Public Disclosure Authorized
Document of
The World Bank
FOR OFFICIAL USE ONLY
Public Disclosure Authorized
Public Disclosure Authorized
Public Disclosure Authorized
Report No: 30463-CL
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED L O A N
IN THE AMOUNT OF US$50.26 MILLION
TO THE
REPUBLIC OF CHILE
FOR A N
INFRASTRUCTURE FOR TERRITORIAL DEVELOPMENT PROJECT
NOVEMBER 19,2004
Finance, Private Sector and Infrastructure Department
Country Management Unit - LCC7C
Latin America and the Caribbean Region
This document has a restricted distribution and may be used b y recipients only in the
performance of their official duties. I t s contents may not be disclosed without W o r l d Bank
authorization.
CURRENCY EQUIVALENTS
(Exchange Rate EffectiveNovember 23,2004)
Currency Unit =
CLP590 =
Chilean Pesos (CLP)
US$1
FISCAL YEAR
- December 31
January 1
ABBREVIATIONS AND ACRONYMS
MOF
MOPTT
Ministry of Finance
Ministerio de Obras Priblicas, de Transportes y de Telecomunicaciones
(Ministry of Public Works, Transport and Telecommunications)
Memorandum of Understanding
National Competitive Bidding
Non-GovernmentalOrganization
Net Present Value
Operations and Maintenance
Organizaciones No Gubemamentales (Non-Governmental Organizations)
Project Appraisal Document
Project Affected Person
ADIS
APL
Develoment Indigenous Areas
Adaptable ProgramLending
APR
BIP
CAS
CASEN
CGR
CNE
CONADI
CONAMA
Agua Potable Rural potable Rural Water)
Banco lntegrado de Proyecto (IntegratedProject Bank)
Counay Assistance Strategy
Household survey of social and economic characteristics
Contraloria General de la Repriblica (General Comptroller’s Office)
Comisidn Nacional de Energia (National Energy Commission)
National Council for IndigenousDevelopment
Comisidn Nacional de Medio Ambiente
(National Environmental Commission
Consejo Regional (Regional Council)
CONAMA’s Regional Offices
Country Procurement Assessment Review
MOU
NCB
NGO
NPV
O&M
ONG
PAD
PAP
Consultants Qualifications
Direccion de Analisis y Conrrol de Gestion (Directorate of
Analysis and Management Control of the Regional Governments)
Direccidn de Desarrollo Regional
(Directorate of Regional Development)
Direccid de Obras Hidraulicas
(Directorate of Hydraulic Works)
Direccidn de Vialidad (Directorate of Roads)
Environmental Assessment
Esradisticas Bdsicas de lnformacidn (Basic Information Statistics)
PER
PHRD
Project Concept Document
Project Coordination Unit
Plan Marco de Desarrollo Territorial
(Regional Development Framework Plans)
Programa de Electrificacidn Rural (Rural Elecmcity Commission)
Policy and Human Resources Development Fund
PIC
Project Implementation Committee
pm
Project Information Document
CORE
COREMA
CPAR
CQ
DACG
DDR
DOH
DV
EA
EBI
ERD
ESW
FDT
FM
FMR
FNDR
FNDR-ER
FOSIS
GORE
HDM
IADB
(IDB)
ICB
IC1
ICT
IMO
INDAP
Estraregia Regional de Desarrollo (Regional Development Strategy)
Economic and Sector Work
Fondo de Desarrollo de las Telecomunicaciones
(TelecommunicationsDevelopment Fund)
Financial Management
Financial Monitoring Report
Fondo Nacional de Desarrollo Regional
(National Fund for Regional Development)
FNDR Rural Electrification Project (w. IDB financing)
Fondo de Solidaridad e Inversidn Social
(Fund for Solidarity and Social Investment)
Gobiemos Regionales (Regional Governments)
Highway Development and Management
Inter.-American DevelopmentBank
INE
International Competitive Bidding
Information and CommunicationsInfrasaucture
Information and Telecommunications Technology
Independent Monitoring Organization
Instituto Nacional para el Desarrollo Agropecuario
(Agricultural and Livestock DevelopmentNational Institute)
Instituto Nacional de Esradisricas (National Institute of Statistics)
IPDP
Indigenous Peoples DevelopmentPlan
Inversidn Sectorial de Asignacidn Regional
(Sectoral Investment for Regional Assignment)
Intergrated Safeguards Data Sheet
ISDS
Learning and Innovation Loan
LIL
M&E
Monitoring and Evaluation
MIDEPLAN Minisrerio de Planificacidn y Cooperacidn
(Minisay of Planning & Cooperation)
I S AR
Vice President:
Country Director:
Acting Sector Director:
Sector Manager:
Sector Leader:
Task Team Leader(s):
PCN
PCU
PMDT
PLADECO Plan de Desarrollo Comunal (Municipal Development Plan)
Programa Mejoramienfo de Barrios (Neighborhood Improvement Program)
PMB
PMDT
Plan Marco de Desarrollo Territorial
(Territorial Development Framework Plan)
PROFIM Municipal Development Project
PSR
Project Status Report
Quality and Cost Based Selection
QCBS
RAP
RP
RFP
Resettlement Action Plan
Resettlement Policy
Full Resettlement Plan
RPF
SBD
Resettlement Policy Framework
Standard Bidding Documents
SERCOTEC Servicio de Cooperacidn Tecnica
(Technical Cooperation Service, Min. o f Econ.)
SEREMI Secretaria Regional Ministerial (Regional Ministerial Secreteriat)
SERPLAC Secretaria Regional Ministerial de Planificacidn y Coordinacidn
(Regional Secretariat of the Ministry Planning and Coordination)
SIL
Specific Investment Loan
SPA
Social Impact and Participatory Assessmnt
SME
Small and Medium Scale Enterprise
SIN
Sisrema Nacional de Inversiones (National Investment System)
SOE
Statement of Expenditures
SUBDERE Subsecretaria de Desarrollo Regional y Administrativo
(Subsecretariat of Regional and Adminisaative Development)
SUBTEL Subsecretaria de Telecomunicaciones
(Subsecretariat of Telecommunications)
TOR
Terms of Reference
UGD
UGR
UT / T U
WB
Management and Development Unit
Unidad de Gerenciamiento Regional (Regional Management Unit)
Unidades Ttcnicas (Technical Units)
World Bank
David de Ferranti
Axel van Trotsenburg
John Henry Stein
Jose Luis Irigoyen
Juan Gaviria
Aurelio Menendez I Jennifer Sara
FOR OFFICIAL USE ONLY
CHILE
Chile Infrastructure for Territorial Development
CONTENTS
Page
A
.
STRATEGIC CONTEXT AND RATIONALE
..............................................................
1.
Country and sector issues .................................................................................................... 4
2.
5
3.
.
Rationale for Bank involvement ..........................................................................................
Higher level objectives to which the project contributes .....................................................
PROJECT DESCRIPTION
B
..............................................................................................
1.
Lending instrument ..............................................................................................................
2.
Project development objective and key indicators
..............................................................
3 . Project components ..............................................................................................................
4 . Lessons learned and reflected in the project design ............................................................
5 . Alternatives considered and reasons for rejection ...............................................................
6
6
6
6
7
7
9
.......................................................................................................
9
Institutional and implementation arrangements...................................................................
9
2.
Monitoring and evaluation o f outcomeshesults ................................................................
13
3.
Sustainability .....................................................................................................................
14
4.
Critical risks and possible controversial aspects ...............................................................
15
5.
Loadcredit conditions and covenants ...............................................................................
16
.
APPRAISAL SUMMARY
..............................................................................................
17
Economic and financial analyses .......................................................................................
17
.
IMPLEMENTATION
C
1.
D
4
1.
2.
3.
4.
5.
Technical ............................................................................................................................ 18
Fiduciary ............................................................................................................................
18
Social .................................................................................................................................
19
Environment
22
......................................................................................................................
6 . Safeguard policies ..............................................................................................................
7. Policy Exceptions and Readiness ......................................................................................
22
23
This document has a restricted distribution and may b e used by recipients only in
the performance of their official duties I t s contents may n o t be otherwise disclosed
without W o r l d Bank authorization.
.
Annex 1: Country and Sector or Program Background .................................................................
Annex 3: Results Framework and Monitoring ..............................................................................
Annex 4: Detailed Project Description ..........................................................................................
Annex 5: Project Costs ..................................................................................................................
Annex 5: Project Costs ..................................................................................................................
Annex 6: Implementation Arrangements.......................................................................................
Annex 7: Financial Management and Disbursement Arrangements .............................................
Annex 8: Procurement...................................................................................................................
Annex 9: Economic and Financial Analysis ..................................................................................
Annex 10: Safeguard Policy Issues ...............................................................................................
Annex 1O.C. Indigenous Peoples Plan...........................................................................................
Annex 11: Project Preparation and Supervision ..........................................................................
Annex 12: Documents in the Project File ....................................................................................
Annex 13: Statement of Loans and Credits .................................................................................
Annex 14: Country at a Glance ...................................................................................................
.
Map IBRD No 33707
24
35
39
49
50
51
59
63
70
79
83
104
106
108
109
CHILE
C H I L E INFRASTRUCTURE FOR TERRITORIAL DEVELOPMENT
PROJECT APPRAISAL D O C U M E N T
LATIN A M E R I C A AND CARIBBEAN
LCSFT
late: November 3,2004
2ountry Director: Axel van Trotsenburg
sector Managermirector: Jose Luis Irigoyen
'roject ID: PO76807
,ending Instrument: Specific Investment Loan
XI Loan
[ ] Credit
[
3 Grant
[ ] Guarantee
Team Leader: Aurelio MenendedJennifer Sara
Sectors: General water, sanitation and flood
protection sector (35%);Roads and highways
(30%);General information and communications
sector (25%);General energy sector (10%)
Themes: Rural services and infrastructure
(P);Rural policies and institutions (P);Rural
markets (S);Other rural development (S)
Environmental screening category: Partial
Assessment
Safeguard screening category: Limited impact
[ ] Other:
Tor Loans/Credits/Others:
rota1 Bank financing (US$m.): 50.26
RECONSTRUCTION AND
DEVELOPMENT
Total:
Borrower:
Government o f Chile, Ministry o f Finance
Teatinos 120
Santiago
Chile
Tel: (56) 2 473-25 17
mpv@dipres.cl
Responsible Agency:
SUBDERE
Julio Ruiz, Jefe Division Desarrollo Reg
Zenteno 234
Santiago
Chile
Tel: 562 636 3625
julio.ruiz @subdere.cl
70.32
19.94
90.26
Project implementation period: Start January 1,2005 End: June 30,2009
Expected effectiveness date: June 30,2005
Expected closing date: June 30, 2010
Does the project depart from the CAS in content or other significant respects?
Ref. PAD A.3
Does the project require any exceptions from Bank policies?
Ref. PAD 0 . 7
Have these been approved by Bank management?
I s approval for any policy exception sought from the Board?
[ ]Yes [XINO
[ ]Yes [XI N o
[ ]Yes [ IN0
[ ]Yes [XINO
Does the project include any critical risks rated “substantial” or “high”?
Ref. PAD C.5 (Some risks are moderate.)
[ ]Yes [XINO
Does the project meet the Regional criteria for readiness for implementation? Ref.
PAD D.7
[XIYes [
3 No
Project development objective Ref. PAD B.2, TechnicalAnnex 3
The project development objective i s to increase the effective and productive use o f sustainable
infrastructure services by poor rural communities in selected territories o f the regions o f Coquimbo,
Maule, BioBio, Araucania, and Los Lagos (and any other region as may be proposed by the Borrower
and agreed to by the Bank).
Project description [one-sentence summary of each component] Ref. PAD B.3.a, Technical Annex 4
1. Participatory Territorial Planning: this component will assist local stakeholders and regional
government agencies to: (a) prepare in prioritized rural territories in the five eligible regions
development framework plans, (b) identify demands for improved infrastructure services, and (c)
monitor progress with plan implementation.
2. Infrastructure Service Delivery: this component will support: (a) feasibility and design studies o f
subproject proposals to submit for financing under this component, (b) rehabilitation o f rural roads,
and construction, rehabilitation and expansion o f rural water, sanitation, electricity and ICT
infrastructure, (c) supervision, o f the mentioned works, and (d) studies and support for the
establishment and strengthening of local service providers to operate, maintain and administer the
services to achieve quality and sustainability.
3. Institutional Strengthening: this component w i l l support: (a) project coordination units at national
and regional levels, (b) implementation o f studies and capacity building to strengthen policies and
institutions in areas o f territorial planning and rural infrastructure service delivery (including those
related to the application o f social and environmental safeguards), and (c) project monitoring,
evaluation and learning as a contribution to national level expansion o f the program.
2
Which safeguard policies are triggered, if any? Ref. PAD 0.6, TechnicalAnnex 10
0
Environmental Assessment
0
Involuntary Resettlement
0
Indigenous Peoples
0
Cultural Property
Significant, non-standard conditions, if any, for:
Ref. PAD C.7
Board presentation:
None
Loadcredit effectiveness:
I
(a) The SUBDERE has prepared and adopted the Project Operational Manual in terms and scope
acceptable to the Bank.
(b) The Project National Directorate, consisting at least o f representatives from the SUBDERE,
Ministry o f Finance, Ministry of Public Works, Transport and Telecommunications (MOPTT),
MIDEPLAN, Ministry of Agriculture, and Ministry o f Economy, has been officially constituted
through a legal document acceptable to the Bank.
(d) The SUBDERE establishes the Management and Development Unit (Unidad de Gerenciamiento y
Desarrollo) in a form and with the number of qualified staff acceptable to the Bank.
Covenants applicable to project implementation:
Covenant:
The borrower should, not later than a date two years after the Effective Date o f the Loan, furnish to the
Bank for i t s review and comments, the new methodology developed for the technical, social and
economic evaluation of subprojects based on a territorial approach, and thereafter test and apply such
methodology in the evaluation o f subprojects, as appropriate.
Conditions of disbursements for subprojects:
Before submitting first withdrawal applications for a subproject in a Region, the SUBDERE has
signed the Eligible Region Agreement (Convenio de Trabajo) with the relevant Regional Government
and, through that Regional Government, the UGR has been established and staffed with personnel
with qualifications and experience satisfactory to the Bank.
3
A. STRATEGIC CONTEXT AND RATIONALE
1. Country and sector issues
Over the past decade, the Chilean government has made impressive strides in economic growth,
poverty reduction and increasing access of the poor to public services, including in rural areas.
Infrastructure services are essential to ensure all Chileans have sufficient opportunities for
achieving basic standards o f living, generating income and rising out o f poverty. Despite the
highly urbanized nature o f the country, 2 million Chileans reside in rural areas, o f whom 500,000
live in poverty and many lack basic services.
The Chilean government has made a significant commitment to expanding rural infrastructure
services as a means to address poverty and income inequality in the rural space. This has taken a
variety o f forms: the creation o f rural infrastructure programs and expertise within technical
ministries, the establishment of specialized funding streams, and applying versatility to the
selection o f service delivery options. The sectoral agencies have gathered the human and
financial resources necessary for planning, evaluating and implementing rural infrastructure
projects o f high standardized quality. Over the past five years, the government has invested
approximately one billion dollars in rural potable water, electricity, roads, and public telephones,
with the majority designated for roads. Government’s focus on rural infrastructure has increased
the pace o f service expansion over the past decade, allowing Chile to achieve high rural
infrastructure coverage rates: 86% in electricity and over 90% in water supply for concentrated
rural populations, in addition to constructing 6,093 new public telephone centers covering 2.2
million people, 25,000 individual rural telephone lines and an extensive rural road network.
Chile now faces the challenge o f continuing coverage expansion into primarily dispersed rural
populations while maximizing the sustainability and productive and social impact o f existing
infrastructure investments. The needs are large and the remaining unserved populations are the
most difficult to reach. Currently, 77,118 rural households lack electricity, 680,000 households
in dispersed rural areas are without potable water service, and many more lack access to basic
sanitation facilities, all-weather roads, and a working phone or internet service. Household
studies conducted in two regions showed that communities in poor rural municipalities identified
roads, sanitation, and potable water services as their primary needs.
The design o f an improved multi-sectoral program to address the challenge o f reaching the
unserved rural population must build on the strengths o f the existing service delivery models, but
also address some limitations o f the current single-sector, target-driven service delivery
mechanisms in several areas, specifically:
0
0
Inefficiencies in the way services are planned and financed, due to centralized decisionmaking based on sectoral funding allocations and a long project preparation and approval
process
Unrealized development impact due t o the lack o f coordination across sectors and
investments that do not always respond to community and municipal priorities or to a local
economic development strategy
4
a
Social and economic evaluation methodologies that do not allow for innovative multisectoral project designs and that present limitations to adapt to realities of dispersed
populations and small settlements
a
Inappropriate technical standards resulting in services that are expensive to maintain and
an inability to reach the dispersed populations with more cost-effective solutions
0
Focus on coverage expansion without ensuring quality and sustainability of existing
services b y strengthening the capacity of local management bodies (such as water
committees, SMEs, etc), increasing cost recovery and improving the efficiency o f rural road
maintenance.
2. Rationale for Bank involvement
The Government of Chile i s very interested in finding new approaches to rural infrastructure
service delivery, and started working with the Bank in 2003 on the implementation of an ESW to
identify areas where existing strategies could be improved (the results o f ESW are summarized
in Annex 1). In particular, the Ministry o f Finance (MOF) has delineated an action plan to
transition away from the centralized sectoral-driven approaches to investment decision-making.
During the past few years, i t has progressively increased the amount o f fiscal transfers to
regional governments, particularly via the Fondo Nucional de Desarrollo Regional (FNDR)
which i s managed by Subsecretaria de Desarrollo Regional (SUBDERE) of the Ministry o f the
Interior, to allow regional governments (GORE) prioritize investments within each sectoral
allocation, especially in the rural infrastructure sectors (water, roads and electricity). M O F and
SUBDERE would like to further advance regional government discretionality in the allocation o f
resources across sectors, and particularly in the infrastructure sectors which are the domain o f
FNDR.. At the same time, M O F would like to ensure continued efficiency in resource
expenditures on rural infrastructure while increasing their impact on improving the economic
development potential of the rural poor.
As a follow up to the ESW, the Ministry of Finance requested Bank support in preparing and
financing a multi-sectoral infrastructure program targeted to the poorer regions and communities
in the country. In this context, government sees the Bank as a source of strategic advice in
designing new approaches to rural infrastructure and territorial development, based on i t s
international experience and analytical work. At the same time, as government looks for more
appropriate institutional arrangements for planning and delivering rural infrastructure services,
the Bank serves as a more neutral third party to help bring together a large number o f actors at
the national, regional and local levels to increase cross-sectoral coordination and jointly develop
a new way to provide rural infrastructure services within a territorial approach. In addition, the
Bank i s able to share i t s global expertise in designing poverty-responsive rural infrastructure
programs, and introducing community participation, demand-responsive approaches and
solutions for reaching the unserved, poor and dispersed populations. The project also allows to
build synergies with the long-standing Bank-supported municipal development project,
PROFIM. Finally, the Bank's provision o f US$50.26 million of funding enables government to
introduce a new a multi-sectoral budgetary allocation within FNDR specifically targeted to
infrastructure service improvements for the rural poor.
5
While the project had initially been envisioned as a US$30 million loan to partially finance
specific sector investments, the analytical ESW work and the subsequent dialogue with the
Government of Chile led to the design of an operation supporting a new system for the delivery
of rural infrastructure that empowers regional and territorial entities with a decisive role in the
planning and allocation o f resources. The broader scope o f the operation led to an increased in
the amount o f the loan which i s well within the CAS resources envelope and country exposure
levels.
3. Higher level objectives to which the project contributes
The 2002 CAS set three broad goals: (a) sustaining economic growth and social progress, (b)
heightening inclusion, especially o f rural populations and vulnerable groups, and (c)
modernizing the state as an underpinning of the two previous objectives. To achieve these goals,
the CAS incorporates a project on rural infrastructure following the completion of the sector
work.
The proposed project aims to improve livelihoods o f rural communities b y i)developing more
appropriate strategies for efficiently extending services for those rural households without access
to one or more infrastructure services, and ii)improving the efficiency, sustainability and
developmental impact of the infrastructure services already provided. The project w i l l also
support reforms to help government move towards: greater cross-sectoral coordination in rural
infrastructure, investment decisions that respond to community demand and investment
coordination to maximize impact. Although the project would contribute to some overall sector
and policy improvements, related mainly to improving access of the rural dispersed population to
infrastructure services (and in particular in the water and sanitation sector), specific sectoral
policy reform i s not an over-riding objective of this multi-sectoral project. At the same time, the
project builds on and strengthens the existing institutional framework in Chile and does not
provide a parallel implementation mechanism.
B. PROJECT DESCRIPTION
1. Lending instrument
The proposed lending instrument i s a Specific Investment Loan (SIL). The Borrower selected a
Fixed Spread Loan, repayable in 6.5 years with a grace period of 4.5 years.
Despite a learning focus o f the project, a LIL was not considered an appropriate instrument
because of i t s small size and limited potential impact. An APL has not been deemed appropriate
at this time due to our recent engagement in this type o f project in Chile and the innovative
nature of this operation.
2. Project development objective and key indicators
The project development objective i s to increase the effective and productive use o f sustainable
infrastructure services by poor rural communities in selected territories o f the regions o f
Coquimbo, Maule, BioBio, Araucania, and Los Lagos (or any other region as may be proposed
by the Borrower and agreed to by the Bank). The infrastructure services include water supply,
sanitation, roads, Information Communications Infrastructure Technology (ICT) and electricity.
6
As an intermediate institutional objective, the project w i l l strengthen the capacity of
participating agencies to implement territorially-based, demand-responsive and multi-sectoral
approach to rural infrastructure as a contribution to local economic, social and environmental
sustainability. The learning and results o f the project w i l l provide a basis for implementing a
longer-term institutional reform on how rural infrastructure services are planned, financed and
delivered in Chile.
Project outcomes w i l l be measured by the increased use o f sustainable and quality services b y
the rural population and their contribution to economic and productive activities (see Annex 3 for
indicators). The institutional outcomes w i l l be measured b y the mainstreaming o f the territorial,
demand-responsive and multi-sectoral approach to rural infrastructure within government
programs, namely: (a) new methodologies for integrated economic and social evaluation o f
multi-sectoral projects implemented by MIDEPLAN; (b) more effective, decentralized service
delivery models and appropriate technical solutions adopted b y relevant sectoral agencies to
reach unserved and dispersed population; and (c) multi-sectoral territorial-based planning and
service delivery model replicated in other non-project territories and regions.
3. Project components
The project w i l l include the following three components (costs include contingencies but do not
include the front-end fee of US$0.25 million):
1. Participatory Territorial Planning (US$3.94 million): this component w i l l assist local
stakeholders and regional government agencies to: (a) prepare in prioritized rural territories
in the five eligible regions development framework plans, (b) identify demands for improved
infrastructure services, and (c) monitor progress with plan implementation.
2. Infrastructure Service Delivery (US$80.29 million): this component will support: (a)
feasibility and design studies o f subproject proposals to submit for financing under this
component, (b) rehabilitation of rural roads and construction, rehabilitation and expansion o f
rural water, sanitation, electricity and I C T infrastructure, (c) supervision o f the mentioned
works, and (d) studies and support for the establishment and strengthening of local service
providers to operate, maintain and administer the services to achieve quality and
sustainability.
3. Institutional Strengthening (US$5.52): this component w i l l support: (a) project
coordination units at national and regional levels, (b) implementation o f studies and capacity
building to strengthen policies and institutions in areas of territorial planning and rural
infrastructure service delivery (including those related to the application o f social and
environmental safeguards), and (c) project monitoring, evaluation and learning as a
contribution to national level expansion of the program.
4. Lessons learned and reflected in the project design
The ESW on Rural Infrastructure Services analyzed the strengths and limitations o f the different
delivery mechanisms implemented in Chile. The key lessons from this work (characteristics o f
successful programs, limited investment coordination among sectors, focus on coverage rather
than long terms sustainability, need to adapt technical standards to reach dispersed populations,
7
etc.) were incorporated in the project design resulting in a cross-sectoral approach that aims to
increase impact and add value to existing single-sector investments b y providing a full package
of demand-appropriate infrastructure services required to undertake meaningful productive
activities in rural areas. At the same time, such an approach could bring about greater efficiency
and sustainability o f services to the remote and unserved populations b y offering opportunities
for single and cross-sectoral service bundling. The project seeks to build on successful existing
experiences and at the same time introduce some innovations in the timing and sequencing o f
project evaluation and funding allocation processes to move from a sectoral to a territorial
approach within an established budgetary framework. The approach would also identify
complementary programs to assist communities to make more efficient and productive use o f
their infrastructure services, by associating infrastructure investments with other productivity
enhancement programs.
Key lessons related to rural infrastructure provision:
Need to incorporate participatory approaches in the design and implementation o f rural
infrastructure projects as a means to enhance ownership, tailor the investment to local
demands, and improve the sustainability o f investments.
'
There are a range of technical options for improving infrastructure services in rural areas,
each with i t s associated cost and service delivery options. In Chile, investments have often
relied on technical standards that are more appropriate to larger populations and have led to
facilities that are more expensive to maintain and operate. There i s a need to introduce more
appropriate and lower cost technologies, especially to serve the large number o f rural
dispersed communities, and assess their willingness to pay and preferences for operating the
services as a means to enhance sustainability.
Mechanisms that promote local involvement in the operation and management of
infrastructure services tend to lead to better management and maintenance practices. The
experiences of other countries in the operation o f rural infrastructure services has been
brought to the preparation o f this operation. For instance, the successful experiences of the
road maintenance micro-enterprises in countries such as Colombia, Peru and Bolivia have
been taken into account with the adaptations required by the specificities o f the Chilean rural
areas. Chile has already developed successful community-managed approaches to rural water
supplies, and through this project, these would be expanded to the off-grid electricity and
operation o f local telecommunication services.
Sectoral policies and approaches to rural infrastructure, while necessary, are not sufficient to
achieve the impacts necessary to increase living conditions in rural areas. Territorial
approaches can provide a means to improve coordination and complementarity o f
investments, and also build linkages to productive activities. This approach, however,
requires a shift in the manner the investments are identified and evaluated. Studies in other
countries, such as Peru, show that when several infrastructure services are made available
simultaneously in the same rural area, the impact i s greater that the sum of the individual
effects when the services are provided individually in separate areas.
8
5. Alternatives considered and reasons for rejection
Alternative development interventions and approaches that have been considered include:
a) National Program vs Targeted Regions. Given the pilot nature of the project, a phased
approach in fewer regions would allow the development and testing of new participatory
methodologies and cross-sectoral implementation mechanisms that take into account local
demands and development impacts. The lessons for this first phase would allow government
to expand the approach to all 13 regions in the country.
b) Inclusion of Productive Infrastructure Investments (such as irrigation and support to
agro-processes) Achieving an economic development impact in each territory w i l l require a
series o f coordinated interventions in social, economic and productive infrastructure, and
associated technical assistance to local service providers and user groups. At the same time,
government, through the Ministry o f Agriculture and other specialized agencies, has a large
number o f existing funds and programs to support productive rural activities. I t was agreed
that the added value of this project would be to provide the platform for local level
coordination and territorial planning, develop a working model for cross-sectoral investment
coordination, and focus its investments in the four infrastructure sectors. This i s already an
ambitious agenda since in each sector, the objective w i l l be to put place sustainable local
service delivery models for the services provided, all o f which w i l l require specific sectoral
expertise.
c) Implementation by Ministry of Public Works (MOPTT). MOPTT as the implementing
agency for rural water and rural roads had important expectations about their role in the
proposed project. They were responsible for initiating the ESW and have been active
throughout project preparation. However, government decided to appoint the SUBDERE,
guided by an inter-agency steering committee (the National Directorate), as the overall
project implementation agency as a means to facilitate the multi-sectoral and decentralization
objectives of the project. SUBDERE also has the advantage of managing the FNDR fund
channeling to the regions. However, i t i s clear that SUBDERE w i l l need to secure the active
participation of all technical line agencies for project implementation, including MOPTT,
CNE and SUBTEL.
