Mexico Environmental Services of the Forest
PROPOSAL FOR PDF BLOCK B / GEF
NATIONAL FORESTRY COMMISSION
GENERAL INFORMATION
1.
Country: Mexico
2.
Focal Area GEF:
3.
Operational Programs:
Biodiversity
Cross-cutting: OP 4 Mountain, and OP 3 Forest
Ecosystems
BD Strategic Priority: I . Catalyzing Sustainability of
Protected Areas: (a) Demonstration and
Implementation of Innovative Financial Mechanisms and II . Mainstreaming Biodiversity in Production
Landscapes and Sectors: (b) Developing market incentive measures
4.
Project Name: Mexico Environmental Services of the Forest
5.
Total cost of the project: US$ 95 Million
6.
Financial Plan
7.
8.
Implementing agency
Managing organization
Project Total US 95 million
GEF $ 15 million
IBRD $ 52 million
GOM $ 28 million
Block B Total US 1’405,000
GEF $350,000
GOM $540,000
Japan PHRD TF $515,000
World Bank
National Forestry Commission (
Comisión Nacional
Forestal CONAFOR/Semarnat ) )
9.
Project duration PDF B: 12 Months;
Full Project: 4 years
ii
I. Project Objective
The project overarching objective is to implement an innovative financial mechanism to strengthen the sustainability and consolidation of the Priority Areas for Conservation in Mexico.
The project will develop and promote markets for environmental services in order to conserve mountain and forest ecosystems while improving living conditions of local communities*. The payments for the
Environmental Services of the Forests, will come both through public mechanisms involving different sectoral agencies, as well as through individual agreements within productive sectors.
* (Owners of forests in Mexico are 80% poor indigenous communities and ejidos/communal holdings resulting from the agrarian reform.)
The key expected outcomes will be the broad acceptance and the implementation of flexible mechanisms to capture financial resources from the most dynamic economic sectors, on a permanent basis.
The implementation of this financial mechanism will contribute to: a) the consolidation of the Natural Protected Areas System, through direct financial flows, but most importantly; b) create the proper economic environment and incentives to integrate biodiversity conservation in agriculture, forestry, tourism and infrastructure to secure national and global environmental benefits.
Implementing financial mechanisms that capture the value of the environmental services of the forest offers the possibility of testing out new partnerships between indigenous communities and ejidos, the private sector and various government agencies.
The market mechanisms include the implementation of the private lands conservation tools (designed and validated under the Mexico MSP Private Lands) to develop innovative partnerships between the poor peasant and indigenous communities -on one side-, with public-private funds developed by the Federal and Local Governments, as well as by civil society initiatives, -on the other side-.
Validating this new strategic approach in Mexican mountainous and tropical forests will protect globally significant biodiversity as well as set the stage for replicating this strategy in other parts of the world.
II. Project Rationale
Mexico has made a significant progress in the last 10 years, with the support of several GEF operations and is deeply committed with the environment through an adjustment program financed by the World
Bank. (see II.E. Related Activities and Projects)
This progress represents a platform to move from a project by project intervention to a more programmatic approach where the catalytic role of the GEF and the long term multi-sectoral involvement of the World Bank can better address the need for sustained systematic efforts together with the Mexico
Government.
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Mainstream biodiversity conservation in relevant economic sectors is part of the country assistance strategy. This projects will contribute to create an enabling environment and promote the implementation of innovative mechanisms to guarantee the long term incentives for conservation.
The proposed approach builds on the series of activities already initiated under the program of Payments for Environmental Services for Water (PES-W) already in operation.
The better targeting and expansion of the innovative financial mechanism developed by the Mexican
Forestry Fund of Conafor gives the opportunity to expand the area under protection through market mechanisms and legal agreements, better focus in the most biodiversity relevant areas of the country and guarantee the sustainability of results through the legal and economic instruments implemented.
The project will test the potential for replication of the PES-W by expanding the present design to the area of environmental services of the forest biodiversity for tourism and the pilot integrated services approach to mainstream biodiversity conservation objectives in Carbon Sequestration and Land
Management initiatives, promoted by other agencies, with potential synergies.
Sustainability
In order to guarantee the sustainability of the new financial mechanism, the project is building on an existing partnership between the National Water Commission (CNA), the National Forestry Commission
(Conafor) and the Ministry of Finance (SHCP).
The Payments for Environmental Services of the Forests for Watersheds (PES-W), is based in a transfer of a relatively small proportion (3%) of the revenues collected by the CNA from large water users mainly from the industrial sector-, to support the conservation of forests in strategic watersheds.
The amount allocated to the PES-W in the first two years of operation represents 0.01% of the 2003 federal budget for rural development, and could become a complementary non distorting instrument within the new agreements of the Federal Government with the rural organizations (Acuerdo para el
Campo).
Even though it’s a small proportion of the revenues of the water sector, this partnership made it possible for Conafor to make the first call for proposals in 2003 and allocate US 20 M to a total of 163,000 has. of temperate forest plus 3,000 has of cloud forest.
The participation of the rural communities in the design of the first edition of the mechanism guaranteed its rapid acceptance. Already Conafor has received expressions of interest from indigenous communities and ejidos that represent 650,000 has of areas with over 80% of canopy cover, which is the initial eligibility criteria .
As stated above, the revenues collected by CNA come from large industrial users, which leaves room for any number of initiatives to collect payments directly from the population, as is already happening in the
Municipality of Coatepec, Veracruz or with particular sectors, like with the tourism operators in
Huatulco, Oaxaca.
The tourism sector is another potential ally since biodiversity is one of the features that is increasingly valued by local and foreign visitors. While the income generated by the Water Sector which is already
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contributing US20 million plus a year to the Payment for Environmental Services of the Mexican
Forestry Fund of Conafor, is in the order of US 600 million/year, the tourism sector generates ten times as much, over US 6,000/year. Initial talks indicate that they would be willing to contribute a small fraction out of their Trust Fund for tourism promotion, to support conservation of biodiversity in forests, on a permanent basis as well.
Putting in place the right legal agreements and harnessing a broad based support for the program guarantees the long term sustainability of the financial mechanism.
The project will contribute to expand, consolidate and most of all focus it to preserve the greatest ecological values. (Components II, III and IV).
Component I will focus on building institutional capacity and the enabling environment to foster a market of multiple bilateral payments for environmental services.
Background
Presently in Mexico, nearly 60% of surface area under protection belongs to biosphere reserves. Most of these are managed for sustainable use of natural ecosystems (IUCN category VI); few are strict nature reserves (IUCN category Ia). The second most important type of protection (27% of protected territory) consists of protected areas of flora and fauna (IUCN category VI). National parks (IUCN category II) account for 7% of total surface area under protection. There are various other categories of protected areas, including forest reserves (IUCN category VI). The National System of Protected Natural Areas
(SINAP) includes natural areas of special national importance due to their biodiversity and ecological characteristics; 41 natural areas are currently included, one of which is state-administered. The
40 Federally-administered natural areas cover almost 10 million hectares (i.e. 55% of the total designated area) but only about 5% of this area is Government property.
On the other hand, not all the areas with relevant biodiversity are covered by a status of NPA, hence the
National Commission for NPAs has produced a map of the Priority Areas for Conservation, which include the System of NPA, plus the areas that should be incorporated under some kind of formula for protection, including economic incentives and legal agreements with their proprietors.
The small property, ejidos and communal owners of forest resources in Mexico have been slowly developing capacities to manage their resources and to successfully market their products, especially as technology changes and markets become increasingly complex, global and more competitive. In many cases, communities and “ejidos” have set up community enterprises to add value to timber and are in the process of taking advantage of Non Timber Forest Products, some of which have significant economic value and market potential. Finally, although they have a traditional attachment to the forests, including a rich spiritual tradition rooted in the forest, they have not, in general, been able to reach a comfortable level of income to conserve natural areas that have both spiritual and material value. Also, most of the rural indigenous people inhabit in a broad range of ecological niches, many of them catalogued as fragile and remote. As part of the diagnosis it is important to take into account that exists a strong overlapping among indigenous communities and ejidos and high biodiversity areas, including the ones recognized as protected areas.
