsupport.
The Governmentdoes not approveadditionallegal
and institutionalreforms.
Low
__________________
_under
This risk is low whileCOFOPRI
maintainsits currentstrong political
support. Sub-component1.1shouldbe
carried out quickly,such that muchof
the legislativesupportwouldbe sought
__
the current
administration.
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Risk
RiskRating'
RPU's sustainabilityis threatenedby future
weakeningof its managerialautonomy(for instance,
throughprematureunificationwith RPI) or failureto
continuebuildingits registryexpertise.
Moderate
Weakeningof formalizationprinciplesin COFOPRI.
Low
Risk'-"
'::"-.ni.. tin M
Two sub-components(2.1 and2.3)
directly addressthe strengtheningof
RPU. RPU will,followingthe outcome
of a long-termstrategicstudy in the
first year of the project,implement
arrangementsto assure greater
managerialautonomyand
accountability,increasedfinancial
autonomy(partlythroughthe
introductionof full cost recoveryon
subsequentregistry transactions),and
strengthenedqualitycontrols.A merger
with RPI wouldbe contemplatedonly
underthe conditionslaid out in the
_
Letter of Sector Policy.
Continuityin COFOPRImanagement
and the Government'sabidingby the
principlesdefinedin its Letter of Sector
Policymakethis risk manageable. One
of these principlesis the use of simple,
robust, and appropriate technology.
Otherurbanareaspresentmore seriousobstaclesto
formalizationthan Lima.
Low-toModerate
Otherpublicagenciesdeclineto cooperateand
provideCOFOPRInecessarybaselineinformationto
implementthe NationalFormalizationPlan.
Low
Whenareas underthe jurisdictionof COFOPRIand
PETThave a commonboundary,the lack of
commonoperationalandtechnicalstandardsmay
lead to difficultiesin assigningpropertyrights.
Moderate
Problemswouldbe handled,as they
arise, throughtrainingand specialized
teams. Arequipais alreadyfurnishinga
successful example.
The COFOPRILaw (803)mandates
cooperation,and continuingpolitical
supportfrom the Governmentwill
ensure this.
COFOPRIis continuingto establisha
clear and completeset of standardsand
has been askedby the Governmentto
coordinatea commonset of standards
I with PETT.
I
OverallRisk Rating
Moderate
RiskRating- H (HighRisk), S (SubstantialRisk), M (ModestRisk), N (Negligibleor Low Risk)
3. Possible ControversialAspects:
A project of this nature has a high political profile because it provides tangible assets to poor people.
In this sense, conferring property ownership is used as political currency, and this has often been the
case. But unlike the past, this project will provide effective output mechanisms that will lead to
effective property formalization on the basis of technical criteria.
The approach used in this project, emphasizing radical legal and institutional changes that
circumvent traditional property systems and simple, "low-tech" registration technology, is
controversial. But the controversy has receded as a growing number of countries have sought to
adopt similar reforms.
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G: Main Loan Conditions
1. EffectivenessConditions:
- COFOPRI and RPU shall have signed the collaboration agreement.
- The Ministry of Finance and COFOPRI shall have signed the subsidiary agreement.
- COFOPRI shall have established and made operational the financial management system.
- Approval of the final Operational Manual.
- RPU and COFOPRI will have put into effect user fees as agreed with the Bank.
2. Other [classify according to covenant types used in the Legal Agreements:
- In the event that COFOPRI engages in any activities additional to those in the Project, it shall make
arrangements, satisfactory to the Bank, to ensure that such additional activities will not adversely
impact on the implementation of the Project. Without limitation to the above, COFOPRI shall not
assign any of the staff in the Key Positions agreed with the Bank, to activities not included in the
Project.
- COFOPRI shall ensure that: (a) AC is formed at all times by experts with terms of reference,
qualifications and experience satisfactory to the Bank; (b) AC conducts regular meetings to discuss
the Project and not less than on a quarterly basis;-and (c) AC prepares a report, on a quarterly basis,
on its findings and recommendations and such reports are submitted to the Bank.
- COFOPRI and RPU shall maintain an organizational structure, a basis for its function, autonomy
and staffing satisfactory to the Bank. Without limitation to the above, COFOPRI and RPU shall
obtain the Non Objection of the Bank in respect to the hiring of personnel in the key positions.
RPU shall: (a) not later than December 31, 1999, carry out, jointly with COFOPRI, the study on
RPU's long-term strategy; (b) promptly thereafter, exchange views with the Bank on the findings
and recommendations of the study; (c) not later than April 30, 1999, prepare and present to the
Bank an action plan, satisfactory to the Bank, based on the findings and recommendations of the
study and the Bank's comment thereon; and (d) carry out such action plan in accordance with its
terms.
-
- COFOPRI shall ensure that RPU undertakes under the Collaboration Agreement to: (a) put into
effect, no later than April 30, 1998 adjustment.s to all of its user fees on the basis of long-run
marginal cost; (b) thereafter adjust the fees on the basis of a price index satisfactory to the Bank; and
(c) collect such fees in a timely and adequate manner.
- During the mid-term review, the Bank, COFDPRI and RPU will exchange views on COFOPRI' s
institutional future and RPU's assumption, after project completion, of COFOPRI's functions and
operations within 90 days of the mid-term rev:iew, COFOPRI will submit to the Bank an action plan,
satisfactory to the Bank, on COFOPRI's institutional future and RPU's assumption of COFOPRI's
functions and operations.
- COFOPRI shall have independent auditors acceptable to the Bank and under terms of reference
satisfactory to the Bank audit the procurement procedures under which the employment of
consultants and consulting fmns contracted under the sub-component "Implementation of the
National Formalization Plan" is realized. These audits will take place at the time that 30, 60 and 100
percent of the consultants will be contracted.
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H. Readiness for Implementation
[X] The engineeringdesign documents for the first year's activities are complete and ready for the
start of project implementation.Not applicable.
[X] The procurementdocuments for the first year's activities are complete and ready for the start of
project implementation.
[X] The Project Implementation Plan has been appraised and found to be realistic and of satisfactory
quality.
[ ] The followingitems are lacking and are discussed under loan conditions (Section G):
I. Compliancewith Bank Policies
[X] This project complies with all applicable Bank policies.
[ ] [The followingexceptions to Bank policies are recommended for approval: The project
complies with all other applicable Bank policies.
Task TeanmMeaderffas>/anager
Elena Panaritis
(LCSPR-PS)
AcX Sector Manager/Director
JoAHnderwood
Poverty Reduction and Economic ManagementUnit (LCSPR)
Latin America and the Caribbean Region
ti
ountry Manager/Director
Ernesto May
Bolivia, Paraguay,Peru Country ManagementUnit (LCC6C)
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Rights
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Project
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PERU: Urban P:roperty Rights Project
Project Organization
ianaget
rojectm
w
1 17CAdViXryt-ComAdmiffZY
Administration
woQlr
&
PlanninC
Operation
Manager
COFOF'RI
Other
Components
Coordinator
'
I
Legal& Institutional
JFramework
/
Coordinator
i
\
/
\
_
[
Procurement
| Informat;;on
Technology
Finance
and
Accounting
Other
Components
Assistant
Titling
Manager
Field
Manage
r
Pnroperty
Issuance
Coordinator
COFOPRI
COFOPFII
Manager
Registration
Manager
System
Manager
~ ~ ~ ~~~~~
PPI IRPI ~~~~~~National
~~~~~~~~
Formalization
PlanIntemational
Advisors
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Annex 1
Peru Urban PropertyRights Project
Project Design Summary
NarrativeSummary
Sector-relatedCASGoal:
Key PerformanceIndicators
Monitoringand Evaluation
CriticalAssumptions
(Goalto BankMission)
To reduce poverty in urban
areas.
1. Increased private and public
investment in the urban
sector.
2. Increase in economic
growth
ESW reports (periodic)
Institutional Reforms (2nd
generation reforms)
contribute significantly to
the equalization of welfare
distribution.
(Objective to Goal)
1. Increased property values.
2. Increased property
transactions.
3. Increased access to credit.
4. Increased investment in
property.
5. Increased share of female
owners.
1 to 4. Household survey
and land assessment (subcomponent 1.3)
Economic growth will
continue.
Project Development
Objective:
To create a system assuring
formal and sustainable rights
to real property in selected
predominantly poor human
settlements in larger urban
areas, where property rights
are largely informal. Greater
security of ownership
enhances the welfare of the
owners.
Outputs:
1. Well-functioning urban
property-based markets
as a result of legal,
regulatory and
institutional reforms.
2. Effective and sustainable
organizations (RPU,
COFOPRI) created to
establish and maintain an
active registration and
adjudication system
nationwide.
1.1
(a) Suspension level (share of
properties not registered)
not higher than 5%.
(b) Contingency level (share of
registered properties not
titled) not higher than 20%,
reducing to 15%.
2.1
(a) Progress on RPU strategic
plan.
(b) RPU unit costs must not be
higher than $15 for first
registration, $15 for
mortgage registration.
(c) RPU: level of client
satisfaction not lower than
the result of the first client
survey.
(d) Average duration of first
registration (COFOPRI +
RPU) not more than 10
days.
(e) Average duration of
mortgage registration
(RPU) not more than 10
I
days.
5. RPU registry records.
1.1 COFOPRI and RPU
records.
2.1 COFOPRI and RPU
client survey and
accounting and
management records
Political support for
institutional reform will be
sustained, also in
complementary.
(Outputs to Objective)
There will be an increasing
supply of formal credit.
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Narrtiv Sumr
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KeyPefomac
Indicator
tMo itringan Evauaio
Criica As0sm tions0
(f) Average duration of a lease
RPU-not more than 10
days.
3. Rapid conversion of
informal urban property
into formal secure
property.
2.2
(a) COFOPRI unit costs rmust
not be higher than $35 for
issue of title.
(b) COFOPRI level of client
satisfaction not lower than
the results of the first client
survey.
2.2 COFOPRI and RPU
client survey and
accounting and
management records
2.4 Numbers of managers,
registrars, technical staff
trained.
3.1
(a) Average number of days of
processes P0, P1, P2
should not increase beyond
the present level.
2.4 COFOPRI and RPU
project records.
3.1 COFOPRI and RPU
records.
3.2 National Formalization
Plan targets:
The number of properties to be
targeted:
1998 May-Dec. 215,00()
1999
398,000
2000
369,000
2001
28,000
The number of properties to be
registered:
1998 May-Dec. 204,000
1999
378,000
2000
350,00G
2001
27,00C
The number of titles to be
registered:
1998 May-Dec.
163,000
1999
321,000
2000
298,000
2001
23,000
Project Components/Sub- Inputs:(budgetfor each
components:
1. Urban Property Market
Reforms:
1.1 Legal & institutional
framework;
1.2 Investment promotion;
1.3 Social & economic
monitoring.
component)
1. US$ 1.16 million
1.1 US$ 0.34 million
1.2 US$ 0.28 million
1.3 US$ 0.54 million
(Componentsto Outputs)
- Progress reports (quarterly)
- Disbursement reports
(quarterly)
Vested interests opposing
the reform will be
contained.
Political support for the
reform will be maintained.
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Country:
Peru
NarrativeSummary
Key PerformanceIndicators
Monitoringand Evaluation
CriticalAssumptions
The autonomy and
independence of COFOPRI
and RPU will be
maintained.
2. National Organizations
(RPU, COFOPRI) for
Urban Property:
2.1 Strengthening of RPU
administration;
2.2 Strengthening of
2. US$ 13.07 million
2.1 US$ 5.17 million
The Government will
continue to approve legal
and institutional reforms.
2.2 US$ 1.34 million
RPU will continue to
developits managerialand
COFOPRI
administration expansion of
COFOPRI nationwide;
2.3 Institutional
development of
COFOPRI & RPU;
2.4 Human Resource
Development;
2.5 Project Management
registry capacity.
COFOPRI and RPU
continue to abide by
formalization principles,
including use of simple,
robust and appropriate
technology.
2.3 US$ 1.16 million
2.4 US$ 1.27 million
2.5 US$ 4.13 million
._______________________
3. Conversionof Existing
Informal Property:
3.1 Collection & analysis of
ownership-related
information;
3.2 Implementation of
National Formalization
Plan.
Obstacles to formalization
outside Lima are not
unexpectedly high.
3. US$ 52.06million
Agenciesproviding
3.1 US$ 0.44 million
information continue to
cooperate with COFOPRI.
3.2 US$ 51.62 million
COFOPRI and PETT agree
on standards for dealing
with common boundaries.
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Project
Title:Urban
Property
Flights
Annex2
Peru Urban Property Rights Project
Project Description
Project Component 1: Urban Property Market Reforms - US $1.16 million (total cost of
component)
This component will support a series of legal, administrativeand regulatory reforms to
sustain and deepen the existing market reforms. These reforms promote a formal urban
property market and are based on Laws 495, 496 (1988) and 803 (1996) that have established
the principles of formalizationand have been the importantmilestones governingthe
formalizationprocess. Three sub-componentssupport this activity. The first focuses on the
accessibilityof propertyrights, the second on their usefulness, and the third deals with
monitoring issues that extend to the overall project. All three activities contribute to a
feedback mechanismto ensure project progress and effectiveness during implementationin
reducing legal, administrative,and regulatory bottlenecks.