C. I M P L E M E N T A T I O N
1. Institutional and implementation arrangements
At the national level, the overall responsibility for project implementation and coordination will
rest with SUBDERE, through the Management and Development Unit (UGD), within the
Direccidn de Desarrollo Regional (DDR). Regional governments w i l l be in charge o f the
execution of the rural infrastructure investment plans, using the existing legal and fiduciary
framework of the FNDR. The FNDR was established by Decree 573/74, b y the Government o f
9
Chile to decentralize public investment at regional level, and works under the overall supervision
o f SUBDERE (see box below).
The SUBDERE, through the UGD, w i l l be responsible for monitoring compliance with the
requirements and procedures established in the Loan Agreement and the Project Operational
Manual, and as such w i l l be responsible for overseeing project implementation. The SUBDERE,
also through the UGD, w i l l be responsible for monitoring the achievement o f the project
development objectives and performance indicators and in charge o f providing technical
assistance4irectly or through the contracting o f specialized consultants-to the entities at the
regional and local levels. SUBDERE w i l l be directly responsible for implementing Component 3
o f the project. A national level Project National Directorate comprising representatives of
MOPTT, MOF, MIDEPLAN, Ministry o f Agriculture, and Ministry o f Economy w i l l provide
overall strategic directives for project implementation. The Decree that w i l l formally established
the National Directorate w i l l summarized the responsibilities o f the participating entities,
particularly as they related to the operational implementation o f subprojects by their respective
sub-entities such as SUBTEL, Directorate o f Roads (DV) and Directorate of Hydraulic Works
(DOH) of MOPTT, CONADI of MIDEPLAN, or the CNE and Chile Emprende of the Ministry
of Economy.
Within each region, a Unidad de Gerenciamiento RegionaE (UGR) w i l l be put in place, under
the oversight o f the Regional Zntendentes and in coordination with the relevant units in the
regional governments (such as the Chief o f Staff of the Zntendente or the SERPLAC). The
SUBDERE w i l l sign an Eligible Region Agreement (“convenio de trabajo”) with each of the
Regional Zntendentes (executive heads of the regional governments and chairs o f the regional
councils, as regulated b y Law No. 19175 o f January 2003), laying down the administrative and
fiduciary responsibilities, including those related to social and environmental safeguards, as
specified in the Project Operational Manual, and reporting requirements. The UGR w i l l
10
implement Component 1 of the project in close coordination with UGD, through government
staff and consultants for the development of the Territorial Development Framework Plans. As i s
usual practice in Chile, the Regional Government w i l l also oversee implementation of
Component 2, through Subproject Implementation Agreements (“Convenios Mandates") signed
with the qualified Implementation Technical Units, as described below.
The project w i l l be implemented following a territorial approach to the identification of needs
and the execution o f the selected infrastructure investments and the subsequent operation and
maintenance. The project will work through existing institutions, including regional
governments, deconcentrated sectoral agencies and municipalities, which w i l l be adequately
supported as required b y project managers and technical specialists. At the same time, a strong
coordination effort w i l l be made through the formal establishment of directorates or commissions
where the representatives of the key entities at the national, regional or local levels will be
represented. Annex 6 details the institutional framework and responsibilities.
In each region, the project cycle i s initiated b y the identification o f territories that respond to a
minimum set o f socio-economic criteria, with the consensus o f the Regional Council (CORE).
In these territories, the participatory planning process leads to the design of territorial
development framework plans (PMDTs) which w i l l identify the priority rural infrastructure
investments-the subprojects-to be funded by the project, as well as other activities, such as
productive initiatives, that would be implemented b y other government programs, or with private
financing (e.g., productive initiatives). The plans and infrastructure investments would be
validated by the CORE. All infrastructure subprojects would also need to be approved by
MIDEPLAN, based on the socio-economic appraisal performed by i t s regional units
(SERPLACs). (The B o x below summarizes the key characteristics o f the pilot PMDTs.)
Implementation Technical Units (“Unidades Tbcnicas” or U T s ) made up o f staff o f the sectoral
agencies (MOPTT, CNE, municipalities, and other public sector entities) at the regional and
local levels w i l l be responsible for preparation, procurement and supervision of subprojects
within their respective areas o f expertise. The Execution Agreements signed between Regional
11
Zntendentes and the UTs w i l l specify responsibilities for carrying out the implementation of the
specific infrastructure components in a particular region. These UTs w i l l be responsible for the
implementation o f their respective subprojects, including for example, preparing bidding
documents, carrying out the bidding processes, contract award and signing, approving payments
to contractors, and supervising o f the contracted works and services). The Execution
Agreements w i l l also specify the scope of the subprojects, the allocation o f budgetary resources,
procurement guidelines and procedures, supervisory and reporting requirements, and transfer
mechanisms o f completed works for their .operation and management', and specify that the
procedures o f the Project Operational Manual would be followed.
The selection o f UTs w i l l be carried out by the Regional Government in consultation with the
UGR, based on the specific technical needs o f each set o f subprojects identified in a PMDT. In
addition, with the principle o f devolving responsibilities to the local level, the UGRs, in
agreement with the UGD, and with resources from the Project, w i l l build up the capacity of more
locally-based U T s , such as municipalities or local committees, so that they can be engaged in
project implementation activities.
The UGRs and the CORES, supported by the existing Regional Control Units (deconcentrated
units o f SUBDERE that are responsible for collecting and reviewing documentation on
expenditures under the FNDR), w i l l conduct the oversight of the UTs. The UGRs w i l l be staffed
with a limited number of personnel, determined by the size of the project portfolio in the region,
and including specialists in financial and administrative management.
Schedule of project implementation. The project w i l l require a long-start up period to fully
develop in each territory, in a participatory and coordinated manner, including: (a) the
elaboration o f PMDTs; (b) subproject identification, design, approval and procurement with due
consideration to safeguards; and (c) agreements with the Implementation Technical Units. The
implementation schedule and disbursement profile reflect this expected longer startup period.
Partnership arrangements. Project preparation has taken place in coordination and partnership
with a broad spectrum of Chilean entities involved in activities in rural areas. T h i s partnership
w i l l be preserved during project implementation through the establishment o f a National
Directorate that w i l l provide overall strategic direction (the establishment o f this Directorate i s
an effectiveness condition). Regional and territorial coordinating bodies w i l l also be put in place
for carrying out specific project activities. This scheme-formalized for the National Directorate
through a Decree-will allow to achieve the necessary synchronization with complementary
government programs (such as ChileSolidario, FOSIS, Origenes, Emprende Chile) and the
investment subprojects of the sectoral institutions (MOPTT, SUBTEL and CNE). At the
regional level, as required b y the characteristics of the territories and subprojects, specific
Memoranda-of-Understanding will be signed between the Regional Governments and the
CONADI, with the ratification o f MIDEPLAN, to further ensure adequate coordination on
indigenous issues.
'
This type of agreements have been used by the SUBDERE for the execution o f FNDR-supported projects and
other regional initiatives (those previously financed by central budgetary allocation subject to regional decisionsthe so-called ISAR). The most recent example i s the IDB-financed Rural Electrification Project.
12
Within the SUBDERE, the project w i l l coordinate i t s activities with those being undertaken
under the World Bank-financed Municipal Development Project (PROFlM), currently in its
second phase. The exchange o f information and strategies between PROFIM’s national and
regional offices and those o f the project i s paramount towards increasing the involvement o f
municipalities in the management of rural infrastructure services, and their development in
general. Furthermore, the municipal Communal Development Plans (PLADECOs) and
Strengthening Development Plans, w i l l provide an important input into the PMDTs.
Coordination across the two projects could also be enhanced by joint Bank implementation
support missions.
2. Monitoring and evaluation of outcomedresults
The SUBDERE w i l l implement a monitoring and evaluation (M&E) system designed to assess
the gradual impacts o f the implementation o f the infrastructure components o f the PMDTs on the
communities in the selected territories and on the related productive activities. The system w i l l
incorporate mechanisms to monitor subproject implementation b y the Technical Units and
compliance with the established procurement, financial management and social and
environmental safeguards procedures.
The M&E system w i l l also keep track o f the achievement of the project performance
indicators included in the Results Framework (Annex 3). These indicators will track final and
intermediate project outcomes, while SUBDERE w i l l have a more elaborate M&E system to
report on project results and processes. As the specific subprojects are not specified from the
outset but are identified through the participatory PMDTs, the actual number o f physical targets
among the different infrastructure sectors will only be known at the end o f the project. However,
SUBDERE i s identifying a l i s t o f physical targets related to increase in service coverage in each
sector and these w i l l reflect an overall estimate o f the percentage participation of each sector in
the l i s t of subprojects identified in the f i r s t pilot PMDTs, extrapolated to cover the total amount
of resources and considering the average cost per unit o f measurement for each sector. During
the preparation of each PMDT, coverage rates, quality and use of the infrastructure services in
the territory w i l l be measured to establish a baseline of information. Upon completion o f
subproject activities in that territory a new measurement of the same data will be carried out to
analyze the progress in increasing coverage rates, quality and use of those services. As these
activities w i l l be an integral part of PMDT preparation, their cost i s covered as part of
Component 1.
The Project will also undertake an assessment of intermediate socio-economic impact
indicators related to the contribution of infrastructure services to productive activities and the
socio-economic well-being o f participating families. These evaluations may also use control
cases, by comparing similar territories that were not subject to project interventions. The
information annually generated under the household survey, CASEN, will be used, to the extent
allowed by i t s reference to the selected territories, for cross-checking the results of the
evaluation. The costs o f these evaluations has been included in Component 3. The UGD i s
responsible for carrying out these analyses with support from the relevant UGR.
A participatory monitoring process w i l l be also incorporated into the overall M&E system and
implemented at the territorial level to include a beneficiary assessment o f adherence to project
13
rules, progress and results of implementation. As stipulated in the recommendations of the social
assessment, particular attention w i l l be paid to including household and community data
collection, as a means to track overall participation, but also that of indigenous peoples and
women. Household data sheets w i l l be completed in a representative sample of households
within benefiting territories to collect demographic and ethnic data, gender information,
infrastructure priorities, willingness to pay for improved services and to participate in
implementing local service delivery systems. The project M&E system w i l l capture this
household data and use i t for analysis of results and impact. The participatory monitoring of
project process will address the following: (a) project procedures were well explained and
followed, (b) quality o f infrastructure provided, (c) quality and effectiveness of training, and (d)
methods and effectiveness of community participation in the project.
3. Sustainabi1;ty
Sustainability i s a cornerstone o f the overall project strategy to ensure the quality, continuity and
reliability o f the infrastructure services that w i l l be put in place.
In the rural water sector, despite a highly effective strategy, which puts in place well organized
community-based service providers that have demonstrated excellent technical and
administrative capacity to operate their services, the ESW identified several gaps in their
capacity to be fully sustainable without continued government subsidy. The largest threat comes
from the established financial policy of the sector, whereby government fully subsidizes the
investment cost and only requires the tariff to cover basic operational and maintenance costs,
with no reserves for depreciation or major repairs. At the same time, many of the water
committees lack the legal ownership o f the water resources or o f the land on which the systems
are constructed as well as the operating license from the Ministry o f Health, consequently they
are unable to access credit to self-finance system rehabilitation and expansion. These issues
have been brought to the attention of government, and Component 3 o f the project includes
resources for funding additional studies and policy work to encourage government to redress the
situation.
Sustainability o f the rural roads that w i l l be rehabilitated in the project will be enhanced b y
following a three-pronged approach: (a) the Directorate o f Roads (DV) w i l l be in charge o f the
design, implementation and maintenance o f the roads within their network, (b) DV w i l l also
promote a model for the strengthening of the capacity o f municipalities in project territories to
help in managing the road networks within their jurisdiction, and (c) community-based microenterprises w i l l be formed and trained so that they can be hired by DV and municipalities to
undertake maintenance activities. Component 3 includes additional resources to delineate a rural
transport policy and help identify strategies and actions in the provision of transport services and
attend road safety issues on the rural (secondary) networks.
In terms of the networked and well-regulated services such as grid electricity and ICT, the active
role of the private sector as service providers coupled with an adequate regulatory framework,
investment subsidy and tariff structure, provide the technical, administrative and financial means
for the services to be sustainable as long as consumer pay their tariffs. O n the other hand, the
project w i l l need to support government put in place local management structures to operate the
14
non-networked decentralized electricity and telecommunication services, building on the
successful experiences in Chile o f the rural water sector.
4. Critical risks and possible controversial aspects
The possible risks refer to the methodologies to be followed during project implementation,
especially those that involve: participatory processes for the selection o f investments, the active
coordination o f multiple actors at different levels of government, and the identification o f
territories which require the validation o f the CORE, and therefore a marrying of technical and
political criteria. These elements represent a shift in the manner the Chilean government has
been undertaking interventions in rural areas and as such represent a challenge for the successful
implementation of the project, as well as for the longer-term institutionalization o f the approach.
The overall risk for the project i s rated as modesthubstantid.
Klsk
The capacity of the
SUBDERE to manage the
Project and effectively
coordinate across multiple
agencies does not measure
up to expectations.
(SubstantiaVModest)
The Implementation
Technical Units do not have
a functional dependence
with SUBDERE, and may
therefore have fewer
incentives to participate in
the project rather than
implement their own
programs andor may pay
less attention to the quality
of implementation.
(ModesdSubstantial)
Governments and Councils,
arising from political
factors. adverselv affect
Mitigstian
The institutional capacity of most agencies at the national and regional
levels in Chile i s quite strong, especially on technical and project
implementation issues. SUBDERE i s a well qualified implementation
agency, with experience in managing IDB projects, as well as the Bankfunded PROFIM project. SUBDERE will need to hire additional staff for
the project at both the national level (the Management and Development
Unit or UGD) and within each project region (the Regional Implementing
Units or UGRs). SUBDERE will be required to put in place the UGD as a
condition of effectiveness, to support procurement, project management,
social and environmental management, infrastructure engineering and
economic functions. In each region at the UGR, qualified staff will also be
appointed or hired, and a task manager assigned to follow up on the
implementation of each PMDT, ahead of initiating transfer of resources to
that region. One of the greater challenges for SUBDERE will be to ensure
active coordination and collaboration with all participating agencies (see
next risk)
A series of legal instruments are being put in place to specify roles and
accountabilities for project implementation. The Decree that establishes the
National Directorate w i l l provide the umbrella framework for the effective
partnership of the GORES, TUs and the SUBDERE in the implementation
of the Project. At the same time, each participating sectoral ministry will be
requested to orient and supervise i t s deconcentrated units in the regions to
ensure that their participation in the project form an integral part of their
regular work program. In addition, the Subproject Implementation
Agreements between the Regional Governments and the Implementation
Technical Units will detail the responsibilities of the TUs and the
procedures for implementing all project activities, as described in the
Project Operational Manual. The National Directorate will be informed of
any possible non-compliance issues and requested to propose actions to
address them.
The territorial approach will require the region to allocate funds as a multisectoral package rather than on a subproject-by-subproject basis. Strong
initial buy-in of project scope and approach by Regional Governments and
Councils appears to indicate a low level of this risk. Nonetheless, the
15
project implementation.
(LowNodest)
MIDEPLAN i s not able to
elaborate the
methodological proposal for
incorporating an integrated
analysis in the evaluation o f
subprojects under the
P M D T approach. (Modest)
Limited experience with
participatory and
decentralized projects may
limit the opportunity
provided to community
members and municipal
governments to be actively
engaged in all stages o f
subproject identification and
in the operation and
management o f their
services.
(SubstantiaYModest)
I
formalization o f the Eligible Region Agreements between the SUBDERE
and the GORESw i l l cement the framework for the implementation o f the
project in each region. In addition, the SUBDERE has been undertakingand w i l l continue to undertake-a dissemination campaign o f the project
features and the advantages of the territorial approach. The Regional
Territorial Commissions are also expected to counterbalance interests at the
regional level and ensure that the Regional Zntendente and the CORE
support the implementation o f the plan in an integrated manner and
according to its dictates.
During project preparation the SUBDERE and MIDEPLAN signed an
M O U endorsing the need to consider the possible complementary benefits
and reduced costs entailed by a territorial approach for subproject
identification and implementation. Further memoranda w i l l be issued to
ensure that these principles are effectively incorporated into the ways the
SERPLAC appraise subprojects and also to advance in defining costeffectiveness thresholds for lower-cost sub-projects.
The technical
assistance component includes resources to support MIDEPLAN in
analyzing alternative methodologies for the evaluation o f infrastructure
subprojects in low-density rural areas and o f a combination of subprojects
that are part o f a PMDT. A covenant has been defined agreeing on the
testing o f the new methodology upon its elaboration two years after the
Effective Date o f the Loan.
At the national and regional levels, the Project Operational Manual w i l l
outline the steps for implementing agencies to secure community and
municipal participation in the project, including addressing gender and
indigenous issues. Capacity w i l l be built within these agencies to
incorporate more participation into their work. Indicators are included in the
results framework to track local level endorsement o f the PMDTs and
investment plans.
At the local level, the coordination with PROF'IM w i l l help build upon i t s
achievements in municipal strengthening. At the same time, participating
communities and municipalities w i l l be assisted to put in place local service
delivery mechanisms for management of water and sanitation, off-grid
electricity, and secondary roads, b y promoting and strengthening local
micro-enterprises, cooperatives, committees, etc.
5. Loadcredit conditions and covenants
Effectiveness conditions:
0
0
The SUBDERE has prepared and adopted the Project Operational Manual in terms and scope
acceptable to the Bank.
The Project National Directorate, consisting at least of representatives from the SUBDERE,
Ministry of Finance, Ministry of Public Works, Transport and Telecommunications
(MOPTT), MIDEPLAN, Ministry of Agriculture, and Ministry of Economy, has been legally
established in form and substance acceptable to the Bank.
16
0
The SUBDERE establishes the Management and Development Unit (Unidad de
Gerenciamiento y Desarrollo) in a form and with the number o f qualified staff acceptable to
the Bank.
Covenants:
0
0
The SUBDERE should, not later than a date two years after the Effective Date of the Loan,
furnish to the Bank for i t s review and comments, the recommendations o f the studies on the
new methodology for the social and economic evaluation o f projects based on a territorial
approach, and thereafter test the methodology in the evaluation o f subprojects.
The SUBDERE should seek prior approval o f the Bank o f any resettlement plans developed
following the Resettlement Policy Framework, and carry them out. The SUBDERE w i l l
carry out the indigenous peoples plan in all relevant regions with indigenous population.
Conditions of disbursements for subprojects
0
Before submitting first withdrawal applications for a subproject in a Region, the SUBDERE
has signed the Eligible Region Agreement (Convenio de Trabajo) with the relevant Regional
Government and the UGR has been established with a number o f qualified staff acceptable to
the Bank.
D. APPRAISAL SUMMARY
1. Economic and financial analyses
Due to the demand-based nature and characteristics of the multiple, relatively small subprojects
that w i l l be financed, an ex-ante specific economic or financial rates of return analysis for the
overall project i s not feasible. Since this i s a framework-type of project, the eligibility criteria,
procedures and methodologies for evaluation and screening methodologies o f the subprojects
have been determined. These methodologies rely largely on the systems in use b y MIDEPLAN.
However, the innovative aspects o f this project w i l l also require that MIDEPLAN make
adjustments to i t s current practices to reflect: (a) the territory-based approach and so that
complementary benefits that stem from a combined set o f rural infrastructure subprojects are
taken into account and (b) more streamlined procedures for evaluating smaller scale subprojects
through the application of per capita investment thresholds and to promote the use of more
appropriate and cost-effective technologies for dispersed rural populations.
The main characteristics o f the MIDEPLAN methodologies for each sector, the adjustments to it,
and the cost-effectiveness criteria to be applied in the evaluation o f the proposed subprojects
identified through the participatory PMDTs are described in detail in Annex 9. This "adjusted"
framework has been discussed and agreed upon with MIDEPLAN and an MOU has been issued
in this respect. During project implementation, and before two years after the effective date,
MIDEPLAN would be supported to develop a new methodology for the evaluation of
territorially-based multi-sector infrastructure plans. This methodology would then be tested and
applied in the evaluation of subprojects as appropriate.
17
The MIDEPLAN methodological process aims at evaluating the private and economic (social in
MIDEPLAN terminology) rates o f return to vet the sustainability of investments (private
perspective) and the worthiness of those subprojects that may not be financially sustainable
(social perspective). Rural roads subprojects are solely assessed on the basis of economic
(social) considerations. Both private and economic assessments are pertinent in the case o f rural
electrification and rural telecommunication subprojects and, in some instances, for water and
sanitation subprojects.
In the case o f rural electrification and telecommunication subprojects the responsible entities are
often private concessionaires in charge of providing those services as part o f the interconnected
network. When the system i s not financially sustainable a minimum subsidy policy applies.
When the rural electrification subprojects are not interconnected, or in the cases o f water
committees, then the community or a committee becomes responsible for the management and
upkeep of the system, i t becomes imperative that the system i s financially self-sufficient to
ensure i t s sustainability.
2. Technical
The characteristics of the subprojects to be identified through the PMDTs do not impose major
technical difficulties. The design of the subprojects w i l l follow technologies and standards
adapted to the features of the territories. However, in some sectors there will be a need to adjust
technical design standards so that they are more appropriate to the needs and capacities o f the
smaller, more dispersed communities. This w i l l be particularly relevant in the case of water and
sanitation and off-grid electricity services, and provision have been made under Component 3 to
undertake studies in these areas. For roads, the technical characteristics w i l l involve
improvements to-existing surfaces, drainage systems and retaining walls to ensure a level of
access tailored to the specific transport needs o f the local communities as identified by them in
the PMDTs. To ensure the appropriate technical quality o f the design o f the subprojects and then
of their implementation, the proposals w i l l be subject to a technical evaluation by the sectoral
entities (DV, D O H and SUBTEL of the MOPTT, and the CNE), in addition to the customary
socio-economic appraisal undertaken b y MIDEPLAN.
3. Fiduciary
Financial management. The Financial Management (FM)Assessment took into consideration
SUBDERE experience in executing Bank ( 4429 CL Municipal Development 11- P069259) and
other multilateral financed projects. The assessment covered the proposed project’s financial
management system (budgeting, accounting, internal control, auditing and reporting).
For the infrastructure component the project w i l l rely on the established SUBDERE and country
the established fiduciary framework (Financial
systems already in place-FNDR-using
Management policies and procedures, fiduciary controls and reporting systems). Furthermore,
all project funds w i l l be subject to the National Administration budgetary and control framework.
The assessment has found that the existing arrangements are satisfactory and in compliance with
Bank policies and the only specific action required i s a project audit report under acceptable
terms o f reference with a single audit opinion. No additional €34 staff i s required for this project.
18
Retroactive financing i s being proposed for this project in the amount of US$5 million for
expenditures after November 1,2004.
The preparation o f the financial statements of the project as a whole and the justification of
expenditures and the withdrawal requests to the World Bank w i l l be the responsibility of
SUBDERE. Accounting reporting will follow Chile’s public sector accounting standards and the
accounting procedures set by the accounting division of the Contraloria General de la Repziblica
(CGR). SUBDERE will provide, within six months of the end o f each fiscal year an audit report,
prepared b y CGR, with a single opinion on special accounts, project accounts, and statement of
expenditures (SOE). SUBDERE w i l l also be in charge of supervising the technical assistance
plan and monitoring key indicators for the project.
The Project Operational Manual w i l l include the additional procedures for this operation
complementing those in use for the FNDR and the formats and content of the quarterly financial
monitoring reports (FMRs) and Audit Terms of Reference.
The assessment concluded that SUBDERE financial management system satisfies the Bank’s
minimum financial management requirements. On the Fiduciary Risk, the assessment concludes
that the inherent risk i s l o w due to country considerations discussed below and the control r i s k
related to the proposed project i s low at the time of this evaluation. The overall risk assigned to
the project i s low. The supervision plan is designed to handle the risks identified. Annex 7
provides additional information on financial management arrangements and on the results o f the
assessment.
Procurement. An assessment of the capacity of the agencies that would implement procurement
actions for the project has been carried out. The assessment reviewed the organizational
structure for implementing the project and the interaction between the PCU and the
implementing agencies. Procurement activities w i l l be carried out b y various Implementation
Technical Units located in the regions.
A recent CPAR for Chile revealed that local legislation differ from Bank rules in several aspects.
These differences have become part of the legal documents agreed upon at negotiations, and w i l l
be taken into account in the elaboration of the national bidding documents for the project. In
addition, due to the limited participation o f the Bank in the financing o f works in Chile, it i s
expected that most o f the UTs would not have adequate previous experience in Bank
procurement. In this respect, a supervision plan has been designed to ensure closer review o f the
procurement processes performed by the UT at the beginning of project implementation and
accompanied by training and support from a specialist at the SUBDERE, following with an
incremental ex-post review as the capacity o f UTs i s built up. Annex 8 details the procurement
processes that w i l l be followed as well as the agreed institutional strengthening requirements o f
SUBDERE. The Overall Procurement Risk i s assessed as average.
4. Social
The current Chilean normative and legal framework include appropriate and exhaustive
consideration of social and environmental issues, and w i l l be an integral part o f the actions to be
carried out under the project and the contracts to be executed for the implementation of
19
subprojects. The project however w i l l not use country systems per se albeit i t w i l l use the
country’s institutional framework and capabilities while meeting all Bank standards and
requirements. The key Chilean entities involved in social and environmental matters (CONADI,
CONAMA) will provide counterpart support to ensure the application of the normative and legal
framework and the carrying out o f capacity-strengthening actions at the national and regional
level, while ensuring the application o f Bank procedures and requirements.
Consultation and disclosure at the local level has taken place as part o f the development of
participatory PMDTs in the pilot areas in the B i o B i o and Araucania, regions. (See Box 3.)
These have served as a basis for designing the locally-based participation and consultation
mechanism that w i l l be followed during project implementation. All relevant stakeholder groups
from communities, municipalities, private sector, civil society and regional government have
participated in the elaboration o f the PMDTs. Representatives o f local stakeholders w i l l have the
opportunity to sign the PMDTs and SUBDERE w i l l be required to monitor the specific
participation of women and indigenous groups in this process.
In addition to community and local stakeholder participation in the design of the PMDTs,
participation will form the cornerstone for prioritizing, implementing and managing the rural
infrastructure services. This w i l l be most critical in the utility sectors, including water, piped
sanitation, electricity and ICT, as the services provided would have to respond to user demand
and willingness to pay the basic tariff for consumption. Community input w i l l also be essential
to identify the critical areas and priorities for road improvements and maintenance as local
inhabitants are best suited to know where the problems occur. In all sectors, locally-based
service management bodies w i l l be established, giving community groups, cooperatives and
small enterprises greater responsibility for administrating, operating and delivering services.
This w i l l also contribute to additional source o f employment in rural areas.
20
To address social safeguards, an indigenous peoples development plan (IPDP) was also
prepared due to the large number of Mapuche population in the Regions of Araucania and B i o
Bio. The National Council for Indigenous Development, CONADI-MIDEPLAN, was consulted
during project preparation and has requested close coordination between this project and the
IDB-financed Origenes program, which has many lessons to share regarding indigenous people
participation. CONADI w i l l assist as pertinent in the implementation of the IPDP, in the context
of other current indigenous plans in the relevant territories, and under the terms of an agreement
to be signed with the SUBDERE and ratified by MIDEPLAN. Specific IPDP actions w i l l be
specified, as required, as part of the PMDTs and subproject development and implementation.
An involuntary resettlement policy framework was also prepared, although no major issues
are expected. All plans prepared following the framework w i l l be subject to the Bank's prior
review and approval. A summary o f the results of the safeguard assessment, and action plan and
framework are included in Annex 10, and the detailed report issued b y SUBDERE i s available in
the project files.
Specific activities were agreed with SUBDERE to ensure and monitor opportunities for
participation of all eligible members of the population in project territories and to address
safeguard issues (in addition to those in the IPDP and Resettlement Framework). These w i l l be
included in the Project Operational Manual, and are as follows:
SUBDERE, through the Regional Management Units, w i l l ensure that broad dissemination
campaigns are used to promote the project, i t s objectives, geographic scope, potential
beneficiaries and activities. These campaigns w i l l target both indigenous and non-indigenous
communities in potential project areas, using a variety o f communication methods.