The Mexico Environmental Services of the Forest Project was triggered by three relevant accomplishments: a) the expansion of the Community Forestry Project which has strengthen the local
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capacities to develop integrated management plans for the different timber, non timber products and environmental services of the forests; b) the design of a public policy initiative under the Environmental
Structural Adjustment Loan program to recognize and internalize the services provided by forests; and c) the creation of the Mexican Forestry Fund in Conafor with an initial yearly allocation of US 20 Million
(4% of the water rights of major users in the country) for the first phase of the Payments of
Environmental Services of the Forests for Watersheds (PES-W).
The development of markets and payments for environmental services is part of two national strategies, one to reduce subsidies, better reflect costs and internalize the social and environmental externalities in the development initiatives and economic sectors, and a national crusade for forests and water, as these natural resources has been declare a matter of national security by the president of Mexico.
For the forestry sector in particular, the diverse initiatives: technical assistance, adjustment and investment, are designed to promote a regulation and an incentive structure which promotes the conservation of the forests while addressing social protection short term tradeoffs in a sustainable long term scheme.
The Environmental Services of the Forest Project is going to explore synergies with existing projects such as the World Bank – Mexico Community Forestry Management and Conservation Program (Procymaf ) which has extended its pilot stage (Oaxaca) to six states under a new operation (Procymaf II), to assist indigenous communities and ejidos that own forests in priority regions of the Country to improve management and conservation of their forest resources and to generate alternative sources of income. The technical assistance component of this project, includes support to identify and appraise forest environmental services.
The National Commission for Natural Protected Areas created under the Mexico GEF Natural Protected
Areas Project (1997-2002) is consolidating a Natural Protected Areas System (SINAP) and is also moving into a more active role in the productive landscape, where it has identified, -based on a comprehensive assessment of IUCN, WB, WWF, CI and others’ work-, all the relevant biodiversity areas
(Areas Prioritarias de Conservation) ( see Annex 1) . The SINAP include areas under state or municipal protection, private reserves and under community management, but also identify relevant biodiversity areas which are not presently under any kind of protection. The CONANP currently administers 148 natural areas of federal character that represent more than 17 million hectares ( see Annex 2) . These areas are classified in 6 categories as it is shown in the following table:
Number
34
65
Category
Reserves of the Biosphere
National Parks
Surface (hectares)
10,479,534
1,397,163
4
2
26
17
Natural Monuments
Natural Resources Protection Areas
Wildlife Protection Areas
Sanctuaries
14,093
39,724
5,371,930
689
148 6 17,303,133
There are a number of NGO supported initiatives for community forest management and local conservation including: (1) the WWF Oaxaca Community Reserves Program; (2) WWF-Mexico support
4
for Dry Tropical Forests; and (3) the Quintana Roo Forestry Conservation and Management Initiative in the Yucatan.
The vast experience of the forestry sector in Mexico which has participated in the above mentioned joint efforts result in a process of accumulation of knowledge and capacity regarding the design and implementation of projects, which is going to be useful for the design of the Environmental Services
Project.
II. A. Global Significance
The project will focus the economic incentives created under the Environmental Services Program to consolidate the efforts of the Government and the conservation community within the Priority Areas for
Conservation defined by the Consultative Council of the National System of Protected Areas (see map 1 attached in Annex 2).
Mexico is one of the 12 megadiverse countries (see next table) . With 1.3% of the land in the world, it hosts about 12% of the known terrestrial biota with very high endemicity. With respect to Latin America and the Caribbean, Mexico contains the five main types of terrestrial ecosystem listed by WWF, nine of the 11 main types of habitats in the region and 51 of the 191 eco-regions identified. Of these 51 ecoregions, 14 (covering over 40% of national territory) have priority at international level regarding their biodiversity and current conservation status. There are nine large natural vegetation types in Mexico, classified according to their ecological characteristics.
The total number of known species in Mexico is about 65 000. There are thought to be at least 212 000, as many areas and many taxonomic groups have not yet been studied in detail. The most important states in terms of species richness are Oaxaca, Chiapas, Veracruz and Guerrero. There are about 23 000 known plant species, including algae, bryophytes, pteridophytes and phanerogams. The total number could be about 36 000 (i.e. over 10% of the world’s known species); 10 000 (40%) are endemic.
There are at least 6 000 known species of fungi in Mexico (i.e. 9% of the world total). Mexico’s vertebrate fauna are among the richest in the world, with over 5 000 species (the equivalent of almost
10% of those in the world); about 1 000 (20%) are endemic. Invertebrate species number almost 30 000, taking into account only marine invertebrates and arthropods, of which nearly 7 000 (almost 25%) are endemic to Mexico.
The genetic diversity of Mexico’s wild species is very poorly known. However, given the country’s great territorial spread and environmental heterogeneity, the genetic variability of many of them is very high.
Some species which are potentially of direct use to people (e.g. wild maize species) show considerable variation but are under threat due to current rates of deterioration of natural ecosystems.
Mexico is regarded as one of the world’s most important centers of genetic diversification in plants and one of the areas where agriculture originated. Some 120 cultivated plant species belonging to 39 families originated in Mexico, including cocoa, kidney bean, maize and tomato. Mexico’s contribution to domesticated breeds of animals has been less important. It has produced 12 different breeds: two horse, three pig, one goat species, four sheep and two cattle.
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Rank Mammals
1 Indonesia (515)
2 México (449)
3 Brazil (428)
4 Zaire (409)
5
6
7
8
9
China (394)
Peru (361)
Colombia (359)
India (350)
Venezuela (340)
The World’s Ten Most Biodiverse Countries
Birds Amphibians
Colombia (1,721) Brazil (516)
Perú (1,701)
Colombia (407)
Brazil (1,622) Ecuador (358)
Indonesia (1,519) Venezuela (284)
Ecuador (1,447)
India (1,200)
México (282)
Venezuela (1,381) Indonesia (270)
Bolivia (Ca, 1,250) China (265)
Perú (251)
Malaysia (~1,200) Zaire (216)
Reptiles
México (717)
Australia (686)
Indonesia (~600)
Brazil (467)
India (453)
Colombia (383)
Ecuador (345)
Perú (297)
Malaysia (294)
Flowering plants
Brazil (56,000)
Colombia (51,000)
China (27,100)
México
(18,000–30,000)
South
(23,420)
Africa
Borneo
(20,000–25,000)
Venezuela
(21,070)
Ecuador
(17,600–21,100)
Perú
(18,000–20,000)
10 Tanzania (310) China (1,195) USA (205) Venezuela (292) Papua New Guinea
(15,000–20,000)
The National Biodiversity Information System (SNIB) integrates taxonomic, ecological, geographic and bibliographical information related to Mexico’s biodiversity and biological resources. It has data on
8 176 000 specimens - this figure has increased by 3 676 000 since 1998.
Under the mandate established by the Convention on Biological Diversity**, Mexico has put into operation a Clearing-House Mechanism via the CONABIO website to promote and facilitate technical co-operation and information exchange on biodiversity conservation and sustainable use. It has also promoted a Worldwide Biodiversity Information Network (a computerized network of botanical and zoological collections in universities and research centers).
** (Mexico Ratified the CBD in March 11, 1993, and it is also a signatory part of CITES and the
Cartagena Protocol on Biosafety)
Priority Terrestrial Regions have been identified, whose ecosystems are richer and more specific than in the rest of the country and which have significant ecological integrity. There are 151 of these regions covering over 50 million hectares (over one-quarter of the territory) ( see map 1 in Annex 1 )
Mexico’s biological wealth is extraordinary but the future is precarious. The Ecosystem Monitoring
Program uses remote sensing techniques; it identifies qualitative and quantitative space-time changes in land use and distribution of vegetation.