1.1: Legal and Institutional Framewvork(enhancingaccessibility) - US $0.34 million
The objective of this sub-componentis to improve the process of formalizationby decreasing
transactions costs. This implies a continuousimprovementin legal, administrativeand
regulatory issues in relation to (a) property delineation,so that new types of informalityare
captured; (b) land administration- dispositionof new urban public properties; (c) maintaining
low transactions costs so that transactions do not revert to informality; conflict resolution.
Informalitycan change over space ancltime, and rules need to be adapted accordinglyin
order to bridge the gap between formal and informal markets. The output of this activityis to
propose, through COFOPRIand RPU, new legal, administrative,and regulatory solutions.
The exercise is based mainly on client feedback (i.e. the number of contingencies and
suspensions that get collected after each formnalizationfield campaign) monitoring of the
speed, ease, and cost of formalization(registrationand titling). This methodology was built
on the experience of the RP Pilot project of 1992/94,and on COFOPRI's and RPU's work
during 1996/97. The National Formalization Plan has incorporated mechanisms through
which COFOPRIand RPU will identify new problemsin the formalizationprocess.
Internationaland local consultants willibe engaged on a regular basis to help develop those
reforms.
1.2: Investment Promotion (enhancingmarket use of property rights)- US$0.28 million
This sub-component,studies the opportunities for enhancing the market use of the property
rights conferred through COFOPRIand RPU. The aim is to identify the bottlenecks caused
by legal shortcomings,other than those involved in the delineation of the formal property
rights (addressed at 1.1), and which could result in missed market opportunities.
Real property is the principal asset of most families. Because of its informal nature, it is
virtually impossible to apply this investment in the formal sector. The ability to keep
property in the formal sector depends on the incentives; i.e. subsequent transactions over
formalized property will be registered only if the property owners recognize benefits.
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To this end, the sub-componentwill diagnose the legal and regulatory framework which
guides asset disposition,focusing directly on: (a) the obstacles and transactions costs that
arise from the laws (in the civil code tradition) that govern property ownership and disposal,
includingjoint ownership rights (e.g. marriage, or property acquired in common outside of
marriage),notary public legislation, etc. and (b) the cost of providing formal credit (i.e. the
functioning of the market within the existing legal framework). Also the sub-componentwill
identify any additional information that needs to be provided by the RPU to the financial
institutions. Local consultants will be engaged in the implementation of this component.
International experts will also be involved.
1.3: Social and EconomicMonitoring-US$0.54 million
The aim of this sub-componentis, first, to learn more about the economic and social benefits
of property formalization under the project and, second, to identify obstacles and aids to
realizing the project's objectives. First, in order to gauge the impact of this project (and for
the benefit of future projects), the sub-componentwill provide some qualitative and
quantitativeinsights into the variety of economic and social, private and public effects that
can be hypothesizedto result from property formalization(including private wealthenhancing effects, fiscal effects, externalities such as impact on migration, and effects on
family and community life). Second, the sub-componentwill provide feedback (which can
lead to corrective actions within the project) by: verifying that the private costs of using
COFOPRI and RPU for property-relatedtransactions do not grow; identifying some of the
obstacles (such as taxes, regulation, or information deficiencies) which raise the cost of using
formalized property in markets; and investigating whethercommunity or government action
can alleviate some of these obstacles.
The project will develop a conceptual basis (and identify correspondingmeasures) for
understandinghow property markets function and the economic and social impact of property
formalization. The sub-componentwill finance household surveys (one each at the
beginning and end of the formalizationprocess), land value assessments (one each at the
beginning and end of the project), small specific studies (e.g. to understand the project's
impact on family and community life), and client surveys for COFOPRI and RPU
(measuringtransactions costs and levels of satisfaction)to collect information. The project
would produce research reports covering quantitative measurement of economic costs and
benefits, as well as more qualitative assessmentsof social impacts. The project would also
produce and publicize regular client-satisfaction surveys,whose results would be fed back
into the project.
Consultants(probably a local research group and local survey firms) whose work would be
overseenby a Steering Committee (Observatory)of local and foreign specialists would
implement the sub-component.
Project Component2: National Organizations(RPU - COFOPRI) for Urban Property
U$13.07 million (total cost of component)
This component is designed to strengthen the organizationsresponsible for the national
formalizationprocess, RPU and COFOPRI,in their administrativeand institutional
capacities, including training and human resource management. The followingfour subcomponentswould support this process:
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2.1: Strengtheningof RPU Administration-US$5.17 million
The objective of this sub-componentis to provideRPU with technical assistance that to
strengthen its registration system in order to meet the objectives of the National
Formalization Plan. RPU is built on an innovative,active system of registrationthat has
being applied for both urban and rural properties. As a relatively new registry, RPU is now
in the process of completely changing its character from its initial beginnings as a small-scale
registrar of newly titled properties to a large-scalemodern registry primarily involved in
subsequent registrationservices for property owners. It will register commercialtransitions
and provide public and commercialinformation. RPU will play a major role in the
formalization of urban properties, and will have a long-term role as an agency of the national
government.
Currently RPU operates only in Lima, Nazca, Caiiete and Huacho, but as the implementation
of the project takes place, RPU will open two additionaloffices in metropolitan Lima and
new offices in Arequipa, Chiclayo, C'himbote,Huaraz, Iquitos, Piura, and Trujillo.
The activities that will take place will heavily involve international expertise and will review
and develop methodologiesand proceduresin the following areas: (a) the long-term strategy
of RPU (addressing questions such as: sustainability,unification with the traditional public
registry, the establishment of the RegistryTribunal, aspects of quality control after the first
registration,etc.); (b) informationtechnologyin relation to mapping standards, management
systems, informationtransfer from RPI to RPU within the formalizationprocess, etc; (c)
customer relations and services (CRIS)policy. This work will be done in conjunction with a
similar review in COFOPRI.
2.2: Strengtheningof COFOPRIAdministration- Expansion of COFOPRINationwide.
US$1.34 million
The objective of this sub-componentis to strengthen COFOPRI's administration and scale it
up to an optimal capacity in order to successfullyprocess the targeted objective of
formalizing 960,000 properties with RPU in the selected eight urban areas. COFOPRI during
its first 18 months of operation with ]RPUhas titled and registered 200,000 properties in Lima
and Nasca.
The activities designedin this sub-componentwill continue much of the work that has
already started during the preparationphase, and are designed to build on existing
accumulatedexperience. Internationalexperts will be contracted to provide technical
assistance to improve the current processes, and propose production of manuals. More
specifically, the activities will focus on: (a) analyzingthe appropriate use of information
technology in COFOPRI so that it is robust, upgradable and not excessive. This analysiswill
be carried out in associationwith a similar study for RPU; (b) rationalizing, integrating and
synchronizingthe information technologyused by COFOPRIand RPU; (c) reviewing the
managementreporting systems and preparing a proposal to implement a Management
Information System; (d) undertaking necessaryoffice refurbishment; (e) producing the base
mapping required and any additionalcadastral plans needed for the formalizationof
properties; (f) developing methods to upgrade the equipmentof the cartographicunit.
2.3: Institutional Development of COFOPRI and RPU - US$1.16 million
The objective of this sub-componentis to develop mechanisms for institutional development,
through procedures and arrangements(including legal reforms), which sustain the viability of
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COFOPRIand RPU as efficient, independentagencies. COFOPRIand RPU derive their
current level of efficiency and effectiveness in part of them being autonomous agencies
subject to more flexible procedures than the average government ministry. COFOPRI and
RPU also currently enjoy the direct support of the President of Peru. However, such agencies
are far more vulnerable than governmentministries and are less protected by the Constitution
and rapid political change.
This sub-componentis aimed to make COFOPRIand RPU effective and accountableand to
make RPU sustainable in the long-tenn. To this end activities are designed to: (a) develop
and establish accountabilitymechanisms with the Government, customers and the public; (b)
study and propose an optimal degree of budgetary and administrativeautonomy for the two
agencies; (c) create a mechanism of client responsiveness,including consultations with the
public on reforms rights, etc; (d) study how the two registries (RPU and RPI) will function in
the future, and propose an action strategy; (e) define the long-term future of COFOPRI.
During the mid-term review, activities (d) and (e) will have produced a policy view regarding
the future of the two agencies in more solid terms. Regarding COFOPRI the study will
define what functions will be maintained under what organizational structure and
configuration. A timetable with an action plan for implementing the study results will also be
a result of the study.
2.4: Human Resource Development- US$1.27 million
The objective of this sub-componentis to develop knowledge management in COFOPRIand
RPU, as well as develop a human resources management strategy for the two organizations.
Regarding the former, because the system used by COFOPRI and RPU is relatively new, it is
important to solidify the existing knowledge base. Therefore, two major training programs
are proposed, for the registrars, managers and technical staff, in order to introduce and
transfer specific knowledge on registry systems, mapping surveying, as well as management.
The first program will occur in January 1999 and the second in January 2000. Training
consists of local training of managers and of some internationaltraining programs. Local
training is proposed to start immediately after the formalizationstaff has been contracted.
The Advisory Committee will serve as an external reviewer to the curricula and programs
suggested.
Regardingthe latter, based on the existing experience of the two agencies, consultants have
already being contracted to develop recruitment methods and procedures. This activity will,
like all the other activities on components 1 and 2, continue to build on already existing work
done by both agencies.
2.5: Project Management - US$4.13 million
Project Component 3: Conversionof Existing Informal Property - US$ 52.06 million
(total cost of component) This component aims at the rapid conversion of informallyowned
property to securely delineated property rights. This component, which produces the central
output of the project (registeredproperties), requires the documentation of all formalization
processes, the recruiting of staff and the executionof field campaigns. Two sub-components
support this activity. One focuses on the collection of necessary data for the processing of
title and registration and its documentation,and the other on the actual fieldwork. The basic
premise of this activity is that of large scale titling and registration (in order to take advantage
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Project
Title:Urban
Property
lights
of economies of scale in production and the generation of a critical mass of beneficiaries).
Sporadic individual registrationis also built into the registration and titling systems, so that
COFOPRI has the capacity to respond to individual demands.
3.1: Collectionand Analysis of Owinership-RelatedInformation -US$0.44 million
The objective of this sub-componentiLsto allow COFOPRIto collect, review, investigate and
substantiateproperty-related data. It is critical that the methodology developed by COFOPRI
can deliver the required information on each property (processes 0 and 1) in a timely and
cost-effectivemanner, but at all times ensuring that the properties formalized are legally
secure and acceptable in the market.
This activity provides technical assistance in implementingthe detailed recommendations
(see Annex A4 of the PPD) of project preparationon how the process may be strengthened to
support the scaling up of the formalizationactivity. To effectively implement the
formalizationprocess, property-relateddata is collected from a number of national
government agencies, municipalities and from individual property owners and occupiers. All
of the relevant information for each property to be formalized has to be collected, reviewed,
investigated and substantiated. This work is undertaken by COFOPRI with process 0,1 and 2
mentioned in part E5 of the main text.
Specifically the activity will finance: (a) the completion of the computerized process
management control system (PMS) th,atdocuments and computerizes processes 0, 1, and 2;
(b) a series of internal and external technical audits that will be carried out on data collected
and computer storage of the data during the National Formalization Plan. These will ensure
that the information gathered and stored by COFOPRIis reliable and consistent.
3.2: Implementationof the National FormalizationPlan - US$51.62 miillion
The objective of this sub-componentis to register 960,000 properties and 805,500 titles in
eight designated urban areas in Peru. This is where most of the project activity will take
place. The activity finances: (a) salaries of the contracted employees to implement process
0, 1 and 2 in the eight urban areas. The project will obtain about 10,500 person months for
COFOPRI and 4,400 person months for RPU; (b) goods; including computers and the
establishment of provincial offices; (c) mapping services and mapping products; (d) base
mapping; (e) development of graphical indices, and computer programming.
The employees financed by this sub-componentwill be hired under private labor law, with
specific time-bound contracts. The miethodologyand strategy of selectingthe urban areas
and the process by which the work will take place were developed in detail during project
preparation (see Annex A5 of the PPI)). The cities representing these urban centers, in
addition to Lima, are Arequipa, Chiclayo, Chimbote, Huaraz, Iquitos, Piura, and Trujillo.
These seven urban centers were selected through a careful process detailed at the PPD. The
process used INEI statistics and data from SUNARP and COFOPRI field teams, weighted by
criteria taking account of concentrations of populations in informal settlements, and other
measures indicating the likely ease and cost of formalizationand the expected poverty
impact.
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Annex 3
Peru Urban Property Rights Project
Estimated
Project
Costs
Project
Component/Sub-component
LegalandInstitutional
Framework
Investment
Promotion
Local
Foreign
Total
----------------------US$million-------------------0.33
0.27
-
-
0.33
0.27
Socio-Economic
Assessment
Strengthening
ofRPU
Strengthening
ofCOFOPRI
Administration*
Institutionalization
ofCOFOPRI
andRPU
Human
Resource
Development
Collection
andAnalysis
ofOwnership-Related
Information
Implementation
oftheNational
Formalization
Plan
0.52
3.09
4.41
0.78
0.66
0.31
42.05
1.66
0.80
0.33
0.56
0.13
5.80
0.52
4.75
5.21
1.11
1.22
0.44
47.85
TotalBaseline
Cost
52.42
9.28
61.70
1.63
1.91
0.67
0.39
2.30
2.30
55.96
10.34
66.30
Physical
Contingencies
Price
Contingencies
TotalProlectCost
*
Includes
Project
Management
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Annex 4
Peru Urban PropertyRights Project
Cost Benefit Analysis Summary
Present
ValueofFlowsfromDifferent
Points
ofViews
Million
1998
US$
a
COFOPFRI
LOTOWNERS
GOVERMENT
OTHERS SOCIETY
Benefits
Userfees
Increase
in valueoflot
Increase
in consumer
surplus
Costs
Project
costs
Taxes
Subsidy
toCOFOPRI
Premium
onforeign
exchange
Deadweight
loss
NetBenefits
3
(3)
0
1,760
0
(44)
(10)
(44)
(3.5)
51
0)
1,760
0
13
0
(51)
(0.5)
1,753
(38)
(11)
0
(0.5)
(11)
(11)
1,704
Totalsmay not addup due to rounding.