SUBDERE w i l l maintain close coordination with regional, provincial and municipal
governments and CONADI-MIDEPLAN for the elaboration and implementation o f the
PMDTs to ensure that indigenous areas and peoples have an equal chance o f being selected
and o f participating in the project.
All consultation and training events held in communities with indigenous populations w i l l
build on the cultural practices, habits and beliefs o f the indigenous population.
As mentioned in the M&E section, a household data sheet w i l l be completed in a
representative sample o f households and included as baseline information in the project
M&E system. Community members w i l l participate in the participatory M&E process.
Project implementing agencies that interact directly with indigenous communities w i l l have
to include at least one facilitator who i s specialized in working with the Mapuche
population.
Project implementation agencies will' also need to build their capacity to introduce
participatory processes in the way they work, including addressing gender and indigenous
issues. This training w i l l also review safeguards issues and w i l l be done as part o f the overall
training on participatory preparation o f PMDTs.
21
Specific steps for implementing resettlement, should it occur, are also outlined in Annex 10
and the Social Assessment (available in project files).
5. Environment
The project does not foresee any major environmental issues arising from the subprojects that
w i l l be financed, due to their small nature and technical characteristics. Environment issues in
the project are being mainstreamed into the territorial planning and subproject preparation and
approval process. Checklists for conducting EAs have been prepared for each type of sectoral
investment. An environmental assessment was conducted by SUBDERE as part of project
preparation, i s available in project files and summarized in Annex 10.
Chile has very good institutional and regulatory capacity to address environmental issues. As
stated above, the project w i l l not use country systems per se but w i l l make use o f the country’s
capacity to address environmental issues, while meeting Bank requirements. The Environmental
Agency, CONAMA, has established procedures for identifying and providing mitigation for
The regulations for the National
environmental issues arising from project activities.
Environmental Evaluation System have been operational in Chile since December 7, 2002.
These regulations define the types of investment that are subject to a full-scale impact evaluation
process, and those that can be managed through the application o f environmental guidelines
(such as check-lists) and procedures pre-defined during project preparation. The guidelines w i l l
be incorporated in the Project Operational Manual.
Institutional capacity to address environmental and social issues i s weaker at the regional and
local levels. The project, therefore, includes the strengthening of environmental planning and
supervision capacity of government agencies (including the regional offices of the CONAMA),
as an integral part of the territorial development planning and project design and implementation
process. (Annex 10.) The SUBDERE has reached an agreement with the C O N A M A with the
purpose o f receiving the support of this entity in the strengthening of the project’s environmental
guidelines and carrying out the capacity-building program on environmental management.
6. Safeguard policies
Safeguard Policies Triggered by the Project
Yes
Environmental Assessment (OP/BP/GP 4.01)
Natural Habitats (OP/BP 4.04)
Pest Management (OP 4.09)
Cultural Property (OPN 11.03, being revised as OP 4.1 1)
Involuntary Resettlement (OP/BP 4.12)
Indigenous Peoples (OD 4.20, being revised as OP 4.10)
Forests (OP/BP 4.36)
Safety of Dams (OP/BP 4.37)
Projects in DisputedAreas (OP/BP/GP 7.60)*
Projects on International Waterways (OP/BP/GP 7.50)
[XI
[I
El
[XI
[XI
1x1
[I
[I
El
[I
No
[I
[XI
[XI
[I
[I
[I
[XI
[XI
[XI
[XI
* By supporting the proposed project, the Bank does not intend to prejudice thefinal detenninution of the parties’ claims on the
disputed areas
22
Social safeguards, including the IPDP and the involuntary resettlement policy framework, and
the environmental policies and procedures are described above. The safeguards w i l l be taking
into account with due compliance with Bank standards and requirements. The safeguard policy
on cultural property has also been included as required b y recent Bank policies. In the event
that chance findings o f goods or sites that might appear o f cultural significance are encountered
during the project implementation, works w i l l be stopped and the relevant authorities called upon
to investigate the site. If these goods and sites are found of cultural significance, the subproject
w i l l be redesigned to avoid any harmful effects to such goods or sites, or otherwise cancelled
altogether. These requirements and those related to environmental policies w i l l be incorporated
into the Project Operational Manual.
7. Policy Exceptions and Readiness
There are no policy exceptions and the project i s ready to be implemented.
23
Annex 1: Country and Sector or Program Background
CHILE: Chile Rural Infrastructure Services
Introduction
The design o f this project i s based on the analysis and results of a comprehensive Economic
Sector Work (ESW), undertaken by the World Bank and government over an eighteen month
period (see report No. 29037-CL, May 23, 2004), as well as a series of more operationallyfocused studies funded through a PHRD grant, and the study financed b y the Dutch Trust Fund
on "Bringing Broadband Internet Access to Chile's Rural Areas" (with a complementary USTDA
grant to undertake the related feasibility studies). The project provides government with an
instrument to develop, test and expand solutions for improving the access, quality, sustainability
and impact o f rural infrastructures within a territorial approach to local economic and social
development. The project w i l l address both cross-sectoral constraints as well as the limitations
of the existing institutional and policy frameworks of the water, sanitation, transport, electricity
and ICT sectors as they relate to services in rural areas. The findings o f the ESW as they relate to
project design are summarized below.
Background and Overview of Rural Infrastructure Situation
Over the past decade, the Chilean government has made impressive strides in economic growth,
poverty reduction and increasing access o f the poor to public services, including in rural areas.
Infrastructure services are essential to ensure all Chileans have sufficient opportunities for
achieving basic standards o f living, generating income and rising out of poverty. Despite the
highly urbanized nature of the country, 2 million Chileans reside in rural areas, of whom 500,000
live in poverty and many lack basic services. Large portions o f the rural population live in
Regions V I - X, with the majority of the rural poor found in Regions VU-X, as shown b y Table
Al.l.
Table Al.l. Majority of the rural poor reside in Regions VI1 - X
24
The Chilean government has made a significant commitment to expanding rural infrastructure
services as a means to address poverty and income inequality in the rural space. This has taken a
variety o f forms: the creation of rural infrastructure programs and expertise within technical
ministries, the establishment of specialized funding streams, and applying versatility to the
selection o f service delivery options. The sectoral agencies have gathered the human and
financial resources necessary for planning, evaluating and implementing rural infrastructure
projects of high standardized quality. Over the past five years, the government has invested
approximately one billion dollars in rural potable water, electricity, roads, and public telephones,
with the majority designated for roads. Government’s focus on rural infrastructure has increased
the pace of service expansion over the past decade, allowing Chile to achieve high rural
infrastructure coverage rates: 86% in electricity and over 90% in water supply provision for
concentrated rural populations, in addition to constructing 6,093 new public telephone centers
covering 2.2 million people, 25,000 individual rural telephone lines and an extensive rural road
network.
Chile now faces the challenge of continuing coverage expansion into primarily dispersed rural
populations while maximizing the sustainability and productive and social impact of existing
infrastructure investments. The needs are large and the remaining unserved populations are the
most difficult to reach. Currently, 77,118 rural households lack electricity, 680,000 households
in dispersed rural areas are without potable water service, and many more lack access to basic
sanitation facilities, all-weather roads, and a working phone or internet service. Household
studies conducted in two regions showed that communities in poor rural municipalities identified
roads, sanitation, and potable water services as their primary needs. National statistics hide
regional and municipal variations in service coverage. Although there i s less cross-regional
variation in percentage terms, there are major differences in the absolute number of rural
inhabitants without services, as shown in Tables Al.2 and Al.3 below.
The regions with the highest service coverage gaps closely coincide with the regions with the
highest poverty levels. These are ranked in order o f highest level of deficiencies: Regions VIII,
IX, X, VI1 and IV.
25
Table A1.2 Percent Of Rural Chileans With Access T o Services
Table A1.3 Number of Rural Population Without Access to Services
Coverage includes houses with indoors connections and an assumption that 50% of households with water on
their property actually have improved potable water sources (deep protected wells)
Includes houses connected to improved facilities: sewer, septic systems or improved latrines
see footnote I
see footnote 2
26
Sector Overviews and Issues to be Addressed by Project
Rural Water and Sanitation
The national rural water program for concentrated populations (the APR Program), implemented
by the Hydraulic Works Department (DOH) o f M O P " relies on a community-managed service
delivery model for providing water services to concentrated rural communities. Despite the
success of this program in increasing water supply coverage to the concentrated population and
the positive results o f the community management model, long-term sustainability of the
installed system i s at risk. This i s mainly due to the inadequate government-mandated tariff
structure and legal limitations that constrain water committee capacity to achieve full cost
recovery and sustainability. In addition, there i s a need for providing improved water to the
680,000 unserved rural population. This can be accomplished b y adopting demand-responsive
strategies for finding technologically and economically feasible solutions to the water and
sanitation needs o f all rural communities. A huge effort i s also needed to improve sanitation
services in all rural areas, with a strategic focus of interventions in territories where there are
greater potential for economic, social and environmental impacts. At the same time, outreach and
hygiene promotion w i l l be required to generate demand for and maximize the impact o f these
improved water and sanitation services, especially in dispersed populations. Finally, the sector
work noted the need for government to address a major in institutional gap in the sub-sector,
especially in terms of establishing responsibility for a national rural sanitation policy and
investment program, and a clear institutional mandate and program for providing water to the
dispersed communities. The study recommended that government should continue to finance the
technical capacity o f a central government agency, which could be either maintained within
MOPTT or else assigned to another agency with similar capacity, to assist decentralized
governments and communities in implementing water and sanitation projects. The project w i l l
address service coverage deficits, sustainability issues and provide some support to assist
government in addressing the afore-mentioned institutional issues, especially related to studies
on lower cost technologies, financial policies, simplified economic and social evaluation
procedures for small projects and expediting the legal recognition o f water and sanitation
committees to facilitate their access to credit.
Rural Transport
Road management in Chile i s highly centralized at the MOPTT, however unlike other
infrastructure sectors, there i s no specific program for rural roads. There has been considerable
experimentation with a variety o f mechanisms that have led to the reasonable upkeep o f an
extensive network of rural and non-rural roads. Participation o f the private sector, particularly on
inter-urban roads, has evolved in various forms and has been greatly enhanced over time.
However, for rural (communal) roads, the current force account system appears inefficient as the
average age o f the labor pool i s high, the machinery i s in need o f major overhaul and the socalled "global" contracts are expensive to reach the needs of the secondary communal network,
thereby limiting the opportunities to engage communities in maintenance activities. Rural roads
lack clear classification, leading to difficulties in analyzing traffic safety and maintenance data,
and the evaluation o f resource needs i s carried out on a basis similar to that of inter-urban roads
which results in a reduced level o f maintenance funds available for low-traffic roads.
27
There i s a need to enhance the assessment and categorization of rural roads, as well as the
evaluation o f maintenance needs and the assignment of responsibilities and allocation o f funds at
an appropriate level to meet local economic development priorities. Gradual devolution o f road
maintenance responsibilities requires technical, financial and administrative capacity-building of
the municipal and regional governments. T h i s effort should be accompanied b y greater attention
to the maintenance o f non-enrolled rural roads. The use of community-based micro-enterprises
for periodic rural road maintenance should be promoted as a cost-effective alternative to force
account or global contract systems. The project w i l l start to address some of the above issues, by
engaging local actors in assessing needs for road improvements, prioritizing interventions in
relation to the territorial development priorities, promoting the implementation of a communitybased enterprise maintenance program, and building the capacity o f municipal and regional
governments. The regional offices o f MOPTT w i l l play a major role in implementing these
interventions as a means for the lessons to be internalized and replicated in other areas o f the
country.
Rural Electricity
The innovative national Rural Electricity Program (PER) has achieved great successes in
increasing coverage rates from 53% to 86% over the past decade while leveraging significant
private financing. While the PER has greatly assisted the CNE develop significant technical
planning capacity for grid expansion, enhanced capacity i s s t i l l required to address off-grid
service delivery and evaluation mechanisms in order to reach the remaining unserved population.
The lack of a strong off-grid market and local capacity for operation and maintenance limits the
cost efficiency and sustainability o f investments. A t the same time, the basic level of service
provided to most rural areas, that o f single-phase electricity, restricts capacity to use i t for large
productive activities, such as agro-processing and freezing required in the fisheries sector. The
sector work recommended that off-grid electricity service should be planned for and provided on
a regional basis in order to achieve economies o f scale, maximize use o f renewable resources and
promote productive uses. The PER should also pay increased attention to developing demandresponsive technological options, specifically off-grid systems for isolated or dispersed
populations. Off-grid electricity service necessitates multi-level capacity-building, including
strengthening the CNE’s expertise in alternative technologies and helping small-scale off-grid
and renewable electricity operators provide better quality services. The project w i l l assist CNE
to work with the regional governments and territorial actors in identifying and meeting the
demands o f electricity coverage gaps, in terms o f both basic services for those s t i l l unserved, as
well as providing higher service level for productive needs identified in the territorial
development plans. I t w i l l also support the capacity building of decentralized service delivery
providers o f off-grid solutions.
Rural Information and Communications Infrastructure
The IC1 sector in Chile i s among the most advanced in Latin America and access to
telecommunications services i s higher than most countries in the region and those with similar
income levels. Chile i s a pioneer in universal access funds, with the Telecommunications
Development Fund (FDT), operated by SUBTEL, providing public telephone and Internet center
services to marginalized populations. The sector work, however, identified a major weakness in
the lack o f coordination across programs, specifically for Internet services which l i m i t s the
28
efficiency and sustainability o f IC1 investments and burden rural municipalities with high
operation costs. Also, the introduction of cellular service and poor equipment maintenance have
limited the impact o f public telephone investments, with many o f the public phones in rural areas
not functioning. The sector work identified the need for additional Internet service demand
assessments in order to expand the secondary network in a cost-effective manner. As a result,
during the past year, the WB has assisted SUBTEL develop a $10M investment program for
Internet expansion to rural areas. A territorial approach to planning can bring about improved
coordination and demand assessment for local IC1 interventions to avoid overlap across
programs and ensure services match operational cost feasibility criteria. O n the other hand, such
an approach needs to be balanced with the economies of scale and efficiencies of rolling out
Internet services to rural areas through a centralized program as envisaged b y SUBTEL. The
project w i l l support elements o f SUBTEL’s broader Internet roll-out program within the five
project regions b y assisting local entrepreneurs to set-up commercially-based info-centers, as
well as through the development of useful applications and user training in the territories that
receive Internet services as a means to build up a critical mass o f users.
Cross-sectoral Issues
The cross-sectoral findings of the sector work identify some strong points of the sectoral
programs characterized by:
Clear sectoral objectives and a continuous and reliable stream of funding
Transparent procedures for accessing funds and consistency in application o f standardized
project evaluation criteria
0
Technical capacity in central line agencies and deconcentrated regional offices
Success in leveraging private sector financing
Versatility in service delivery model selection
0
Progressive decentralization of decision-making
At the same time, the sector work also identified some cross-cutting issues that restrict the
effectiveness and impact of rural infrastructure investments on rural well-being. These are the
gaps that the project w i l l seek to fill through i t s multi-sectoral intervention strategy, targeted at
poor areas and adopting a territorial approach. Cross-sectoral weaknesses include:
Focus on coverage expansion may have been at the expense of long-term sustainability:
Service sustainability i s heavily dependent upon the accountability and the technical and
financial capacity o f the organizations charged with operation and maintenance. Historically, the
government has focused i t s technical and financial resources on installation, at times failing to
ensure that service providers have the financial, technical, and administrative capacity necessary
to operate, maintain and rehabilitate services over time.
29
Technical standards and evaluation criteria lack the flexibility to adapt to realities of
dispersed populations and small settlements. In all four sectors, the established high quality
technical standards lack the flexibility necessary to successfully expand infrastructure services to
dispersed and/or rural poor populations. Lack of flexibility in technology options at times leads
to the installation of systems beyond the financial and technical capacity of the community to
maintain. The universal application of relatively high cost solutions also leaves projects in
dispersed populations unable to pass cost-benefit evaluations.
Lack of a coordinated cross-sectoral planning process limits the effectiveness and impact of
infrastructure investments. A final set of limitations of the current model across all sectors
includes the lack o f a coordinated planning process to align the priorities and projects of the
various sectoral agencies, regional and municipal governments and community members. The
failure to coordinate results in project preparation investments inefficiently spent on programs
that do not match local priorities. Communities obtain one infrastructure service, but not the
bundle o f services necessary to increase their productive capacity or to open new business
ventures. In some cases, competing programs provide duplicate services in the same
communities. Limited community participation further results in users possibly uninterested or
unable to cover operation and maintenance costs. Incorrect demand assessments, particularly in
the case of electricity services, fail to capture willingness to pay for a higher level of service and
to meet the demands for productive uses.
Cross-Sectoral Issues to be Addressed by the Project
The recommendations emerging from the ESW, and adopted by the project, are designed to
address two broad sets of needs: (a) to improve the efficiency, sustainability and impact of
infrastructure services for the rural population that already has received access, and (b) to
develop more appropriate strategies for extending service coverage to those still unserved
segments o f the rural population. There are as follows:
A territorial approach as a means to increase planning and financing efficiency,
sustainability and impact of infrastructure investments. Adopting a territorially-based,
multi-sectoral planning approach for rural infrastructure w i l l help support the economic, social
and environmental sustainability o f the rural territory by identifying the infrastructure
requirements necessary for economic development and ensuring basic standards of living. A
cross-sectoral approach w i l l increase impact and add value to existing single-sector investments
by providing a full package o f demand-appropriate infrastructure services required to undertake
meaningful productive activities in rural areas. At the same time, such an approach should bring
about greater efficiency and sustainability of services to the remote and unserved populations b y
offering opportunities for single and cross-sectoral service bundling. The model would require a
modification in the timing and sequencing of project evaluation and funding allocation processes
to move from a sectoral to a territorial approach within an established budgetary framework.
The approach would also identify complementary programs to assist communities to make more
efficient and productive use of their infrastructure services, b y associating infrastructure
investments with productivity enhancement programs.
30
Ways to improve financing through mobilizing funds and increasing cost recovery. T o
serve the largely poor, dispersed rural population requires innovative new methodologies for
project financing, design, evaluation and implementation. Possible areas for efficiency gains
include setting tariffs closer to cost recovery levels and improving approaches to rural road
maintenance. Technical standards should be adjusted to meet the specific needs, demands and
payment capacity of the dispersed rural population. Revised technical standards also require
improved evaluation methodology, to better assess the social as well as economic impact of
small-scale rural investments and to shorten the project cycle. B y increasing community
participation in design and implementation, specifically the participation of indigenous peoples
and women, projects w i l l better meet local demands and achieve enhanced sustainability through
improved maintenance and community support.
Institutional development to clarify roles and fill holes in institutional framework. While
Chile has done an excellent job of building i t s national sectoral agencies and establishing specific
rural infrastructure programs, more work i s needed. The government should clarify and specify
appropriate roles for each level of government in rural infrastructure and assign responsibilities
where there are gaps, specifically in the rural water, sanitation and road sectors. There are
benefits to be gained from increased decentralization to the regional and municipal levels,
combined with community participation, and also associated costs of developing capacity at the
local level. However, this proposed decentralization should be accompanied b y incentives and
resources for the sectoral agencies to continue to provide technical support to lower levels of
government, independent of the management o f a specific investment program. In addition,
performance benchmarks should be implemented to improve the monitoring of service quality
tied to incentives for encouraging better maintenance.
Community participation and l d l y - m a n a g e d services to improve demand-responsiveness
and sustainability. Support for locally-provided service delivery models and enhanced
community participation i s necessary to increase the efficiency and sustainability o f services, and
i s a key component o f the territorial development strategy. To enhance community participation
across sectors, there is a need to expedite the legal recognition and registration process to
promote and enhance the quality o f small-scale community committees, micro-enterprises and
cooperatives in service provision. Local providers should be encouraged to take on a more
entrepreneurial approach by facilitating their access to private financing and specialized agencies
offering business development services. Government should develop outreach programs to build
on community-based self-help initiatives, focusing on reaching indigenous groups and women.
Appropriate evaluation methodology and technology selection. The territorial planning
methodology aims to increase investment impact b y improving coordination of planning and
participation o f private, community and public stakeholders in project design and
implementation. In order to help rural communities obtain the bundle o f infrastructure services
necessary for a basic standard of living and economic growth, the current evaluation
methodologies, institutional framework, and strategies for reaching dispersed rural populations
require adjustments. Through efficiency gains, government investments can provide more rural
inhabitants with infrastructure services and maximize social and economic development impact.
(Also, see Annex 9).
31
Annex 2: M a j o r Related Projects Financed by the Bank and/or other Agencies
CHILE: Chile Rural Infrastructure Services
Project
Support the efforts o the Chilean
Government to implement Chile
Solidario and to lay the foundation of a
national system o f social protection
Improve local governance and
efficiency in providing public services
Improving the effectiveness,
efficiency, and transparency o f the
Chilean public administration through
the establishment o f a modem and
integrated financial management and
resource allocation system
Social Protection
Assistance Project
S
S
Municipal Development I
I
S
S
Public Expenditure
Management Project
Other Development Agencies
Help improve living conditions and
reduce social alienation among the
low-income rural populations in those
regions o f the country with the lowest
rural electrification coverage rates
IDB: Rural Electrification
Improve living conditions and to
promote the economic, social, cultural
and environmental development o f the
Aymara, Atacamefio, and Mapuche
peoples in rural areas.
IDB: Integral Development
Program for Indigenous
Communities
Support efforts to improve the
efficiency and management o f regional
investment in the framework o f an
expanded government decentralization
process.
IDB: Program for
Improvement o f the
Efficiency and
Management o f Regional
Investment
Program
32
S
S
World Bank
Chile: Social Protection Technical Assistance Project
The objectives o f the proposed Social Protection Technical Assistance Loan Project are to
support the efforts of the Government of Chile to implement the program “Chile Solidario” and
lay the foundation of a national system of social protection. The project has the following four
components: (1) design and implementation of a national information system for social
protection; (2) training o f MIDEPLAN and other government officials, at both the central and
local levels and strengthening the capacity of the social workers and others who work with the
families o f Chile Solidario; (3) capacity building within the public sector to measure the impact
of Chile Solidario and its associated programs; (4) program of institutional modernization and
strengthening for MIDEPLAN.
Chile Municipal Development I1
The Second Municipal Development Project seeks to improve local governance and efficiency in
providing public services, by strengthening the capacity o f the national government to formulate,
implement, and monitor decentralization policies and programs, and o f municipalities in areas
such as municipal planning, financial and human resources management, and the management of
health and education services. There are two main components: (a) policy studies in key areas;
and developing action plans for implementing them; and (b) municipal institutional development
subprojects that focus on internal processes and improvements; technical support to
municipality’s relationship with the community; and development of innovative subprojects to
address specific municipal problems.
Public Expenditure Management Project
The Public Expenditure Management Project aims at improving the effectiveness, efficiency, and
transparency o f the Chilean public administration, through the establishment o f a modern, and
integrated financial management and resource allocation system. Within tight fiscal constraints,
project components w i l l strengthen financial management, and accountability, through: (a) a
unified information management system, (b) strengthening the capacity to focus on
macroeconomic, fiscal, and public investment policies, including budgeting by results; (c) design
of a human resources management information system, and (c) building up financial, and human
resource management units.
Inter-American Development Bank
Rural Electrification Program
The program’s general objective i s to help improve living conditions and reduce social alienation
among the low-income rural populations in those regions of the country with the lowest rural
electrification coverage rates, and to strengthen the decentralization process, further build up the
management capacity o f municipal and regional governments, achieve the optimal distribution,
and make efficient use o f public resources. The program w i l l support: (i)
creation and execution
of an incentives program to induce private investment in rural electrification for grid-extension
and self-generation projects; (ii)strengthening the sectoral programming strategy and
formulation, design, monitoring and evaluation o f rural electrification projects; and (iii)
electrification and/or improvement o f the power supply to 36,600 residences, thereby helping to
achieve the rural electrification coverage goal o f 90% at the national and regional levels planned
33
for 2006, while working to achieve sustainable investments, and improve service quality. The
program's total cost i s US$57.2 million.
Integral Development Program for Indigenous Communities (Origenes)
The general objective of the program i s to improve living conditions and to promote the
economic, social, cultural and environmental development o f the Aymara, Atacameiio, and
Mapuche peoples in rural areas.
Program for Improvement of the Ef'ficiency and Management of Regional Investment
The general objective o f the program i s to support efforts to improve the efficiency and
management of regional investment in the framework of an expanded government
decentralization process.
34
Annex 3: Results Framework and Monitoring
CHILE: Chile Rural Infrastructure Services
Results Framework
Effective and
productive use of
infrastructure services
by poor rural
communities in the
selected territories of
the regions of
Coquimbo, Maule,
BioBio, Araucania,
and Los Lagos
increased
Intermediate Results
One per ('ompoaent
Component One:
Orttconie Indicators
Increase in use of quality and sustainable
services in the selected territories, as
measured by 6:
Water and sanitation: % of population
benefitingfrom project PMDTs with
sustained access and effective use of
services provided by the project (as
measured by demand for services).
Roads: increaseduse of transport
services along rehabilitated road
infrastructure (as measuredby pro-rated
increase in demand six months after
completion of works, for a
representative sample of roads).
Electrification: 9%of population
benefiting from project PMDTs with
increased use of electricity for economic
activities (as measured by surveys)
Assess impact of enhanced
infrastructure services in users'
perceptions of the ultimate
effects of the investments on
their most immediate livelihoods
and activities
tdentify possible shortcomings of
policy framework or
infrastructure managemenu
delivery mechanisms to achieve
the expected combined impacts
from the implementation of the
infrastructure components of the
PMDTs
Increase in annual production for the key
priority areas identified each PMDT (note
this indicator will be tracked separately by
SUBDERE as i t involves a broader set of
actions not under the control o f the project)
Assess overall satisfactory
impact of subproject investments
towards achieving the goals of
PMDTs.
Results Indicators for Each Component
tfse of Results Monitoring
Component One:
Number of PMDTs approved by the
CORESin line with agreed standards
Territorial
)
of community,
including: (ievidence
Development Plans are indigenous and gender participation, (ii)
preparedand
sign-off of communities for the identified
implemented
adequate
investments, and (iii)
following agreed
consideration of social, environmental
methodology and
safeguards
eligibility criteria
Participatory
Territorial Planning:
Component One:
Assess pace of project
implementation and capacity to
identify a quality portfolio of
infrastructure investments
through the PMDT approach.
Assess quality and level of
participation of population in the
territories in the elaboration of
the PMDTs.
'A representative number of PMDTs w i l l be selected for evaluation every reviewing period. Baseline data w i l l be
collected at the initial stages of elaboration of a PMDT, providing information on access to and use of infrastructure
services for productive purposes.
35
Component Two:
Infrastructure Service
Delivery: The
availability and quality
of infrastructure
services demanded in
the PMDTs i s
achieved and
mechanisms are put in
place to ensure their
sustainability
Component Two :
Annual percentage o f subprojects (by cost
amount) i n a representativesample of
PMDTs recommended satisfactorily by the
MIDEPLAN(this process indicator will be
maintained in SUBDERE files).
Annual percentage level of compliance with
targets set in PMDTs for
% o f water and sanitation connections
constructed with service providers
having revenues greater than the cost of
operation and maintenance
0
% kilometers o f roads rehabilitated
with sustained routine maintenance
mechanisms established
% o f electrification constructed with
service providers having revenues
greater than the cost of operation and
maintenance
Percentage of PMDT subprojects managed
by local organizations or entities, with
adequate consideration of indigenous and
gender issues
Component Three:
Institutional
Strengthening:
Capacity in the
Government o f Chile
to deliver
infrastructure services
based on a territorial
approach improved
I
Component Three:
MIDEPLANevaluation methodology
expanded to include assessment of projects
within the territorial development approach
advanced by the project.
New approaches adopted in water and
sanitation: (a) appropriate technologies for
water for dispersed populations and rural
sanitation, (b) improved financial policy to
increase cost recovery, (c) legal framework
that would allow providers higher
management and revenue raising capacity,
(d) assignment o f institutional
responsibilities for rural sanitation and
water for dispersed population
Number o f quality PMDTs (or % of
regional public investment program)
implemented with a temtorial approach
outside project regions using non-project
resources
36
2omponent Two:
h e s s quality of portfolio design
owards enhancing the process of
:laboration of PMDTs and
subproject formulation
4ssess possible inter-agency
lifficulties in coordination,
:owards informing the Directory
3 f the Project of necessary
:orrective actions
Assess key performance
improvements in the provision of
infrastructure services in terms of
quality, delivery efficiency, etc.