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Species of wild flora and fauna at risk , 2001
Probably extinct in the wild
Endangered Threatened
Subject to special protection
Total at risk a
Total number b
Mammals
Birds
Reptiles
Amphibians
Freshwater fish
Arthropods
Fungi
Vascular plants
Total
0
0
4
41
7
19
0
0
11
43
72
15
6
70
16
10
141
373
124
107
109
42
74
11
25
350
842
121
173
342
148
30
19
7
486
1 326
295
371
466
196
185
46
42
981
2 582
491
1 054
704
290
??
..
..
10 819 a) Total at risk or extinct. Sum of previous columns. b) Total number of species known.
Source: NOM-059-ECOL-2001.
One-third of birds and nearly 66% of amphibian, reptile and mammal species are at risk. The wild species whose state and patterns of conservation are in decline are legally protected by Mexican Official Standard
NOM-059-ECOL-2001; 2 582 species and subspecies are at risk (161 more than under the previous 1994 standard), of which 41 are probably already extinct in the wild, 1 215 are endangered or threatened with extinction, and 1 326 are subject to special protection. This lead us to conclude that significant progress has been made in the last decade in promoting the sustainable use and conservation of Mexican biodiversity with the goal of reversing the habitat loss and unsustainable exploitation of species.
Vegetation types , 2000
Vegetation type
Temperate forest
Conifer forest
Conifer and holm oak forest
Holm oak forest
Mesophilic montane forest
Tropical rain forest
Evergreen and sub-evergreen rain forest
Sub-broadleaf rain forest
Broadleaf rain forest
Low thorny rain forest
Scrub
Xerophilous scrub
Mezquital
Chaparral
Grassland
Induced grassland (not cultivated)
Natural grassland
Other types of vegetation
Surface area
(‘000 hectares)
34 504
12 854
7 829
11 997
1 824
34 229
11 144
4 649
17 810
626
55 588
49 386
3 186
3 016
16 352
6 665
9 687
9 829
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Share of national territory
(%)
17.6
17.5
28.4
8.3
5.0
Sandy desert vegetation
Halophilous vegetation
Hydrophilous vegetation
Palm forest
Total
2 172
5 283
2 246
128
150 503 76.8
Source: National Institute for Statistics, Geography and Information Technology, 2002.
The project is fully consistent with guidance form the Conference of the Parties of the Biodiversity
Convention regarding conservation and sustainable use of biological diversity in vulnerable areas.
This project intends to be consolidate a breakthrough in the challenge of capturing resources for a sustainable management of natural resources and mainstreaming of biodiversity conservation. In other words, it is intended to consolidate the environmental services system as an essential keystone of the conservation strategy, by turning potential social benefits of biodiversity into tangible monetary values.
Accompanying and strengthening this innovative mechanism, will contribute to develop its sustainability through new services and financing sources.
Besides the direct global benefits that this project will generate:
(a) maintenance of habitats that are important to conserve biodiversity of global significance, and
(b) incentives for long-term habitat maintenance.
It is also of great significance for Mexico and other countries the path that the Mexican Forestry Fund is opening by channeling US20M yearly in payments for environmental services in water catchments and exploring other services/users to expand the model to biodiversity, scenic beauty, infrastructure protection, disaster prevention and carbon sequestration.
Other global benefits generated from the project would include:
increased public awareness of issues related to biodiversity conservation and meaningful participation of local stakeholders for sustainable community conservation;
establishment of corridors through sustainable management of critical habitats;
empowerment of communities through legal agreements with individuals and local governments to receive compensation for the environmental services of their forests;
demarcation and conservation of critical forest ecosystems and enhancing the probability of achieving long-term conservation;
incentives for communities to maintain conservation areas and complementary areas of sustainable use;
increased collection and analysis of information on impact of the program in the conservation of endemic flora and fauna;
development of methodologies and best practices for integrated socioeconomic and bio-physical information bases on high priority biodiversity resources in community lands.
II.B. Strategic Approach and Priorities for Biodiversity Conservation Efforts
The World Bank Forestry Policy (OP/BP 4.36), adopted in November 2002, builds upon the lessons learned in developing the World Bank's Environment Strategy and Rural Development Strategy. The new policy provides the basis for pro-active engagement with client countries to broadly address the
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challenges of sustainable forest management, biodiversity conservation and maintenance of ecosystem services from forests. The policy encourages the incorporation of forest issues in the CAS and addresses the cross-sectoral impacts of forests as well as providing guidance for forestry and conservation projects.
Likewise, it encourages community forestry with consideration for social and poverty issues and it encourages the use of certification as a means of assuring environmental quality.
In the Mexico CAS approved on May 13, 1999, and updated in April 23, 2002, the central theme is sustainability. Throughout, the primary focus has been poverty reduction based on 5 pillars, the fourth being Balancing Growth and Poverty Reduction with Protecting the Environment.
The draft 2004 - 2007 Mexico CAS focuses on four main pillars: poverty alleviation, environmental management, increased competitiveness, and improved governance; and builds on the positive experience of the EnvSAL in the revision of existing programs and incentive structures, to address the implicit shortterm tradeoffs between social protection and environmental protection. The CAS indicates that Mexico faces tremendous pressure on its natural environment, to the degree that failure to reverse some of the most damaging environmental trends may not only act as a brake on continued growth but likewise contribute directly to reduced social welfare and increased poverty. In supporting the Government of
Mexico's 2001-06 National Environment and Natural Resources Program (ENRP), priority environmental issues which the Bank will focus on over the next three years include: sustainable development as a shared responsibility of different sectors and institutions; decentralization of environmental management and increased public participation; ensuring that beneficiaries pay for environmental services provided; and addressing the loss of tropical forests and biodiversity and sustainable water resources management.
Within this framework of cooperation of the World Bank with the sector, the National Forestry
Commission (CONAFOR) has confirmed its interest to develop a proposal for inclusion in the 2004 -
2006 CAS for the coming years, and the preparation of a loan of the World Bank to the Government of
Mexico to finance the National Environmental Services Program and the blended GEF Grant Operation
(see Annex 3) .
II.C. Potential Beneficiaries
Over 12 million people inhabit forested areas. Most are highly marginalized and live in extreme poverty.
In the areas with the greatest biodiversity, 3.3 million people live in such conditions. This population exerts excessive direct pressure on natural resources.
Areas where deforestation rates tend to be lowest are also those under communal and municipal ownership which are subject to regulated management schemes (and where forestry activity has become a regional development alternative), and protected natural areas (where the deforestation rate is 10 times lower than in unprotected areas). (OECD Report July 2003).
II.D. Threats and Root Causes
Mexico’s biological wealth is seriously threatened and is undervalued as a primary factor in socio-economic development. Biodiversity loss and issues have been associated with the pressures created by inadequate earlier development policies: conversion of natural habitats to unsustainable agricultural schemes, deforestation in temperate and tropical forests, overgrazing of arid zone vegetation, illegal trade in threatened species, conservation conflicts in protected areas, lack of integrated coastal zone management programs, risks of genetic contamination. Demographic pressures and the limited
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amount of productive land per family combine with illegal activities (logging etc.) form serious threats to the maintenance of biodiversity.
Mexico suffers from one of the world’s highest deforestation rates, around 1.2% per year. Based on preliminary information from the 2002 National Periodical Forest Inventory, approximately 770,000 hectares of arboreal forest per year were lost between 1993 and 2000. Of this total, 66% takes place in tropical forests, including in areas of high biodiversity value which often overlap with areas with indigenous communities.
The main immediate causes of deforestation and forest degradation are cattle ranching, land clearing for agricultural expansion, urban growth, unsustainable exploitation, uncontrolled tourism, forest fires, illegal logging and urbanization. Assuming a constant rate of deforestation, this trend would lead to the conversion of half of Mexico's forests within 42 years. Loss of forests on this scale would have highly undesirable results for loss of biological diversity, watershed functions, ecosystem stability, plus the global release of carbon.
In addition, even where forests remain standing, poor management practices have resulted in genetic quality degradation and loss of regenerative capacity. Many of these activities respond to the demand for development opportunities by private entities as well as livelihood activities undertaken by local and indigenous communities.