Main Assumptions:
The increase in value of lots as a result of tilling will be approximately the observed increase in recently titledllots,
namely $25 per square meter.
COFOPRI will be able to title one million lots under the project.
1. Cost Benefit
Under the traditional system, property tenure for intended project beneficiaries has proven uncertain.
Improvementin security, through formalization,has proven costly and out of the reach of most
people. Some families have waited for over 30 years to register in their name the land they own de
facto.
Greater security of ownership would bring,economic benefits deriving from greater investment in
land (for instance, better building materials or a second floor) and an increase in transactions such as
sales or use of property in mortgages. These improvementswould be reflected in higher property
values. Estimates from a pilot study suggest that titling increases property values, on average, by
about $25 per square meter, or about $2,500 per lot (the average size of a lot is 100 squared meters).
Over the life of the project, the present value of the incrementalchanges would amount to about
$1,760 million, as shown in the table above. Lot owners would not keep all of the increase in the
value of their properties,-as they would have to pay fees and incremental taxes. The present value of
the fees would be about $3 million and the present value of the taxes about $3.5 million, for a net
gain to lot owners of about $1,750 million.
The fiscal impact of the project is expectedto be negative, as the government would bear the costs of
most of the formalizationprocess, that is, the government will pay for the project. Local and central
governments would recover about $13 million in incrementaltaxes (about $3.5 from property taxes
and $10 from sales taxes and import duties paid by COFOPRI on the purchase of goods and
services). Taxes would be lost due to the premium on foreign exchange, amounting to $0.5 million,
for a negative fiscal impact of $38 million. Finally, there would be a deadweight loss in the
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incremental taxes needed to cover the negative fiscal impact amounting to $11 million. This
deadweight loss would be spread throughout society and therefore was assigned to the column
"Others" in the table above.1
The total social net present value of the project would be given by the column labeled "Society"
and would be about $1,704 million, equal to the increase in the value of the lots, minus the costs
of the project, minus the premium on foreign exchange, minus the deadweight loss.
2. Risk Analysis
The project aims to issue about one million titles. As a result of the decrease in uncertainty
stemming from security of tenure, the value of lots is expected to increase. The total costs of issuing
the titles are about $66 per title, or about $66 million for the entire project. Let us assume a worstcase scenario, that all of the costs are fixed. Two things can happen that can turn the project's NPV
negative: COFOPRI does not issue a million titles, or the incremental gain in the value of the lots as
a result of titling is less than $25.00 per squared meter. For the project's NPV to be negative,
COFOPRI would have to issue less than 40,000 titles. Only a major catastrophe could possibly result
in such an outcome (an earthquake, a revolution, a political assassination, etc.) as COFOPRIhas
issued 200,000 already. We, therefore, do not consider issuing less than 40,000 titles under the
project as likely outcome.
The other possibility is that the incremental value of the lots turns out to be less than $25.00 per
squared meter. For the NPV to be negative, the incremental value of the lots would have to be less
than $0.66 per squared meter, if one million titles are issued. We do not see that as a possible
outcome either, as the standard error of the estimate of the increase in value was 5.9. Therefore, the
regression estimates indicate that the true value of the parameter falls within $7 and $42 with a 99%
certainty. The probability that the incremental income is only $0.66 per squared meter is virtually
non-existent. Of course it could still happen, but such outcome would be extremely unlikely.
Assuming that the increase in the value of land turns out to be $7 per square meter, or three standard
deviations below the mean (probabilityless than 1%), as long as COFOPRI issues more that 95,000
titles, the project's NPV would still be positive.
3. ConceptualFramework
The conceptual frameworkfor economic benefits can be depicted as follows. Before titling, there are
two markets for land, one for titled land and one for untitled land, as shown in figure 1. The supply
of titled land is OQt, and the supply of untitled land in Qt+U- Qt . The market price of titled land is Pt
and the market price of untitled land is Pu. The demand curve for untitled land always lies below the
demand curve for titled land because purchasing the right to occupying untitled land is riskier than
occupyingtitled land. The absence of a title acts as a tax on untitled land in the sense that it drives a
wedge between the price of titled land and the price of untitled land. The "tax" on untitled land,
however, differs from an ordinary tax in one importantrespect: no one collects the "tax." The size of
the tax is equal to the transaction costs of obtaining a title, as certainty of tenure can be obtained with
a clear title.
1Following Harberger, we assumed that the deadweight loss would be about 30% of the fiscal impact (see Belli, et
al, Handbook on Economic Analysis of Investment Operations).
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ProjectTitle: UrbanProperty
Rights
After titling, the supply of titled land will increase as shown in figure 1, from OQt to OQt+U
and hence
the price of titled land is likely to go down. At the same time, the demand for previouslyuntitled
land will go up, as titling will effectively remove the "tax." The net result will be to increase the
price of untitled land and to decrease the price of titled land. The new equilibriumprice of titled land
will become Pe.
Owners of titled land will see the value of their land reduced by the difference in price (Pt - Pe) times
the amount of land that they own. This will be a net loss for owners of titled land, but not a net loss
to society because it will represent a gain to potential purchasers of titled land. The net gain to
society from the reduction in the price of tit]ed land will be the increase in consumer surplus. We did
not attempt to measure ex ante this benefit, but will attempt to measure it ex post.
Holders of untitled land will receive two benefits, a transfer from the "owner" (i.e., the Governrent)
of titled land and a benefit from the removal of the "tax." The transfer part of the benefit is given in
figure 1 by the area PU(Qt+U
- Qt) under the demand curve for untitled land. This benefit to the owners
of untitled land will not represent a benefit to societybecause it will be obtained by the holders of
untitled land at the expense of the Governmentof Peru. This amount will constitute a transfer from
the Government to the project beneficiaries.
The other benefit to holders of untitled land will be the increase in the value of the land that they
occupyresulting from the act of titling and the attendant reduction in the uncertainty of tenure. The
benefits accruing to untitled landholderswill be equal to the increase in price of untitled land (P. - Pu)
as a result of titling, times the amount of land that they own. Since this increase stems from the
elimination of the "tax" on untitled land, it represents a true benefit to society. In the case at hand,
this benefit will be enormous, given the trermendoustransactioncosts of obtaining a title in Peru.
Based on econometric estimates of the increase in the price of lots after titling in a pilot project, the
benefit can be expected to be on the order of $25 per square meter which, for an average-sizedlot
estimated at 100 square meters, will be on the order of $2,500. Consideringthat the market price of
an average lot is about $2,500, titling is likely to double the value of the lots. It is importantto
realize, however, that this benefit will be a capital gain, not cash in the pocket, and the gain will not
be realized until the beneficiaries sell or mortgage the lot.
Project beneficiaries fall on the borderline between the poor and the non-poor. The project, then, will
improve the asset position of about a million families.
land
to
purCh.e.r.
ot
tfMed
land
P__
___
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Annex5
Peru Urban Property Rights Project
Project Monitoring Indicators
The "mandatory"indicators of Table A5.1 are those where the project specifies targets to be met.
Information indicators are those where no a priori quantitativeexpectations can be set. Tables A5.2
and A5.3 provide supplementaryinformation.Table A5.2 contains details of the main project
outputs, registered properties (lots) and titles, by year and by urban area, along with a definitionof
targeted suspensionand contingencylevels. Table A5.3 supplies estimates of expected fee collection
during the life of the project.
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Component
Stage
indicatordescription
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ProjectTitle: UrbanPropertyRights
Table
A5.1:PERU
URBAN
PROPERTY
RIGHTS
PROJECT:
PROPOSED
INDICATORS
Indicator
amount Frequency
Source
A. MANDATORY
INDICATORS
(Targets
in Logframe)
PDO Output
2 Totalnumber
ofproject
properties
(lots)registered
(P1)
PD0 Output
2 Totalnumber
of project
titlesregistered
(P2)
P00 Input2
COFOPRI
costoffirsttitlenothigher
than
PD0 Input2
RPUcostoffirstregistration
nothigher
than
PD0 Input2
RPUcostofmortgage
registration
nothigher
than
PD0 Input2
RPUcostofsale(compraventa)
registration
nothigher
than
1.1 Output
1 Suspension
level(share
of properties
notregistered)
nothigher
than
1.1 Output
1 Contingency
level(share
ofregistered
properties
nottitled)
nothigher
than
1.2 Output
1 Progress
ondifferent
investment
promotion
actions
1.3 Input2
Progress
ondifferent
socio-economic
monitoring
studies/surveys
2.1
Input2
Progress
onstrategic
planforlongtermsustainability
of RPU
2.1 Input2
Average
duration
offirstregistration
(COFOPRI
+ RPU)
notmore
than
2.1
Input2
Average
duration
ofmortgage
registration
(RPU)
notmore
than
2.1
Input2
Average
duration
ofcompraventa
(RPU)
notmore
than
2.3
Input2
Progress
ondifferent
institutional
development
elements
2.4
Input2
Numbers
trained
3.2
Output
1 Totalnumber
of inputtargets
(lots)(P1)
3.2 Output
2 Totalnumber
oflotsregistered
(P1)
3.2 Output
2 Totalnumber
oftitlesregistered
(P2)
959690
(seeTable
2) Project COFOPRI
records:
seeTable
2
805527
(seeTable
2) Project RPUregistry
records:
seeTable2
$35
Annual COFOPRI
accounting
records
$15
Annual RPUaccounting
reoords
$15(re-confirm) Annual RPUaccounting
records
$15(re-confirm) Annual RPU
accounting
records
SeeTable
2
Annual COFOPRI
records:
seeTable
2
SeeTable
2
Annual COFOPRI
records:
seeTable
2
Timetable
TimetableCOFOPRI
project
records
Timetable
TimetableCOFOPRI
project
records
Timetable
TimetableRPUproject
records
50days
Bi-annualCOFOPRI
records
10days
Bi-annualRPUrecords
10days
Bi-annualRPUrecords
Timetable
TimetableCOFOPRi,
RPUprojedrecuOrds
Numbers,
timetable TimetableCOFOPRI,
RPUproject
records
SeeTable
2
Annual COFOPRI
records
SeeTable
2
Annual RPUrecords
SeeTable
2
Annual RPUrecords
B.INFORMATION
INDICATORS
(nottarget)
PDO Output
2 Share
of male
andfemale
owners
innewly
registered
titles
0
Outcome Change
inproperty
values
0
Outcome Number
ofsubsequent
registry
acts(transfers,
sales,
inheritance,
donations)
1.1 Output
1 Number
ofsuccessful
arbitration/mediation
cases
as%oftotalcases
1.1 Output
1 Number
ofsuccessful
adjudication
cases
as%oftotalcases
1.2 Outcome Number
ofmortgages
registered
1.2 Outoome Totalvalue
ofnewRPmortgages
atthetimeof registration
1.2 Outcome Creation
of newfinancial
products
2.1
Input
2
RPU:
level(verbal
&written)
ofclient
complaints
andsatisfaction
2.2
Input2
COFOPRI:
level
(verbal
&written)
ofclientoDmplaints
andsatisfaction
2.3 Outcome Invasions
3.2 Output
1 Totalnumber
of input
targets
(lots)(P1)bycity
3.2 Output
2 Totalnumber
of lotsregistered
(P11)
bycity
3.2 Output
2 Totalnumber
oftitlesregistered
(P2)bycity
Totaluserfeescollected
byCOFOPRI
Totaluserfeescollected
byRPU
%
Percent
Number
%
%
Number
$
Number
Number
Number
Number
Number
Number
Number
$
$
NOTES
PDO:project
development
objective
Input2:'final'input
Output
1:intermediate
output
Output
2:finaloutput
Outcome:
hoped-for
project
impact
Annual RPUregistry
records
2surveys Land
ValueAssessment,
Household
Survey
Annual RPUregistry
records
Annual COFOPRI
records
Annual COFOPRI
records
Annual RPUregistry
records
Annual RPUregistry
records
Annual COFOPRI
records
Annual RPU/COFOPRI
clientsurvey
Annual RPU/COFOPRI
clientsurvey
Annual COFOPRI
records
Annual COFOPRI:
seeTable
2
Annual RPU:
seeTable
2
Annual RPU:
seeTable
2
Annual COFOPRI
records:
seeTable
3
Annual RPUrecords:
seeTable
3
Status/action
or agreement
required
Confirm
atendoffirstyear(RPU
strat.study)
Confirm
atendoffirstyear(RPU
strat.study)
Agree
timetable
byendJuly1998
Agree
timetable
byendJuly1998
Agfretinira6bue
byendJuly
1998
Agree
timetable
andprogram
byendJuly1998
ProjectAppraisal
Document
Country:Peru
Page: 32
ProjectTitle: UrbanProperty
Rights
TableA5.2:PERUURBAN
PROPERTY
RIGHTS
PROJECT:
INPUTANDREGISTRATION
TARGETS
Row
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Cty
Input
Targets:
Properties
(Lots)
Lima
Metropolitana
Piura
Chidayo
Chimbote
Arequipa
Trujillo
Iquitos
Huarez
Total
Registered
Properies
(Lots)
[1]
Lima
Metropolitana
Piura
Chiclayo
Chimbote
Arequipa
Trujillo
Iquitos
Huarez
Total
Registered
Titles
[2]
LimnMetropolitana
Piura
Chiclayo
Chimbote
Arequipa
Trujillo
Iquitos
Huarez
Total
31 Input
Targets:
Propertes
(Lots)
32 Target
properties
pre-project
33 Properties
targeted
inproject
(flow)
34 Properties
remaining
unregistered
(flow)
35 Suspension
level
36 Cumulative
properties
targeted
(stock)
37
38
39
40
41
42
43
44
Cumulative
unregistered
properties
(stock)
Suspension
backlog
Registered
Properties
(Lots)
[1]
Properties
registered
pre-project
Properties
registered
inproject
(annual
flow)
Properties
remaining
untitled
(flow)
Contingency
level
Cumulative
properties
registered
(stock)
45
46
47
48
49
50
CumulatNe
unregistered
properties
(stock)
Contingency
backlog
Registered
Titles
[2]
Tities
registered
pre-project
Titesregistered
inproject
(annual
flow)
Cumulative
titlesregistered
(stock)
Oct1997to May
1998to
Apr.