Evaluate community-based
management mechanisms with
effective consideration of
indigenous and women groups in
the design o f management
mechanisms
Component
Three:
Assess advances in inter-agency
coordination and development of
knowledge in the application o f
the territorial approach
Assess progress in definition of
key policies to achieve
improvements in the water and
sanitation sector
Assess level o f dissemination o f
the project's approaches and
lessons learned
c
g
m
o
go
R
W
g
0
-
0
E
Annex 4: Detailed Project Description
CHILE: Chile Rural Infrastructure Services
The project w i l l include the following three components:
Participatory Territorial Planning: this component w i l l assist local stakeholders and
regional government agencies to: (a) prepare in prioritized rural territories in the 5 project
regions framework development plans; (b) identify demands for improved infrastructure
services; and (c) monitor progress with the implementation of the plans.
Infrastructure Service Delivery: this component will support: (a) prepare subproject
proposals; (b) rehabilitation of rural roads, and construction, rehabilitation and expansion of
rural water, sanitation, electricity and IC1 infrastructure; (c) supervision of the activities
under (b); and (c) studies and support for the establishment and strengthening o f local service
providers to operate, maintain and administer the services to achieve quality and
sustainabilit y.
Institutional Strengthening: this component w i l l support: (a) project coordination units at
national and regional levels, (b) implementation o f studies and capacity building to
strengthen policies and institutions in areas of territorial planning and rural infrastructure
service delivery, and (c) project monitoring, evaluation and learning as a contribution to
national level expansion o f the program.
Component 1- Participatory Territorial Planning (US$3.94 million)
Territorial Framework Development Plans (PMDTs) w i l l be prepared in eligible territories in
the regions of Coquimbo, Maule, Bio Bio, Araucania and Los Lagos (or any other region as
may be proposed b y the Borrower and agreed to by the Bank). Prior to initiating work in any
region, SUBDERE and the Regional Governors (Intendente) w i l l sign an Eligible Region
Agreement (“Convenio de Trubujo”) to outline respective responsibilities in project
implementation. The Regional Government, in coordination with the SUBDERE, w i l l put in
place a multi-disciplinary team in charge of coordinating and implementing the PMDT.
(Component 3 o f the project will cover consultant and incremental operating costs for this team).
T h i s component w i l l finance the costs o f consultants, workshops, and studies to: (a) prepare the
PMDTs in a participatory manner with the beneficiary communities and other local stakeholders,
including the identification o f the prioritized infrastructure investments; and (b) provide followup support and monitoring o f the overall PMDT process in each sub-territory.
PMDT preparation w i l l involve an active role o f local stakeholders and continuous dialogue with
authorities o f the regional government and sectoral agencies. The following steps w i l l be
followed to prepare the PMDT and i t s portfolio o f rural infrastructure projects:
1. Selection of participating territories b y Regional Government and validated b y the
Regional Council and b y SUBDERE, based on the following minimum eligibility criteria:
(a) high incidence of rural poverty, (b) rural infrastructure service gaps, (c) a territorial unit
39
that builds on existing social and economic relationships, and (d) productive potential to
ensure long-term sustainability and viability o f the territory.
Implementation of basic socio-economic diagnostic of territory to identify key
stakeholders, understand the development priorities and potential, assess community demand
for infrastructure and the linkages between infrastructure improvements and increased
economic productivity, all with due attention to environmental conditions and considerations
in the territory.
Evaluation and mapping of existing institutional actors, including public and private
sectors and local stakeholders, and identification of on-going and planned productive and
infrastructure investment projects and programs.
Preparation of the PMDT to include strategic vision for the development of the territory,
integrated portfolio o f rural infrastructure and productive support projects, prioritized in a
participatory manner, analysis of existing resources to finance project portfolio, social
assessment o f the population, results o f inter-sectoral dialogue and agreement to coordinate
actions in the territory, local working groups formed (“mesas de trabajo”) around thematic
areas, and territorial “pacts” agreed b y all stakeholders. For the preparation o f the PMDTs
environmental guidelines agreed with the C O N A M A w i l l be applied. The regional
environmental offices o f the CONAMA (the COREMAs) w i l l support, as to be detailed in an
agreement between the SUBDERE and the CONAMA, in the training o f the regional entities
and technical implementation units in the application o f the guidelines.
Validation of PMDT by local stakeholders. This validation w i l l take place at the Regional
Council upon presentation by the Regional Government. At this stage, the participatory
planning process should have produced a set o f infrastructure proposals agreed upon with the
beneficiary communities and local government entities (such as municipal mayors and, when
applicable, provincial governors). At this stage also, the Regional Council w i l l vet the results
of the PMDT in the context of other competing regional priorities. If substantial changes are
incorporated to the set o f proposals, the Regional Government (supported by the project’s
regional implementation unit) would need to revalidate the new set with the local
stakeholders.
Agreements (convenios) signed between communities, local actors, regional government
and sectoral agencies for PMDT implementation, as pertinent.
The PMDT will be updated during project implementation, including a participatory
evaluation of the results, and identification o f a follow-up rural infrastructure investment
program.
-
Component 2 Infrastructure Service Delivery (US$80.29 million)
The project w i l l make available subproject grants to regional governments to cover the costs of
subproject feasibility studies and designs, and of civil works, goods, equipment, supervisory
services and training associated with the provision o f locally-managed rural infrastructure
services in transport, water and sanitation, electricity and ICT.
40
The following eligibility criteria w i l l apply to subprojects:
a) included in the PMDTs,
b) approved b y Regional Council (CORE),
c) successfully appraised b y MIDEPLAN,
d) a qualified technical unit has been selected by GORE for implementation,
e) sustainable service delivery model and the requisite institutional strengthening mechanisms
are identified.
The project w i l l finance the infrastructure investments listed below, including the preparation of
subproject feasibility studies with the technical, social, environmental, economic and financial
aspects, as required to meet the standards o f MIDEPLAN’s social and economic evaluation
criteria. (Annex 9), and the studies and support for the design of sustainable service delivery
models. More details on technical design criteria, implementation arrangements and service
management arrangements are provided for each sector.
a) upgrading of existing secondary rural roads, paths, bridges and foot bridges
b) rehabilitation and construction of piped water systems, point source water improvements, onsite sanitation and sewers with appropriate treatment processes
c) improving quality of conventional electricity services (to provide continuous services and to
upgrade from single-phase to 3-phase grid connection) and off-grid and renewable solutions
(generators, solar panels and wind turbines)
d) expansion o f the secondary telephone access network, tele-centers and Internet for schools,
health posts, etc
Road Sector
T h i s component w i l l finance the rehabilitation (of about 1,000 km7) of roads in the selected
territories to improve transportation accessibility to and from these territories. These roads,
currently largely unpaved and with poor engineering conditions, have geometric standards
reasonably adapted to the terrain and the traffic they serve, from a few vehicles a day up to 700
vehicles per day, with a high proportion of micro-buses and light (three-ton) trucks. The roads
would be identified as priority links of the territory’s road network in the context of the
identification o f the infrastructure investments that are part of the PMDTs.
This target i s a preliminary estimate on the basis o f the initial allocation o f project resources to the road sector and
the average cost per kilometer o f the initial list o f projects evaluated at appraisal. Since the selection o f the
investments takes place in the context of the participatory workshops for the elaboration o f the PMDTs, the final
amount-as the final amounts for the other sectors-will depend on the final combination o f infrastructure sectors
that results from the investments selected in the PMDTs.
41
The works would entail spot improvements to eliminate drainage deficiencies, correcting
existing surfaces with re-graveling, building retaining walls and additional drainage and erosion
control structures, and limited adjustments to the road width when required to create continuity
along specific segments o f the selected roads. With these activities, access w i l l be substantially
improved at a low cost, both in terms of transport time required and accessibility during the rainy
season, and w i l l provide a more durable running surface all year round. Paving or realignment
are not envisaged, to avoid unnecessary high standards that w i l l affect both cost and program
output over time.
The secondary road network i s under the direct responsibility of the Directorate o f Roads
(Direction de Vialidad, DV) of MOPTT. Thus the proposed works will be coordinated with the
program of the DV, as will be the maintenance mechanisms to be implemented upon the
completion of the works. Agreement w i l l be reached at negotiations that the SUBDERE and the
DV w i l l s i g n a Memorandum o f Understanding to coordinate the outputs obtained from the
PMDTs with the DV program and ensure technical standards in line with the expected traffic and
benefits of the roads, as a mechanism to ensure that the investments under the project become
connected to the broader strategies and investments o f the DV.
There exist other roads that often do not fall strictly under the responsibility o f the DV as they
are not categorized as public roads-and are denominated “no enrolados” since they do not have
a “rol” or name assigned to them. These roads-if they become part o f those identified as
priorities under the PMDTs-will become “enrolled” and the activities on them also subject to
the coordination and technical supervision mentioned in the previous paragraph.
In both cases, and initially, the regional and provincial offices o f the DV, under the overall
oversight of the SEREMIs o f the MOP, w i l l be the selected “Technical Unit” to carry out the
pre-investment studies, the procurement process for the contracting o f the identified works, and
the supervision of the said works. Upon completion of these works, DV will provide technical
guidance on the maintenance program. As the project matures, the regional and provincial
offices of the DV w i l l train municipalities in the management o f the road networks and,
incrementally, transfer responsibilities for the procurement o f additional works and the
supervision of maintenance activities.
Because of the simple nature o f the rehabilitation works, i t is expected they w i l l mostly be
contracted out to local contractors. To the extent possible, and taking into consideration their
geographic proximity, these works w i l l be procured in packages to avoid an excessive timeconsuming and piecemeal management o f a large number o f small contracts, take advantage of
economies of scale (particularly those derived from the use of equipment), and ensure a
coordinated implementation of the works within a territory, elements that w i l l be hard to achieve
if contracts remain of very l o w cost.
Under this component, the Project also includes support to the establishment o f labor-intensive
routine maintenance mechanisms through the hiring o f members o f the local population. The
road network would first need to be rehabilitated before maintenance activities begin, otherwise
the cost of maintenance becomes too high, and then that the routine maintenance can be carried
out with a mechanism that has proved useful and cost effective in many other Latin-American
countries. The routine maintenance would consist o f simple works regularly performed
42
throughout the year to maintain the drainage systems, avoid the invasion of the right-of-way by
vegetation, and keeping the surface in appropriate running condition. These activities would be
supplemented with labor-based spot interventions to restore passage, particularly in the areas and
during the periods with intensive rains.
The project would finance all activities related to promoting the development of microenterprises for road maintenance, building on the experience o f FOSIS, b y financing the
technical assistance services to: (a) assist micro-enterprises throughout their formation and
constitution, including legal and technical advice; (b) put in place adequate contract arrangement
and payment systems, as pertinent; (c) provide on-the-job assistance training on technical, work
organization, financial management/accounting, and business administration skills until microenterprise members develop entrepreneurial capacity; (d) supervise and monitor micro-enterprise
activities to ensure smooth implementation o f this maintenance mechanism during the initial
months of the establishment o f the micro-enterprise; and (f) support a dissemination campaign
among local governments to sensitize them about the benefits of the micro-enterprise program.
The project w i l l not finance the maintenance activities-their cost would be covered as part of
the annual maintenance program of the DV with co-financing from the beneficiary
municipalities-but w i l l support the costs involved in establishing the maintenance mechanism
suggested earlier. I t i s further expected that the periodic maintenance activities that must take
place every three to five years to restore the condition o f the surface will become incorporated
also as part o f the DV “conservation” program. The project w i l l also include as part of this
technical assistance the financing o f training and dissemination workshops for building up
capacity of local entities, with an aim at improving the articulation o f responsibilities at the local
level in the management and maintenance of rural roads.
Water and Sanitation
This component w i l l finance the rehabilitation and construction of water and sanitation facilities
in eligible communities, and consultant services and training activities required to put in place
and strengthen community-based structures for managing and sustaining the services.
The project w i l l work in two types of communities: (a) the “semi-concentrated” populations
which typically include between 500-4000 inhabitants, the majority o f which have improved
piped water systems and usually improved on-site sanitation or to a lesser extent, water-borne
sewer systems, and (b) the “dispersed” populations of less than 500 people, which are often more
remote and poor and do not have improved water or sanitation systems. This component w i l l
therefore support both the rehabilitation and expansion or existing systems in larger
communities, as well as construction o f new systems. An objective o f the project i s to
mainstream the use o f more appropriate and cost effective technologies to for the rural dispersed
population and sanitation for the larger communities (see component 3).
The type of technology and levels of service that w i l l be applied include:
(a) Community piped water systems with house connections: water source could include drilled
borehole with submergible pump, spring catchment or surface water intake with treatment;
43
elevated storage tank; pump and chlorination house. National design standards for these
systems w i l l apply.
(b) On-site water supply improvements: protected hand-dug or drilled well with a hand-pump
or electrical submergible pump and a simple elevated water storage system for the household
or group o f households and spring catchments with small storage tanks and piped-gravity
distribution system to the house.
(c) Individual family on-site sanitation solutions, to include improved pit latrines, ecological
latrines, sanitary unit “caseta sanitaria” connected to either an individual or multi-family
septic tank
(d) In larger communities (at least 10o0 people in a concentrated community), and on an
exceptional basis, piped sewer systems with adequate treatment. The project w i l l promote the
use of lower cost and more appropriate technologies and design standards to include
condominial and small bore sewers, and treatment options such a lagoons, aerated
stabilization ponds, bio-filters, .etc.
Management o f the community water and sanitation systems w i l l be through a community-based
water committee or cooperative, as i s current practice in Chile. The project w i l l provide technical
assistance for the: (a) organizing and training the community-based water and sanitation
management structure, (b) expediting its legal recognition, (c) analysis o f a viable tariff
structure, (d) establishment o f administrative and operational practices and systems, and (e)
hygiene education and community outreach to highlight the need to conserve water, pay tariffs,
and invest in improved hygiene and sanitation practices (respecting existing cultural practices).
The community development and training processes w i l l be implemented before, during and
after construction.
In addition to the generic criteria established above for subproject eligibility, water and sanitation
projects w i l l have to meet these additional requirements:
The choice o f technical solution w i l l be made by the beneficiaries based on a participatory
analysis of alternatives and their commitment to pay their required share of the investment,
operation and maintenance cost
The existing national financial policy, which requires virtually no community contribution to
investment costs w i l l be applied, although the project w i l l also seek to promote increase cost
recovery. At the very least, the community must establish and accept the tariff level required
to cover the costs o f operation, maintenance, administration and minor repairs. Should the
national policy change, i t w i l l then be applied to this project as well.
Self-construction w i l l be promoted as a means of getting future beneficiaries involved in
project implementation, increase community contribution to investment costs and as a
strategy to implement more appropriate and cost effective technologies.
A service management and operational structure (water committee, cooperative or
equivalent), endorsed by the community, must be in place before the subproject i s approved.
44
0
In larger communities where services are being rehabilitated or expanded, the existing
management structure must show evidence of sound financial and operational practices, and
w i l l be assisted b y the project to obtain legal recognition, legal ownership o f the water
resources and the land on which the systems are constructed as well as the operating license
from the Ministry o f Health.
Appropriate management structures w i l l be established in the more dispersed communities
either as sub-committees o f larger neighboring committees, or with the traditional
organizations o f indigenous people and community-based productive associations.
For water and sanitation projects in larger communities the regional offices o f the Direccion de
Obrus HidruuZicas (DOH) o f MOPTT w i l l serve as technical units for project preparation and
implementation, following the usual practice o f construction being contracted out to qualified
firms. For the smaller communities, in addition to DOH, other Technical Units could present
themselves, including for example, municipalities, legally recognized water committees, regional
water companies, NGOs, etc. They would need to show their technical capacity to implement
the work, which would be demonstrated through their ability to successfully undertake the
feasibility studies to meet MIDEPLAN standards, as well as technical approval from DOH.
Particular attention w i l l be given to on-site water supply improvements and on-site sanitation
solutions as only municipalities are entitled to invest public funds for providing basic services in
particular properties. In addition, as the project w i l l place considerable importance on
community development and local service management models, this outreach and training work
w i l l be contracted to qualified external organizations. Finally, D O H w i l l continue to play i t s role
in providing, either directly or through third parties, technical and administrative backstopping to
the water committees.
Electricity
The project w i l l finance the following types o f works:
(a) expansion o f two-phase or three-phase power grids to supply commerce businesses, small
industries and other productive uses;
(b) upgrade of existing grids to three-phase supply for productive uses;
(c) installation or rehabilitation o f distributed systems (mini-hydropower, diesel, wind-power,
hybrid systems), including a generation plant and a generally two phase distribution grid;
(d) installation of individual systems such as solar photovoltaic or wind home systems.
Even though the rural electrification subprojects in the pilot territories are predominantly grid
extension, with some subprojects requiring an upgrade to three-phase supply, it i s likely that
decentralized systems w i l l be identified and requested by consumers during project
implementation. The subproject identification process included in the project manual w i l l ensure
that there i s no involuntary bias against electrification demand by dispersed, remote customers
that could be supplied by distributed systems and/or individual systems at a least cost compared
to grid extension.
45
The project w i l l apply the existing financial policy applicable in the country, which requires that
a minimum o f 10%o f investment cost i s to be covered by users for internal installation, metering
and hook-up to the grid. Subsidy represents in average 60% o f investment cost, while the private
proponent puts up the difference (30%). Operation and maintenance costs are fully financed by
the private proponent, without subsidy. The average investment cost o f rural electrification
projects financed under FNDR and FNDR-ER i s currently around US$1,500 per connection.
Implementation arrangements w i l l be designed to guarantee the sustainability o f subprojects. In
the case of distributed and individual systems, in addition to the regular economic analysis
conducted by MJDEPLAN, the technical, organizational and financial capacity of the project
proponents will be assessed and become an important element of subproject approval. In the case
of grid extension, the projects w i l l be designed, constructed and operated by local private
distribution utilities or rural electric cooperatives. In the case of distributed and individual
systems, the implementation approaches can vary from the classical utilities, to local
entrepreneurs, consumer associations, municipalities, etc. In both cases, i t w i l l be important to
improve incentives for cost minimization and to promote the use o f simplified technical
standards and designs. The project w i l l also finance the establishment and strengthening of local
service providers in the case of decentralized and off-grid systems.
Another objective w i l l be to maximize, as applicable, the synergies and economies of scale with
other subprojects in the same territory. In particular i t i s conceivable that there could be joint
arrangements between rural electrification and water and sanitation projects for part or all o f
installation, O&M and commercial management in the case of decentralized systems. The
potential and justification for joint implementation arrangements w i l l be assessed at the stage of
project identification and prefeasibility.
Information and Communications Technology Infrastructure ( I C I )
T h i s component w i l l support the financing o f telecommunications infrastructure and access to
telecommunications services in rural communities in Chile. The beneficiaries w i l l be schools,
municipalities, micro enterprises, health centers, or communities in rural Chile.
Subproject implementation arrangements w i l l be based on the following principles: (i)
the central
role o f SUBTEL in the management of project funds; (ii)
private-sector led implementation of
investment programs; (iii)
the use o f existing mechanisms for social investments; and (iii)
the
efficient involvement of decentralized levels o f the government in areas o f their competency,
managed b y SUBDERE.
Financing w i l l include the subsidy to the investments to be undertaken by provide operators to
build up the connectivity to rural towns with the purpose of enhancing the access to
telecommunications services to schools, health centers, municipalities, micro-enterprises, or
communities. B y bringing private operators to build (as well as own and operate the networks),
the model of service delivery w i l l ensure that good management practices are used and i t w i l l
ensure the future sustainability of the proposed investments. At the local level, schools,
municipalities, health centers, micro-enterprises, and communities, as pertinent, w i l l administer,
use and operate the telecommunications services (such as info-centers) under the technical and
managerial oversight of the private operator, who w i l l provide them with technical support,
46
training, and effective administration tools to ensure that the entities benefit from these
investments and that the service provision i s sustainable in the longer term.
The identification o f potential localities for the implementation of these investments w i l l be
determined b y criteria defined by the Regions with SUBDERE (within the framework o f a
PMDT) and by SUBTEL on a technical basis. The selection w i l l be determined by the public
consultation process of the localities as part of the preparation of the PMDTs, and w i l l take into
account: (a) demand expressed by localities on needs for access to modern communications
services; (b) synergy across infrastructure services to increase development impact; and (c) the
organizational capacity o f the communities to benefit from these services, in terms of sharing
services among schools, municipalities, health centers, micro enterprises and other entities, and
their capacity to productively use these services. In addition, technical criteria will be analyzed,
including:' (a) Service Penetration: the candidate localities must have low levels o f service
penetration; and (b) Eficiency: the candidate localities preferably meet a number of socioeconomic conditions that assure future use of the broadband services.
Once subprojects have been identified and have satisfactorily appraised by MIDEPLAN,
SUBTEL-as Implementation Technical Unit for the ICT subprojects-will prepare the bid
specifications and a draft contract for the provision o f services, and oversee the invitation to bid
on the projects. Once the contract i s awarded, SUBTEL w i l l help administer the disbursement o f
the funds o f the component b y making payments to the operator according to the contract. In
general, these contracts w i l l specify the payment schedules, that w i l l be based on the actual
commencement o f the delivery of services to the beneficiaries. Usually, contracts w i l l include
initial payments based on the completion of detailed network design. SUBTEL w i l l verify that
the operator has completed the roll out o f the networks and has started service to the
beneficiaries to make the payments as agreed under the contract.
Funds w i l l also be made available to assist local service providers set up business models to
operate the customer interface o f the service, for example for info-centers and public intranet
facilities. Linkages could be built with the other service providers whose capacity w i l l be
strengthened by the project, including the micro-enterprises maintaining roads, rural water
committees, or electricity cooperatives.
All subprojects w i l l need to incorporate-when applicable-the
resettlement framework and cultural property safeguards.
requirements o f the IPDP,
Component 3 - Institutional Strengthening (US$5.52 million)
This overall objective of this component i s to strengthen government's capacity to delivery
infrastructure services based on a territorial approach. The component will cover the costs o f
consultant services, equipment, training and incremental operating costs for (a) strengthening
the capacity o f national and regional agencies to implement the project, (b) conducting policy
and institutional reform studies, and (c) program monitoring, evaluation and replication.
~
~~~
Universidad de Chile. 2003. EZaboracidn de bases para la adjudicacidn de subsidios del FDT 2003; Infonne I .Santiago, Chile.
47
Subcomponent A: Strengthening Capacity of government to Implement a Territorial
Development Program As described in the project implementation arrangements, Territorial
Development Units w i l l be established in SUBDERE and in each o f the five regional
governments. As a result of the capacity that w i l l be built in these units through their role in
project implementation, i t i s expected that the units will continue after the project is completed as
they w i l l have qualified staff in place who are able to implement demand-responsive, locallymanaged infrastructure services following a territorial approach and ensuring wide cross-sectoral
coordination, with appropriate incorporation of the actions needed for application of social and
environmental safeguards (as detailed in Annex 10). In addition to strengthening the regional
governments and SUBDERE, this sub-component w i l l also have resources available to provide
training to the associated implementation agencies, including: MOPTT, SUBTEL, CNE and
others. This training w i l l encompass: (a) participatory planning; (b) application of social and
environmental safeguards; (c) procurement; (d) project management; and (e) monitoring and
evaluation.
Subcomponent B. Policy Improvements This component w i l l also support the implementation
of studies and discussion fora to improve government’s policy and institutional framework
related to the following issues:
Methodologies for the social and economic evaluation o f projects based on a territorial
approach, as well as development of streamlined procedures for approving simple, low-cost
projects in small communities
New approaches in the water and sanitation sector related to: (a) an improved institutional
framework for attending rural dispersed populations and addressing sanitation, including
support for developing a new Law o f Rural Sanitary Services (Ley de Sewicios Sanitarios
Rurales), (b) improved financial policies to increase cost recovery, (c) introduction o f more
appropriate and lower cost technologies, and (d) expedited legal recognition of local service
providers
Development o f a rural transport policy including: (a) enhancements to current subsidy
schemes for transport services in isolated areas; (b) identification o f road safety issues in the
rural (secondary) network and strategies for their attention; and (c) definition of a mediumterms strategy for clarifying and transferring responsibilities to local municipalities and
communities in the management o f the road network within their jurisdictions.
Subcomponent C: Monitoring, Evaluation (M&E) and Program Expansion. An M&E
system, including the collection o f baseline data, w i l l be established in SUBDERE This
component w i l l also support the information dissemination, learning and communications
processes to systematize good practices and build a foundation for expanding the program to the
entire country.
48
Estimated Costs
The estimated cost for each component i s summarized in the table below.
Estimated Cost of each Component (US$ thousand)
Counternart
- - -. .- - . -. - WB
- . - loan
.- -. .
Participatory Territorial Planning
Elaboration and approval of PDTs
Sub-total
Infrastructure Service Delivery
Pre-investment project formulation
Execution of investments
Supervision of execution of investments
Support to establishing local management mechanisms for O&M
Sub-total
InstitutionalStrengthening
Strengthening capacity to implement territorial development program
Policy improvements
Monitoring & evaluation, and program expansion
Incremental operating costs
Sub-total
Contingencies
Front-endfee
Grand total
49
Total
.
1,125
1,125
2,625
2,625
3,750
3,750
2,400
31,760
703
782
35,645
5,600
31,760
1,640
1,825
40,825
8,000
63,520
2,343
2,607
76,470
905
165
375
132
1,577
1,653
2,112
385
875
308
3,680
2,879
251
50,260
3,017
550
1,250
440
5,257
4,532
251
90,260
40,000
Annex 5: Project Costs
CHILE: Chile Rural Infrastructure Services
Project Cost By Component and/or Activity
Participatory Territorial Planning
Pre-investment Activities
Infrastructure Service Provision
Support to Management of Infrastructure Services
Institutional Strengthening
Policy Improvements
M&E and Program Expansion
Incremental Operating Costs
Total Baseline Cost
Contingencies
Total Project Costs'
Interest during construction
Front-end Fee
Total Financing Required
1
Local
U S $million
3.38
7.20
50.19
1.82
2.53
0.37
0.88
0.42
66.79
3.54
70.33
0.00
0.00
Foreign
U S $million
0.38
0.80
15.67
0.78
0.49
0.18
0.37
0.02
18.69
0.99
19.68
0.00
0.25
30.33
19.93
Total
US $million
3.75
8.00
65.86
2.61
3.02
0.55
1.25
0.44
85.48
4.53
90.01
0.00
0.25
50.26
Identifiable taxes and duties are US$15.86 million, and the total project cost, net o f taxes, i s US$74.40 million.
Therefore, the share of project cost net o f taxes is 82%.
50
Annex 6: Implementation Arrangements
CHILE: Chile Rural Infrastructure Services
The project w i l l be implemented following a territorial approach to the identification of needs
and the execution of the selected infrastructure investments and the subsequent operation and
maintenance. As such, the project will devolve responsibilities to the regional and local levels
towards entrusting the relevant entities and technical units with the participatory planning
process and the procurement and supervision o f project investments. In this process, the
principle i s not to create new institutionality but rather to utilize existing institutions, adequately
supported when required b y project managers and technical specialists. This scheme also
requires a large coordination effort that will be achieved through specific directorates or
commissions where the representatives o f the key entities at the national, regional or local levels
w i l l be represented.
The key management and coordinating unit-Unidad de Gerenciamiento y Desanollo or UGDw i l l be located at the SUBDERE, while the key implementation units-Unidades
de
Gerenciamiento Regional or UGRs-will be located one at each o f the Regional Governments
where the investments w i l l take place. The actual technical oversight and implementation o f the
project will be entrusted to selected Implementation Technical Units (the so-called “Unidudes
Tecnicus” in the Chilean framework) at the regional level-those that would normally be units o f
the corresponding sectoral ministries or entities. The SUBDERE, through the UGD, w i l l
monitor compliance with the requirements and procedures established in the Loan Agreement
and the Project Operational Manual, and as such w i l l be responsible for overseeing the
satisfactory implementation o f the project. The SUBDERE, also through the UGD, w i l l be
responsible for monitoring the achievement o f the projects development objectives and
performance indicators and in charge o f providing technical assistance-directly or through the
contracting of specialized consultants-to the entities at the regional and local levels.