The deforestation rate is still extremely high (among the highest in the world). Despite progress in managing protected areas, these areas account for under 10% of the territory and some types of ecosystems are under-represented; human, material and financial resources are still insufficient, leaving a sizeable number of protected areas without management plans. In the last few years the number of endangered animal and plant species has increased.
II.E. Related Activities and Projects
A number of diverse activities and projects are currently in progress in Mexico for the conservation of biodiversity and watersheds that have an important bearing on development of the Environmental
Services of the Forests project, including:
PRODEFOR. Technical assistance and financial assistance to support and expand sustainable management practices in the use and conservation of Natural Forests. Operated by Conafor/Semarnat since 1997.
PRODEPLAN. Financial incentives for forest plantations, particularly in degraded lands where the incentives reach up to 65% of reimbursement of investments. Operated by Conafor/Semarnat since 1998.
PRONARE. National Program for Reforestation, finances nurseries and promotes voluntary campaigns to plant in the order of 10 million trees yearly, with the assistance of civil society, local governments and the military. Operated by Conafor/Semarnat since the 1980s.
PROCYMAF. Community Forestry Program, financed by the World Bank, to provide technical assistance to indigenous communities and ejidos to sustainably manage the natural forests and support their livelihood through diversifying their production. Includes a fund for non traditional forest products and non timber products. Operated by Conafor/Semarnat since 1997.
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Forest Fire Prevention and Combat. Permanent program operated by Conafor/Semarnat with the participation of local communities, governments and the military, and financially assisted by bilateral
North American cooperation agreements.
Environmental Structural Adjustment Loan. World Bank SAL which is currently supporting the GOM in reviewing the impact on the environment and natural resources of related policies and instruments from relevant sectors (Water, Forests, Energy and Tourism) and developing adequate policy framework and economic instruments to promote sustainable development. The World Bank – Mexico Environmental
Structural Loan has identified and is addressing some of the most relevant barriers to mainstreaming environmental concerns and biodiversity conservation objectives in productive landscape and relevant economic sectors. Executed by Semarnat since 2002.
Water Management Investment Loan. World Bank technical assistance and investment loan supporting the modernization of the meteorological service, security in dams, aquifer and watershed management.
Executed by the National Water Commission (CNA/Semarnat) since 1996.
Links to Other GEF Projects and Proposals in Mexico
The GEF has financed enabling activities in Mexico, including the First Biodiversity Country Report and preparation of the National Strategy and Action Plan for Biodiversity–NBS . The strategy has been the basis for all subsequent major biodiversity projects and proposals in the country, particularly those being submitted or prepared for GEF financing.
Currently, the following projects are either funded or proposed for funding by the GEF:
GEF-WB Natural Protected Areas System . The Natural Protected Areas projects: FANP I and SINAP II, have focused in the financial requirements of the System’s administration, providing for an endowment which produces financial yields yearly to support a current flow to 10 initially and eventually to 24
NPAs, under the Mexican Fund for Conservation, a non for profit private financial institution created with the support of the NFTA partners in 1994.
GEF-UNDP Three Priority Ecoregions and Sierra Gorda Biosphere Reserve , are two related projects supported by GEF through UNDP, to promote participation of local actors in the conservation efforts headed by the National Commission for Natural Protected Areas (Conanp/Semarnat) The latter could be candidates for a future decree to create new protected areas or to promote new instruments to promote sustainable practices while conserving biological diversity. Another initiative is the Indigenous and
Biodiversity Conservation Project (COINBIO) that is also oriented towards good management of biological diversity and is based on the capacity developed and extension mechanisms of the
PROCYMAF and PROCYMAF II projects.
GEF-WB Mexico-Mesoamerican Biological Corridor , is an institutional mechanism designed to reorient rural/regional development investment in 4 States in the South of Mexico, to foster biodiversity friendly investments in the connecting areas between NPAs in Chiapas and the Yucatan Peninsula, in the southern border of Mexico with Guatemala and Belize.
GEF-WB Indigenous and Community Conservation . Complementary to the Community Forestry World
Bank loan designed to assist poor peasants and indigenous communities to manage their forests
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sustainably and improve their livelihood, operates in the States of Oaxaca, Guerrero and Michoacan, in areas where the satellite images show the best conserved forests on communally owned properties.
GEF-WB Medium-size project Private Lands Legal and Financial Conservation Mechanisms is an innovative approach to conservation that recognizes the fact that Natural Protected Areas are 90% on private owned lands (individual and communal properties), where there are no incentives or legal agreements to promote and guarantee the adequate participation and commitment of the owners to conserve through fair contracts and incentives.
Other two GEF-WB Medium size projects completed recently in Mexico are relevant to the conception and design of this operation: Hillside Management, which developed a systematic approach to carbon sequestration methodologies in poor hillside parcels and El Triunfo Productive Landscape which developed certification mechanisms to take advantage of niche markets for biodiversity friendly coffee from plantations in the buffer area of a biosphere reserve.
The projects are similar in that they cover most of the threats identified above through different mechanisms to secure participation, sustainability and physical integrity of the areas.
Together these programs provide a strong baseline for the project proposal.
The main innovation in the Environmental Services initiative is a market mechanism to sustainably capture financial resources from the sectors that benefit directly or indirectly from the environmental services produced by the forests.
Lessons Learned and reflected in proposed project design:
Several lessons have emerged from other environmental service markets and from protected area management projects from around the world. i) Environmental Service Markets
Lessons from other environmental service markets include: a) Applying a watershed management approach can be a powerful tool for improving livelihoods and achieving efficient, equitable and sustainable use of natural resources.
i
Effective watershed management programs can: (i) improve the management of externalities resulting from land and water interactions; (ii) increase the social, environmental and economic benefits derived from the management of these interactions; and (iii) improve land use practices.
Where watershed approaches have been found to be useful are, among others, where there are objectives to: (i) manage externalities, i.e., where significant land and water-related externalities exist and are sufficiently transparent (or can be made so), such that they can be taken into account and be driving forces in decision making; and (ii) improve natural resource management, by assisting to focus efforts on priority and critical areas and the actions required to sustain production and appropriate land use systems while reducing or mitigating downstream impacts.
While there are other important explanatory variables – such as land tenure, inappropriate technology, inadequate participation of local stakeholders – the failure to address externalities has played a significant role in failures to achieve the types of permanent change in patterns of livelihood and land uses which
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generate negative on-site and downstream impacts. This historic failure to address externalities also helps explain the persistence of land degrading practices in upper catchments. Payments for environmental services by downstream users are seen as a promising option to achieve these objectives. Payments may take a variety of forms ranging from direct compensation to indirect measures aimed at giving upstream communities a stake in watershed conservation. b) Development of an environmental service payment system is a long-term process .
Forging the partnership and capacity for government, the private sector, and civil society to work together toward implementing an ecosystem approach to natural resource management is a long-term process.
Institutional frameworks for environmental service payment system can range from self-organized private deals to public payment schemes. Capacity building to design and implement these types of systems is best done through “learning by doing” and thus proven implementation approaches have tended to be those which start out focused on assessed and agreed priorities, and devolve development management responsibility to those most directly affected (including local government officials, administrators and service providers).
Thus, the project’s aims are focused on piloting and testing a variety of institutional frameworks and incentives for the creation of a system of payments for environmental services in Mexico and taking steps towards strengthening the national system of protected areas by means of exploring and implementing sustainable financial mechanisms for conservation. c) Design details matter.
With reference to the strengthening of a payment system for environmental services in Mexico, experiences with the project’s pilot sites would aim to shed light on key issues identified by a recent
World Bank Environment Department study ii of the Payments for Environmental Services Program of
Costa Rica and other research. These issues include:
Identifying and quantifying water service s. Hydrological services depend on the rainfall regime, type of soil and vegetation, topography. Water services can range from improving water quality, improving baseflows, or increasing total water volume. For each site questions arise as to: What water services does a given land use in a given location generate? How much of that service is generated? Who can provide this service?
Scale and topology matters. Research in Guatemala and Honduras indicates that effects of land use on hydrological functions are going to vary a great deal depending on the size and physical characteristics of the watershed, the amount and timing of rainfall and on the nature of the land use change.