1998 Dec.
1998
1999
288248
135000
40000
210000
81000
63000
17495
40000
43900
2W0
140200
42900
49400
42000
2001
Total Ofwhich
ProjectTotal
(May
1998
to2001)
20400
773448
163900
112400
49800
101395
83400
25700
5900
1315943
485200
163900
112400
49800
83900
83400
25700
5900
1010200
460940
155705
106780
47310
79705
79230
24415
5605
959690
7800
305743
215000
397900
63000
25700
5900
369100
273836
0
0
0
16620
0
0
0
290456
128250
38000
0
0
38000
0
0
0
204250
199500
76950
59850
0
41705
0
0
0
378005
133190
40755
46930
39900
0
59850
24415
5605
350645
0
734775.6
0
155705
0
106780
7410
47310
0
96325.25
19380
79230
0
24415
0
5605
26790 1250146
203231
102600
30400
0
0
30400
0
0
0
163400
169575
65408
50873
0
35449
0
0
0
321305
113212
34642
39891
33915
0
50873
20753
4764
298050
0
0
0
6299
0
16473
0
0
22772
10988
214219
28200
588618
130450
90764
40214
76837
67346
20753
4764
1019746
385386.5
130449.25
90763
40213.5
65849.25
67345.5
20752.75
4764.25
805527
Sources
305743
215000
397900
369100
28200
1010200
= row10
15287
10750
19895
18455
1410
=rows41-33
5%
5%
5%
5%
5%
= rows34133
305743 520743 918643 1287743 1315943
cumul
of rows
32&
33
15287
26037
45932
64387
65797
cumul.
ofrow34
5%
5%
5%
5%
5%
= rows
37/36
290456
204250
378005
350645
26790
959690
= row20
76237
40850
56700
52595
4019
= rows52-41
26%
20%
15%
15%
15%
= rows42/41
214219 418469 796474 1147119 1173909
cumul
ofrows40&
41
76237
117087 173787 226381 230400
cumul.
ofrow42
36%/
28%
22%
20%
20%
= rows45/44
214219
163400
321305
298050
227
605527= row30
214219 377619 698924 996975 1019746
cumul
ofrows48&
49
[1]Based
onasuspension
level(ratio
ofinput
targetproperties
notregistered
toalltargeted
properties)
of5%(i.e.Input
Target
x .95=Registered
Lots)
[2]Based
onacontingency
level
(ratio
of registered
properties
nottitiestoallregistered
properties)
of20%to 12/98
and15%from1.99.
Page:33
Rights
Property
Title:Urban
Project
Document
Project
Appraisal
Peru
Country:
PROYECTADA
RECAUDACION
PROJECT:
RIGHTS
PROPERTY
URBAN
TableA5.3:PERU
AntesdelProyecto
10/97
01/97hasta09197
Hasta1996
hasta
06/98
COFOPRI
Aranceles
Emision
deTitulosPaniculares
deThulos
LotesComerciales
Emision
UUPP
Atectos
Saneamiento
RPU
Aranceles
deTitulos
Inscrpcion
Hootecas
Transferencbas
Solicitudes(promedio)
FlulodeTftulos
Acumulado
07/98
hasta
12/98
el Proyecto
Durante
2,000
05/99
01/99
hasta
hasta
12199
04/99
2,001
0
0
0
0
0
0
0
0
0
0
45
45
0
45
45
0
90
90
0
90
90
0
90
90
0
21
21
6
0
21
21
6
0
21
21
6
36
30
36
8
36
30
36
8
45
35
50
8
45
35
50
8
45
35
50
8
80,000
80,000
Suuesftos
71.50%
deLotesParticulares
Thtulos
0.50°h
LotesComerciales
28.00°h
LotesdeUUPP
6.30%
afecto
LoesdeUUPP
clpago
queseregistran 75.00%h
Lobes
deUUPP
stock) 4.00%
dePredios(del
Transferencias
10.00°h
Solicftudes
(delStock)
%deHipotecas
(delFlujo)
deHipotecas
Transacciones
133,337 96,520 163,400 107,102 214,203 298,050 22,772
213,337309,857 473,257 580,359 794,562 1,092,6121,115,384
116,831
817
45,752
10,294
34,314
9,465
23,663
5.00%h
8,170
76,578
536
29,988
6,747
22,491
7,738
19,345
6.00%h
6,426
153,155 213,106 16,282
114
1,071
1,490
6,376
59,977 83,454
1,435
13,495 18,777
4,782
44,983 62,591
21,188 43,704 44,615
52,971 109,261 111,538
8.00h/o
7.000/
6.00%
1,822
12,852 20,864
de Inoresos
ProveEclon
36,765
24,098
96,392 134,123
Recaudacion
Total
RecaudacionenDolares
(@2.8)
enSoles
107,723
301.,624
10,247
COFOP(95%contrapartida)
RI
COFOP(95%contrapanida)
deUPIS
Saneamiento
RI
RPU (100%contrapartida)
LotesComerciales
contrapartida)
RPU (100%
UUPPqueseRegistran
RPU (0%contrapatida)
Hipotecas
contrapartida)
RPU (0°%
Transferencias
contrapartida)
RPU (0°%
Solicitudes
Totalproyeccion
3,800,466
1,357,309
169,071
5,124
29,412 19,278 48,196 67,061
1,235,304 809,6892,024,222 2,816,573 215,195 7,100,982
245,100 192,783 449,827 730,223 63,762 1,681,694
340,745 278,572 1,059,4162,185,2242,230,768 6,094,725
189,303 154,762 423,766 874,090 892,307 2,534,228
2,539,8681,782,8155,316,351 8,497,2363,546,521 21,682,791
60,383
2,536,065
600,605
2,176,688
905,082
7,743,854
Distribuciondel Inareso
Contrapanlida
COFOPRI
Disponbilidad
RPU
Disponbilidad
1,739,7201,140,3113,317,7954,616,496 352,716 11,167,039
6,968
205105
25,000 16,387 65,546 91,203
775,148 626,117 1,933,0093,789,5363,186,837 10,310,648
3,988,228
73,252
3,682,374
TotalCOFOPRI
TotalRPU
500,004 327,731 1,310,9241,824,066 139,365 4,102,090
2,039,8641,455,0844,005,4276,673,1703,407,156 17,580,701
1,465,032
6,278,822
LotesComerciales
463,239 303,633 1,214,5331,689,944 129,117
Project
Appraisal
Document
Country:
Peru
Page:34
Project
Title:Urban
Property
Rights
Annex 6
Peru Urban Property Rights Project
Summary of Social Assessment
1. Methodologyof SocialAssessment
The Social Assessmentwascarried out in the last three monthsof 1997 and is based on three
backgroundstudies:
El Perfil del Beneficiario(December1997)reported on a household surveycovering 120 Lima
households(more than600 family members)in AsentamientosHumanos(Human Settlements)-formalizedand unformalized--and UrbanizacionesPopulares(HousingAssociations)-unformalized.The reportcovers characteristicsof householdmembers (sex, age, civil status,
education),their employmentand health status,characteristicsof the dwelling,patternsof
householdexpenditure,and participationin socialprograms.
*
A SocioeconomicEvaluation (December1997)used extensive interviewing,including 12 focus
groups(coveringa range of people from informalcommunities),in Lima to identify and
criticallyanalyzestakeholdersin differentsectors,community-levelorganizationsand networks,
and project participatorymechanisms.COFOPRIalso contributedto the identificationof
participatorymechanisms.
C
Criterios para el Estudio de Impacto Socioecon6mico del Proyecto Urban Property Rights
(December1997)developeda methodologyand some baseline indicatorsfor the socioeconomicmonitoringof the project.
The results of these studies were summarizedin the Socio-EconomicAssessment(AnnexA3 of the
ProjectPreparationDocument).This assessmentalso contains a review of the literature on the socioeconomicimpactof titling and registration,in Peru and elsewhere,and developsa conceptual
frameworkfor socio-economiccost-benefitanalysis.
2. TargetPopulation
The ProjectPreparationDocumentidentifiedtarget populations,and projectedthem forwardsto 2001,
using data from 1993 (INEIpopulationcensus of AsentamientosHumanos)and 1997(estimatesof
propertiesin UrbanizacionesPopularesand Cooperativas)as a basis for identifyingthe number and
locationof propertiesto be formalizedunder the project. Paragraphs4 and 5 below describethe target
populationusing estimatesupdated to 1997 on the basis of the PPD data and characterizesthe
populationon the basis of data in the Social Assessment(AnnexA3 of the PPD) and the background
papers to the SocialAssessment(see 1. above).
In 1997,accordingto Table A6.1, Peru had around an estimated 1.4million informalurban properties
(out of a total of almostfour millionpropertiesin all of urban and rural Peru)
Page: 35
ProjectTitle: UrbanPropertyRights
Document
ProjectAppraisal
Country:Peru
TARGET
ANDPROJECT
LOTS
URBAN
INFORMAL
TOTAL
PROJECT:
RIGHTS
PROPERTY
URBAN
A6.1:PERU
TABLE
1993
nearcity TotalAAHH
Incity AAHH
AAHH
Totalpopulation
oflots
LimaMetropolitana
Piura
Chidayo
Chimbote
Arequipa
Trujillo
Iquitos
Huaraz
397.306
65.905
40.778
36.473
49.484
29.734
20.112
5.090
80.940
42.924
21.344
8.053
3.174
13.860
Subtotal8 Projectcities
644.882
170.295
urban
Other
TotalinformalurbanPeru
1997
AAHH
1997
CP
1997
UUPP
478.246
108.829
62.122
44.526
52.658
43.594
20.112
5.090
522.967
118.959
70.300
47.707
57.875
48.553
23.115
5.551
150.000
14.300
14.010
50.000
21.600
20.000
35.000
10.010
10.000
15.120
815.177
895.027
223.320
98.924
914.101
124.158
1019.185
14.369
237689
116.720
1997
Total
1998
Total
722.967
154.859
104.310
47.707
102.875
73.683
23.115
5.551
739.306
158.343
107.585
48.537
105.334
75.695
23.933
5.672
1235.067
1264A06
1999
Total
756.015
161.906
110.963
49.381
107.852
77.761
24.780
5.797
1294.455
163.153
2000
Total
773.101
165.549
114.448
50.241
110.429
79.884
25.657
5.923
1325232
168.537
2001
Total
Annual
Growth
Rates
790.573
169.274
118.041
51.115
113.069
82.065
26.566
6.053
1356.755
174.099
14.369
152.896
157.941
131.089
1387.963
1422.347
1457608
1493.769
1530.854
3680.269
3753.875
3828.952
3900.000
3978.000
1999
2000
2001
urban
Peru
Formal
TotalruralPeru
in Peru
Allproperties
3400.000
toSepOct97to Apr l-ay 98to
cumul.