A steering committee at the national level-the National Directorate-with key representatives
from the sectoral and planning ministries and institutions, would ensure that the strategic
directives of the project are agreed upon and properly coordinated. This type of committee
would also be constituted by the regional governments for the purpose o f promoting and
advancing the territorial approach at the regional level. At the level o f territories structured
participatory processes and fora w i l l ensure the adequate incorporation o f local needs and
priorities and the equal treatment o f community groups.
51
In brief, the specific overall responsibilities o f each institutiodentity are as follows:
National Directorate
SUBDERE
UGD (Program o f Rural
Infrastructure)
Regional Governments
Leading agents in identifying territories, backing the efforts for the
elaboration o f the PMDTs, and presenting the proposals to the Regional
Councils for their validation
Regional Councils
Responsible for validating the selection o f territories and the l i s t of
priority infrastructure investments identified in the PMDTs
UGR
Regional units o f the SUBDERE, endorsed b y the Regional
Governments, in charge o f project management at the regional level and
managing the elaboration o f PMDTs
Implementation Technical
In charge o f overseeing the technical quality o f the implementation o f
the projects, from their design to carrying out the procurement o f works,
contract management, and the supervision o f their execution, to be
“contracted” b y the Regional Governments (with the support and
oversight o f the UGRs) through the “convenios mandato”
Territorial committees (adhoc)
Coordinating body in each territory and oversight of PMDT
implementation
Local actors: municipal
mayors, producers,
communities, etc.
Participate actively in the elaboration o f PMDTs and in the ultimate
selection o f investment priorities in the territories
Units
The f o l l o w i n g tables detail the entities with a stake in project implementation and their
responsibilities, divided by national, regional and territorial levels.
52
National
HcsixmsihilitiesI (‘omposition (when applicable)
iational
)irectorate
Responsibilities:
Strategic supervision of project implementation, providing the strategic view of i t s
principles and policies.
Coordination among institutions involved in project activities.
Provision of politicaVinstitutiona1support to project implementation and agrees on overall
budgetary strategies to support territorial approach to investments.
Composition:
Constituted with Undersecretaries from MinHacienda, MIDEPLAN, MOPTT, Ministries of
Economy and Agriculture, SUBDERE, and Ministry o f Economy, calling on other
entities-SUBTEL, CNE, CONADI-when discussing issues that involve specific sectors
or indigenous peoples as relevant.
To be chaired by the SUBDERE. The SUBDERE would also be, through i t s Regional
Development Division, the technical secretariat of the Directory. As necessary, ad-hoc
technical commissions may be constituted to address specific project issues or themes.
XJBDERE
Responsibilities:
Management of the project and administration of project resources, through a “management
and development unit” within the Regional Development Division.
Monitoring of compliance with relevant requirements o f the Loan Agreement and the
Project Operational Manual and evaluates implementation progress and impacts.
Procurement of technical assistance activities.
Convening meetings of the National Directory (at least one every four months) and presents
progress reports and work-program proposals and policy strategies.
vlanagement and
Ievelopment
Jnit (Unidad de
jerenciamiento y
lesarrollo or
JGD of the
’rogram of Rural
nfrastructure)
Responsibilities:
Administration of the project and the day-to-day communications with the World Bank and
project implementation entities at the regional level and technical units.
Signing-off on the transfer of resources to the regional implementation units based on loan
agreement procedures.
Technical secretariat of the SUBDERE for project activities,
Provision of technical assistance to the regional entities (by itself or through contracts with
specialized consultants).
Recollection and analysis o f information on project implementation progress
Provision of information on monitoring compliance with loan agreement and project
operational manual procedures.
Monitoring and evaluation of achievement of objectives and results (perfomance indicators:
of the project.
Analysis of experiences and proposals for corrections to strategies and courses of actions to
enhance project effectiveness.
Composition:
Management unit within the Regional Development DivisiBn of the SUBDERE, staffed
with contracted professionals. Consisting of a head and up to seven professionals with
specialization on: project management, social and environmental safeguards, procurement,
engineering, and economics.
53
Regional
Responsibilities/ (’omyosition (when applicable)
3ead of
iegional
3ovemment
Intendente)
Responsibilities:
Definition of mechanismfor integral management of territorial development and
operationalizes that mechanism.
Subscription of Eligible Regional Agreement (convenio de trubajo) with the SUBDERE.
Subscription of Subproject Implementation Agreements (convenios mandam) with technical
units in charge of designing and implementing projects.
Creation o f the Regional Management Unit (UGR) and nominates i t s staff in consultation
with the SUBDERE.
Definition of proposals of territories and investment packages generated through the PMDTs
for presentation to the CORE.
Compositionof support team:
The Intendente selects and mobilizes representative staff from the sectors (SEREMIS) and
SERPLAC, and the CONADI in the relevant cases, and nominates secretary (e.g., Chief of
Staff, SERPLAC, chief of the DACG) for Project implementation follow-up, with an aim at
promoting territorial approach, buildingup alliances for coordination at the regional level,
with the CORE, the sectors, and municipal and local entities, and supporting the Intendente i r
presentations at the CORE.
Zegional
Zouncil
:Consejo
Regional or
ZORE)
Responsibilities:
Approval of the “Convenio de Trabajo” to be subscribe by the Regional Government with the
SUBDERE for the implementation of Project activities in the Region.
Validation of territories identified by the Head of the Regional Government (Intendente).
Endorsing the PMDTs and approving the allocation of resources to the PMDT investment
program including the list of rural infrastructure investment subprojects in the selected
territories, in agreement with the National Investment System (SNI).
Regional
Management
Unit (Unidad de
Serenciamiento
Regional or
UGR)
Responsibilities:
Oversight of the implementation of the project cycle ip the selected territory.
Definition and establishment o f the links with the technical units for the execution of the
projects (in all i t s phases: design, execution, supervision) and prepares the convenios
manduto for the signature of the Intendente.
Responsible for presenting to the SNI a solid portfolio of eligible subprojects for financing
under the project, with due consideration of the procedures and provisions of the Project
Operational Manual.
Participation (through i t s head) in the coordinating instances at the regional and local levels.
Definition and implementation o f a management mechanism (to be endorsed by the UGD) to
monitor actions of technical units, to ensure adherence to procurement procedures and other
arrangements established in the Project Operational Manual.
Alerting the Regional Government and the UGD on difficulties in project implementation and
lessons learned.
Generation and submission o f information to the Regional Government and the UGD on
project outputs, indicators and performance
Composition:
Staff nominated by the Regional Government (Intendente) in agreement with the SUBDERE.
Normally, constituted b y a head and up to three professionals, with qualifications to
effectively manage the elaboration o f PMDTs and monitor the implementation of subprojects
by the implementation technical units (specializations in participatory planning and
infrastructure technical issues). These professionals will become “managers” of a number of
PMDTs.
54
Territorial
rerritorial
Zommittee
Responsibilities:
Oversight of the elaboration, implementation and evaluation o f the Territorial Development
Plans (PMDTs), ensuring they are consistent with the directives of the regional entities and
within the methodological parameters defined in the Project Operational Manual.
Promotion of the territorial approach in the territories
Composition:
Though i t s composition will vary from region to region, it would include representatives
from the involved municipalities or associations of municipalities, the regional councilors,
and the directors of the infrastructure sectors or services within the territory.
Chaired by the provincial governor or the chief of the territorial entity selected and
delegated by the “Intendentes.”
Municipal majors
Responsibilities:
Facilitation, in a participatory manner, of the definition and the prioritization of
interventions under the infrastructure component of the PMDT (the PiRDT) at the
community level.
Reporting to the municipal councilors about the progress in the implementation of the
investment program o f the PMDTs.
When pertinent, approval of initial permits and of final reception of works (particularly for
water and sanitation subprojects)
When PROFIM Project i s present, promotion of common efforts in institutional
development to achieve synergies in the strengthening of capacities at the local level.
Further coordination should be undertaken with other programs at the municipal level (suck
as the “Programa de Mejoramiento de Barrios.”
Productive,
cultural or social
territorially-based
organizations9
Responsibilities:
Participation on the definition of needs and social and economic priorities in the territories.
Provision o f information related to local realities for the elaboration of PMDTs and that for
the justification of the worthiness o f alternative projects.
Definition of alternative options to solve the possible bottlenecks for expanding productive
activities.
Can become agents for the operation and maintenance o f the executed investments.
Local developmenl Responsibilities:
agents and entities To be consulted on a regular basis about the local needs and current programs in support of
social and economic initiatives in the territory.
Participation in workshops (mesas) organized in the process of elaboration of the PMDTs
(and PIRDTs) towards achieving an adequate coordination o f interventions,
Consist of private local organizations and public entities with initiatives or programs within
territories: CONADI (On’genes), INDAP, FOSIS, SERCOTEC, ONG’s, etc.
Neighborhood committees or association, indigenous communities or associations, agricultural associations,
irrigation committees or association, cooperatives or associations related to the fabrication of local products or
delivery of services (tourism), women groups, youth groups, health committees, other groups. Also members of
organizations involved in rural development, promotion of productive activities (including those as fishing or
tourism).
55
The interrelationships among the various institutions listed above and the agreements to be
reached among them are represented schematically in the graph below.
Schematic representation of institutional framework
Framework defmition, approval
of program. evaluation
4
1
D e c w with res+nsiRiiities<i
lmpbtnenlution
("Conveniosde
The interrelations among the different stakeholders will be governed mainly through the
following inter-institutional documents and agreements (or "convenios"):
The Decree for the establishment of the National Directorate. This decree w i l l specify the
overall framework for the participation o f the entities that are part o f that Directorate and
their overall responsibilities in particular: (a) for the sectoral agencies, in terms o f nominating
the relevant Implementation Technical Units when selecting in the regions and ensuring that
they cany out their duties in a timely and efficient fashion; and (b) for MIDEPLAN, in terms
of advancing the evaluation framework along the territorial approach and guaranteeing that
the evaluation process of projects takes place within reasonable periods o f time and with
methodologies that are commensurate with the size and characteristics o f the projects.
Eligible Region Agreements ("Convenio de Trubujo") between the SUBDERE and the
Regional Zntendentes (who are executive heads o f the regional governments and chairs o f the
regional councils, as regulated b y Law No. 19175 o f January 2003). This agreements
establish the administrative and fiduciary responsibilities, including those related to social
and environmental safeguards, as specified in the Project Operational Manual, and the
reporting requirements from the regional governments to the SUBDERE.
56
Subproject Implementation Agreements (“Convenio Mandata") between the Regional
Government and the selected Implementation Technical Unit for carrying out the investments
(subprojects) within a particular sector in a region. These agreements must include at a
minimum the responsibilities in ensuring the technical quality o f the design and the
implemented works, including those related to the social and environmental safeguards, the
procurement regulations and procedures, any possible contract management issues, the
supervisory and reporting requirements, the financing arrangement for the administration of
these activities, and the transfer mechanisms o f completed works for their operation and
management. The Project Operational Manual i s part of these agreements. The UGR w i l l be
responsible for overseeing o f this agreements (with support from the Regional Control Unit
o f the SUBDERE in the respective region).
At the regional level, as required by the characteristics o f the territories and subprojects,
specific Memoranda-of-Understanding w i l l be signed between the Regional Governments
and the CONADI, with the ratification o f MIDEPLAN, to ensure the exchange o f
information and support in addressing indigenous peoples and adequately incorporating them
into the participatory methodology and the evaluation of project outcomes. This mechanism
seeks to articulate the project with the current indigenous .peoples development plans
elaborated by the CONADI in the pertinent territories.
The SUBDERE has experience managing projects for the World Bank (Municipal Strengthening
Projects Iand I
Iand the PHRD Grant that financed project preparation activities) and for the
IDB (most recently, a Rural Electrification Project), and i s then familiar with procurement,
disbursements, environmental and social guidelines, and auditing requirements. The UGD w i l l
be headed b y an executive coordinator and assisted b y other adequate professional staff with
expertise in engineering o f rural infrastructure, procurement, social and environmental
guidelines, and economic and monitoring methodologies. The UGD w i l l rely on the SUBDERE
financial systems (those being used for the FNDR) for the purpose o f tracking financial flows,
managing the transfer of resources to the implementation units in the regions, and complying
with the audit requirements. The staffing of the UGD with professionals in number and with
qualifications satisfactory to the Bank w i l l be a condition of effectiveness.
At the regional level, the establishment of the UGR-with professionals in number and with
qualifications acceptable to the SUBDERE-will be a condition for initiating disbursements in
the eligible regions. The SUBDERE w i l l submit to the Bank for i t s no objection the justification
of the staffing plan for each UGR and the provide documentation on the setting up of the UGR as
evidence o f the appropriate creation o f that unit at the regional level. This documentation should
also detail the establishment o f the complementary entities at the regional and territorial levels,
as defined in the previous table.
Project cycle
The report on “Estrategia de Diseiio lnstitucional para la Operacidn del Programa de Inversidn
en Infraestructura Rural para el Desarrollo Territorial” details the specific steps to be
undertakenup to the selection and implementation of a particular project. These steps are part of
the Project Operational Manual, currently being developed. The completion o f this manual with
the scope and extent satisfactory to the Bank i s a condition o f effectiveness.
57
Annex 7: Financial Management and Disbursement Arrangements
CHILE: Chile Rural Infrastructure Services
Introduction
The overall responsibility for project implementation and coordination w i l l rest with SUBDERE,
through the Management and Development Unit (UGD), within the Direccidn de Desarrollo
Regional (DDR). Regional governments w i l l be in charge o f the execution of the rural
infrastructure investment plans, using the existing legal and fiduciary framework of the FNDR.
The FNDR was established by Decree 573/74, by the Government o f Chile to decentralize public
investment at regional level, and works under the overall supervision o f SUBDERE.
For the infrastructure component the project w i l l rely on the existing country systems using the
already established fiduciary framework in FNDR (Financial Management policies and
procedures and fiduciary controls). FNDR s financial management system provides support to
the control environment in which the operation w i l l take place. The Financial Management
assessment has found that the proposed arrangements are satisfactory and in compliance with
Bank policies and the only specific action required i s a project audit report under acceptable
terms o f reference with a single audit opinion. No additional project FM staff i s required for this
project .
The Borrower ‘ s proposed accounting arrangements for the project comprise both the financial
management system o f the FNDR and a dedicated budget , accounting and reporting system
used for FNDR - IDB project. The current FNDRs financial management system provide
support to the control environment in which the operation w i l l operate
The Bank has concluded the assessment of the financial accountability arrangements and
reviewed regional fiduciary systems and concluded that proposed project financial management
arrangements satisfy the Bank’s minimum financial management requirements, They include the
accounting and budgeting, preparation of financial reports, and auditing in accordance with
international accounting and auditing standards.
Flow of Funds and Disbursement Arrangements
Transaction-based Disbursements w i l l be followed, in accordance with established Bank
procedures, e.g., reimbursement o f Government pre-financed expenditures, replenishment o f the
Special Account based on full documentation and/or Statement o f Expenditures, direct payments
and Special Commitments.
Retroactive financing up to 10 % of the Loan amount i s proposed for the project and w i l l allow
the project to obtain enough resources in Chilean pesos to pre-finance expenditures. The project
w i l l operate by the Government pre-financing expenditures and after expenditures are made
requesting reimbursing to the Bank to a local currency Account, at Central Bank o f Chile, which
i s under the responsibility o f the General Treamry o f the Ministry o f Finance and i s subject to
budgetary controls. The option to open a Special Account will be maintained in the legal
59
agreement to allow SUBDERE use this option in case o f necessity. The authorized allocation for
the Special Account i s recommended to be set up to five million dollars which represents 10 %
of loan and allows the project afford external financing for at least four months of operation
expenditures.
The project w i l l request access to Bank’s Client Connection webpage to get the 1903 Form from
the web and to perform on a periodic basis the reconciliation process between their bank account
and the resources received from the different sources.
Loan proceeds would be disbursed against the expenditure categories:
Project Cost Ry (’ategory
t
I
Amounts allocated I,wn
In million
1. Subprojects
(a) Works and goods
(b) Consultants’ services
(pre-investment studies and supervision)
2. Consultant Services and Training
(other than subprojects)
(a) Elaboration of territorial development
framework plans
(b) Support to service management mechanisms
(c) Institutional strengthening, support to
management units, systematization, dissemination,
impact evaluation and monitoring, and training
3 1.76
7.24
39.00
50%
70%
7.57
2.63
70 %
1.83
3.12
70 %
70 %
The disbursement schedule planned for this project i s presented below:
60
I
of
Expenditures to
he Financed
Use of Statement of Expenditures (SOEs):
The types and thresholds for SOE/Summary Sheets is recommended to be set aligned with
procurement prior review threshold (to be added as per LOA requirements). These arrangements
w i l l be confirmed during negotiations and reflected in the minutes of negotiations and
disbursement letter to the Borrower.
Accounting and Reporting Arralagements
All of the project’s operations w i l l flow through the General Budget o f SUBDERE. SUBDERE
budget structure w i l l be modified to allow a specific identification o f the project in SUBDERE
budget execution to facilitate the control and supervision of this project under Chile’s public
expenditure system. The accounting will be kept in the SUBDERE’s controller system
(METASYS or a subsequent one) for FNDR under a separate ledger. Accounting reporting w i l l
follow Chile’s public sector accounting standards and the accounting procedures set b y the
accounting division of the Contraloria General de l a Repxiblica (CGR). The public sector
accounting rules are comprehensive and consistent with public international standards. They are
set by the CGR and entities are responsible for developing and maintaining their own accounts
within the rules’’.
SUBDERE w i l l also be in charge o f supervising the technical assistance plan and monitoring
key indicators for the project.
The Borrower w i l l prepare quarterly Financial Monitoring Reports which will submitted to the
Bank within 45 days o f the end o f each quarter. The first quarterly FMRs w i l l be submitted after
the end of the first full quarter after disbursements commence. FMRs format w i l l be part of the
FM Annex o f the Operational Manual.
Auditing Arrangements
Project’s annual financial statements w i l l be audited under acceptable Terms o f Reference by the
Chile Supreme Audit Organization (Contraloria de l a Repdblica - CGR) and w i l l present to the
Bank the audit report within six months o f each fiscal year. The World Bank New Audit Policy
applies to this project, and the Terms of Reference w i l l request under a scope acceptable to the
bank a single audit opinion on special accounts, project accounts, and statement o f expenditures
(SOE) and w i l l be part o f the FM Annex of the Operational Manual. The fiscal year i s the
calendar year.
Risk Analysis
Proposed financial management arrangements were assessed and found acceptable. Control risk
can be considered low on the basis o f the strengths o f the systems and the oversight from country
fiduciary control systems. Hence the control risk i s considered low.
lo
Chile:
Report on the Observance of Standard and Codes
- Fiscal Transparency Module, IMF, August 2003.
61
Entity Specific
sector in budget management; also it has an excellent record in
execution of Bank projects.
Subject to rigorous control of Chile’s financial management
arrangements.
FM operations mainly embedded in FNDR execution subject to
public sector fiduciary control. Management has experience in
project execution and i s very conscious in financial management
matters.
Low
Low
Management System
Internal Control
I Framework
Low
I
of accounts to be conditions 0; effectiveness.
Chile’s Public Sector control framework in place for this project.
Action Plan and Condition of Eflectiveness
The following action must be completed prior to Effectiveness:
0
A project operational manual Annex approved by the Bank which documents additional
procedures and requirements for the project including accounting system, internal controls,
planning, budgeting, financial reporting system (including format and contents of the
Financial Monitoring Reports and chart of accounts), auditing and disbursing.
SUPERVISION PLAN
Visit
FMR Review
Mechanism
General Supervision:
Twice a year for first
year, for following
years, with the mid
term review and
completion if
unqualified opinion i s
given, if not once a
year.
With each report
Integrating supervision
missions at least one
time each semester.
Once a Year
Over the Audit Report
submitted to the Bank
Over the FMR
submitted to the Bank.
[
Objective
0
Review FM system.
0
Supervise Reimbursing and or
Special Account
Reconciliation. Use of funds.
Follow up on External Auditors
recommendations/ raised
issues.
Review staffing.
0
0
Audit
Review
62
0
0
Review FMR information
consistency.
Raise issues disclosed in FMR.
Review Audit Report.
Raise issues disclosed in Audit
ReDort
Annex 8: Procurement
CHILE: Chile Rural Infrastructure Services
A) General
Procurement for the proposed project would be carried out in accordance with the World Bank’s
“Guidelines: Procurement Under IBRD Loans and IDA Credits” dated May 2004; and
“Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” dated M a y
2004, and the provisions stipulated in the Legal Agreement. The general description of various
items under different expenditure categories i s described below.
For each contract to be
financed by the Loan, the different procurement methods or consultant selection methods, the
need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed
between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan
w i l l be updated at least annually or as required to reflect the actual project implementation needs
and improvements in institutional capacity.
Procurement of Works: Works procured under this project would pertain to the following
Sectors: (i)
water and sewerage; (ii)bridge and roads; (iii)electrification; and (iv)
telecommunications, all o f them to be constructed in the territory of eligible Regions within the
Chilean territory. Works would be small and the cost-estimate for the individual contracts i s
expected to be below $1 million. Pre-qualification and ICB procedures are not deemed
necessary, due to the small amount of the contracts. N C B procedures would be followed for
contracts estimated to cost up to $5 million. There w i l l be no other contracts above $5 million
and therefore no ICB. Shopping procedures might be followed for contracts estimated to cost
less than $45,000, which i s the threshold established by local legislation.
The procurement under NCB would be done using Sector National SBD satisfactory to the Bank,
which would substantially follow: (a) the Bank SBD for ICB, as format and organization i s
concerned, and (b) the bidding documents currently used by Sector Technical Units located in
the Regions (TUs), with the necessary amendments to make them consistent with Bank policies
and procedures, as language i s concerned. In spite o f the foregoing, Sector Interim National SBD
satisfactory to the Bank, which would be based upon those bidding documents currently being
used by TUs, as amended to make them consistent with Bank policies and procedures. The
above-mentioned Sector Interim National SBD might be used for Advance Contracting, as
defined in paragraph 1.9 o f the Procurement Guidelines, and for the bidding processes to be let
during one year after Loan Effectiveness. Notwithstanding the Special Procurement Conditions
listed in E) and taking into consideration that annual investments under the project would
represent just one per cent (1%) o f the annual investment in public works in Chile, the Borrower
and the Bank agreed that the above mentioned National SBD for NCB would include the
following features: (i)
the two-envelope procedure, provided that the safety o f the second
envelope i s warranted until i t s opening and that the evaluation of the first envelope is done
within reasonable short time, and (ii)
the employment of registries in replacement o f postqualification procedures for f i r m s established locally, provided that the SBD include postqualification requirements for foreign firms equivalent to those of the registries and the post-
63
qualification o f foreign firms i s done b y the contract evaluation committee and not by the
registry’s authorities.
CDD Procurement: The proposed loan would also finance small electrification, water and
sanitation, and telecommunication subprojects following CDD approach. As evidenced in the
pilot territories surveyed during project preparation, most electrification and telecommunication
subprojects, and some water and sanitation subprojects would be of very small amount and
scattered geographically and in time, with few possibilities o f aggregation. These subprojects
would be proposed by local private or public entities, such as: distribution utilities, cooperatives,
entrepreneurs, consumer associations andor municipalities (hereinafter called “CDD entities”).
In order to ensure transparency and equal access to funds, the Regional Governments would
advertise the opportunity of getting subsidies in a newspaper of national circulation. The projects
would be evaluated b y the application o f the MIDEPLAN economic evaluation methodology,
further approved b y the Regional Governments and implemented b y the proposing organization
under the supervision of the Regional Governments. The overall technical supervision o f the
works would be, for electrification, the National Electrification Commission (CNE), for the ICT,
the Deputy Secretariat o f Telecommunications (SUBTEL) of the MOPTT, and for water and
sanitation, the Directorate of Hydraulic Works (DOH), also of the MOPTT. Detailed procedures
for the allocation of subsidies to finance goods/works would be included in the Project
Operational Manual. Two different methodologies have been designed for the carrying out o f
these subprojects:
1. Financing of subsidies: The contracting would follow the C D D entities’ own procedures:
commercial practices or local procedures depending upon the proposing organization
being a private or a public entity, respectively. In order to ensure cost-efficiency, the
amounts o f the subsidies would be a percentage of the total construction costs, which
would result from de application of standard unitary-costs, regardless o f actual contract
amounts. This approach would be applicable to electrification, water and sanitation, and
telecommunication subprojects with aggregate amounts not exceeding the equivalent of
$lOO,O00 per proposing organization. Above said amount, other Bank procedures should
be followed (NCB/shopping/direct contracting).
2. Construction b y the Community: Manpower would be provided by the community that
would benefit from the subproject under the supervision and guidance o f individual
consultants. The procurement of goods (i.e., construction materials) would follow the
CDD entities’ own procedures: commercial practices or local procedures, depending
upon the proposing organization being a private or a public entity, respectively. T h i s
approach would be applicable to water and sanitation investments with aggregate
amounts not exceeding the equivalent of $20,000 per proposing organization.
Procurement of Goods: Goods procured under t h i s project would be limited to office
computing equipment to be procured through ChileCompra, which procedures (namely,
framework agreements) have been accepted by the Bank as equivalent to Shopping (for contracts
below $100,000).
64
Procurement of non-consulting services: Non-consulting services under this project are limited
to those necessary to deliver training activities (Le,, facilities and services for workshops) and
would be procured following local procedures.
Selection of Consultants: Consulting Services under this project would include services to be
provided by firms, such as: (i)
elaboration o f PDTs, (ii)
sub-project formulation, (iii)
supervision
of works, (iv) support to establishing local management mechanisms for O&M, (v) studies on
methodologies and policies, and (vi) project monitoring and evaluation. Consulting Services
under this project would also include services to be provided by individuals, such as: (i)
consultants for management units, (ii)
training and (iii)
formulation o f national program.
Consulting Firms would be selected following QCBS. CQ might be followed for contracts
estimated to cost $l00.O00 or less. Single Source Selection might be used for contracting NGOs
and legally established communities for the preparation o f PDTs under contracts estimated to
cost $20,000 or less. Short lists o f consultants for services estimated to cost less than $500,000
equivalent per contract may be composed entirely of national consultants in accordance with the
provisions of paragraph 2.7 o f the Consultant Guidelines. Individual consultants might be
selected following Section V o f the Consultant Guidelines.
Operational Costs would be procured using the implementing agency’s administrative
procedures, which were reviewed and found acceptable to the Bank. This includes transportation
fares, travel expenses and per diem, either related to training or supervision activities.
Additional Use of ChileCompra: ChileCompra would be used for advertising invitations to bid
and requests o f expression o f interest for consultants, and to publish information on contract
award, as mandated by local legislation.
Others: None.
B. Assessment of the agency’s capacity to implement procurement
An assessment of the capacity of the Operational Department of the Regional Development
Division of SUBDERE, which would be in charge o f procurement actions and supervision for
the project, has been carried out b y Andrks Mac Gaul, Procurement Specialist (LCOPR). The
Procurement Capacity Assessment report i s contained in the Aide Memoire resulting from the
mission to Santiago that took place on the week starting on August 16, 2004. The assessment
reviewed the organizational structure for implementing the project and the interaction between
the PCU and the implementing agencies.
Procurement activities concerning civil works w i l l be carried out b y various TUs under the
supervision of the existing Regional Control Units (UCRs) and of the above-mentioned
Operational Department. For works in roads and bridges, the TUs would be the Regional
Directorates of Road of the Ministry o f Public Works, Transport and Telecommunications
(MOPTT) and for works concerning water and sewerage, the TU would be the Hydraulic
Department of the M O R T . Procurement of Goods and Selection o f Consultants would be
carried out directly by the Operational Department o f SUBDERE. C D D Procurement would be
carried out by CDD entities.
65
Most of the issues/ risks concerning procurement have been identified and include that:
1. The CPAR for Chile carried during CY2003 revealed that local legislation and practices
differ from Bank rules in many aspects.