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The land use/hydrological functions tend to be most salient on steep slopes. And smaller watersheds -- in the tens, perhaps low hundreds of km square -- are more likely to exhibit land use change impacts on hydrological function. The rapidity of hydrological change depends on the rapidity of land use change. In Mexico, where forests are rapidly disappearing, there could be different land use dynamics at work than those studied in the Guatemala and Honduras case studies. This speaks to the need for a piloting approach in micro-watersheds and a strong monitoring component to understand better the effects of land use on hydrological functions in Mexico.
Identifying key beneficiaries . What specific water services are demanded by downstream users? Who are the beneficiaries and how many are there?
Setting the price : What level of charges should be imposed? What is the willingness of downstream users to pay for this service? What is the minimum payment level sufficient to induce landholders to change their land use practices? Is there need to pay upstream users to supply this service or are there win-win opportunities that negate the need for a payment system?
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Targeting payments. Both the quantity and value of environmental services is site-specific, depending upon local physical and agro-ecological conditions, and on the presence and importance of downstream populations and infrastructure. Programs that do not prioritize priority areas from the start would be inefficient in promoting the generation of environmental services and those services that are generated may be of little economic value.
Particular care needs to be taken to avoid perverse incentives. For example, payments for reforestation can encourage land users to cut down standing trees so as to qualify.
Examining equity issues: Payment systems generate benefits that would be distributed among recipients and suppliers of the environmental service.
Developing institutional arrangements that work . How are payments to be collected and made? Who should manage the funds? How can the process be made transparent and avoid corruption? Are indefinite, sustained payments necessary? Previous approaches have tended to provide only front-loaded payments, coinciding with the project's implementation cycle. The typical result is that once the project ends, land users revert to previous practices and the project's benefits are lost. In addition, current research on scale of intervention mentioned above speaks to a strong role for community organizations and local governments to negotiate management strategies (including payment for environmental services). Mexico, with its ejidos in the rural setting is well placed to explore this dimension. d) Monitoring is important . The pilot environmental service payment sites are pilots in testing the design and institutional arrangements for a more widespread system. As such, it would be important to monitor (both in-project sites, and nearby out-of-project sites) land use, socioeconomic changes, biodiversity, and other key indicators to properly evaluate the pilots. To support this monitoring, baseline information on these indicators for both the project and control sites on land use would need to be gathered. e) High quality public participation is key. Project experiences suggest that providing for a strong role for NGOs and the private sector can be very effective during implementation. For example, one of the most important lessons learned from activities associated with the projects within the Mesoamerican
Biological Corridor is the importance of involving local populations and institutions in the design, implementation and benefits of the project. This approach helps assure sustained impacts after project completion.
Experiences of projects throughout the MBC also indicate the importance of clearly defining the roles of the project’s implementing unit and the site stakeholders in project administration, fund management, decision-making, and implementation. This can help avoid creating false expectations or leaving ambiguities that can cause delays in implementation. Experience also suggests the importance of a strong administrative and coordination capacity supported by adequate technical assistance and--- particularly initially---close supervision of implementation. Clear linkages between conservation and development are also needed, prior projects suggest. These factors would be taken into account during project preparation. ii. Protected Areas Management Projects
The project would build on the following lessons learned from other GEF projects supporting National
Systems of Protected Areas, which identify five key aspects of project design: a) Limit Project Focus : This proposed project supports a short time slice of the long-term vision to develop the country’s National System of Protected Natural Areas (SINAP). Project activities will be targeted and be appropriate to the social context and current institutional capacity. The project will have
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measurable results in its own right as well as making a contribution to the longer term plan. Drawing on these lessons, efforts to improve the system of protected areas in Mexico would initially concentrate on a few targeted sites, aiming at getting the basic building blocks in place (notably management plans, partnerships, and key infrastructure investments) for satisfactory management. b) Strengthen Institutional Sustainability : Project activities will be designed to build a central institutional capacity for managing the SINAP within the Environment Secretariat and will strengthen the institutional mechanisms for active participation of stakeholders at a national scale. At the site level greater involvement of civil society in park management is expected to contribute to long-term viability and social and institutional sustainability of the protected areas.
This project will strengthen publicprivate partnerships and further build capacity within partner organizations (i.e. NGOs, community organizations) to implement co-management arrangements. c) Strengthen the Legal framework : Project activities would support consolidation of the protected area system by working with the recommendations of the National Commission for National Protected
Areas (NPA) as reflected in their map of the Priority Areas for Conservation, which include the System of NPA, plus the areas that should be incorporated under some kind of formula for protection, including economic incentives and legal agreements with their proprietors. Further project preparation will explore the adequacy of the legal framework for protected areas management in this regard. d) Ensure Adequate Monitoring and Evaluation : Building on ongoing activities the project will include conducting baseline assessments of biodiversity and creating mechanisms to monitor biodiversity impact and protected area management effectiveness in the project sites. e) Have a Viable Financial Sustainability Strategy : The project will assess various potential financial mechanisms for covering protected area recurrent costs and develop a long-term financing strategy for each of the protected area sites. iii. Communication strategy
Various World Bank studies indicate that one of the main lessons learned from the Bank’s past assistance is that borrower ownership and policy continuity are key to successful projects.
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Second, the Bank should keep the medium and long-term focus of its assistance, aligned with government objectives and coordinated with other external donors. In this context of a long-term vision and policy continuity, it is important during project preparation and implementation to develop an open dialogue with a broad range of stakeholders in the country.
These lessons learned are reflected in the communication strategy for project preparation, which includes reaching out to a broad range of stakeholder groups through the Environmental Services Consultative
Group, as well as project preparation plans which would include engagement with local stakeholder groups in the communities of the pilot sites and buffer zones of selected protected areas. These lessons learned would also be reflected in key elements of the project’s design, which would include a state-ofthe-art communications strategy and active participation of community-based organizations and the private sector in each of the major project components.
The Experience of the World Bank with Semarnat
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As mentioned above the GEF biodiversity portfolio in Mexico provides lessons which are fully integrated in the concept and will be further incorporated in the preparation of the World Bank blended GEF/Loan operation. Probably the most direct linkage will be the implementation of the tool kit produced by the
GEF-WB MSP Private Lands .
The lessons learnt form two projects approved in 2000 are of particular relevance to this project:
Mexico-Mesoamerican Biological Corridor, took almost 3 years to become fully effective. The stated obstacle according to the executing agency which is a recognized academic institution, is the cumbersome mechanisms built in the project which were intended to guarantee an adequate social participation. The lesson derived from this operation has led the team to a fully participatory approach from the initial stages of preparation in order to secure an adequate representation of the relevant stakeholders and hence their support for the implementation.
Indigenous and Community Conservation (Coinbio), was originally conceived as a complementary GEF grant to the Community Forestry (Procymaf) World Bank loan. Their preparation (and implementation) was decoupled and Coinbio was not able to take advantage of the infrastructure created to promote and operate the loan in the field. Coinbio, approved in 2000, is still struggling to adapt a hybrid institutional arrangement which has not been able to develop the local capacities that Procymaf (which started to operate in 1997) could have provided. In this case, the lesson is incorporated in the project by building on the already initiated Payments for Environmental Services program in Conafor, and designing a fully blended World Bank loan and GEF grant operation.
III. Project Description
The project will implement three schemes of payments for environmental services of the forests
(components II, III and IV) as innovative financial mechanisms to strengthen the sustainability and consolidation of the Priority Areas for Conservation in Mexico. On-the ground activities will focus on areas of high global biodiversity. ( map 1 ANNEX 1 Priority Terrestrial Regions)
Complementarily the project will promote markets (component I) by creating the proper environment, economic incentives and removing the barriers for private-private deals, public-private partnerships and public-public transactions between government agencies, sectors and local governments.
The markets for environmental services will contribute to conserve selected mountain and forest ecosystems while improving living conditions of local communities.