97
Dec98
97
Project
Inputtargets
perannum
cumulative
Inputtargets
215.000
342.000
397.900
739.900
26.790
378.005 350.645
1115.889 1466.534 1493.324
412.984
120.650
533.634
204.250
737.884
Cumulative
registered
titles
to Oct.97
Registered
titlesperannum
titles
cumulative
Registered
213.337
96.520
309.857
163.400
473.257
Source:
rates:
Table
7,Annex
A5
1993dataandgrowth
28200
369.100
1109.000 1137.200
127.000
lotsperannum
Registered
lotscumulative
Registered
321.305
794.562
1.0226
1.0225
1.0314
1.0174
1.0239
1.0273
1.0354
1.0219
22.772
298.050
1092.612 1115.384
1.0330
Project
Appraisal
Document
Country:
Peru
Page:36
Project
Title:Urban
Property
Rights
formedfrom the invasionof public lands.2 (Therewere 1,632urban Human Settlementsin the 1993
census,and householdshad an average family size of five.)Housingassociationsand cooperatives
(whichprivatelyown land,but where individualpropertiesare not titled) are the other part of urban
informality,accountingfor around a quarterof urban informal propertiesin 1997.The National
FormalizationPlan has selectedeight urban areaswith 1.2 millionpropertiesin 1997 (89 percent of
the total),a figureexpectedto growto 1.4millionby 2001. By the start of the project, some
propertiesin theseareas (mostlyin Lima) will alreadyhave been formalizedunder the previous
activitiesof COFOPRIand RPU, and the project aimsto formalizeas many of the remainderas
possible.The eight areas were selectedusing criteria takingaccount of concentrationsof populations
in human settlementsand emphasizingpovertylevels and the relativeease and expectedbenefitsof
formalization.Reflectingthe historicalpatterns of migrationthat have contributedto urban
informality,around 60 percent of the targetedpropertiesare in Lima, another 30 percent in other
coastal areas(Piura, Chiclayo,Chimbote,and Trujillo),and the rest in the mountains (Arequipaand
Huaraz)and the Amazon(Iquitos).
The targetpopulationcontainsa high proportionof the urban poor and very poor. Poverty is greater
in the Human Settlementsthanin the housing associationsand cooperatives.Human Settlementsare
systematicallylocatedin 1993census (INEI)districts wherepoverty indicators,as measuredby the
lack of "basic necessities"(education,health, housingconditions,adequateemployment,housing
services),are at their highest. Accordingto a project surveyof a sample of informalurban areasin
Lima in late 1997, 26 percent of respondentsaged 17-25had not completedhigh school and 22
percent aged5-16 were not attendingschool for economicreasons. Only 41 percent of housesin
Human Settlementswere made of bricks or cement,only 31 percent had running water,and only 49
percent-had sewage(equivalentfigures for housingassociationsand cooperativeswere 83, 86, and 69
percent).Monthlyper capita expenditurewas $49 for Human Settlementsand $68 for housing
associationsand cooperatives.Very few people had accessto housingloans.
3. Social Assessment: Summary
From a surveyof the principal stakeholders,undertakenas part of a social assessmentin late 1997,it
is clear that securityof propertyownershipis a centralconcern of the informal urban population.
Hence the proposedproject addressesa concern at the core of informal urban life. This concernis
expressedmost stronglyby the inhabitantsof Human Settlements.Housing associationsand
cooperativesmay face propertydisputes withintheir boundaries,but there is less fear than in Human
Settlementsof insecurityof propertyownershipand, sincetheir inhabitantsare better off, the interest
in usingpropertyas collateralis correspondinglygreater.
Peru's urbaninformalsettlementsgrew out of the massiveurban-ruralmigrationthat occurredover
the last half-centuryas a result, first of the collapseof the rural economy,then of the growthof
terrorism.Theprocessof settlingurbanmarginallandtypicallytook the form of organizedinvasionsby
pre-formedgroups,usuallycomprisingpeoplefrom the samearea of emigration.Thus, new informal
communitiesevolved, stronglyreflectingtheir regional origins,bringingwith them theirregional
culture,and oftenmaintainingstronglinks with home. 71 percent of a sampleof COFOPRIclients
were born outsideLima (51 percent from the mountains, 13 percentfrom thejungle, and seven
percenitfrom the coast).But as these communitieshavematured and a second generationhas come of
age, regionalties have graduallyweakened.
2 The Project Preparation Document (Annex A5) provides the basic data that allow us to construct, in Table A6.1, the estimated
1997 populationof urban informal properties in Peru, divided by Asentamientos Humanos, Urbanizaciones Populares, and
Cooperalivas,to project this through to 2001, and to show, for the sake of comparison, project targets for registered lots and
titles.
ProjectAppraisal
Document
Country:Peru
Page: 37
ProjectTitle: UrbanProperty
Rights
The new informal urban communities demonstratedconsiderablecohesion and provided a substantial
amount of self-governmentin the forimof a system of property rights, elements of community
dispute resolution, some community-fundedservices,and a rudimentarylocal economy. The
presence of the state (local or central govermnent)was correspondinglyweak. The "neighborhood
organization" has been the most common vehicle for communityorganization of the acquisitionand
distribution of land and for seeking municipal recognitionand services. Men have typically
dominatedthis form of organization,which usuallyconducts its business on a one-property-one-vote
basis. In some cases, a successfulconclusion to the propertyformalizationprocess has weakened the
neighborhoodorganization.In other cases, the organizationhas evolved in the direction of providing
communitysocial services. In parallel to these organizations,urban settlementshave also seen the
growth of voluntary functional organizations(in the form of communitykitchens, mothers' clubs,
parents associations,sports clubs, etc.), normally run by women and often providinga safetynet to
poorer people. The increasing importanceof functionalorganizationsin recent years has
strengthened the role of women in these communities,and property formalizationis expected to
further consolidate their position.
It is not clear how property formalization(and other aspects of formalizationsuch as regulatory
reforms) will affect the life and the "social capital" of local communities.Property formalizationis
part of a broader process of economicmodernization in which poor, formerly "excluded" people
enter into a closer relationshipwith the state (both local and central government).Will the
associationscreated for ownershipprotection survive formalizationand could they transforminto
organizationsto promote civic engagementor mobilize local and financial resources? Part of the
objective of sub-component 1.3, on social and economic monitoring, is to track the impact of
property formalizationon local communities.
Finally, the social assessment emphasizedsome problems related to the property formalization
process:
*
*
At present RPU registers only land, not building; as the trend to urban densificationcontinues
(through the subdivision of homes or building of multiple stories), registration of buildings
becomes more important.
In some cases, it may prove difficult to identify and register the ownership of communallyowned land and buildings.
The different stages of development of urban settlementsand differences in the degree of
regulation of settlements will require flexibility in the way COFOPRIapproaches formalization
in different areas.
Project
Appraisal
Document
Country:Peru
Page: 38
ProjectTitle: UrbanProperty
Rights
Annex 7
Peru Urban Property Rights Project
User Fees
1. Cost Recovery:User Fees
The Bank and the Govemmenthave agreedfor the UrbanProperty Rightsproject that, in principle,it
is correct to chargethe full cost of a servicewhere users reap the entire benefit of the service.
COFOPRIprovides such as service in titling and RegistroPredial Urbanosuch a servicein
registration.
Recoveryof the costs of these servicesis importantfor severalreasons.
*
*
*
RP,which providesa service to individuals(i.e. a "private good"), should cover its costs as a
matterof good public fiscal practice (just the sameas utility servicesthat are publiclyprovided
to individualprivate parties).
A fee reflectingcosts will encourageusers to correctlyvalue the servicethey receive.
Charginga fee will help reverse the "entitlementmentality"that has been the historicalresult of
subsidizingpublic servicesin Peru
Currently,COFOPRIdoes not charge for titling, whileRegistroPredialchargesonly for services
subsequentto the first registration.RP levies a fee for a large numberof servicesthoughthese do not
cover the cost of the service.The most importantof these fees -- registrationof first titles (when a fee
is charged),transfersof title, mortgages-- are levied at S/.21 (about$8). See TableA7.1 for the
rangeof current fees (set by Resoluci6nde la Presidenciadel DirectorioNo. 021-92-PDRP,June 30,
1992).
Projectcalculationsindicatea long-runmarginalcost (LRMC)of titling and registrationunder the
project averagearound $35 and $16 respectively(see TableA7.2).The Bank and the Government
have agreedthat no costs willbe recoveredon the issue or registrationof new titles for propertiesin
AsentamientosHumanos (AAHH).This is for severalreasons:
*
*
*
COFOPRILaw 803 obligesthe state to formalizetheseproperties,and the Presidenthas
publicly declaredon severaloccasionsthe Government'spolicy that this service willbe free.
Inhabitantsof AAHHhave typicallyspent a long time and manyresources,includingpayments
to municipalities,seekingto have their propertiesformalized,and chargingthem again for this
servicecouldbe seen as bad faith on the Government'spart.
Inhabitantsof AAHHare typicallypoor, and sinceformalizationin itself does not lead to any
immediatefinancialgain, manyof them may not be in a positionto pay a fee at the time of
titlingand registration.Moreover,since the project saves unit costs by mass titlingand hopes to
"jump-start"financialmarketsby large-scaleregistration,it best serves the objectivesof the
project to formalizeas manyproperties as possible.
The Bank and the Governmenthave agreedto levyuser fees as follows:
a) As an effectivenessconditionRPU will put into effect an agreed adjustmentto the user fees
in the categoriesand at the rates listed in the attachedTableA7.1 (penultimatecolumn).
Fees will thus be applied:(i) to first registrations,under the project, of the followingclasses
of properties:commercialpropertiesin AsentamientosHumanos,private propertiesin
AsentamientosHumanosformed from invasionsafter October31, 1993("New
ProjectAppraisal
Document
Country:Peru
Page: 39
ProjectTitle: UrbanProperty
Rights
Occupations"),and UrbanizacionesPopulares;(ii) to first registrationsfor all otherclasses
of property;and (iii) to all subsequentregistrytransactions.Most of these fees will be at the
rate of S/.36 (aboutUS$13).
b) As an effectivenessconditionCOFOPRIwill put into effect a user fee for the issuanceof
titles (emisi6nde titulos) at a rate of S/.45 (aboutUS$16)applied in the categoriesdefined
in the attachedTableA7.1 (penultimatecolumn).Fees will thus be applied:(i) to first
registrations,under the project, of the followingclasses of properties:commercial
propertiesin AsentamientosHurnanosand private propertiesin AsentamientosHumanos
formedfrom invasionsafter October31, 1993("New Occupations");and (ii) to first
registrationsfor all other classes of property.
c) By May 1, 1999RPU willput into effect an adjustmentto its user fees based on long run
marginalcosts (LMRC);LMRC includesall the additionalcurrentand capital costs antd
overheadswhich have to be incurredto producethe service.
d) By May 1, 1999COFOPRIwill put into effect an adjustmentto its rate on thebasis of longrun marginalcosts estimatedat S/.90 (aboutUS$32).
e) RPU will make exemptionsin the chargesof its fees exclusivelyin cases of natural
disastersor other exceptionalcircumstancesto be agreedwith the Bank.
f)
After May 1, 1999 RPU and COFOPRIwill annuallyadjusttheir fees on the basis of a price
indexto be agreed with the Bank.
g) COFOPRIwill proposeto the Bank a policy,based on the capacityof different settlemnents
to pay, to chargefees to recover part of the costs of regularizationof ownershipin
UrbanizacionesPopulares;this policy willbe implementedno later than May 1, 1999.
Estimatesof the effect of the new fee structureon collectionof fees by COFOPRIand RPU appearin
Annex 5 (TableA5.3).
2. Registro Predial Urbano: Long-rutnFinancial Sustainability
The aboveagreementson RPU fees and considerationsaboutthe long-runfinancialsustainabilityof
RPU indicatethat three relatedfinancialexercisesneed to be undertakenas part of the Long Run
StrategicStudy (LRSS)of RPU. The studlywillbe finishedby December31, 1998:it willbe
discussedand actions agreedby the Bank and Governmentby April 30, 1999.
*
The fee for first registrations,wherethese are to be charged,and of all subsequenttransactions
should be calculatedso as to be at least equal to the LMRCof these registrytransactions.Some
considerationshouldbe givento iniliallycharginga largerfee on some secondtransactions,on a
decliningbasis over time (say five years), so that the Treasurycan recoup some of the subsidies
to first registration.A suitableprocess for keepingfees up-to-datein real terms also needs
establishing.In addition,the study shouldconsiderhow to treat payment of fees when poorer
Page: 40
Title: UrbanPropertyRights
Project
Document
ProjectAppraisal
Country:Peru
TableA7.1:PeruUrbanPropertyRightsProject:EstructuraActualy Propuestade Arancelespor ServiciosIndividuales
Proyecto
AAHH
Otros
Nuevas
Lotes
comerciales Ocupaciones
Tipo de servicio
Otros
Arancelesen St.
UUPP
Arancel Arancel al Arancel al l
1 de julio de maio de
actual
1999
de 1998
COFOPRI Emisionde titulos
Arancel
Arancel
Excepcion Por definir
Arancel
0.00
45.00
90.00
RPU
Registro de titulos
Arancel
Arancel
Excepcion Arancel
Arancel
11.00
36.00
45.00 *
RPU
RPU
RPU
RPU
RPU
Otrostransacionesregistrales
Otrostransacionesregistrales
Otrostransacionesregistrales
Otrostransacionesregistrales
Otrostransacionesregistrales
Hipoteca
Transferencia
Resto @ SJ.21
Resto @ SI.17
Resto @ S/.27
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
21.00
21.00
21.00
17.00
27.00
30.00
36.00
36.00
36.00
40.00
35.00 *
50.00 *
50.00 *
50.00 *
55.00 *
RPU
RPU
RPU
Solicitudes
Solicitudes
Solicitudes
@ S/.7
@ S/.4
@ SO.1
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
Arancel
7.00
4.00
1.00
10.00
6.00
2.00
10.00 *
6.00 *
2.00 *
a modificarsegun los resultadosdel estudio de RPU.
Project
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Peru
Page: 41
Project
Title:Urban
Property
Rights
owners cannot afford to pay (for instance, change of ownership through inheritance), perhaps
tirough a form of delayed payment.