2. Due to the limited participation of the Bank in the financing of works in Chile, none of
the implementing agencies for the investment components has any previous experience in
Bank procurement.
3. The above i s compounded by the fact that SUBDERE itself or i t s personnel do not have
experience in the procurement of works.
4. Moreover, due to the fact that SUBDERE and the implementing agencies have
implemented various projects under similar organizational arrangements but following
rules that are different from the Bank’s, i t i s expected that there w i l l be some reluctance
to changing the established modus operandi.
The corrective measures that have been agreed are:
1. Before Negotiations, the Operational Department would recruit under TORs acceptable
to the Bank one (1) full-time Civil Works Procurement Expert with 5 years o f experience
in the contracting of civil works.
2. Before Negotiations, the Operational Department would hire under TORs acceptable to
the Bank one (1) part-time Procurement External Advisor with 5 years of experience in
the contracting of civil works under Bank rules. H i s most important duty would be the
coaching of the Civil Works Procurement Expert on Bank procurement and the carrying
out o f post-review work, as defined below.
3. A set o f Sector Interim National Standard Bidding Document for the procurement of
works under N C B would be agreed at Negotiations and referenced in the Minutes o f
Negotiations.
4. A set of Sector National Standard Bidding Document for the procurement of works under
N C B would be agreed before loan effectiveness.
5. A Project Operational Manual and a Manual o f Functions for the Operational
Department, both acceptable to the Bank, would be adopted before loan effectiveness.
6. A procurement information system acceptable to the Bank would be implemented before
June 30,2005.
7 . Procurement actions carried out by U T s would be supervised ex-ante b y the
corresponding UCR and by the Civil Works Procurement Expert. With no-limitation to
the ex-post review work to be carried out by the Bank, the Procurement Advisor would
ex - post review at least one (1) out of ten (10) contracts signed, including the ex-ante
review reports produced by the UCRs and by the Civil Works Procurement Expert. ExPost supervision of CDD Procurement would be carried out by the UCRs in a manner to
be defined in the Operational Manual.
8. The Special Procurement Conditions listed in Section E would be included in the Loan
Agreement.
66
Considering, on the one hand, the expected balance o f the above-mentioned risks and corrective
actions and, on the other hand, the fact that the CPAR for Chile indicates that the Country Risk i s
LOW, the overall project risk for procurement i s AVERAGE.
Procurement Plan
The Borrower, at appraisal, developed a Draft Procurement Plan for project implementation that
provides the basis for the procurement methods. This plan has been agreed between the
Borrower and the Project Team on November 18,2004, and i s available at SUBDERE, Zenteno
234, Santiago de Chile, Repiiblica de Chile. I t w i l l also be available in the Project's database and
in the Bank's external website. The Procurement Plan w i l l be updated in agreement with the
Project Team annually or as required to reflect the actual project implementation needs and
improvements in institutional capacity.
D. Procurement Supervision by the Bank
Prior review thresholds are as follows: $2 million for works, $300,000 for goods, $200,000 for
consultant f i r m s and $lOO,OOO for individual consultants. In addition to that, the first three (3)
contracts procured under each method, each type o f National SBD (either interim or final) and
for each disbursement category, would be subject to prior review regardless o f amount. Direct
Contracting and Single Source Selection, if any, would be subject to prior review as well.
Post review supervision should be conducted once a year and one (1) out of ten (10) contracts
signed should be reviewed and the quality of the no-objections issued b y the UCRs and b y the
Civil Works Procurement Expert for those contracts would be assessed. Additionally, the ex post review reports produced by the Procurement External Advisor would be reviewed and i t s
results considered during ex - post supervision missions. As a result of the findings of i t s ex post procurement reviews, after one (1) year o f Loan Effectiveness, the Bank may agree on
thresholds below which the UCRs and the Civil Works Procurement Expert o f SUBDERE would
be no longer obliged to prior review procurement decisions made b y civil works implementing
agencies which procurement performance were found satisfactory. For these purposes, the
Project Operational Manual would describe mechanisms for monitoring the procurement
performance o f the civil works implementing agencies.
E. Special Procurement Conditions
The following Special Procurement Conditions are proposed to favor the dissemination o f good
procurement practices:
1) All bid-related documents should be submitted together with the bid and bidders should not
be required to submit any bid related documents in advance o f the deadline for submission o f
bids.
2) All bids received on or before the deadline for bid submission should be admitted for
evaluation at the bid opening ceremony.
3) The evaluation process should be confidential; after the public bid opening, information
relating to the bids, their examination and recommendations concerning awards shall not be
67
disclosed to bidders or other persons not officially concerned with this process until the
publication o f contract award, except for the results of the post-qualification process, which
would precede the opening o f the second bid envelope.
4) Unit price contracts for works construction should be priced on the basis of unit prices
quoted b y bidders after correction of computation errors; and maintaining the total bid price
and changing unit prices in accordance to official cost estimates (“compensatory pricing”) i s
not acceptable,
5) Foreign contractors shall be allowed to bid and such contractors w i l l not be required to (a)
register as a condition for biding or (b) have a local representative to bid. However, such
foreign contractors shall register before contract signature, as mandated b y the applicable
local laws and regulations.
6) Contracts should be awarded on the basis of proposals received from a short-list o f qualified
consultants; no open bidding should be carried out.
68
1. Attachment 1
2. Details of the Procurement Arrangement involving international competition.
1. Goods and Works and non consulting services.
(a) L i s t o f contract Packages that will be procured following ICB and Direct Contracting:
1
1
3
4
1
Ref Contract Estimate Procureme
(Descriptio
d
nt
No.
n)
cost
Method
2
.
6
7
Domestic
Preferen
ce
(yesho)
Review
by Bank
(Prior /
Post)
5
P-Q
'
i
8
9
Expected
BidOpening
Date
Commen
ts
Note: ICB and Direct Contracting are not foreseen.
2. Consulting Services.
(a) L i s t of Consulting Assignments with short-list of international firms.
1
Ref. No.
2
3
4
5
Description
of
Assignment
Estimate
d
Cost
Selection
Method
Review
by Bank
(Prior /
Post)
6
Expected Comments
Proposals
Submissio
n
Date
I
Note: assignments with short-lists of international f i r m s are not foreseen.
69
7
1
Annex 9: Economic and Financial Analysis
CHILE: Chile Rural Infrastructure Services
Introduction
The Project investments include a wide spectrum o f interventions for the four sectors of rural
infrastructure (water and sanitation, roads, electricity, and telecommunications).
These
investments w i l l be identified in a participatory manner during the preparation o f the territorial
development plans (PMDTs) and the related infrastructure investments. As such, the first
mechanism for the selection and screening of potential investments takes place at the time o f
definition o f the territories and, subsequently, the contents o f the PMDTs.
The identification of the participating territories i s undertaken b y the Regional Governments and
validated by the Regional Councils and by SUBDERE. The territories must comply with the
following minimum eligibility criteria: (a) high percentage o f rural population; (b) high
incidence o f rural poverty, (c) rural infrastructure service gaps, (d) a territorial unit that builds on
existing social and economic relationships, and (e) productive potential to ensure long-term
sustainability and viability of the territory. The territories should not encompass more than 25%
o f the region population, and the percent o f population categorized as rural should be higher than
20%, and their population should be at least 20% poor. The initial set of territories present the
characteristics shown in the table below. Two key conditions for the selection o f investment
proposals within the PMDTs are that they must be connected to strategic productive activities in
the territory and that they comply with the overall social and environmental requirements o f the
Project and its criteria and guidelines (for both, the PMDTs as a whole and the specific sectoral
guidelines). In this manner, the initial selection o f subprojects i s assured to respond to an overall
economic justification within the constraints imposed by the adequate attention to natural and
social habitats.
The scope of a PMDT w i l l include, at least, the following elements: (a) a strategic and integrated
vision for the social and economic development o f the territory; (b) an ensemble o f institutional
principles and actions leading to an enhanced articulation of public entities and these with social
organizations and private entrepreneurs; and (c) a preliminary l i s t o f investment initiatives
supporting the strategic development vision. The PMDTs w i l l be formulated in a participatory
fashion and w i l l be approved b y the CORE upon presentation o f the proposal by the Regional
Zntendente. The l i s t of initiatives w i l l be explicitly linked to the strategic objectives and
institutional principles of the PMDT, as w i l l be the possible connections among initiatives. I t
w i l l be complemented with other public initiatives that, even if not eligible for financing as part
o f the project, might be also relevant to achieve the strategic objectives for the development o f
the selected territory, all with due attention to social and environmental considerations.
The identified rural infrastructure investments within a PMDT (the PlRDT) are required to be
evaluated from a economic (social) and financial (private) perspectives through the National
Investment System (SNI) established by the Ministry o f Planning and Cooperation
(MIDEPLAN), an entity with a long tradition o f analysis and evaluation o f projects. The
MDEPLAN methodological process (see Box) aims at evaluating the private and economic
70
(social, in the terminology of MIDEPLAN) rates of return of every separate project with the
purpose of assessing the worthiness of those projects that may not be financially sustainable.
This applies to projects that require public funds-either entirely or partially.
K i ? v c l l a " 'sticsof initial set of territories
coqud
%on
k l e
57,708
3,237 107,018
1%
22%
law0
56,970
10%
3370
42%
32%
ria
da
da
ria
-poor*
23%
24%
36%
)ercenteXtR?l??&ypOOr"
12%
7%
10%
regional geographic surface
h e r a g e of infrastnrdureservices
10%
13%
89%
da
74%
)opulation
'op. as Yoof regional population
)ercentlufal*
'ercent indigenous
)ercent of
Water *
-
Sanitation
Electrification*
Access to tdecomrwications
da
percentearthroads
da
cey produdive "apuestas"
6%
157,235
8%
89,m
10%
=YO
Z / O
11%
12%
3%
42%
21Yo
1PI0
13%
6%
15%
1P/O
15%
10%
47%
50%
70%
18%
21%
da
da
8%
44%
95%
91%
da
94%
96%
78%
da
da
da
da
47%
da
34%
da
83%
31yo
T0UriS.Q
Fishing, litesiockandagriculture, agricukure, fishing, Cheese, potatcs, Fruits,
seafoodfarms
atticrafts
fishing, tourism
agrcindustrial
fa: ndadde
M
kawania
Bo Bo
d pqxlatia,living incaTmudtieS d less than Z000pecple
* sclsce: ci4sEN moo, dherfiguresfrallma2census
* p e r C g B o f ~
-~~to~systemorseptictardc
71
Economic and Financial Evaluation
The evaluation methodology, information requirements, and the inputs for i t s application are
available through the Internet (www.mideplan.cl/sitio/Sitio/inversion/htm/sni.htm).
This
methodology varies depending on the type o f subproject, but i t normally includes the following
steps: (a) diagnosis o f the current situation in the area of intervention; (b) analysis and estimation
of current and future demand and supply; (c) definition and analysis of alternatives; (d)
identification o f benefits (private and social, with conversion factor defined by the MIDEPLAN);
(e) identification o f costs (also private and social, with conversion rates defined by the
MIDEPLAN); (f) calculation of the social (economic) NPV (and private, if pertinent) and other
economic indicators; and (g) performance o f sensitivity analysis on the basis o f variations to
benefits, costs or both. The information required b y this methodology also includes the possible
environmental impacts and the related mitigation impacts.
This overall methodology, however, i s not to be applied equally across the board to all types o f
projects but i s simplified and/or adjusted depending on the type o f subproject, i t s characteristics
and i t s scope within a given PMDT. Agreement has been reached with the MIDEPLAN on the
following evaluation methodologies:
72
(a) Cost-effectiveness w i l l be applied to those subprojects whose benefits, given their
characteristics, are difficult to quantify though they might be evident in qualitative terms. This
methodology w i l l apply also to those initiatives that generate “services” but are not oriented to
the markets. In these cases, the project w i l l seek to obtain the maximum benefits with the least
cost.
For instance, a simplified procedure for the preparation of subprojects involving on-site water
supply improvements and on-site sanitation solutions was developed with MIDEPLAN and
DOH. This procedure aims to: (i)
fulfill the minimum requirements for the implementation of
implement small projects in a more efficient and time-saving
sustainable services, and (ii)
process.
(b) Economic cost-benefit analysis w i l l be applied to those instances when the identification
and quantification o f investment costs and expected benefits can be reasonably undertaken.
Subprojects that include the recovery o f costs through tariffs w i l l be subject to a financial
analysis.
Thresholds. For those subprojects subject to the cost-effectiveness criteria, the MIDEPLAN and
the sectoral entities have developed an initial set of investment ceiling thresholds. These
thresholds w i l l be reviewed every six months of project implementation to assess their
appropriateness for the purpose o f simplifying the analysis o f those projects without ready
quantifiable benefits, with an aim at ensuring that the inclusion of those subprojects for approval
under the criteria does not affect i s technical and social (economic) worthiness. The partition of
projects to reduce their costs w i l l not be permitted. Projects that include recovery through tariffs
will also be submitted to a financial analysis.
The MIDEPLAN jointly with the corresponding technical entities has proposed the thresholds
per beneficiary, connection, or other unit for those subprojects to be evaluated under the costeffectiveness approach. Those subprojects that have costs per beneficiary, connection, or other
unit below those threshold values w i l l be subject to that evaluation approach and, if they are
higher, a cost-benefit analysis w i l l be carried out, with the calculation o f the indicators for NPV
and internal rate o f return.
The table below shows the details o f the proposal o f the threshold values on the basis o f the
characteristics and data for the initial l i s t o f subprojects and discussions with the sectoral entities.
Water
Sanitation
Roads
Electrification
Below $1600 per connection for interconnected systems or all individual
systems
“Casetas sanitarias” e US$2,W
Periodic maintenance or rehabilitation works under US$30,000/km and
US$l50/beneficiary
Investment costs under US$2,000 per beneficiary for distributed off-grid systems
For all the subprojects the appraisal will take into account and make explicit the possible
interrelations among them within a territory, in such a manner as to include the possible
73
complementary benefits. Through t h i s procedure, the analysis w i l l show the basic characteristics
o f those interrelations and verify if those initiatives are complementary, mutually exclusive, or
conditioned on each other, and the temporal sequencing and possible pooling o f risks involved in
their concurrent implementation, in the context of each PMDT.
In the case of initiatives that do not obtain a positive recommendation from MIDEPLAN, a
revised evaluation w i l l be undertaken between MIDEPLAN and the corresponding technical
entities, to review: (a) if there are combined benefits not quantified or erroneously quantified; (b)
if the formulation of the project does not respond to the minimum information requirements
required by the National Investment System for the specific type o f subproject. If upon the
completion o f t h i s review, the subproject continues to be non-recommended b y the MIDEPLAN,
an analysis of the consequences o f not proceeding with this subproject in the context of the
PMDT w i l l be evaluated and the possibilities of other alternatives to satisfied the same objectives
o f the subproject w i l l be considered. This may imply the incorporation of other initiatives to
further compfement the achievement o f the strategic objectives o f a PMDT.
Details on the process of evaluation based on cost-benefit analysis
The social prices are based on methods developed in 1987 b y the Catholic University of Chile
and then updated by the MIDEPLAN when required by changes in the country economic
conditions. For instance, for labor costs the latest update took place in 2002 (see table below),
for the social discount rate (currently at 10%) in 1998, while for the foreign exchange premium
(currently with a value of 1.01) the number i s updated annually. T h i s effort of updating the
conversion factors means that the shadow prices reflect adequately the possible distortions or
overabundance in the input markets, and the social interest rate o f discounting benefits and costs.
Adjustment factors for labor costs
Skilled
Semi-skilled
Unskilled
0.98
0,68
0,62
1
0,94
0,89
For those components that require foreign inputs, the foreign exchange premium has been
established by the MIDEPLAN at 1%, reflecting an economy that i s largely void of exchange
restrictions and taxes. This means that the cost of foreign inputs must be adjusted b y a factor o f
1.01. Finally, the social discount rate for infrastructure project was set at 10% starting in 2004.
In the road sector, the projects subject to costhenefit analysis are evaluated with the use of the
Highway Development and Management (HDM) Program. Chile has been an active participant
in the development and implementation o f this programming tool and i t s use has been standard
for several years in the Chilean road sector. The values for the variables used in the HDM are
available in the project files. The table below summarizes the values for key variables.
74
Key values of HDM variables
(Social prices as of December 31, 2004)
Vehicle type
Price of new vehicle (CLP thousand)
Maintenance cost (CLP/hour)
Travel time cost (CLP/hour)
based on value of time per pass-hour of:
Fuel (CLPAiter)
Lubricants (CLP/liter)
Tires (CLP/unit)
Auto
8,118
2,036
7,630
Pick-up
8,887
2,036
9,007
Light truck
10,732
2,036
3,108
Articulated
truck
25,063
2,036
3,108
Buses
71,394
2,036
29,234
186.4
2,004
43,458
184.0
1,005
96,890
182.7
1,005
126,593
182.7
1,005
126,593
750
187.0
2,004
19,599
The application of the HDM program to the projects identified from the initial PMDTs, yielded
high positive rates of return, as it i s frequent with rehabilitation and maintenance projects when
traffics are at medium levels (such as 200-500 vehicles per day).
In the water and sanitation sector, the MIDEPLAN methodology i s used for subprojects in
concentrated and semi-concentrated communities. For smaller subprojects and in those in
dispersed communities, threshold criteria w i l l be introduced as an initial criteria for approval. In
all cases, subproject formulation also confirmed that consumer demand was adequately assessed
as well as the willingness and capacity to pay the required tariff.
In the electrification sector, the Mideplan methodology w i l l be used as the basic tool for
economic appraisal and ranking of proposed subprojects (Evaluacidn de Proyectos de
Electrificacidn Rural, Mideplan-CNE, 2002, and i t s subsequent amendments).
This i s a proven methodology that has been gradually improved through project feedback. I t
compares the situation with and without the project, in order to quantify the project’s private and
social benefits related to increased demand o f electricity and/or substitution of energy sources in
the residential, commercial, productive and public sectors. Private benefits are equal to projectrelated revenues for the project’s proponent under the electricity tariff regime in the project area,
or a specific regime agreed upon with the municipality in the case o f decentralized systems.
Social benefits are those accruing to consumers. Benefits are then compared to the project’s
private and social costs, to establish the private and social NPVs (VANprivado and VAN socia2)
of the discounted cash flow of costs and benefits. The project’s private costs include the
investment, O&M and administrative costs for the project’s private proponent. Social costs are
obtained from private costs after accounting for duty/taxes and shadow prices o f labor and
investment. In both cases a sensitivity analysis i s conducted to confirm the robustness o f results.
Comparison o f alternatives i s based on maximizing the social NPV to supply a given demand. T o
be judged eligible b y the regional planning office (SERPLAC), projects must have a positive
social NPV. Eligible projects are then prioritized by the Regional Councils, often on the basis o f
the maximization o f the ratio of social NPV to investment cost.
During project appraisal some complements to the above methodology were discussed with CNE
and MIDEPLAN, including the following:
75
a. Apply the consumer surplus approach in the estimation af social benefits for residential users
that substitute low-quality energy sources such as kerosene lamps, candles, batteries, etc.
b. Assess sector demand taking into account the effect of packaging subprojects implemented in
a given territory (e.g. productive uses o f electricity w i l l be higher if road access i s improved
and residential demand of electricity w i l l be higher if water and telecom services are
provided at the same time)
C.
Allow project proponents to define project specifications provided they comply with
minimum standards and service quality requirements.
d. In the case o f distributed systems that often have a higher cost per connection than the
current average cost o f grid connection, apply a least cost approach up to qualify projects up
to a maximum investment cost per connection (e.g. US$2,500), which i s commensurate with
the lower part of the range o f costs o f renewable energy systems).
In the Information and Communications Technology Sector, the SUBTEL has undertaken a
country wide assessment of rural localities where the implementation o f telecommunications
centers would benefit from their connection to the broadband backbone that runs from the North
to the South of the country. The possible projects w i l l have to be identified by the participating
communities in a territory and become part of the PMDTs (Territorial Development Framework
Plans). The PMDT, with the support of the S U B T E L as pertinent, w i l l show the number of
beneficiaries o f the telecommunication services-on an annual basis, for a period of 10 yearsand the expected benefits. These expected benefits would be measured by multiplying the
number o f beneficiaries by their willingness-to-pay (the latter to be measured b y the estimated
(subsidized) tariff the users w i l l pay for the service). The net benefits would be calculated
substracting from the annual benefits the initial investments costs and those for the operation and
maintenance o f the telecommunication services, taking into account the conversion factors
described in the previous section.
Results of economic analysis of sample from initial set of subprojects
An analysis of the projects to be implemented at the start of project implementation yields the
cost-effectiveness or economic indicators shown in following table. The information provided
was confirmed with MIDEPLAN and covers about 50% of the costs of the initial set o f
subprojects identified in the five eligible regions or about two thirds o f those that received the RS
recommendation from MIDEPLAN.
76
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135
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O
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-%
Financial Evaluation
For the financial analysis, the methodology requires the assessment o f tariff structure and levels
and the calculation o f the income generated by the revenue-raising projects (therefore, this
analysis w i l l not be performed on road projects), and then a comparison of this income with the
private costs of construction, operation and maintenance of the project (including taxes and
utilities). This provides the financial cash from which the NPV and the corresponding rate o f
return can be calculated. In this calculation, the private discount rate for the company i s applied.
F o r the electricity sector, the basis o f investment subsidy allocation i s precisely to turn
financially viable (private NPV equal to zero) those projects that have a positive social NPV. In
that sense, subprojects that are approved are financially viable b y definition. In any case, i t i s
worth noting that the subproject cost and demand risks are fully taken by the subproject
proponent, who i s bound through a concession contract, to supply service at a given quality and
price to all customers that are part of the subproject. This applies to both interconnected and
decentralized electricity systems.
Decentralized systems face the challenge o f either high investment costs (in the case o f
renewable energy systems such as mini-hydropower, wind-power, or hybrid renewable/diesel
systems, which however have O&M costs comparable to average tariff for grid-connected
electricity customers, or about US$O.lZ/kWh for residential customers in rural areas), or high
O&M costs (in the case o f diesel plants for which O&M costs are in the range o f US$0.300.35kWh) combined with usually low customer affordability for electricity services that, in
addition, are often o f lower quality than grid electricity.
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For the ICT sector, the financial analysis of the telecommunication services (e.g., to enhance
connectivity) in a particular territory w i l l provide the financial rate of return of a cash flow that
includes the operating and management costs, and the expected revenues (estimated demand
times tariff), and a provision for amortization of the (subsidized) investment cost as a manner to
ensure that the equipment i s replaced when it becomes obsolete.
Fiscal Impact and Sustainability
The total project costs amount to US$90 million, of which US$40 million w i l l be counterpart
funds, over a period of four years, that i s an average o f about US$22.5 million per year (and
US$lO million o f counterpart financing). This amount contrasts with the US$200 million that
the Government of Chile allocates annually to rural infrastructure services in the same four
infrastructure sectors. The project then requires less than 12% o f the combined resources
currently being allocated to rural infrastructure, a figure that provides comfort that counterpart
funding w i l l be available with a high level of certainty.
The Government of Chile has been recognized for i t s fiscal prudence and ability to achieve
budgetary and debt targets. The project costs and the loan have been factored in the Government
accounts during the four years o f implementation o f the project and, hence, their fiscal impact
has been neutralized as the resources have substituted rather than added to the budget resources.
During CY2004, about US$5 million have been allocated to activities s i m i l a r to those of the
project. This amount has been increased to more than US$30 million in the budget for CY2005
prepared b y the Ministry of Finance (and to currently being discussed at the Congress). This
figure compares favorably with the estimated annual needs for the (calendar) years of project
implementation: US$7.3, US$18.3, US35.2, and US$29.2 million for calendar years 2005 to
2008, respectively.
The size of the project is relatively small compared to overall budget allocations for
infrastructure investments and for those assigned to the SUBDERE’s FNDR (about US$325
million allocated in the 2005 draft budget). The project funds are not additional to the budget;
therefore, assurances w i l l be sought at appraisal and negotiations for budgeting the required
FNDR “provision” allocations to ensure the implementation schedule o f the project.
Nonetheless, the project investments w i l l require future allocations to cover the recurrent costs
involved in the O&M o f those investments. These recurrent costs applied to the road sector, as
for the other sectors the costs o f O&M are being covered by the tariffs charged to the consumers.
For the road sector, an estimate o f the costs of maintaining the rural roads amounted to an annual
costs of between US$1,200/km and US$1,700/km (depending on the number of kilometers per
member of the micro-enterprise) under a system that would involve the conformation and
contracting o f micro-enterprises with members living in the proximities of the roads to be
maintained. The Project w i l l provide the funds to established enhanced mechanisms for the
O&M of the infrastructure services, including technical assistance activities to community-based
initiatives (APR Committees or maintenance micro-enterprises) to strengthen their efficiency and
technical capacity to manage these services. In the case of roads, assurances were received from
the Directorate of Roads o f the MOPTT and o f MIDPLAN’s FOSIS to provide the financing for
these micro-enterprises, complementing similar type o f initiatives under FOSIS.
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Annex 10: Safeguard Policy Issues
CHILE: Chile Rural Infrastructure Services
Annex 10.A. Principles for the Application of Safeguard Policies
A key element o f project implementation consists of the participation o f the possible
beneficiaries in order to establish a virtuous relationship between their demands and public
interventions. T h i s is achieved through the application of the social evaluation and participatory
methodologies developed during project preparation. In this respect, the participation of the
population in the eligible territories w i l l be an integral part of the PMDT-elaboration process and
subproject implementation, regardless of the socio-economic, gender or ethnic characteristics of
that population.
The territories to be identified and selected under the project w i l l likely present diverse socioeconomic characteristics and in each case the PMDT w i l l reflect the particular heterogeneous
profile of the territory’s population, seeking the appropriate social inclusion and environmental
sustainability. Both the diagnostic, the technical design of subproject, and the estimation of
subproject impacts w i l l count with the participation, as pertinent, o f the public entities involved
with social and environmental issues (CONADI-MIDEPLAN, CONAMA, National Women
Service-or Servicio Nacional de l a Mujer-Council for National Monuments, etc.)
The current Chilean normative and legal framework include appropriate and exhaustive
consideration o f social and environmental issues, and w i l l be an integral part o f the actions to be
carried out under the project and the contracts to be executed for the implementation of
subprojects. The project however will not use country systems per se albeit i t w i l l use the
country’s institutional framework and capabilities while meeting all Bank standards and
requirements. The key Chilean entities involved in social and environmental matters (CONADI,
CONAMA) w i l l provide counterpart support to ensure the application of the normative and legal
framework and the carrying out o f capacity-strengthening actions at the national and regional
level, while ensuring the application o f Bank procedures and requirements.
Annex 10.B. Social Assessment Summary
SUBDERE commissioned the implementation o f a comprehensive social assessment as part o f
project preparation to generate information on socio-economic and cultural information that are
relevant to local infrastructure projects. The study also addressed Bank safeguard issues related
to indigenous people (OP 4.20), involuntary resettlement (OP 4.1 1) and cultural property (OPN
4.1 1). The extensive study results are included in the project files and the recommendations
have been integrated into the project design.
Safeguard issues. Since the rural areas in region IX and part o f region VIII where the project
w i l l be implemented has a good portion o f indigenous population, even though the bulk o f
beneficiaries are non-indigenous, the project has been designed with the provisions o f World
Bank Policy related to Indigenous Peoples (OD 4.20), and has prepared an Indigenous Peoples
Development Plan (IPDP). Although i t i s unlikely that the project w i l l engage in resettlement
79
activities, provisions have s t i l l been made in case any resettlement issue may arise. The
application of Bank policies on Cultural Property (OPN 4.1 1) and Involuntary Resettlement (OP
4.12) were reviewed in order to prepare guidelines for a possible resettlement plan. The
preparation of these plans also included a review of Bank policy compared to the Chilean
legislation. I t i s also worth noting that a comprehensive IPDP and RP was prepared as part of a
proposed Watershed Management Project and these documents also provided a good foundation
for the recommendations of this project.
Methodology for the Social Impact and Participatory Assessment (SIPA). T h i s was
conducted using beneficiary surveys and semi-structured interviews of key informants.