The key interventions, detailed under the five components, focus on cost-effective and innovative mechanisms to guarantee the environmental, institutional, social and financial sustainability of the conservation efforts, while taking advantage of a growing awareness that creates the conditions for new partnerships with local and indigenous communities, on the side of the owners of the land and natural resources and government agencies, NGOs, the international community and the private sector, on the side of the groups that benefit from the environmental services of the forest.
The Project Development Objective is to conserve globally significant mountain and forest ecosystems
(see map ) while improving living conditions of landowners of forests, through payments for the
Environmental Services of the Forests and promotion of Markets for Environmental Services as economic
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incentives to promote sustainable management and support long term conservation of Mexico’s biodiversity.
The specific project objectives include:
(a) Demonstration and Implementation of Innovative Financial Mechanisms with high replication value.
(b) Capacity Building for long-term Sustainability of the Financial Mechanisms and Enabling
Environment.
(c) Promote the participation of local community and indigenous groups, and the equitable sharing of the benefits –monetary and other-, achieved.
(d) Remove Barriers to Facilitate Private Agreements, Inter-Agency Transactions and Public–Private
Partnerships and
(e) Developing market incentive measures through both demand and supply side interventions, promotion of independent certification, to catalyze market forces.
(f) Pilot test integrated approaches to mainstream biodiversity conservation objectives in Carbon
Sequestration and Land Management initiatives, promoted by other agencies, with potential synergies.
The project will be organized under five components:
Component I: Promotion of Markets for Environmental Services: Development of institutions,
Regulatory Framework, Certification and Public Awareness and Support.
This component will foster environmental services payments schemes and markets, whether they have a direct participation of the Mexican Forestry Fund or not. Activities: Build capacity, develop institutions, update regulatory frameworks and develop economic instruments and incentives for potential markets, marketing and technical assistance for "packaging" the demand and supply. Development of independent institutions for the monitoring and certification for new market niches..
Component II: Mexican Forestry Fund: Payment for Environmental Services of Water.
This component will strengthen the existing environmental services payments for watersheds program within the Mexican Forestry Fund of Conafor to better define and focus its support to strategic mountain and forest ecosystems while developing surrogate local arrangements to guarantee long term financial sustainability. Activities: Continuous improvement of the operational rules for the Mexican Forestry Fund for the Payment of Environmental Services and incorporation of new partners, sources and services; and the use of better techniques for monitoring and evaluating the PES-W. This includes identification of areas and eligible activities, design of the contractual and institutional arrangements: Legal Framework,
Conditions, Guarantees, Insurance, Payments, Prioritization of Environmental Services, Definition of
Critical Areas, Threats and Opportunities, Comparative advantages of various land uses, comparative efficiency and technical assistance for improved conservation practice and use in order to achieve the best production mix of goods and associated services including environmental services.
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Component III: New Payments for Environmental Services for Tourism (PES-BD): Scenic Beauty and Biological Diversity.
Design and promote a similar approach for a trigger PES-BD program mainly supported by a regular contribution of the Tourism Sector Fund which is supported by local taxes, migration taxes, airport taxes, and voluntary contributions of the tourism operators who benefit from the conservation of ecosystems, particularly around the most popular destinations, including the Pacific mountain dry forests and the
Caribbean tropical forests.
Component IV: Component IV: Integrated Environmental Services
Design and implement pilot projects to mainstream biodiversity conservation objectives in Carbon
Sequestration and Land Management initiatives, promoted by other agencies, to maximize synergies that generate local and global biodiversity benefits.
Component V: Project Coordination, Monitoring and Evaluation
Evaluation of impacts, synergies and cost sharing. Design of direct and indirect field monitoring tools, remote sensing and systems of spatial analysis (GIS), Best Practices demonstration Plots, Management of
Funds, Costs, and Requirements, Indicators and Means of Verification, including independent certifiers.
Evaluation and international recognition.
The proposed Environmental Services Project will support the development of markets for and providers of environmental services. It will also support diversification of household incomes among the poorest members of Mexican society -- rural poor living in ejidos and indigenous communities -- where approximately 35% of the population lives in conditions of extreme poverty and social marginalization in terms of access to basic services, and where it is likely that the most basic of the Millennium
Development Goals -- a reduction in extreme poverty by 50% -- is unlikely to be met.
The project will not finance a simple transfer of financial resources to rural communities, but rather contribute to a comprehensive strategy to strengthen indigenous communities and ejido organizations, their technical and entrepreneurial capacities and the certification of good management practices that will guarantee the long term sustainability of the natural resource base of their economy.
Coordination of the Project
This section will be developed during preparation to address project coordination and management for implementation and monitoring of the previously mentioned components. The Coordination Unit will implement the following:
Organizational and functional performance unit.
Management system that includes multi-year strategic planning and yearly operational planning.
Administrative-financial system.
Global Benefits
Baseline Scenario
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National public financing has not provided the necessary resources to establish and maintain protected areas. While CONANP’s budget increased by almost 55% (from MXN 147 million in 2000 to almost
MXN 227 million in 2002), it is still half of what would be desirable in the present phase of consolidation of CONANP and the National System of Protected Natural Areas.
Through a USD 25 million donor agreement with the Global Environment Facility (GEF) signed in 1992, a project was established to support the primary operating and management needs of 10 protected natural areas chosen for their great biological wealth and endemic species. USD 8.7 million was spent by 1997; the remainder was used to create the Fund for Protected Natural Areas as a private investment fund, the interest on which finances basic operations in the 10 protected areas along with funding from budgetary sources (ranging between 10 and 40% of the budget of individual areas).
A second donation (USD 31.1 million) was agreed with GEF in 2002 to finance consolidation of SINAP, including USD 22.5 million for an investment fund for 12 additional protected areas. Mexico is expected to provide USD 27.5 million in matching funds. In addition, 26 protected natural areas have been assisted through financing from private enterprises to execute conservation projects.
In 1996 the Income Tax Act was amended to make donations to NGOs carrying out conservation projects in protected natural areas tax deductible. In 2001 the Legislative Assembly reformed the Federal Law on
Rights and approved the instrument on charging for use, enjoyment and exploitation of marine national parks to finance conservation of biological resources; in 2002 MXN 11 million was collected and invested in equipment, operation and management of the natural areas that generated them.
Within the National Forest Fund, the mechanism for payment for environmental services to communities would continue to provide financial reward for initiatives that contribute to conservation of biological diversity. The first twenty millon dollars have been channeled to mountainous forest of relevance to critical watersheds, and technical guidelines are being revised on a yearly basis to better focus the investment and promote local markets for environmental services of the forest.
Other economic instruments currently available for conservation of biodiversity are: i) financial support to rural communities from PROCYMAF to prepare sustainable forest management plans; ii) income from royalties on collection of biological material; iii) charges for hunting permits issued by communities that own land on which game is hunted; iv) charges for other hunting permits and permits to capture and sell songbirds and ornamental birds; v) issuance of CITES certificates and licenses to import and export specimens, parts and by-products of species of wild flora and fauna; vi) charges for inspections of cross-border movements of wildlife; and vii) charges for administrative procedures relating to wild flora and fauna.
GEF Alternative
The direct global benefits that this project will generate are: (a) maintenance of habitats that are important to conserve biodiversity of global significance, (b) incentives for long-term habitat maintenance, (c) increased public awareness of issues related to biodiversity conservation and meaningful participation of local stakeholders for sustainable community conservation; (d) establishment of corridors and sustainable management of critical habitats; (e) empowerment of communities to manage protected areas and form collaborative agreements with other communities; (f) demarcation and conservation of critical forest ecosystems and enhancing the probability of achieving long-term conservation; (g) incentives for communities to maintain conservation areas and complementary areas of sustainable use; (h) increased collection and analysis of information vital for conserving endemic flora and fauna; and (i) development
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of methodologies and best practices for integrated socioeconomic and bio-physical information bases on high priority biodiversity resources in community lands.