* A financial plan should be prepared for RPU whLich
would assure its financial autonomy
within a specified period, say five years. Financial autonomywould mean that income,
except from extraordinarysources such as projects or emergencyprograms, should fully
cover the cost of all registry activity,including debt servicing.This financial plan would
provide the basis for calculating LRMC.
* The Study should also lay the groundwork(for example, propose terms of reference) for
alternative future modes of financial self-sustaiinability.For instance, "corporatization" of
RPU would submit it to commercial-enterpriseaccountingpractices (including the valuation
and depreciation of assets), to a full financial-accountabilityrelationship with the
government, and to providing a return to the governmenton the assets used in the business.
(Note that such alternativeswould eventuallyalter the financial plan: for instance,
corporatization,by requiring a return on assets.,would increase the costs accounted and
increase the LRMC.)
TableA7.2PERU:UrbanPropertyRightsProject:Estimated
UnitCostof TitlingandRegistration
Year
DirectComponent
COFOPRI Costof Title+
CostperTitle Contingencies
108.11996
1997
1998
1999
2000
2001
2002
VG:98-00
VG:98-01
108.1
52.2
31.4
34.7
39.6
133.7
0.0
35.2
59.9
108.1
39.7
23.9
28.1
31.9
108.0
0.0
28.0
48.0
-----------
RPU
Costof
TotalDirectCost2
TotalCosti
Difference
180.2
70.1
37.7
44.7
50.4
177.6
0.0
44.3
77.6
180.2
70.1
43.1
52.6
59.8
271.1
0.0
51.9
106.7
0.0
0.0
5.4
7.9
9.4
93.5
0.Ci
7.6
29.1
m to_ >-
72.1
30.4
13.8
16.7
18.5
69.6
0.0
16.3
29.6
1/ Sise incluyen
loscomponentes
directose indirectos
2/ Comprendido
comoelcostodirectode cadatituloadicional
(marginal
costs)
Fuente:Information
fromCostab230498
Page: 42
Project
Title:Urban
Propery
Rights
Appraisal
Document
Project
Country:
Peru
Annex 8
Governmentof Peru
Letter of Sector Policy
Proyecto Urbano de Derechos de Propiedad
Documento de Politica del Proyecto
NTRODTUCCION
1. El presente docu:ento establece la Dtclaraci6n de Politica, que realiza el Gobiemo del
Peni (GOP), coa. respecto al Proyecto Urbano de Derechos de Propiedad (EYPRP).
2. El UPR.? forma parte ded conijunto de refonas insttucionales desarrolladas por el GOP
co. el fin de coasolidar el funxcioa=ientq de una econo3nia social de mercado, a traves del
establecin-mieato y forializacidn de derechos de propiedad sobre predios. El UPRP
constituye la profiandizaci6a de la zeforma instirucional sobre ia propiedad, puesta a prueba
enze 1990 y 1992 mediantela ejecuci6n ae un Programa Piloto del Registro Predial (RP) e
im"pulsada.y perfeccioaada a parir de 1995 a traves de la creaci6a y fincionamniento de la
Co=isi6n de Formalizaci6n de la Propiedid Informal (COFOPRI).'
\9)e
\
3. 21 GOP ba decidido desarrollar el UP." a traves de las dos instituciones creadas para
formalizar La propiedad urbana. La CQFOPRI es el organismo encargado de formular,
ap;obar y ej ecuxar un Prgrama de Fornaiizacii6a de la Propiedad de iinbito nacional; crear
los mecanismnos para que las propieodes fornalizadas se mantengan dentro de la
fbtr=aLidad, cuidando que los cosxos de esta altima sean iztencres a los de la informalidad;
y, propoa.er las condiciones insdticionales necesaxias para el desarsollo de la inversi6a
privada y pablica en la prestacidn de ;servicios complemetarios relacionados con ia
propiedad, que incluyan la inofacstzuctua de servicios publicos, el credito y otros. El
Registro Predial Urbana (RPUT) es el( organismro encargado dei establecimienro de
rec anismos registrales que, con bajos costos de traasacci6a, genere las condiciones 5
Lnceativos para que las propiedades se inscriban y para qua las transacciones que se realicen
so bre elas, se manteagan dentro de la fonnalidad.
Enajulio dc 1996 COFOPRI y ei ERPUikaiciaron el perfeccionamiento y puesra en marcha
leas reibrma institucionales y sistenas masivos de formalizacidn. Ello les permitid
; ; \ oront,0aciar
y nmejorarlas experiencias del Plan Piloto y poner en prictica ur conjunto propio
-_;>n,*t
procedim.ientos, metodologias, tecaologias y sistemas, que son los que actualmente
emplean para fornaliza
sivamente la propiedad. El 6xiro de dichas acciones ha podido
rcomprobarse coa los 320,000 predios inscrtos por COFOPRI en el RPU, sobre los cuales
4ntregado
230,000 titulos de propiedadiregisaados, en veinmemeses de labor.
"L-apresent* -cy crea un nuevo mecamismo iimSucional que permitirl que la propiedad predial de los
scc.ores informales de mcnorcs recursos se pueda convertir on activos '1quidos que puedan integrarse al
=crcado
y ser objeto do transaccionca; incrcrncntando el valor de las propiedades y posibilitando a sus
nropietarios el acceso a los scr-viciosde ia.raestrucura baisica" (Axiiculo 2 dcil Decreto Legislativo 803,Lcy do
areac:dn de COFOPRI).
Pro*ect
Appraisal
Document
Country:
Peu
Page: 43
ProjectiTe:UrbanProperty
Rights
5. El UPRPcomplementalos Planes de Inversi6nSocial y Programasde LuchaContrala
Pobreza trazadospor el GOP; hace efectiva la decisi6npoiftica del GOP de impulsarla
formalizacionde la propiedadmarnifestadaen la Carta de Intenci6nsuscritacon el Fondo
Monetario Internacional;expande las grandes economfas de escala generadaspor los
mecanismosdisenladospor COFOPRIy el RPU; responde a la demanda social por la
formalizacionde la propiedad,lo que ha rodeado a las acciones del GOP de legitimidad
social y aceptaci6npoiftica;genera la "masa critica" de propiedadesnecesariapara el
fortalecimientodelmercadode capitales. La situaci6ndescrita muestraque se presentauna
gran "ventana de oportunidad"para extender la formalizacionde la propiedada nivel
nacional.
6. Por las razonesmencionadasel GOP ha solicitado al Banco Mundial su asistencia
financierapara expandirlas accionesde COFOPRIy el RPU a las principalesciudadesdel
Peru.
LOS PRINCIPIOSPARA LA CREACIONDE UN SISTEMA SOSTENIBLr,DE
DERECHOSDE PROPIEDAD
7. El UPRPtienecomoprincipios esenciajes:
o Que el marco legal y regulatorio que r0gc las acciones de fonlizacido de la propiedad
reflejecontinuamentela realicla4dand6 seguridadlegal y seguridad a las tansacciones
de los derechosasignados.
* Qua Lasorganizacines a cargo de la ftrmalizacifn de la propiedad tenganestructuras y
nmetodologias
flexiblesy que pererenbajos costos de tasaccidf a las operacionessobre
la propiedad.
Que la formalizaci6ade la propiedad generela masa cntica dc propietariosque amplie
Q
significativamentela base de anmercadoi=obiiario.
c.ONo@ ,
Que las accioncsde formali-zaci6ncomtibuyanal forclecimiento y prohmizaci=in del
y respetode los derechos de propie4ad.
/ORGANZACIONDEL IJPRP
8. La orgaaizaci6nde las entidades publicasa cargo de la ejecucidn del UPRPse basarh,
conformelo establecensus leyes,de creacion,en'
'
k
Autonomiafuncional,adrainistrativay econ6mica.
$
Mecanismos de retroalimwntaci5n que les penmitan recibir infarmaci6n sobre la
^
}ejecuci6n
de sus funciones'para la idenOficaci6nde obsiculos insitucionaies que deban
str removidospara culminarlas acciondsde formalizaci6n.
Mecanismos de readici6n de cuentaj que permita a sus usuarios comaunicarlos
problermasque enfrentanpara obten.erlj fomnalizaci6n.
de sus propiedades.
Page: u
Right
Propey
Tide:Ufban
Project
Document
Appraisal
Project
Peru
Country:
LA METODOLOGIA DE FORMALIZACION Y REGISTRO
9. La metodologiade formalizaci6nde laipropiedad se basa en:
El establecimiento de procedimicntqs que permiten la evaluaci6n, verificaci6n y
saneamzientofisico y legal de las propiedades y que son el producto de una constacte
investigacion institucionalpara identilicar los obstAculoslegales, dc organizari6n y de
usos y costumbresqua genoranla inforqalidad.
* La utlizaci6n de procedimientospro-activos, definidos, iniciados e impulsados por las
ontidadesejecutoras.
de simplificaci6n
siguen
los principios
yuo
de procediminatos
La utilizari6a
bajos costos de Wransacci6oL
y que representa
admimistrativa
y control social sobre los procedimientos
de mecanismos de partiJipaci6n
* La utilizaci6n
ejecuten.
que se
de disputas.
* El empleo de mecanismos alternativos de resoluci6n
*
10. La metodologia
-
a
*
a
se basa en la udilizaci6n
de registro de la propiedad
de:
se rfeljo
fisica y legal de las propiedades
que facilitan que la situa46n
Mecanismos
registral constantcmen±4
la informaci6n
a las propiedades.
Un sistema registral qua toma comno unidad base de la informacion
do la propiedad.
a
adecuada parm larnalii6n
Tecnologia
de bajos costos de transacci6n.
Ua sistema de tarifas que garantice la porxnanencia
DE DESAIRROLLO
LAS CONDICIONES
11. Las condiciones
que rodearin
al UPRP
DEL
en
UPRP
son las s.guientes:
oficinas
proveerI
en las ocho ciudades
desconcentradas
para
de locales adocuados
la asignaci6a
y el RPU cuentan coa un p,rsonal
COFOPRI
dirigido y ejecutado las refonras institqcionales
de direcci6n y gerencia que ha diseoado,
Este
de formalizacin
y las actividades
y el RPU establecerin
COFOPRI
para lo cual el GOP
esleccionadas,
fqo.
8/wscrodicho
*>,,
($
h
*
personafl
ocupa
cargos
que
forman
pare-
del
esquema
orgaazacional
del
'UPRP,
por
lo
para dichas actividades.
calificados
por p¢ofesionales
o sustit=cin,
que su continuidad
la reforma
formalizaci6n,
la
sobre
E1
conocimiento
GOP.
por
el
est. garantizado
de las
la
extensifn
para
son
fundamentales
insdtucio4l
y
la
memoria
institucional
actividades de la formalizaci6nal pais.
A medida que vayan concluyendo Ia4 actividades de fonnalizaci6n en cada ciudad.
COFOPRI empleara sus recursoso la parte de cllos que fuieranecesaria para aender la
fon3alizaci6n de zonas quo deterxinc jel GOP, o, concluira sus actividades. El RPU
mnantendrilos recursos que fueran necsarios para continuar brindando sus servicios a
los usuarios. COFOPRItransferiragradualxenrteal RPU sus recursoshumanos, equipos
y la memona. institucionalnecesarias,para quo el RPU pueda continuar sus funcionesy
desarrollar los mecanismosprivados de formalizaci6n de la propiedad previstos en sus
normas.
Project
Appraisal
Document
Counter:Peru
Page: 45
Project
Trie: Urban
PropertRights
* Para las accioncs relacionadas al UP"R, serdn cobrados:
1. cl servicio de formalizaci6a y los aranccles regist-ales para la fonnalizacion de lotes
cornerciales y nuevas adjudicacione's en asentamientos humanos;
2. los aranceles registrales para la fornvalizaci6rude urbanizaciones populares;
3. el servicio de formalizaci6n de urbapizaciones populares, conforme a la propuesta que
COFOPRI desarrollc y ponga en funcionanmiento aates del 1 de Mayo de 1999, la que
contemplara la posibilidad de cobra;rpor el servicio de regularizaci6n de la propiedad
de urbanizaciones populares con capacidad adquisitiva.
Las tarifas defmitivas de dichos servicios seran deterninados en los estudios y
evaluaciones que se realicen sobre el RIpU.
* E1 GOP desarrollari una estratbgia !de unificaci6n de los registros pfiblicos de la
propiedad inmobiliaria. Mientras dilcha estrategia no se defina, el GOP procurarA
mantener la independencia del RPU respecto de la Superintendencia Nacional de los
Registros PdbliUcos(STJNARP), coa ei fiLnde asegurar la eficacia de los cambios en el
sistema registral que el IJPRP prevAJ El GOP reconoce que cualquier propuesta nLo
debeia poner en riesgo los objetilos, pnncipios y metodologias del sistema de
formalizaci6n desarroUado y que desarrole el UPRP, durante su vigencia.
* El Ministro de Transportes, Comunica ionos, Vivienda y Construccifn, eXLsu calidacl do
Presidente de la COFOPRI y el ,inisnio do Economia y Finaazas tutelarAn por mantcener
el marco insdtucional creado y por crearse para elininar la informalidad, garantizando
que la formalizacidn de la propieldad sca irreversible.