Secondary demographic and socio-economic information also contributed to build a detailed
characterization and changes that beneficiary communities included in the pilot areas of the
project have gone through in the last few years. The study carefully analyzed demographic and
socioeconomic conditions o f indigenous and no- indigenous populations, and also took into
account gender issues. Fieldwork was carried out in the VIII and I X regions, and included 4
municipalities and 4 representative communities (with a focus on selecting indigenous areas).
The results of these studies were also used to prepare the afore-mentioned IPDP.
The objective of socioeconomic impact analysis i s to assess the magnitude and distribution of
both direct and indirect effects. Past efforts at assessing the impact o f infrastructure projects have
typically been limited due to the lack of available demographic and economic baseline and
control data. The SIPA carried out as part o f project preparation i s aimed at providing useful
baseline data in diagnostic areas o f the target population, assess in a more systematic way
potential impacts and to identify potential risks.
Some key data on the project regions shows that they have the highest percentage of rural
population compared to other regions o f the country. The regions also include the largest
percentages of indigenous population. At national level the indigenous population registers low
rates at 5%, o f which 83% i s Mapuche, most o f whom live in the M and X regions recording 33
and 16, respectively. In terms o f age structure, about the 40% of the rural population ranks
between 30 and 64 years old while an average of 25% belong to the age group 0-14 years old and
about 20% to the age group 15-29.
Poverty. Despite Chile’s improvements in infrastructure, and especially in electricity, coverage
i s s t i l l limited in the rural dispersed and isolated populations, and even more so where indigenous
communities live. These communities have historically registered higher poverty rates. From
1992 to 2000, poverty rates in large dropped across the country moving from 38% to 21%. But,
s t i l l the 24% o f rural population lives under the poverty line. In the same years urban income
increased 89% while rural income only increased 36%. The project regions register higher
poverty rates running from 21% (VII, VIII Region) to 33% (X Region).
Ethnicity and Poverty. There i s a correlation between indigenous peoples and poverty since
indigent or --extremely poor-- indigenous population i s about 10% while non- indigenous i s only
5.4%. According to official data, in 2000, rural indigent indigenous peoples totaled about 14.7%
while only 7.5% of non-indigenous registered as indigent and 21.4% indigenous peoples were
classified as non-indigent rural poor in contrast to 14.7% non-indigenous rural poor (see
MIDEPLAN, 2000, Etnia y Pobreza en Chile). While 10% o f indigenous poor households
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depend on subsidies only 7% o f non-indigenous households do so. The SIPA fieldwork
confirmed that indigenous households have lower income and higher dependency on government
subsidies, and that there are a large percentage of indigenous peoples living under poverty line in
the project areas. However, the four municipalities studied are not homogeneous in the
indigenous population and poverty rates. Ercilla i s the most rural (64.2%) and gathers not only
the most of Mapuche population but also the indigenous rural Mapuche. In Los Alamos overall
13% of total population i s Mapuche, however in rural areas, this figures increases to 38%. The
entire community of Renaico registers the lowest Mapuche population, but at rural level it
gathers a high percentage of Mapuche people 42.8. Poverty data shows that there is, indeed, a
correlation between ethnicity and poverty since Ercilla and L o s Alamos show that almost 50% of
the population lives under poverty line (Tables 37 and 39 of SPA).
Access to infrastructure services in the five project regions: Table 10.1 shows the lag in
coverage o f electricity, potable water and sanitation at the national level between rural and urban
areas, and as well as the regional differences. The rural areas o f project regions in some cases
show coverage figures above the national rural average and also below. This i s a mainly a
reflection of a centralized and sectoral approach to planning, which does not address the
comprehensive development o f rural areas on a territorial basis.
Table 1. Coverage of Basic Services by Urban and Rural Areas in Project Execution Areas
Source: INE. Censo de Poblaci6n y Vivienda. 2002.
The SIPA provides a detailed analysis o f the four pilot areas o f the project in terms of poverty,
ethnicity and access to infrastructure. It also assessed beneficiary priorities for infrastructure
improvement and willingness to participate in the project and pay for services. Communities had
a high priority for improvements of their rural roads, and a higher willingness to pay for potable
water. However, the SPA also showed that not all communities’ members were willing to pay
for project benefits, beyond in-kind contributions, and so i t will be critically important to
implement detailed demand assessment and participatory analysis o f investment alternatives to
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ensure that any solution proposed meets local willingness and capacity to use and sustain the
services. Communities also expressed that there i s a lack o f coordination across sectors and
government interventions, many of which do not correspond to community priorities.
The SPA report recommends specific actions to work with Mapuches and other indigenous
peoples, which were discussed with top officials of the CONADI, SERPLAC and MOPTT".
There also included lessons from other programs and projects executed in these regions such as
Origenes financed b y IADB. Some o f the recommendations include the need to recognize the
traditional forms of organization and respect cultural expressions of the indigenous communities.
CONADI officials recommend working with indigenous traditional forms of organizations,
which could: (a) contribute to effectively manage investments and foster sustainability, (b)
ensure the adequate definition o f territories, when applicable, (c) fully take into account cultural
and language background of target indigenous population (and project staff working in Mapuche
communities have been trained in these aspects) and (d) set a clear system of indicators and
monitoring and evaluation system which allows for a mid-term review to identify and correct bad
practices, processes, impacts and or results. Project regional staff must be trained in monitoring
and evaluation skills for this purpose.
''
Ministry o f Public Works (Ministerio de Obras Publicas MOP")
civil works in Mapuche indigenous peoples communities.
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has prepared a Participatory Manual to build
Annex 10.C. Indigenous Peoples Plan
Before the initiation o f a PMDT in a territory with preponderance o f indigenous peoples, the
Regional Management Unit w i l l consult with the regional CONADI-MIDEPLAN offices to
identify and take into account the existing Indigenous Peoples Development Plans in that
territory, in order to articulate the PMDT and project interventions with the strategies and actions
already identified in those plans. In this manner, the project w i l l strengthen current plans in line
with Bank policies.
Responsibility: Design and execution o f the IPDP specific actions i s the responsibility o f
implementing institutions such as Regional Governments’ Operative Units and Technical
counterparts o f institutions such as MOPTT, specifically the Directorate o f Roads (DV), the
Directorate of Hydraulic Works (DOH) or the Deputy Secretariat for Telecommunications
(SUBTEL). CONADI plays a key technical role in all regions and territories where indigenous
peoples reside. Therefore, as part o f the current regional institutional framework and procedures,
C O N A D I w i l l be part of the elaboration of PMDTs and subprojects, contributing with i t s
knowledge and expertise in territories with preponderance o f indigenous peoples, as pertinent,
strengthening the consideration o f ethnic issues in all subprojects and in the evaluation and
monitoring systems.
According to the Chilean Indigenous Law 19.243 the institution in charge of indigenous peoples
development i s the National Corporation of Indigenous Peoples (CONADI). The C O N A D I i s a
decentralized autonomous entity of the MIDEPLAN, subject to the oversight o f the MIDEPLAN
and the Intendente and authorities at the regional level. The Article 39 of the Law establishes
that the CONADI i s the organization in charge o f promoting, coordinating and executing actions
oriented to foster an integral development of indigenous peoples mostly o n the economic, social
and cultural issues. I t also manages the land and water rights fund.
All implementing institutions w i l l take into consideration the diversity and existence o f ethnic
groups (such as Diaguitas and Collas) in the project’s eligible territories.
Some conclusions of the Social Assessment and Indigenous Peoples Plan are the following:
(a) All regions where the project w i l l be executed have indigenous peoples. However, the larger
percentage of indigenous peoples i s located in the B i o B i o and Araucania Regions. The
Mapuche predominate in these regions.
(b) In those regions with presence of indigenous peoples not recognized as “originarias”
communities, the project will consider the specific cultural characteristics through the social
assessment methodology (that w i l l be part o f the elaboration o f the PMDTs), including the
traditional forms of land tenure, production activities, and organizational representation
modalities.
(c) Most indigenous communities have local forms of community organization upon which they
rely to faithfully represent community interests, opinions, investment areas, definition of
territories and development concerns.
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(d) Most indigenous communities have a clear sense of ethnic identity and desire to maintain
their distinctive identity, and culture.
(e) Most rural indigenous communities are interested in improving their basic infrastructure, and
especially roads and potable water.
(f) Some indigenous communities still have deficits in access to health, education and basic
services, and exhibit illiterate rates that w i l l require specific and appropriate communication
strategies.
(g) Based upon the Chilean law, territories named Development Indigenous Areas (Area de
Desarrollo Indigena) can be constituted.
(h) Definition o f “territories” based upon “productive variables” might or not coincide with the
geographic definition and l i m i t s of ADIS. When defining project working territories or sub
territories, these ADIS cannot be divided.
(i)
Project-related indigenous communities-like other rural communities-are aware o f their
right to participate in governmental projects that affects them. In the context of the
elaboration o f the PMDTs, as i t w i l l be done with any other rural populations and in all the
eligible territories irrespective of their socio-economic characteristics, indigenous peoples
w i l l be informed and consulted regarding subprojects that affect them.
Based upon on the above, as part of the IPDP, SUBDERE must ensure that the following actions
are executed, in territories with preponderance o f ethnic groups and b y the relevant entities, for
the identification o f territories, the elaboration o f PMDTs, and the preparation of subprojects. All
activities related to the IPDP w i l l be financed with counterpart funds.
(a) The Regional governments w i l l include the participation of C O N A D I in the technical
working groups in charge of identifying and defining territories.
(b) Implementation Technical Units w i l l coordinate closely with C O N A D I when any of the
following actions need to be executed: (a) facilitation, as applicable depending o f the
requirements o f the subprojects, of the acquisition o f small parcel o f lands or possible
regularization of land titles for the implementation of infrastructure subprojects, (b)
regularization o f water rights, (d) definition o f timetable and procedures for land and water
regularization, (d) initiation and processing of land and water rights to ensure that
indigenous peoples w i l l benefit from subprojects, and (e) ascertaining that indigenous
territories that constitute a geographic unit are not divided to execute specific subprojects.
(c) Implementing institutions must design and execute the specific actions listed at the end o f
this Annex to ensure synergies between the PMDTs in those areas with preponderance o f
indigenous peoples and existing indigenous peoples development plans in the territories,
including specific institutional arrangements and detailed costs for each subproject to be
developed in indigenous territories (ADIS), in indigenous territories not organized as A D I S
and/or, in general, in areas where indigenous peoples reside.
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(d) Implementing institutions have an understanding that participatory process must follow a
demand-based approach (see Annex 10.E). The indigenous communities w i l l be taken into
account in the design, and execution of subprojects including technical options, cost sharing
and willingness to work in micro enterprises and maintenance. Indigenous people as key
beneficiaries must be taken as well into account in participatory monitoring and evaluation
of subprojects.
(e) Implementing institutions have a full understanding that religious sites and cultural property
must be respected.
(f) Implementing institutions and/or consultants hired b y these institutions w i l l take into
account the indigenous peoples characteristics-as identified in the social assessment to be
carried out as part of the process of elaboration o f the PMDTs-in all steps of the subproject
cycle including definition o f territory, subproject’s design (technical options), execution, and
evaluation, seeking their participation.
(8) Implementing institutions and/or consultants hired by these institutions must ensure that all
personnel possess the needed communication and cultural skills for carrying out the PMDTS
and subprojects on a culturally appropriated methodology.
(h) Indigenous social forms of organization and leaders in each relevant territory w i l l be taken
into account in the design and implementation o f subprojects.
In addition to the actions specified in the definition of territories, definition of their respective
plans and identification and implementation o f subprojects the actions listed below w i l l be taken
in project implementation. The budget costs indicated after each action w i l l be financed under
the project, and represent preliminary estimations to be defined with precision b y the SUBDERE
upon the definition of the respective terms o f reference.
SUBDERE w i l l carry out a consultation process to ensure that all implementing institutions
and coordinating agencies such as C O N A D I are properly informed and are aware o f project
scope, objectives and components. This activity i s part o f Component 3 and would be carried
out during the first six months of project execution. Budget: US$ 15.000. Responsible:
SUBDERE
In the context o f the elaboration and validation of PMDTs, the Regional Management Units,
with guidance from the SUBDERE, will develop and implement dissemination campaigns, as
part of the pertinent participatory processes, to seek and obtain the views of indigenous
peoples. These campaigns w i l l take into account illiteracy levels, ethnic and cultural issues,
and a variety o f communication means. This activity i s part of Component 3 and would be
developed during the first six months o f project execution. Budget: US$ 25.000.
Responsible: SUBDERE.
Training workshops and seminars to strengthen the skills and capacities of project regional
managers to take into account social, cultural and ethnic issues in the elaboration o f
Territorial Development Framework Plans (PMDTs). This activity i s part o f Component 3
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and would take place during the first two months of execution in each o f the regions where
the Project would be executed. Budget: US$35.000. Responsible: SUBDERE.
For those territories with presence of indigenous peoples, complementing the social
assessment that i s part of the process o f elaboration of PMDTs, preparation of a specific file
o f a representative sample of beneficiaries’ households specifying ethnic group and gender of
household head. T h i s file must include basic information such as number of members, age
and gender, economic activity, identification of subproject(s), implementing institution(s),
predisposition to cooperate in kind, financially or as labor force, predisposition to participate
in a micro enterprise or committee in charge of maintenance o f civil works built b y
subprojects. T h i s activity i s part o f Component 3 and would be developed as the PMDTs are
elaborated. Budget: US$35.000. Responsible: Regional Management Units.
0
0
Training workshops and seminars to strengthen the understanding of implementing
institutions about the participatory approach, including the social, cultural and ethnic issues
needed to design and execute culturally appropriate subprojects. This activity is part of the
Component 3 and would be carried out during the two years of project execution. Budget:
US$40.000. Responsible: SUBDERE (in coordination with implementation technical units).
Set in place a Monitoring and Evaluation system that w i l l process beneficiaries’ information
collected in the files. The objective i s to measure the social impact of subprojects at mid-term
and project conclusion. Budget: US$ 50.000. Responsible: Regional Management Units
(under the supervision of SUBDERE).
Participatory Monitoring and Evaluation system aimed at evaluating process, impacts and
results of : (a) explanation o f procedures, (b) accomplishments of procedures and rules, (c)
quality of subprojects, (d) quality of training, (e) participation process o f institutional and
population actors. This activity i s part of Component 3 and would be executed all over the
four years of Project execution period. Budget: US$ 50.000. Responsible: Units of Regional
Implementations (under the supervision o f SUBDERE).
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Annex 10.D. Resettlement Policy Framework
Resettlement Policy (RP) Framework. Every reasonable effort i s to be made to avoid or
minimize the need for land acquisition, and to minimize all resettlement-related adverse impacts.
When voluntary donations of land or assignment of rights take place the procedures of this
Annex w i l l not apply. When resettlement and/or displacement are unavoidable a resettlement
plan must be approved by the World Bank. The implementation o f the RP w i l l meet the
requirements of the Chilean Indigenous Peoples Law 19.253 , the Expropriation Decree Law
2186, Dictate 2755 for resettlement, and the Environment Law 19.300. Local needs, investment
and technical preferences must be identified through direct consultation and participatory
approach. I t must also meet World Bank safeguards such O P B P 4.12 and Environmental
Assessment OPBP/GP 4.0 1 and Cultural Property OPN 11.03 revised as OP 4.10.
All resettlements plans have to be presented to the World Bank for its review and approval prior
to the execution o f subprojects. All resettlements plans must include: (a) interinstitutional
agreements as needed for expropriation, compensation, rights-of-way, (b) detailed activities and
schedule, and (c) detailed costs and financing source.
The procedures, actions and guidelines contained in this Annex w i l l be applied in all cases when
resettlement impacts affecting indigenous peoples are generated b y project interventions. The
objective of the Resettlement Policy Framework (RPF) i s to ensure that all persons subjected to
adverse impacts ("displaced persons" as defined below) are compensated-if displaced-at
replacement cost for lost assets and otherwise provided with any rehabilitation measures or other
forms of assistance necessary to provide them with sufficient opportunity to improve, or at least
restore, their incomes and living standards.
Responsibility: The execution of Resettlement Plans prepared as per the RPF i s the
responsibility o f Regional Governments' Operative Units and Implementation Technical Units
such as those o f the M O R T or the National Energy Commission under the Ministry o f
Economy. As CONADI plays a key technical role in all regions and territories where indigenous
peoples reside, as part o f the current regional institutional framework and procedures, the
CONADI w i l l support the steps and procedures involved in the application of the RPF.
Definition of Terms:
0
0
Resettlement Policy Framework (RPF'). The RPF i s a framework with budget setting out
resettlement strategy, objectives, entitlement, actions, responsibilities, monitoring, and
evaluation.
Project Affected Person (PAP) indicates any juridical person being as i t may an individual,
a household, a firm or a private or public who, on account of the execution of the Project, or
any of i t s components or sub-projects or parts thereof would have there: Right, tide or
interest in any house, land (including residential, agricultural and grazing land) or any other
fixed or moveable asset acquired or possessed, in full or in part, permanently or temporarily;
or Business, occupation, work, place of residence or habitat adversely affected; or Standard
of living adversely affected.
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Severely Affected Person for this Project is defined as a person who w i l l (a) lose 20 percent
or more o f total agriculture/aquaculture land holding, and/or (b) relocate and/or loses more
than 50 percent o f their main residential and/or commercial structure, and/or (c) lose US$200
or more o f total income sources due to the Project.
Land Acquisition means the process whereby a person i s compelled b y a public agency to
alienate all or part of the land shehe owns or possesses, to the ownership and possession of
that agency, for public purpose in return for fair compensation.
Replacement Cost means the cost of replacing lost assets and incomes, including cost of
transactions. If land, it means the cost of buying a replacement land near the lost land with
equal productive potential and i t or better legal status, including transaction costs. If
structures, the replacement cost i s the current fair market price of building materials and
required labor cost without depreciation or deductions for salvaged building material or other
transaction cost. Market prices w i l l be used for crops, trees and other commodities.
Resettlement Plan, full or abbreviated, as explained later in pages 84 and 85.
Resettlement Effects mean all negative situations directly caused b y the subprojects,
including loss o f land, property, income generation opportunity, and cultural assets.
Relocation means the physical relocation o f a PAP from herhis pre-Project place of
residence.
Rehabilitation means the process to restore income earning capacity, production levels and
living standards in a longer term.
Compensation means payment in cash or in kind to replace losses o f land, housing, income
and other assets caused by a project.
Framework Principles:
Acquisition of land and other assets, and resettlement o f people w i l l be minimized as much
as possible by identifying possible alternative subprojects’ designs, and appropriate social,
economic, operational and engineering solutions.
The populations affected by the Project are defined as those who may stand to lose, as a
consequence o f the implementation o f subprojects, all or part o f physical and non physical
assets, including homes, homesteads, productive lands, commercial properties, tenancy,
income earning opportunities, social and cultural activities and relationships, and other losses
that may be identified during the process o f resettled planning.
All PAPSwho will be identified in the project impacted areas as o f the date o f the updated
census and inventory o f losses, w i l l be entitled to be compensated for their lost assets,
incomes and businesses at full replacement cost and provided with rehabilitation measures
sufficient to assist them to improve or at least maintain their pre- subproject living standards,
income earning capacity and production levels.
88
Resettlement would be minimized in indigenous people’s territories (ADIS). If necessary
action i s needed to be taken, for instance, o f longitudinal trenches of land or for the
installation o f minor equipment or works, and rights of way, etc i t would precede only if
there i s a consensual signed agreement with the community in question.
Implementing institutions have a fully understanding that religious sites and cultural property
must be respected.
All affected populations w i l l be equally eligible for compensation and rehabilitation
assistance, irrespective o f tenure status, social or economic standing, and any such factors
that may discriminate against achieving the objectives outlined above.
The rehabilitation measures to be provided are: (i)
cash compensation for houses and other
structures at replacement cost of materials and labor without deduction for depreciation or
salvageable materials; (ii)
replace agricultural land for land of equal productive capacity
acceptable to the PAP; full title to replacement residential and commercial land of equal size
acceptable to the PAP; or, at the informed decision of the PAP, cash for replacement land at
replacement cost at current market value; (iv) cash compensation for crops and trees at
current market value; and (v) relocation allowances and rehabilitation assistance.
There w i l l be no deduction in payments for salvage value, depreciation, taxes, stamp duty,
fees, or any other payments
Sufficient time w i l l be allowed for replacement structures to be built before construction
begins
Temporarily affected land and communal infrastructure w i l l be restored to pre-project
conditions.
Existing cultural, archeological sites and religious practices shall be respected and, to the
maximum extent practical, preserved.
Adequate budgetary support will be fully committed and be made available to cover the costs
o f land acquisition and resettlement and rehabilitation within the agreed implementation
period.
Special measures shall be incorporated in the RAP and complementary mitigation and
enhancement activities to protect socially and economically vulnerable groups such as,
women-headed families, children and elderly people without support structures and people
living in extreme poverty.
Executing institution of specific subproject has the responsibility to ensure that grievance
procedures shall be established and in place and PAPs informed o f them before any
resettlement activities begin.
Details of the RAP shall be distributed to the PAPs and placed in territories’ offices for the
reference of affected people as well any interested groups.
89
Appropriate reporting, monitoring and evaluation mechanisms w i l l be identified and set in
place as part of the resettlement management system and an independent monitor hired
before commencement o f any resettlement activities.
Each implementing institution w i l l carry out, or cause to be carried out, a census survey to
identify and enumerate the persons to be displaced by a subproject, if that i s the case, and a
socioeconomic survey to determine the range and scope of adverse impacts in the affected area
as a consequence o f that displacement. The census survey must cover 100% o f the persons to be
displaced; the socioeconomic survey may be undertaken on a sample basis. The surveys that may
be undertaken separately or simultaneously would determine whether a full RP or an
"abbreviated" Rp i s necessary. When the number of persons affected exceeds 200 a full RP i s
necessary. Otherwise an abbreviated RP may be prepared where impacts on the entire affected
population are minor or fewer than 200 people, or that affected people are not physically
displaced andlor less than 10%o f their productive assets are lost.
Full Resettlement Plan (FRP). A FRP must be prepared based on accurate baseline census and
socioeconomic survey information, and must establishes appropriate mitigation measures (e.g.compensation for assets, transitional assistance, economic rehabilitation assistance) for all
categories of adverse impacts. A Full andor abbreviated RP must be reviewed and accepted b y
the Bank prior approval of subprojects.
FRP must address, at least, the following issues: (a) description o f the activity causing land
acquisition; (b) range and scope of potential adverse impacts; (c) socioeconomic survey and
baseline census survey information; (d) specific compensation rates (or alternative measures) for
all categories of affected assets; (e) other measures, if any, necessary to provide opportunities for
economic rehabilitation o f displaced persons; (f) eligibility criteria for compensation and all
other forms o f assistance; (g) relocation arrangements, if necessary, including transitional
support; (h) selection and preparation of sites, if necessary; (i)
restoration or replacement of
community infrastructure and services; (j)organizational arrangements for implementation; (k)
consultation and disclosure arrangements; (1) resettlement implementation schedule; (m) costs
and budget; (n) monitoring arrangements; and ( 0 ) grievance procedures.
An abbreviated RP also must be based on policy objectives, planning and implementation
arrangements established in this RPF. An abbreviated RP must include, at least, the following
issues:
a. A census survey o f displaced persons and valuation o f assets;
b. Description of compensation and other resettlement assistance to be provided;
c. Eligibility criteria;
d. Consultation and disclosure arrangements;
e. Organizational arrangements for implementation
f. Timetable and budget;
90
g. Monitoring arrangements;
h. Grievance procedures; and
i. Arrangements for monitoring and implementation.
Eligibility Criteria: In General terms, among eligible people are:
Persons with documented property rights;
Persons with rights recognized in law, but not formally documented (e.g. no
registered deed). T h i s applies, for example, to heirs o f a piece of land which
has not been probated.
Persons with no legally recognized rights, but who are the bona fide
occupants of a piece of land or a home such as for example, the squatters. The recognition of
squatter’s rights would depend more on the Chilean Law than on World Bank policy
framework
Resettlement w i l l be avoided in indigenous peoples’ territories. If i t i s unavoidable i t i s an
indispensable requirement that the indigenous community authority, selected b y the
indigenous community in question, signs an agreement with the community allowing such an
action. Such signed agreement must be submitted to the respective implementation technical
unit, which w i l l in turn submit the agreement to the SUBDERE along with the resettlement
plan (including the above-mentioned requirements for any resettlement plan).
Expropriation o f narrow longitudinal trenches o f land to widen rural roads, to place electrical
poles or water tanks w i l l be agreed between indigenous peoples and local implementing
technical units with the purpose of taking account the indigenous peoples needs and cultural
traditions. If this expropriation i s unavoidable, the indigenous community authority must sign
an agreement with the relevant Implementation Technical Unit allowing such action. Such
signed agreement must be submitted to SUBDERE prior to the beginning of the subproject
interventions.
More specifically, the following people are also eligible:
1.- Agricultural Land Lost. Displaced persons losing agricultural land will be entitled to the
following types o f compensation and rehabilitation measures:
a) Typically, collectively-owned cultivated land remaining after acquisition w i l l be reallocated
among all members of the community. This would apply more to indigenous peoples land
named as ADIS, according to Chilean Indigenous Peoples Law. Under these circumstances,
all displaced persons are eligible for a share of reallocated land, and to benefit from
collective investment of land compensation.
b) In situations where land reallocation i s not possible, the displaced persons who actually are to
lose their share of collectively owned agricultural land must be identified. In some instances,
they may be provided with employment with wages at least equivalent to income lost. In
91
other cases they may be paid a resettlement subsidy normally equivalent to at least 6 times
the average annual production output value of the land in the previous three years. If this i s
not sufficient to restore livelihoods, the subsidy may be raised to as much as 14 times the
average annual output value;
c) I f land compensation and resettlement subsidies paid are s t i l l insufficient, the resettlement
subsidies may be further increased upon approval by the government;
d) Land compensation and resettlement subsidies are paid to PAP, whose land i s affected and
w i l l be used for (i)increasing land areas under cultivation if land i s available, (ii)
intensification of agriculture through provision of irrigation, improved agricultural practices
and, (iii)
development o f non-agriculture based income generation activities. Individual
displaced persons w i l l be compensated at replacement cost for the loss o f standing crops,
fruit or industrial trees, as well as any fixed assets:
e) Displaced persons whose land i s temporarily taken to facilitate construction will be
compensated for their loss o f income, standing crops and for the cost of soil restoration and
damaged infrastructures.
2.- Auxiliary Structures Lost. Displaced persons losing house and auxiliary structures w i l l be
entitled to the following compensation and rehabilitation measures: a) Provision of replacement
housing of equivalent value; or b) Compensation at full replacement cost; and c) Compensation
for replacement or restoration o f all facilities and services (e.g., electricity, telephone, cable
television, school enrollment fees), d) Transitional allowances as necessary to move all
belongings, or to obtain temporary housing if necessary; and e) Special measures or preferences
as necessary to enable poor or vulnerable households to obtain replacement housing that meets
minimum community standards. If partial acquisition would render a house or structure unsafe
or no longer functional, i t should be acquired in i t s entirety.
3.- Business Income Lost. A displaced person losing business income (or employment income)
w i l l be entitled to the following rehabilitation measures:
the provision of alternative
Mitigation measures for loss of business typically include: (i)
business site of equal size and accessibility to customers: or (ii)
cash compensation to the
owner for lost business structure reflecting full replacement cost of the structure and all
fixtures: and (iii)
transitional payment for all moving-related expenses and for loss o f sales or
income during the period in which the business cannot operate.
Mitigation measures for permanent loss o f employment typically include: (i)
provision of
alternative employment at equivalent wages, or (ii)
cash settlement equivalent to at least
three years of lost wages; and (iii)
transitional payment for re-training, relocation or other
measures necessary for obtaining new employment. Persons temporarily losing employment
because o f project disruption receive transitional wage support until employment i s resumed.
92
4.- Maintenance Costs. Costs of ongoing maintenance are expected to be small, consisting of
possible damage to business, crops and ground while improvements are built.
Compensation and Administration Costs. On the basis of an overall estimate of the case when
most interventions w i l l trigger the application of the RPF, the compensation costs for the Project
have been estimated at US$ 12,021,085, including a 20 percent of contingency.