Global priority eco-regions in Mexico , 1998
Eco-region type
Area
(‘000 hectares)
Pine and oak forest of the western Sierra Madre 20, 437
Wetlands of central Mexico 36
California coastal sage chaparral
Cactus scrub of northern Sonora
Dry forest of Jalisco
Dry forest of Balsas
Transvolcanic pine and oak forest of Mexico
Pine and oak forest of the southern Sierra
Madre
2,710
9,796
1,997
16,110
7,280
4,113
Dry forest of Tamaulipas and Veracruz
Moist forest of Tehuantepec
4,086
14,675
925 Savannah of Tabasco and Veracruz
Palm savannah of Jalisco
Alpine tundra of Mexico
Xeric scrub of Puebla
55
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682
Total 82, 917
Source: CONABIO.
Within this context, implementing the Project of Environmental Services of the Forest is going to help restrain the loss of biodiversity, reduce the latent threats as well as give an economic assessment of biodiversity, resulting in both local and global benefits.
The value added brought to the project by the GEF comes from technical assistance, ease of establishing clear rules of operation, transparency of the process, facilitation for achieving an adequate interinstitutional coordination, as well as coordination with other donors, and finally guaranteeing continuity of the efforts through the active involvement of beneficiaries and providers through market mechanisms, regulation and the institutional and fiscal incentives for the future.
Incremental Costs and Tentative Project Budget
While the PDF–B will support preparation of a detailed incremental cost analysis of the GEF project, we anticipate that the following elements will be part of this analysis:
Baseline analysis to evaluate evolving scenarios, taking into account the current institutional arrangements and the ongoing efforts of organizations that have duties and responsibilities within the forest sector.
Analysis of the cost of opportunity with regards to other regionally accepted uses of the land and resources, to differentiate the locally moved initiatives versus the best practices to generate and preserve global benefits.
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An alternate scenario, taking into account the GEF project, and including relevant actions that provide long-term financial sustainability.
Component I
Promotion of Markets for Environmental
Services: Development of institutions,
Regulatory Framework and Public
Awareness and Support Certification
US $ Million dollars
GOM IBRD GEF
1.12 2.08 2.5
25.76 47.84 Component II
Mexican Forestry Fund: Payment for
Environmental Services of Water
Component III
New Payments for Environmental Services for Tourism (PES-BD): Scenic Beauty and
Biological Diversity
7.5
Total
5.7
73.6
7.5
Component IV
Integrated Environmental Services Pilots to mainstream biodiversity conservation objectives in Carbon Sequestration and Land
Management initiatives.
1.11 5.0 5.0
Component V
Project Coordination, Monitoring and
Evaluation
Total
.003
28.0
2.08
52.0 15.0
3.2
95.0
Stakeholder Participation: Multisectoral advisory committee
Since September 2003 a group of individuals was invited to form an Advisory Committee for the project.
The group has met regularly on a monthly basis to discuss the project objectives, the preparation schedule, the present experience on implementation of the Payment for Environmental Services by
Conafor, as well as other international experiences. It’s main objective is to act as an advisory body throughout the development of the Forest Environmental Services Project.
This interdisciplinary committee consists of a group of 17 people that represent different sectors. NGOs such as PRONATURA, the Nature Conservancy, and the Mexican Civil Council for Forestry, who has operated the first Smart Wood/FSC Certification Service in Mexico. The individuals who belong to these three NGOs have a broad knowledge because of their experience in developing projects on environmental issues in Mexico. The head of the Social Trust Fund of the biggest private bank in the country brings in his long experience working in the field with indigenous communities and their forestry organizations.
With regard to academic institutions, two researchers from the National University (UNAM) and the
National Council of Science (Conacyt-Centro GEO) are participating, both institutions prove to have
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extensive and recognized academic value on the national level as well as on international grounds. A prominent member of Ford Foundation is involved because of her broad regional experience in the field of environmental services. Finally there are representatives of the government such as the National
Institute of Ecology, and the National Forestry Commission of the Environmental sector, and the Ministry of Finance. Because of all the above mentioned institutions involved in the project , the committee can be considered an integral group. Other relevant actors, namely the representatives of local schemes of payments for environmental services that are being designed and will soon operate will be invited to join the advisory group.
The Advisory Committee operates both as a consultative as well as a study group, since the issues arising are so innovative and there is new information being processed every month by the individuals that is brought into the sessions for discussion.
Every month specific presentations are made with the goal of identifying the experiences and lesson gained in the field. The group analyzes each specific case in an integral way by addressing social, environmental, and economic aspects, in order to identify success stories as well as barriers in the design and implementation phases.
The first undertaking of the group as a shared task will be the preparation of TOR, identification of candidates and the supervision of the studies required during the project preparation phase. It has already initiated the documentation of successful and non-successful cases in the environmental services field carried out in different states of the Mexican Republic.
Local indigenous and rural communities participation is key in the project since in most cases they are the legal owners of the land, an interested party in the conservation and sustainable use of their land and resources, and finally, the providers of environmental services to the rest of society. Consultations with local communities and indigenous communities, including vulnerable subgroups (women) will be held, prior to ‘Work Program’ inclusion, in order to:
Evaluate ownership of project and social capital in local communities.
Identify local stakeholders, particularly land owners and vulnerable groups, and their main interests in the project.
Assess possible needs for local organizations build up in order to engage in the project and be able to fulfill commitments.
Design participatory decision mechanisms that involve a) local stakeholders (meaning mainly indigenous and rural communities that are owners of the land), b) institutions with a public mandate and, possibly, c) third parties (academic and civil society organizations) interested in conservation and social development.
Design a plan for social capital, conflict resolution, organizational and local leadership build up as needed, to promote active local engagement and long term project sustainability.
The methodology for consultations will include interviews with qualified informers, focus groups discussions, open community meetings and the Participatory Diagnostic and Planning Kit.
1
Other public and private organizations are also in the process of getting more involved and will play an important role in the project.
1 Participatory Diagnostic and Planning Kit (developed with a PHRD for marginal communities in the Rural Development in
Marginal Areas Project).
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Eligibility
The proposed project will fall into the GEF’s Biodiversity Focal Area, as a Forest and Mountain
Ecosystems Operational Program. This is a conservation project in an area of very high biodiversity, much of which is considered regionally and even globally outstanding, and includes exceptional ecosystems.
Mexico signed the CBD on June 13, 1992 and ratified March 11, 1993.
The project is fully consistent with the guidance of the Convention on Biological Diversity (CBD), specifically the Conference of the Parties, regarding the sustainable use and conservation of biodiversity in vulnerable areas.
The Mexican Government, academia, private sector and relevant stakeholders have prepared a Country
Study and a Biodiversity Strategy has been presented, being the following the main broad themes of the
Strategy:
Conservation
Diversified Sustainable Use
Valorization of biodiversity
Knowledge and information management
Knowledge shearing and disclosure
It will also promote and support this by increasing economic viability through the payment of environmental services that contribute to a better management of natural resources (including biodiversity and agrobiodiversity).
The project directly addresses operational programs 3 Forest Ecosystems and 4 Mountain Ecosystems as well as Biodiversity Focal Area Strategic Priorities I and II: I. Catalyzing Sustainability of Protected
Areas: (a) Demonstration and Implementation of Innovative Financial Mechanisms and II.
Mainstreaming Biodiversity in Production Landscapes and Sectors: (b) Developing market incentive measures.
The Environmental Services of the Forest Project responds to national priorities providing for in situ conservation, sustainable use initiatives and economic and social valuation of natural resources with particular attention being paid to biological diversity. This is based on the work the GOM developed in the past years with the GEF Secretariat regarding the Programmatic Framework for GEF support of biodiversity conservation initiatives in the country, that permits the government to incorporate biodiversity objectives into the country’s national strategies and plans.
National Support
The Ministry of Environment and Natural Resources, has been developing through different specific areas, policy instruments that are consistent with the implementation of the proposed strategy.
Under the Mexican 2001-06 National Environment and Natural Resources Program (ENRP), priority environmental issues include: sustainable development as a shared responsibility of different sectors and institutions; decentralization of environmental management and increased public participation; ensuring
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that beneficiaries pay for environmental services provided; strengthening of inspection and compliance rates; loss of tropical forests and biodiversity; and sustainable water resources management.