El GOP reconoce que la formalizaci6n de la propiedad incrementarA significativamente
el mercado inmobiliario y penaitirA integrar la principal propiedad de mi11ones de
ciudadanos al mercado. Tamrbidzn
recopocc que ia propiedad inmobiliaria es la base paa
la generaci6n de un mercado hipotecaio y esto para el surgimiento de un mercado de
capitales. Por ello, el GOP, deniro deklmarco del Programa Econ6mico, procurara poner
en fumcionanmientola estategia de rdfonnas que el UPRP proponga parm facilitar el
acceso al credito y a los servicios pPiblicos, de los propietarios fornalizados. AdemAs,
promovera el uso del catastro del RPU lpara fines fiscales y de administraci6n territorial.
LA META DEL UPRP
12. La meta del UPRP es formalzar alrededor de 950,000 predios y entregar
aproximadanente 800,000 tituos de propiedad inscritos en el RPU. Para eUo se han
seleccionado ocho ciudades aplicando unimodelo de priorizaci6n que combina criterios de
45 ';D-X]concentaci6n de viviendas por rformalizar,
grad. de consolidaci6n urbana, niveles de
£ffi^
, ZMpobreza
y potencial econ6raico. E,1GOP bodria scleccionar otras ciudades mis que tarabien
',
~~~formarin
parte del UPi,
FhiAd n Limsa,"
s
dias del mes de
autcararajl
MMinisoo
5e Transportos, Comunicaciones
Vivienda y Construcci6n
Presidente de COFOPRI
de 1998.
Jo
co
Ministro de Economra y Finatzas
Project
Appraisal
Document
Page: 46
ProectTitle: Urban
Property
Rights
Country:
Peru
Annex9
Peru Urban PropertyRights Project
FinancialSummary
ProjectCostandFinancing
(US$Million)
Implementation
Period*
1998
Project
Costs
Recurrent
Costs
Investment
Costs
Total
1999
2000
2001
3.83
5.96
7.98
18.06
7.68
17.70
1.81
3.26
21.29
44.99
9.79
26.04
25.38
5.08
66.28
22.92
0.00
12.91
12.91
0.00
2.49
38.32
4.21
0.00
3.26
3.26
0.00
0.19
7.66
57.26
0.00
36.73
36.73
0.00
6.02
100.00
Financing
Sources
(%oftotalpromect
costs)
IBRD/IDA
6.52 23.62
Cofinanciers
0.00
0.00
Government
7.31 13.25
Central
7.31 13.25
Local
0.00
0.00
UserFees/Beneficiares
0.94
2.40
Total
14.76 39.27
*
Total
Calendar
years
Mainassumptions:
1. TotalProject
costof US$66.3million,US$24.3million
fromtheCentral
Govemment
and4.0
millionfromuserfees,allto bedisbursed
overfouryears.
2. Theoperational
costsof0.8included
bothCOFOPRI's
andRPU's
offices.
3. TheNewProjectManagement
structure
willbeestablished
andfullystaffed
by August
1998.
4. Thebeneficiaries
willstartcontributing
to theproject
costfromthebeginning
oftheproject.
Project
Appraisal
Document
Country:
Peru
Page:47
Project
Title:Urban
Property
Rights
Annex 10
Peru Urban Property Rights Project
Procurement and Disbursement Arrangements
1. Procurement
Information technology, hardware amdsoftware, and mapping equipment (estimated to cost
about US $ 4.6 million), and vehicles (estimated to cost about US$1.3 million), grouped in
packages amounting to not less than US $ 100,000each, will be procured through
international competitive bidding (/ICB)procedures. A two-stage bidding would be used by
COFOPRI in the procurement of information systems procedures. Before loan effectiveness
COFOPRI will be allowed to acquire computer equipment, up to an aggregate amount of
$100,000, following local shopping procedures. All other goods, including furniture and
office equipment estimated to cost less than US$ 100,000up to an aggregate amount of US $
1.8 million would be procured under national shopping.
Base mapping and topographical surveys, estimated to cost about US $ 5.9 million, will be
procured through International Competitive Bidding (ICB) procedures. Bids will be called
by COFOPRI every two years. The services for different areas (or cities) will be considered
different lots in each bid. Bidders will be allowed to bid for one lot or for a combination of
lots, with the possibility of offering discounts if they are awarded more than one lot. The
bidding documents will clearly specify how bids will be evaluated, taking into account the
offered discounts, in order to award the contract to the bidder or combination of bidders
resulting in the lowest evaluated cost to COFOPRI. Before loan effectiveness COFOPRI will
be allowed to contract topographical surveys, up to an aggregate amount of $100,000,
following local shopping procedures.
The Bank will not finance civil Nvorks,which include only refurbishment of existing offices.
However, since these minor works are widely scattered they are expected to be procured
under lump sum fixed price conlracts awarded on the basis of three quotations.
Consultant services would be procured in accordance with procedures described in the B3ank
Guidelines for Selection and Employment of Consultants of September 1997. Studies related
to financial management, institutional support, and information technology, audit consulting
services, as well as the contracts manager services, and the public relations companies for the
information campaigns will be procured following the Quality and Cost Based selection
(QCBS) process. Studies related to institutional development and strategic planning will be
procured in accordance with Quality Based Selection (QBS) processes. Consultant services
required for evaluation and migration of information from RP and RPU, and specialist survey
or'ganizationsfor the household surveys, will be selected through a Least Cost Selection
(LCS) process. The selection of institutions responsible for the provision of training courses
would follow QBS procedures. Before loan effectiveness COFOPRI will be allowed to
contract individual consultants, up to an aggregate amount of $100,000, to prepare
COFOPRI's and RPU's draft regulations under Part A of the Project.
National Formalization Plan personnel includes both regular COFOPRI /RPU staff and
project staff (including professionals and supporting staff). The Bank will not finance regular
staff from COFOPRI and RPIJ. Professional staff who deliver services on a contract basis,
will be retained by COFOPRI following selection procedures and TOR satisfactory to the
Project
Appraisal
Document
Page:48
Projectitle: Urban
Property
Rights
Countby:
Peru
Bank. Supporting staff (including technicians and administrative staff) will be hired through
a Service Delivery Contractor which will be selected following procedures acceptable to the
Bank. COFOPRI will retain the services of a procurement agent to periodically audit the
strict compliance of Bank's procedures and rules in the selection and contracting of project
professional staff by COFOPRI.
International bidding will be subject to the Bank's ex-ante review of advertising, bidding
documents, bids evaluation, and contract awards. Local bidding will be subject to post
review. This prior review will result in a coverage of above 60 percent of Bank finance of
contracts for goods. Selection and contracting of consultant services, amounting to more
than US $ 100,000for firms and US $50,000 for individuals, will also require prior Bank
review.
The procurement arrangement are summarizedin Table Al:
TableAl : ProjectCostsby Procurement
Arrangements
(inUS$million
equivalent)
Procurement
Method
NCB
Other N.B.F.s
ICB
2.25
1. CivilWorks
2.Goods
11.60
1.98
(9.28)
(1.67)
Computers
andmappingequipment 4.54
0.10
(3.63)
(0.08)
Vehicles
1.29
(1.03)
Otherequipment
1.78
(1.51)
Basemappingandsurveys
5.77
0.10
(4.62)
(0.08)
6
3.Consultant
Services
29.16
14.63
(23.71)
Technical
Assistance
10.61
(8.53)
Professional
NFPPersonnel
11.85
14.63
(9.48)
Technical
SupportNFPPersonnel
6.707
(5.70)
4. Miscellaneous
6.68
(3.34)
Operating
Costs8
6.68
(3.34)
11.60
37.82
16.88
Total
(9.28)
(28.72)
Figures
inparentheses
aretheamounts
tobelinanced
bytheBank
loan
Expenditure
Category
TotalCost4
2.25
13.58
(10.95)
4.64
(3.71)
1.29
(1.03)
1.78
(1.51)
5.87
(4.70)
43.79
(23.71)
10.61
(8.53)
24.48
(9.48)
6.70
(5.70)
6.68
(3.34)
6.68
(3.34)
66.30
(38.00)
4 TotalCostsincludes
contingencies.
5 N.B.F.
NotBankFinanced
6 Includes
individuals
andfirms
7 Contracted
Staff.
8 Operatbng
costsinclude
expendiures
relatedto transportation
andcommunication
costs,office
rentalsand
maintenance,
personnel
travelcostsandpayment
ofper-diems,
surveillance
andcontrol
services,office
materials,
costs.
printngcosts,andvehicles
operation
andmaintenance
Page:49
Rights
Urban
Property
Project
TiUe:
Document
Appraisa
Proect
Country:
Peru
Arrangements
Selection
TableA2:Consultant
equivalent)
(inUS$million
A. Firms
TotalCosti
Method
Selection
Category
Consultant
2
OtherG
QCB$
QBS3 LCS4 CO5
10.06
.
0.94
1.21
7.21 0.70
(8.56)
(6.15) (0.57) (0.77) (1.04)
B.Individuals3
33.73 33.73
(15.18) (15.18)
1.21 33.73 43.79
0.94
7.39 0.52
(6.29) (0.43) (0.77) (1.04) (15.18) (23.71)
bytheBankloan
tobefinanced
aretheamounts
in parentheses
Figures
Total
contingencies
includes
1TotalCost
andCostBasedSelection
= Quality
2 QCBS
3 QBS
= Quality
Based
Selection
CostSelection
4 LCS Least
5 Selection
Qualifications
Based
onConsultants
ofconsultant),
onthebasisofqualifications
(selected
6 Individuals
bytheBank
notfinanced
million
US$14.63
including
MethodsandPriorReview
for Procurement
TableB : Thresholds
TypeofProcurement
Category
Expenditure
1.Goods
3
Shopping
<US$100,000
ICB,
>US$100,000
2.Consultant
Services
Guidelines
Consultant
(a)Individual
Qualil'ications
<US$50,000
Quali'fications
>US$50,000
Guidelines
Consultant
(b)Firms
or
QCBS
orLCSorFixed-Budget
<US$100,000
Consultants
Qualifications
0CBSorLCS
00,000
>US$1
NCBcontracts
onlytwoinitial
agency
I Foreachimplementing
willrequire
pricereview.
willbepost-reviewed.
ofeachagency
contracts
Theremaining
of
assignments
ofconsultants,
selectior
source
forsingle
2 Except
theoriginal
raising
locontracts
andamendments
nature
crHical
thethreshold
value
above
contract
tocostlessthanUS$100,000
estimatecd
oncontract
3Forgoods
priorreview
isnotnecessary.
equivalent,
theBank's
PriorReview
None
All
TORs
only
All
2
only
TORs
All
Project
Appraisal
Document
Country:
Peru
Page: 50
Project
Title:UrbanProperty
Rights
2. Disbursement
The proposed Bank loan would be disbursed over a period of four years, beginning the first
quarter of FY99 through the end of the second quarter of FY2003. The project is expected to
be completed by December 31, 2002, and the project's Closing Date is June 30, 2003.
Disbursement of Loan proceeds would be made on the basis of quarterly financial reports
under the fornat established by the Bank. These reports would include a projection of cash
needs for the quarter, determined by the expected payments to be made for the project
activities falling due in such quarter, being the amount of the projected expenditures the
amount of the withdrawal application submitted to the Bank. After the first Bank
disbursement, each following quarter submission of financial reports would include a
comparison of actual versus projected activities and related costs, on the basis of which, the
Bank would assess the propriety of the utilization of the funds advanced and determine the
eligibility for disbursing the following quarter's funds' needs.
Bank disbursements would be made into a Special Account opened at a commercial bank, in
accordance with Bank requirements. Supporting documentation for all eligible project
expenditures would be maintained at both COFOPRI and RPU, and would be made available
for review by Bank staff and independent auditors.
The allocation of loan proceeds is provided in Table C of this section. (see Table C)
TableC: Allocationof LoanProceeds
Expenditure
Category
CivilWorks
Amountin US$million
0.00
FinancingPercentage
notBank-financed
Goods
10.95
100%of foreignexpenditures
and80%h
of localexpenditures
Consulting
Services
23.71
100%of foreignexpenditures
and80%
Operating
Costs
Total
3.34
38.00
of localexpenditures
50%/o
of localexpenditures
excluding
laborcosts
1.TheBank
willfinance
56%oftotalproject
costs,orabout60%oftotalproject
costswithout
taxes.
Prqect
Appraisal
Document
Country:
Peru
Page:51
Project
Tite:Urban
Pmopery
Rights
Annex 11
Peru Urban PropertyRights Project
ProjectProcessingBudget and Schedule
A. Project
Budget
(US$000)
Planned
(AtfinalPCD
stage)
BankBudget
TrustFund
Total
B. Project
Schedule
200.9
1000.0
1200.9
Planned
(AtfinalPCDstage)
Timetakento prepare
theproject
(months)
FirstBankmission
(identificafion)
Appraisal
mission
departure
Negotiations
BoardPresentation
Planned
DateofEffectiveness
5/15/97
2118/98
4/27/98
6/4198
10/4/98
Prepared by: Commission for the Formalization of Informal Property
Preparation assistance: Japanese TF 029609 (US$1,000,000)
Bank staff and consultants who worked on the project included:
*
*
*
*
X
*
*
*
*
*
Elena Panaritis, LCSPR, Task Manager
Geoffrey Shepherd, LCSPR, Lead Specialist, Public Sector
Pedro Belli, OCSOS, Economic Impact
Robert Crown, LCOQE, Quality Assurance
Elizabeth Dasso, LCCPE, Social Assessment
Gisela Durand, LCSPR, Financial Analyst (consultant)
Carlos Emanuel, Procurement and Cost Specialist (consultant)
Orville Grimes, LCODR, Implementation and Institutional Specialist
Roberto Laver, LEGLA, Senior Counsel
Livio Pino, LCOAA, Financial Management Specialist
Denise von Gersdorff, LCSPR, Operations Assistance consultant)
Marina Vasilara, LCSPR, Project Assistant (consultant)
'From FY95 to FY98
Actual
297.61
904.6
1202.2
Actual
5/15/97
3/1198
618/98
8/6/98
11/30/98
Project
Appraisal
Document
Country:
Peru
Page: 52
Project
Tile:Urban
Property
Rights
Annex 12
PeruUrban PropertyRights Project
Documentsin the ProjectFile*
A. Project ImplementationPlan - including terms of reference for initial work to
be undertaken during the first year of the project.