Table 1. Summary of Compensation Cost Estimate in US $
Implementation Schedule. The implementation o f the resettlement framework and specific
resettlement plans, compensation actions social and environmental requirements shall be part of
the overall implementation of the project. The process for implementation o f resettlement and
compensation activities includes the following steps:
93
Table 2. Budget of Main Resettlement Activities (US$) and Time Frame
Activity
Formation of a RPF committee
Appointment of staff in PUC that would review RP
Develop training plan for capacity development in the Project
executing institution and implementing institutions.
Formation of a Grievance Committee for the project which
must include representationfrom affected communities
Confirmation of project effects based on the detailed
engineering survey, design and construction plan to be carried
out.
Carry out final survey and prepare revised inventory of PAPs
based on the detailed engineering survey, design and
construction plan.
Declaration of Cut-off-Date for inventory of PAPs. After this
time no further people will be accepted onto the l i s t of PAPs
unless they can demonstrate that they were inadvertently
missed in the surveys and are genuine.
Carry out further community consultation in con-junctionwith
the preparationof the revised inventory of PAPS:
Revise and finalize the Resettlement Plan
Formal process for acquisition of land.
Time Frame
3 months after project initiatedexecution
6 months after initiated Droiect execution
2 weeks after staff, consultants and
contractors have been amointed.
4 weeks after staff, consultants and
contractors have been amointed.
7 weeks after staff, consultants and
contractors have been appointed*.
I
I
13 weeks after staff, consultants and
contractors have been appointed
2 months after final survey and prepare,d
inventory of PAP’Shas been finalized.
2 months after Cut-off-Date of inventory
of PAP’Shas been finalized.
1 week after Cut-off-Date of inventory of
PAP’S has been finalized
2 weeks after finalized the Resettlement
I
Compulsory Acquisition Process:
0
0
0
T h i s process can commence from 90 days after communication to acquire land or relocate
houses or other property has been released.
Issue a formal Notice of Acquisition that land i s to be compulsorily acquired or houses or
other property relocated. This will include the Offer o f Compensation, which will be
determined in consultation with the SUBDERE to ensure the compensation package i s
sufficient to enable the PAPs to regain their pre-project living standard in accordance with
World Bank requirements. This will be communicated to PAPs in person and in writing.
PAPs may appeal against the offer o f compensation, within 30 days. If there is an appeal,
then negotiation shall be carried out, w i t h SUBDERE as observer. If compensation value
cannot be agreed by negotiation then an independent mediator shall be appointed to make a
determination.
Monitoring and Evaluation. The contracted I M O will establish contact with local authority in
each Territory for external monitoring of RAP implementation. K e y stakeholders, represented by
PAPs, and vulnerable groups as members o f the contracted LMO, will be involved in the process.
Both internal and external monitoring will be important for providing feedback o f monitoring
findings to management to take necessary action.
94
Internal Monitoring. The objective of the internal monitoring and supervision i s to (i)
verify
that the valuation of assets lost or damaged, and the provision of compensation, resettlement and
other rehabilitation entitlements, has been carried out in accordance with the provisions of the
oversee that the RAP is
resettlement policies o f Chile and World Bank and the RAP; (ii)
verify that funds for implementation o f the
implemented as designed and approved; and (iii)
RAP are provided b y the Project authorities in a timely manner and in amounts sufficient for
their purposes, and that such funds are used in accordance with the provisions of the RAP.
Monitoring Indicators. The main indicators that w i l l be monitored regularly are:
The PAPs entitlements are in accordance with the approved policy and that the assessment
o f compensation i s carried out in accordance with agreed procedures.
Payment o f compensation to the PAPs in the various categories according to the level of
compensation described in the RAP.
Public information and public consultation and grievance procedures are followed as
described in the RAP
Relocation and payment of subsistence and shifting allowances are made in timely manner
Restoration of public facilities and infrastructure affected by the Project
Job creation, as feasible (number of persons who need job provision and number who have
found job)
Linkage of satisfactory completion o f compensation and resettlement and clearance o f all
encumbrances and commencement o f civil works.
All monitoring data shall be disaggregated by gender and indigenous peoples’ group.
External Monitoring and Evaluation. An Independent Monitoring Organization (IMO) shall
be appointed to monitor the resettlement and compensation process and implementation o f social
and environmental requirements to verify that compensation, resettlement and rehabilitation have
been implemented in accordance with the agreed RAP. The IMO will be under the budget of the
RAP. SUBDERE w i l l hire the M O to whom i t w i l l directly report.
Post Implementation Evaluation Study. Six months to one year after the end of resettlement
activities, the IMO shall conduct an evaluation study of severely affected PAPs (house relocation
and substation land) and the vulnerable groups among the affected population to determine
whether or not the objectives of the RAP in terms o f restoration o f incomes and living standards
have been achieved. The survey data thus collected w i l l be compared with the baseline survey
information that has been collected during the preparation of the RAP. All data for the evaluation
study w i l l be disaggregatedb y gender and indigenous peoples.
95
Monitoring and Evaluation Reports. The outputs of the RAP monitoring will include: a brief
methodological Report submitted to SUBDERE and World Bank within one month of beginning
the assignment, a second Monitoring Reports submitted to the SUBDERE and World Bank
within 2 weeks of the monitoring period and a Final report 6 months of RAP execution.
96
Annex 10. E. Environmental Assessment Summary
Most o f the proposed subprojects do not entail potential adverse impacts on the environment.
Most o f the impacts w i l l be localized and associated with minor construction issues and
concerns. However, the siting of some the subprojects w i l l entail careful considerations in order
to avoid unnecessary environmental damages specially in areas of high environmental
sensitivity.
Legal Framework. Chilean Environmental Law allows for two different types of environmental
assessments, according to the potential magnitude and importance o f the potential environmental
impacts. A full Environmental Impact Study i s required for projects which pose potential adverse
impacts on health, natural resources, entail major resettlement o f population, are located near
protected areas or have a high potential of affecting the scenic value of an area or could
potentially alter areas of high cultural or historical value. Projects that do not pose potentially
adverse impacts as those mentioned above are subject to more limited Environmental Impact
statements.
In addition to the EA legislation, subprojects w i l l have to comply with specific environmental
and natural resources legislation according to i t s particular setting. T h i s legislation and the
criteria required for ensuring the appropriate consideration o f environmental impacts w i l l be part
of the elements of analysis in the elaboration o f the Territorial Development Framework Plans
(PMDTs). In Chile there are specific norms for:
0
cutting trees in or near forested areas
construction activities in or near wetlands
activities which imply impacts on local fauna
0
land use plans imply additional restrictions on subproject location
0
water rights must be available for all water supply systems
0
wastewater treatment plants entail additional health permits
0
projects near cultural property sites w i l l follow specific legislations
In addition, construction activities of all subprojects w i l l necessitate permits for burrow pits,
quarries and extraction o f river materials.
97
Environmental Assessment Framework. An Environmental Assessment Framework (available
in project files) was prepared for the project that complies with relevant Bank safeguards.
Bank Safeguards. The safeguards that are potentially triggered b y the project are:
Environmental Assessment: yes; environmental assessments w i l l be carried out as needed
according to Chilean Laws and concordant with Bank policies. Subprojects that are
categorized as A according to World Bank policies and regulations w i l l not be eligible.
Natural Habitats: no; subprojects w i l l not be allowed inside critical natural habitats
Resettlement: yes; although expected to be minimal according to the project magnitude of
subprojects, an abbreviated resettlement framework w i l l be applied.
Indigenous peoples: yes; the expected impacts are all positive, however, special consultation
and participation processes w i l l be applied in areas with indigenous population
Physical Cultural property: yes; chance finding procedures w i l l be applied to all construction
activities.
Project Typology. Subprojects to be financed under the program were grouped in 5 sub-sectors.
Typical activities potentially included in each sub-sector are presented in the following Table.
Sanitation
Electrification
Telecommunications
~
Rehabilitation of rural roads
Rehabilitation o f bridges
Periodic maintenance of rural roads
On-site water supply improvements
Water intakes
Storage tanks
Water Treatment plants
Distribution networks and house connections
Expansion of water systems
On-site sanitation solutions
Expansion of sewerage networks
Wastewater treatment (individual or collective systems)
Network Expansion
Public lightning
Photovoltaic systems
Wind generators
Micro and mini hydros
Biomass systems
Geothermal generators
Rural telephone systems
Rural cellular phone systems
Radio Communications
Access to digital systems
98
Environmental Screening. A screening methodology based on checklists for each project
typology was defined for the project. These checklists include environmental and social issues.
Based on the preliminary screening, subprojects are assigned an environmental Category
following OP 4.01 (A, ByC) and a decision as to what type of environmental work i s required i s
made. The following table presents the required environmental work for the different categories:
r
Category
A
B
Eligible
C
Eligible
1s an EA required?
1)ecisiodtype of EA
Project i s not eligible
Yes
------------EL4
Environmental Guidelines for Design and Construction
EIS
Environmental Guidelines for Design and Construction
Environmental Guidelines for design and Construction
Yes
No
Environmental capacity building. T o strengthen the capacity o f the Project implementation
units (at the national and regional levels), within the regional offices o f the CONAMA
(COREMAS), and of the contractors, communities and/or micro-enterprises responsible for the
implementation and operation of the infrastructure services, a capacity building plan was
developed and agreed upon at appraisal. This plan envisions training activities in each territory
as part o f the implementation of the PMDTs to enhance the environmental awareness of
communities, staff of implementation technical units, and entities (e.g., committees, microenterprises, local contractors, or regional offices o f the CONAMA) on the environmental
guidelines under the project. The cost o f the program has been estimated at US$150,000.
Project resources have been allocated for the implementation o f this program.
Guidelines related to environmental requirements with due consideration to Chilean regulations
w i l l be included in the Project Operational Manual. The CONAMA will support the SUBDERE
in strengthening the environmental guidelines under an agreement that also includes assistance in
the implementation of the capacity-building program.
99
Annex 1O.E. Participatory Strategy
Objectives: The main objective of the participatory strategy i s to execute the project following
an innovative “Top-Down and Bottom-Up Strategy” through which all political and technical
decisions are made with the articulation of regional political and technical authorities with the
participation o f communities and benefited people all over the Project and Subproject cycles. B y
using a participatory the Government of Chile and the World Bank seek to empower indigenous
and non indigenous communities headed b y both genders, improve their economic and social
conditions, and improve the decision-making process o f regional authorities. The strategy seeks
to strengthen the l i n k s between government and civil society and between the public and private
sector.
Actors. The Top-Bottom and Bottom-Up Participatory Strategy i s an inclusive approach that
seeks to involve all government, public, private and community-based organizations to build
innovative decision-making, implementing and evaluating processes.
The participatory strategy has been tested during the pilot phase. One of the main lessons learned
i s that articulation and coordination of social actors differ across regions. Regional governments
have different ways to build social l i n k s between civil society and public institutions.
Community organizations have different forms o f self governance, particularly the indigenous
peoples’ communities. The degree and level of commitment o f the population, ownership and
identity varies across municipalities and counties, even among indigenous communities. Another
key lesson i s that some regions such as the Region of B i o B i o have already pre-identified and
pre-defined the development territories. The other Regions where the project would be executed
have not pre-identified or pre-defined the development and/or investment territories. Both cases
offer different challenges to the project. In the first case, the project has to adjust i t s participatory
strategy to the existing territories and work with them. While in the second case, the challenge
for the project i s to begin building consensus within regional authorities and establishing the
operational spaces to identify and define territories and insert project’s objectives within the
working agenda of regional authorities. In both situations, the project faces the challenge of
establishing key linkages and alliances between public and private actors with civil society actors
(or benefited population). These alliances must reach a Social Pact that reflects the common
interest for improving basic rural infrastructure while fostering production-under the new
definition o f territory following a highly participatory decision-making and executing modality.
Up to now, the participatory strategy has included the following stages and activities, which w i l l
continue to be reviewed, monitored and evaluated along project execution to include necessary
modifications and changes to adapt the strategy to the continue new challenges:
I.
Consensus Building Strategy.
1) Dissemination o f the project among regional and local authorities to make public:
(a) Project objectives, scope, geographical coverage, components.
(b) Top-Bottom and Bottom-Up Participatory Strategy.
100
(c) Cost sharing strategy.
(d) Promotion o f micro-enterprises.
(e) Participatory Monitoring and Evaluation Strategy.
2) Participation and/or establishment o f political and technical working groups within a
negotiation space that gathers public institutions: private sector and civil society.
3) Dissemination of project objectives among potentially beneficiary communities.
II.
Identification
and/or definition of Territories and Sub-territories.
1) Establish the criteria to define territories and sub-territories and select the territories and subterritories in which the project w i l l be executed.
2) Validate with regional authorities the selected territories and sub-territories in which the
project w i l l be executed. The political and technical working groups are the key social actors
consulted to validate the selected territories.
111.- Community Consensus Building
1) Disseminate project among potential beneficiaries to make public
(a) Project objectives, scope, geographical coverage, components.
(b) Top-Bottom and Bottom-Up Participatory Strategy.
(c) Cost sharing strategy.
(d) Promotion of micro-enterprises.
(e) Participatory Monitoring and Evaluation Strategy
2) Present and discuss criteria used to identify and select territories and sub-territories with the
communities.
3) Present and discuss selected territories and sub-territories with the communities.
4) Bring to top decision-making institutions (regional governments, political and technical
tables) the recommendations and suggestions made b y the communities.
IV.- Top-Bottom and Bottom-Up Decision-Making Process.
1) Conciliate both decision-making processes and reach an agreement in terms o f definition and
identification of territories and sub territories.
2) Reach a consensual development strategy.
101
V. - Government and Implementing Institutions Capacity Building Process
1) Train regional governments in top-bottom and bottom-up participatory and decision-making
strategy.
2) Organize workshops to train political and technical working groups in the meaning and
importance of top-bottom and bottom-up participatory and decision-making strategy.
VI.- Government and Implementing Institutions Capacity Building on Indigenous Peoples
and Resettlement Plans
1) Organize a workshop with all implementing agencies and the CONADI to discuss ways to
work in indigenous territories and to expedite sub-project execution in critical cases when
land and water regulation i s needed and in cases when the taking o f narrow longitudinal
parcels of land along existing roads i s needed to improve road conditions.
2) Train regional governments and implementing institutions in the minimum requirements
needed to design, execute and monitor Indigenous Peoples Development and Resettlements
Plans when needed.
3) Disseminate the Chilean legislation and World Bank Operational Directives and Policies.
4) Disseminate the respective Annexes of Indigenous Peoples Plan and Resettlement
Framework included in this Project Document (PAD) among implementing agencies.
5) Discuss with implementing agencies
VI1.- Territorial Development Framework Plan (Plan Marco de Desarrollo Territorial).
1) Revise and evaluate public and private investment portfolio in basic infrastructure
(electricity, roads, connectivity, water, sanitation, sewerage, and telecommunications).
2) Revise and evaluate the public and private investment portfolio in production.
3) Compare both investment portfolios to determine the infrastructure deficit and link
infrastructure needs with economic activities to boost participatory and inclusive regional
development.
4) Based on the analysis o f both portfolios define a strategic Territorial Development
Framework Plan. This plan must include at least the following:
a. Definition of territories and sub-territories.
b. Population benefited, specifying indigenous and non-indigenous communities.
c. Demographic and socio economic characteristics o f target population.
1.
Households b y gender.
102
..
11.
...
Households by ethnic groups-if
111.
Age structure.
iv.
Education levels.
applicable--.
d. Main economic activities.
e. Inventory of basic infrastructure and basic infrastructure deficit
f. Environmental assessment.
g* Peoples’ willingness to cost share in kind, in work or both.
h. People’s willingness to participate in training to form micro enterprises to maintain
works.
VII1.- Communities’ Capacity Building Strategy
1) Provide managerial training to existing community organizations or new organizations
established for the purpose on administering or managing infrastructure services.
2) Provide technical support on how to maintain infrastructure services.
IX.- Participatory Evaluation and Monitoring Process
103
Annex 11: Project Preparation and Supervision
CHILE: Chile Rural Infrastructure Services
Key institutions responsible for preparation of the project:
The SUBDERE was the key institution in charge of preparing the project and implementing the
related PHRD Grant (JPN 52919). The SUBDERE coordinated i t s activities with other key
Chilean institutions, chiefly among them: MOPTT, Ministry of Finance, MIDEPLAN, Emprende
Chile, Ministry of Agriculture, and the Regional Governments of the Regions of Coquimbo,
Made, B i o Bio, Araucania, y 10s Lagos.
Bank staff and consultants who worked on the project included:
104
Bank funds expended to date on project preparation:
1. Bank resources: US$23 1,895
2. Trust funds: US$698,000 (PHRD Grant JPN 52919)
3. Total: US$926,895
Estimated Approval and Supervision costs:
1. Remaining costs to approval: US$35,000
2. Estimated annual supervision cost: US$90,000
105
Annex 12: Documents in the Project File
CHILE: Chile Rural Infrastructure Services
In addition to the ESW (Report 29037-CL), the following background papers are on file1*:
e
“Pobreza e Infraestructura Rural en Chile” by Mauricio de L a Barra and ESW team
e
‘‘Andisis de 10s Sewicios de Infraestructura Rural: Regidn del Maule ” by Universidad
de Talca
e
“Infraestructura Rural IX Regidn de la Araucania” b y Instituto de Desarrollo Local y
Regional - Universidad de l a Frontera (DER-UFRO)
e
“Estudio de Sustentabilidad de 10s Sewicios de Agua Potable Rural en Chile” b y
Alfonso Alvestegui and ESW team
e
“Desafos de la Electrificacidn Rural en Chile ” by Francisco Covarrubias, Ignacio
Irarrizaval and Ram6n Gal&
e
“Andlisis de la Politica de Subsidios a1 Transporte Rural y de la Accidentabilidad en 10s
Caminos Rurales ” b y Eduardo Niiiiez
e
“Identificacidn de Componentes y Acciones en la Gestidn y el Mantenimiento de
Caminos Comunales Primarios y Secundarios y Vecinales” b y H e r n h Otoniel Fernhdez
e
Consultoria para el Fortalecimiento del Modelo de Gestidn Comunitaria, by Deuman
Consultancy Services
e
Estrategia de Disefio Institucional para la Operacidn del Programa de Inversidn en
Infraestructura Rural para el Desarrollo Territorial, by IGT Invertec
e
Metologia Participativa en la Identificacidn de Deficits de Infraestructura y Desarrollo
Productivo a nivel Sub-Territorial, by GIA Consultancy Services
e
Estrategia Participativa con Pertinencia Etnica y Enfoque de Genero para el Proyecto
de Infraestructura Rural, by GIA Consultancy Services
e
Consultoria para el Disefio de las Guias Ambientales del Proyecto de Infraestructura
para el Desarrollo Territorial, by Golder Associates
e
Manual Operativo del Proyecto de Infraestructura Rural, b y Jorge Barrientos
’’
This papers are also digitally available from
13D772F0470C8F85256D80005A9C
http://lnwebl8. worldbank.or~xternal/lac~ac.nsf/Sectors~ner~y&Minin~94
1 O?ODenDocument
106
Consultoria para el Diseiio de un Programa de Consewacio’n de Red Rural (Comunal
Secundaria) con Participacio’n Comunitaria, by Jaime Carramifiana
Previous World Bank studies, including “Chile: Poverty and Income Distribution in a High
Growth Economy” (2001), “Estudio de equidad y eficencia - Sistema de Tansferencias del
Goviemo Nacional a 10s Municipios” (2003), and “Chile: New Economy Study ’’ (2003) provided
additional backgroundinformation for the present document.
107
Annex 13: Statement of Loans and Credits
CHILE: Chile Rural Infrastructure Services
Difference between
expected and actual
disbursements
Original Amount in US$ Millions
Project ID
FY
IBRD
Purpose.
IDA
SF
GEF
Cancel.
Undisb13.
Orig.
Frm. Rev’d
PO82037
2004
CL- Social Protection TA
10.71
0.00
0.00
0.00
0.00
9.34
PO77282
2003
CLScience for the Knowledge Economy
25.26
0.00
0.00
0.00
0.00
22.70
PO69259
2002
C L Pub Expenditure Management
23.23
0.00
0.00
0.00
0.00
14.79
PO68271
2002
CLLifelong Leaming and Training
75.75
0.00
0.00
0.00
0.00
58.08
PO55481
1999
CLHigher Education
145.45
0.00
0.00
0.00
0.00
33.63
PO55480
1999
C L Municipal Development I1
10.10
0.00
0.00
0.00
0.21
0.70
10.10
9.88
0.00
0.00
0.00
0.00
139.24
10.10
9.88
Total:
290.5
CHILE
STATEMENT OF FC’s
Held and Disbursed Portfolio
In Millions of U S Dollars
committed
Disbursed
IFC
FY Approval
Company
Loan
Equity
IFC
Quasi
Partic.
Loan
Equity
Quasi
Partic.
1991193
Aconcagua
0.00
6.45
0.00
0.00
0.00
6.45
0.00
0.00
1989191/99
Escondida
0.00
7.48
15.84
0.00
0.00
7.48
12.09
0.00
1996
FEPASA
0.00
5.60
0.00
0.00
0.00
5.60
0.00
0.00
2003
Lan Chile
30.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1994196197
Moneda Mgt
0.00
0.46
0.00
0.00
0.00
0.46
0.00
0.00
1996
Proa Fund
0.00
6.18
0.00
0.00
0.00
6.18
0.00
0.00
2000
San Antonio
34.15
3.70
0.00
62.66
28.90
3.70
0.00
52.91
2002
San Vicente
15.00
0.00
0.00
0.00
15.00
0.00
0.00
0.00
2004
Sonda
0.00
10.00
0.00
0.00
0.00
10.00
0.00
0.00
2002
TFSA
0.00
4.44
0.00
0.00
0.00
4.44
0.00
0.00
2003
TRANSELEC
0.00
0.00
60.00
0.00
0.00
0.00
60.00
0.00
2003
Thames Chile
33.00
0.00
0.00
33.00
22.50
0.00
0.00
22.50
2003
U. Diego Portales
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
44.31
75.84
95.66
66.40
44.31
72.09
75.41
Total portfilio:
13
112.15
As of November 16,2004.
108
Annex 14: Country at a Glance
CHILE: Chile Rural Infrastructure Services
POUERTY and SOCBU
2003
Population,mid-year fmll/m)
GNI per capna (AFtas m e w , U S 8
GNI (Atlas memod, US$ tnllbns~
Chile
Latin
America
II Carib.
158
4,390
692
534
3,260
1,941
13
20
15
21
Uppermkddleincome
335
5,340
1$788
12
18
Most recent estimste (latest year available, I997-03f
f?
87
76
Child malnutrition[% d c/?f!dmunder 5)
Accass to an improved wafer source
of ~wpulabon)
lrteracy (% ofpapu/ahar>age 154
Grass pnmapy enmliment (% of SchopI-gge m / a t n , R J
Ma&
Female
10
1
93
4
103
1W
101
KEY ECONQMICR A M S and LONG-TERM TRENDS
Life expectancy
T
(average anrwal gnwvbh)
GDP
GDP per w l t a
Exports oi gw& and services
28
86
11
129
$31
nrdlment
Access to improved water source
9
126
104
t04
104
zoo2
2009
445
285
27 5
24 1
20.9
67 4
22.0
342
25.6
208
724
221
345
25.3
20 8
-5 7
21
45 a
231
‘1.3
24
13
21
49 1
S5Q
623
329
61 a
GrosS
primary
89
I993
69
907
3NI
ier
76
73
19
198
99
Currenl “
I
balance/GDP
Inkrest p a y m d # D P
Total debt/GDP
Total deM seMcelexpocts
Present value of d&ffGDP
Present value of debtlexpofts
71
1883
24 0
12 5
39
P
n
I
3evalopment diamond.
Average annuel gtDwth, 19W-03
POpUlatkxt (%)
Labor force (%I
9115/04
-Chile
-
Upper-nuddle-cncomegroup
Economic ratios’
Trade
T
177 3
1983-93
199303
2002
zoo3
2003.07
75
57
103
4.4
30
84
22
10
56
33
21
57
42
33
61
5.9
39.9
212
54.2
9.2
35.8
18.5
55.0
8.8
34.3
15.8
56.9
8.8
34.3
15.8
56.9
73.3
14.2
65.9
10.0
63.0
11.5
63.3
11.4
Indebtedness
STRUCTURE of the ECONOMY
(% of GDP)
Agriculture
lndustty
Manufacturing
Services
Private consumption
General government consumption
Imp& of goods and services
(average annualgrowth)
Agriculture
Industry
Manufacturing
Services
Private consumption
General government consumption
Gross domestic investment
Impotts of g o d s and services
i883-93
7.0
6.2
6.6
8.8
6.6
2.0
15.7
2.9
4.2
2.3
2.9
4.2
3.4
1.8
2.1
2.1
2.1
2.1
-1.7
2.1
2.9
2o
0
-20
-401
--GDI
lO’GDP
[Growth of exports and imports (%)
2002
4.0
4.0
4.0
4.0
3.3
4.0
5.5
al
10
0
10
-201
-
Exports
-0-lmpOrts
Note: 2003 data are preliminary estimates.
This table was producedfrom the Development Economics central database.
‘The diamonds show four key indicatorsin the countty (in bold) compared with its income-groupaverage. If data are missing, the diamond will
be inconwlete.
109
I
I
1
Chile
PRICES and GOVERNMENT FINANCE
Domestic prices
(% change)
Consumer prices
Implicit GDP deflator
Governmenl finance
(% of GDP, includes current grants)
Current revenue
Current budget balance
Overall surduddeficit
TRADE
(US$ millions)
Total exports (fob)
Copper
Fruits
Manufactures
Total imports (cif)
Food
Fuel and energy
Capital goods
Export price index (1995=700)
Import price index (7995=700)
Tems of trade (1995=100)
BALANCE of PAYMENTS
(US$ millions)
Exports of goods and services
Imports of goods and services
Resource balance
Net income
Net current transfers
1983
1993
2002
2003
27.3
30.7
12.7
10.6
2.6
7.6
3.0
4.4
..
..
..
23.1
4.9
2.0
21.5
2.2
-1.1
21.3
2.6
-0.7
1983
1993
2002
2003
3,831
1,875
328
1,168
3,171
531
592
392
9,199
3,248
870
4,056
11,134
19,133
7,151
1,182
9,614
17,151
19,898
7,437
1,230
9,999
18,009
1.118
3,013
2,718
3,589
2,854
3,768
..
..
67
85
79
65
122
53
64
120
53
1983
1993
2002
2003
11,712
12,929
-1,217
23,019
20,594
2,426
23,862
21,631
2,231
-1.656
320
-2,585
-739
-2,654
-493
..
_.
..
..
..
..
..
..
-2,553
-898
-916
3,131
-578
2,063
-1,165
2,128
-1,211
78.8
..
9,759
404.2
17,495
688.9
18,707
691.4
1983
1993
2002
2003
17,928
213
19
19,994
1,902
12
41,945
556
6
35.534
503
5
2,631
28
1
2,819
314
1
7,729
252
1
8,515
132
0
Composition of net resource Rows
Official grants
Official creditors
Private crediiors
Foreign direct investment
Portfolio equity
14
106
943
135
0
84
-209
919
1,034
816
23
-311
1,385
1,713
-317
World Bank program
Commitments
Disbursements
Principal repayments
Net flows
Interest payments
Net transfers
128
24
12
12
17
-5
0
107
173
-66
142
-208
99
30
202
-173
50
-223
Current account balance
Financing items (net)
Changes in net reserves
Memo:
Reserves includinggold (US$ millions)
Conversion rate (DEC, lowVUS$)
EXTERNAL DEBT and RESOURCE FLOWS
(US$ millions)
Total deM outstanding and disbursed
IBRD
IDA
Total debt service
IBRD
IDA
..
Note: This table was produced from the Development Economics central database.
110
-
I
11:
j10
96
w
-GDPdeflator
w
02
01
+CPI
I"I
Current account balanceto GDP (%)
:omposition of 2003 de& (Us5 mill.)
-155
-6,256
F 30,456
0
45
99
-53
34
-87
4 - IBRD
3 - IDA
> - IMF
D - Other multilateral
E - Bilateral
F - Private
G - Short-ten
9115/04