Annex B 1:
Annex B2:
Annex B3:
Annex B4:
Annex B5:
Annex B6:
Pre-ImplementationActivity
The Project
Implementation Arrangements
Implementation Plan
Monitoring and Evaluation
Draft Operations Manual
Project Preparation Document (PPD, documenting the design of the 9 subcomponents)
Annex Al:
Annex A2:
Annex A3:
Annex A4:
Annex A5:
Annex A6:
Annex A7:
Annex A8:
Annex A9:
Legal and Institutional Framework
Investment Promotion
Socio-Economic Assessment
Collection and Analysis of Ownership-Related Information
Implementation of the National Formalisation Plan
Institutionalization of COFOPRI Administration
Strengtheningof Registro Predial (Urbano)
Strengthening of COFOPRI Administration
Human Resources
B. Bank Staff Assessments
Garro, Alejandro. "Peru: Urban Property Rights Project (Peru). Legal Assessment."
April 1998.
Belli, Pedro. "Economic Cost Benefit Analysis: Tables." March 1998.
"Project Cost Tables." April 1998.
C. Other
Barbosa de Lucena, Joao, and Barbosa, Tulio. "Reports on ILD Land Titling
Project." April 1992.
Chavez S., Jorge Fernando. Criteriospara el Estudio de Impacto Socioecondmico
del Proyecto UrbanProperty Rights, Background report for Annex A3 of
Project Preparation Document, December 1997.
Eyzaguirre, Rolando, and WaterMark Industries. "Registro Predial Urbano: An
Inception Report for Long Term Strategies for Sustainability." May 1998.
Government of Peru. Registro Predial Urbano - Comisi6n de la Formalizaci6n de la
Propiedad Informal. "Strategies for the Long Term Sustainability of RPU Terms of Reference." May 1998.
Instituto Libertad y Democracia. "Peru: Pilot Project on the System for Titling and
Registration of Informal Property; Final Report." December 1993.
Instituto Peruano de Economia. "Evaluaci6n de las Polfticas en Materia de Registro
y Regularizaci6n de la Propiedad Predial." March 1996.
Project
Appraisal
Document
Country:Peru
Page: 53
Project
Title:Urban
Property
Rights
Instituto Peruano de Economia. "Titulaci6n, Registro y Catastro del Sector Agrfcola:
Comentarios Sobre la Recientemente Creada: Comisi6n de Formalizaci6n de
la Propiedad Informal - COFOPRI." March 1996.
Lastarria, Cornhiel and Barnes, Grenville. "Assessment of the Predial Property
Registration System in Peru", Draft, Land Tenure Center, University of
Wisconsin-Madison. 1995.
McLaughlin, John, and de Soto, Hernando. "Property Formalization: the Proform
Solution", Geomatica, Vol. 48, No. 4, pp 209-224 - 1994 - September 1993.
McLaughlin, John; Palmer, David; Panaritis Elena, and Shepherd, Geoffrey.
"Security of Ownership: Elements for the Comparison of Two Registry
Systems in Peru." 1995.
Mosqueira, Edgardo. "Ayuda Memoria: Comentarios al Diagnostico Legal." May
1998.
Pachas Sanchez, Walter. El Perfil del Beneficiario, Background Report for Annex
A3 of Project Preparation Document, December 1997.
Panaritis, Elena, and Shepherl, Geoffrey. "Peru: National Program to Formalize
Urban Property in Peru: Framework for World Bank Urban Property Rights
Project." April 1997.
Panaritis, Elena, and Shepherd, Geoffrey. "Terms of Reference for the Preparationof
Peru Urban Property Rights Project." April 1997.
Riofrio, Gustavo. Socio-EconomicEvaluation, (report prepared with Mariana Llona,
Christophe Sarrazy and Julio Gamero, of DESCO) background report for
Annex A3 of Project PreparationDocument, December 12, 1997.
Romero, Alfredo. "Facilitaci6n del Acceso al Credito y a la Inversi6n Privada, Primer Diagnostico." February 1998.
Romero, Alfredo. "Urban Property Rights Project (Peru): Credit and Investment
Promotion - Executive Summary." February 1998.
Soto, Hernando de. The Other Path: The Invisible Revolution in the Third World,
Harper and Row, Publishers, Inc. 1989.
World Bank. "Policy Notes," Report No. 14824-PE (Green Cover), Chapter 5 on
"The Development of Real Property Rights in Peru." July 1995.
*Including electronic files.
Project
Appraisal
Document
Country,
Peru
Page:54
Project
Title:Urban
Property
Rights
Annex 13
Peru Urban Property Rights
Statement of Loans and Credits
IBRD
4,715,525,000
660,135,562
3,268,445,872
786,943,568
1,127,618,204
2,122,513,540
-77,506,254
2,045,007,283
18,314,128
18,314,128
0
Original
Principal:
Cancellations:
Disbursed:
Undisbursed:
Repaid:
Due:
Exchange
Adjustment:
Borrowers
Obligation:
Sold3rdParty:
Repaid
3rdParty
Due3rdParty
IDA
0
0
0
0
0
0
0
0
0
0
0
Total
4,715,525,000
660,135,562
3,268,445,872
786,943,568
1,127,618,204
2,122,513,540
-77,506,254
2,045,007,283
18,314,128
18,314,128
0
Numberof Loans/Credits
Pool
Disbursing
Total
2
35
Non-Pool B-Loans
0
40
0
0
SCL
IBRD
11
16
13
91
IDA
0
0
Total
13
91
Project
Appraisal
Document
Country:
Peru
Page:55
Projecttle: Urban
Property
Rights
Annex 14 Country at a Glance
Peruat a glance
POV
ad SOCIAL
Peu
Pqlian rvid-1
996(m1lios)
MPper cqa 1996U
(LS$)
G* m1996
v ins U $:
24.3
:,410
68.5
Lotn LOWrAhwrc nmddi
&Cmib. Inloili
485
3,710
1,799
1,125
1,750
1,967
1.7
:23
1.4
DswJcpiwtdlaiucr
Ufe
fle cy
Avwre awi gnw& 199::
Pwuafin NJ
Laboroc (%:
:
:
O2.0
3.10
18
per
Mostreoat esniate at yearavWitAnce19,
PAerty.teadcut Irnex
(%dp"opn
Ubanp an(%d4a1pOa7)
lifeeebith&
i)
7
:
lirar nfteJWy(pw1,000CMe1bAosb)
CdWd
on(% o(oNikt wunwr5)
AsstoDSafeWter(%7dpctia6on)
c1fta
:
OIIfracy(%
ofpcxdaagre15)
spdguiym-d
:
n
Om
54
t (%ofsdold-aepqpMoin)
72
:66
47
16
60
74
69
37
56
67
41
80
78
1t
13
123
110
:1e
..
Acomtosae watar
Peru
104
-.
101
LowarrrWe-inmmsc
_
KEYECONOC4RAnOSendLONG:TPEND6
4 S
GDP(b
LS$)
)
Groscdnestinvesiert::P
bc
rpoctdgooandse
ia icWsGDP
Gross
doesIc samv"nGOP
Gmss
natoraisavimsGOP
:
CiMrW wa bba,ceGDP
IerepMwt&GDP
TcOaieWGDP
0
vdJue d dBWPrS
1998
11i4
24.7
1D.9
13.6
125
18A8
18A
23.0
24.9
18.7
5819
24.3
11.6
19.2
16.9
60.9
45 ;042
2:09
0
1.92
to2
-7.3
3
0
:000
119756 19*6648
GOP
GN'Ppercqita
1.1
-1.7
ofComband ums
1996
490:
J.1 ::
TctscUwartviosveq,it
Exof
l115
:
TWdatdmiFtseVpons
Prot
1:75
; 0
3.9
4a3
-1.5
3.2
64.3
28.0
56.8
:35.0:
23.6
'121
19.1
17.7
-5.6
2
decrq
n
SangsW
55.3
35.9:
0
230
995
6
7.0
6.0
8.
t
350
35
19569974W
2.8
-1.3
-91
Low
:5.3,
s
rule~i
erwqa
2.9
10.1
193
1975
1966
Oowlh
16.4
..
31.7
..
20.0
..
51.9
..
1995
1996
7.3
3D
23.1
55.9
7.4
36.9
23.2
55.7
74.1
12.4
21.9
728
8.2
16.6
726
8.3
16.5
. 10 Y
1996
1996
1.0
-23
7.6
,
5.8
.
4.2
27
_
SrRUCnJFE dthe ECONOMY
(%
dGt
Agrbiture
lndkaUy
mnuadaFtn
SevFies
Pdaeoctwrprti
Geer governenrt conwuTVton
lffpt of goodswd serices
(avearmeAgrAime
rKaY
9mm)
MAdactAlrg
65.6
9.5
16.5
19y754 19696
1.0
1.6
-0.7
-26
SnAces
0.9
-1.4
P
o&an,on
fiatea
da. ofdiput
apd tu_ I
..
-0.2
-a5
10.9
Gtenrshgoveunurpliowauiptn
1.3
-1.9
12.4
Grosdmessc irnstr1
4.5
25
11.8
20
10
2
GovwhU
rd o
30
2
736.7
0
3
94
epoand
hpOstw
.
10
1.2
0
s5
-10
4.0
91
1
-2
o
U
Project
Appraisal
Document
Country:Peru
Page: 56
Project
litle: Urban
Property
Rights
Peru
MPRCES
nd GOVERNMENTFINANCE
Doumcpdceew~to
rl dt prcs
Consunmerp,oes
ImplicitGDPdeflator
1975
198.5
19S
1996
%
(s
20.0
232
162.6
167.7
11.1
128
11.5
9.4
40C
GovermntfirANceo.
Curretrvenue
Currentbudget
balance
Overallsurplusideficit
..
..
..
..
17.3
t1
8.
:.
21
-27
a4
-1.2
1975
1985
1995
1996
..
..
..
..
2,978
645
476
714
1,806
5,576
1,200
711
1,438
9,313
5,897
1,052
835
1,590
9,472
1,162
1,354
926
3,054
91
93
G
94
se
ff
CPI
O
TRADE
(fi/io
U
Total exports(fob)
Copper
Fiasleal
Maractures
Total inotS (d).
Food
..
Fueland erney
*-
Capital
goods
..
558
746
3,008
..
..
..
117
73
160
166
181
92
154
150
103
1975
1965
1995
1996
1,689
3,038
-1,349
3,792
2,790
1,002
6,820
9,754
-2,934
7,365
10,021
-2,656
-1,044
-1,934 -1,519
Exportprice
Wndex(1987=100)
Iiport priceindex(1987=100)
Temnsoftrade(1987=100)
204
..
Ept
1
and IUSrt la
(rll. USS)
BAD
0
_
_
-
4,
zcr
o
1
.0 -L
go
91
92 9
Er,orts
94
a If
95
96
BALANCE
o PAYMENTS
(nilliorrsUS$)
Exportsd goodsandservices
Irnorts d goodsand services
soume balance
Netincome
Net urrent farsfers
CurntaacountbanocetoGDP ratio(%)
-242
33
0
565
618
6
Currentacrotut balance,
beforedickialcaal tansfers
-1,58
-42
-4,303
-3,557
Financingirems(net)
Changes
in netreserves
1,040
517
228
-186
5,241
-938
5,410
-1t,853
8,652
2.3
11,012
2.5
Reserie rdudm gold (nmi US$)
Conversion
rate(boaMS$)
566
2,479
4.1E-08 1.OE-05
|
1
1
9
3
I
5
4
4
|
EXTERNALDEXBr
wid RESOutRCEFLOWS
1975
1985
1995
1996
6,118
138
0
12,879
723
0
33,443
1,729
0
33,643
1,633
0
Totaldebt service
IBRD
IDA
845
18
0
1,097
89
0
2586
206
0
2,858
196
0
CWioasifo d netresource
flows
OflFt,algrants
Olfida creditrs
PFvatecr.editos
Forign dired irNeshtTnt
Pcflolbeqh*r
13
326
907
316
0
90
177
80
1
0
271
317
2784
1,896
151
3,351
280
0
110
131
40
91
49
43
386
203
86
116
118
-2
235
108
79
29
116
-87
(millions
US$)0
rotaldebt oustadng and disbursed
IBRD
IDA
WoddBark program
ConnribUts
Conpoltlonof totl debt,1996(mill.US$)
isburseneifts
15
Prnoipal repalyeras
Notfiows
Intreetpaiyments
Nottansfers
9
7
10
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