The Government of Mexico through CONAFOR has endorsed and expressed its interest in developing the Project of Environmental Services that will not only strengthen the Mexican environmental sector, but will also result in associated benefits in environmental, social and economic areas.
The expression of interest regarding the development of the project has been endorsed by the Ministry of Finance and Public Credit. On July the 7 th
2003 the General Director of CONAFOR sent an official letter to the Ministry of Finance and Public Credit (SHCP) confirming the interest of the Commission to develop a conceptual proposal to explore the desirability of including in the Country Assistance Strategy
(CAS) of the World Bank, the preparation of a GEF grant and World Bank Loan will finance the expansion of the Program of Forest Environmental Services. Moreover the Ministry was requested to carry out necessary preparations for a World Bank Identification Mission for Project development .
The Finance Ministry representative and GEF focal point for the country officially requested the Bank’s support to prepare a GEF Grant/World Bank Loan operation to support of the Project of Environmental
Services of the Forest ( Endorsement letter for the GEF attached ) and through CONAFOR requested a first identification mission of a possible operation that would give technical assistance and refinance the program of environmental services (see Annex 3) . Initially a 4 year operation estimated at US95 Million with a US52M loan and a blended GEF grant in the order of US15M.
The government of Mexico is highly committed, through the National Mountain Program and with the support of the recently approved (2003) Forestry Law, to protect Mountainous and Forest Ecosystems.
The World Bank finances a Community Forestry Project (Procymaf) which started as a pilot in Oaxaca
State in 1997 and has now been expanded to 6 states and strengthened through a second loan operation
(Procymaf II) which is rendering relevant lessons for the country, and for the region as a model to balance biodiversity conservation and sustainable natural resource management with societal values, interests and needs.
The Program for Payment of Environmental Services of CONAFOR presently operates with a yearly allocation of 20 million US dollars, this contribution by National Water Commission (CNA) amounts to less than 4% of income generated by tariffs, which means is sustainable.
Also the technical assistance component of the PROCYMAF project is already providing support to identify and value the environmental services provided by the forests. There is also an active policy dialog under the Programmatic Environmental Structural Adjustment Loan (EnvSAL I), and supported by a new piece of sector work on the contributions of natural resources management to governance in rural
Mexico.
The importance of environmental services has been recognized and incorporated in the new Forestry Law
(2003). Under this policy the recently strengthened National Forestry Commission (CONAFOR) has requested the Bank to further the concept and include a specific operation to finance the payment for forest environmental services in the CAS.
Finally is important to mention that this project is directed for better measurement of the impact, expand it to other services and incorporate other sources and sectors.
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Because of the above stated it is evident that the GOM is recognizing, including through the new forestry law which explicitly refers to the Environmental Services of the Forests, the importance forests play in the stabilization of ecosystems, and constitute an important support for preserving biological diversity, contribute to air and water quality, help conserve soils and have an effect on temperature relations.
Description of Proposed Activities for the PDF –B
The Environmental Services Project will support a process of legal and institutional change, by designing and financing feasibility studies on payment schemes in environmental services markets and finance through the WB loan the PES-W program already started, better focusing it to global benefits, while complementing the scheme with a diversified market of individual, corporative and public users and the owners of the forests.
This process will be developed in a participatory way, attending to the GEF
Information/Consultation/Participation guidelines an the WB Forest Policy (OP/BP 4.36) which encourages linking country policy dialogue and project development to national forest programs and other development processes.
The PDF- B will help to optimize the design and operation of the instruments required for an adequate implementation of the environmental services and will use the scheme of payment for water related environmental services initiated by CONAFOR as a model to jump start similar initiatives in other sectors to support other forest related environmental services for tourism, biodiversity, infrastructure protection, disaster prevention and carbon sequestration.
Justification of the PDF –B
The opportunity to prepare a comprehensive Project Concept and Framework to fully develop the innovative approaches and tools to further the concept of the Environmental Services program, will demand a series of activities of technical assistance, consultation and studies.
The PDF Block B resources requested, as shown in the budget table below, will be additional to the loan preparation funds. Since this will be a fully blended operation, the baseline preparation activities will be funded under the PHRD preparation grant and part of the counterpart resources form the client.
In order to design the specific activities to be undertaken by the components addressing globally relevant biodiversity and better focus on the priority areas of conservation, the PDF-B activities will cover the necessary steps to incorporate this global objectives within the final design of the operation.
The final accomplishment of the strategy design supported by the PDF-B will contribute to the sustainability of the conservation efforts of the GOM and the conservation community, -national and international- which has been very active in Mexico for over a decade.
Implementation Arrangements for PDF
–B
Environmental Services of the Forest Unit
The National Forest Commission has created a Unit to manage the Payments for Environmental Services and has been fully in charge of the initial preparation of the concept notes for the proposed operation.
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Conafor successfully operates a Community Forestry WB loan since 1997, and has developed managerial capacity to comply with the basic WB requirements, including the environmental and social safeguards and participation policy.
Nacional Financiera (Nafin), the GOM development bank, will be the financial agent for this project under the same standard agreements that operate for the Community Forestry WB loan since 1997. An hybrid attempt to use Nafin as an executing agent for the GEF Indigenous and Community Conservation project has not been as successful as the prior experiences where it only operates as a financial agent processing procurement and disbursements.
As expressed earlier, the program’s Plural Advisory Committee will go on participating during the preparation and implementation phases.
Conafor
In April 2001 the Government of Mexico created the National Forest Commission (Conafor) with the mandate to support sustainable production of forests and conservation of forest resources based on a
Strategic Forestry Program (2000-2025) with a 25 year horizon. Conafor’s creation and its long-term plan, represents a significant effort to reverse the deterioration and depletion of natural resources, and to transform this national problem into a productive asset through the launching and implementation of guidelines for sustainable management of forests, water and soil of new programs. Its sectoral approach is complemented by the Sustainable Development Program (Programa de Desarrollo Sustentable del
Gobierno Federal) which represents a formal effort to build synergies and complementarities among the different government policies and instruments which have historically responded to oftentimes conflicting sectoral interests.
Regarding the institutional framework, the project will assist the government in addressing the challenge of mainstreaming biodiversity into development planning by introducing an innovative initiative of creating synergy between biodiversity conservation and environmental services payments.
Conafor’s Governing Body is made up of representatives of different Secretariats of the Federal
Government such as: National Defense, Finance and Public Credit, Social Development, Environmental and Natural Resources, Economy, Agriculture, Agrarian Reform, Tourism, and the National Water
Commission. This institutional structure is designed to facilitate the objective of aligning inter ministerial efforts.
Budget and Schedule for the PDF-B
The next Table shows the budget for PDF–B, in thousands of U.S. dollars, detailed by activity components and funding source.
Activities GOM PHRD PDF -
B
Total
US$
Component I
Promotion of Markets for Environmental Services: Development of institutions, Regulatory
Framework and Public Awareness and Support Certification
Design the Plan for Capacity Building 10 10
Design of Institutional and implementation arrangements for the
5 10 15
26
PES
Asses Environmental Services 6
Regulatory Framework
Identify Potential Markets
Asses of Technical needs for marketing 3
Asses of needs for Monitoring and
Certification Institutions
Evaluate Economic Instruments and
Incentives
Asses Economic Valuation
Methodologies
6
60
100
20 160
Component II
Mexican Forestry Fund: Payment for Environmental Services of Water
Design of Institutional and Contractual
Arrangements
5
Identify needs for harmonize the Legal
Framework
Identify Eligible Areas and Activities 150
40
40
30
35
35
160
20
46
60
33
41
35
100
340
5
40
170
Review of existing studies on valuation 5 5 of Natural Resources (water, forests, biodiversity)
Develop the Social Assessment
Technical Assistance to Improve
Conservation Practice and Use
Technical Assistance directed towards
Forest Management for each
Environmental Service
Improve the Operational Rules for the
Mexican Forestry Fund
Identification and Definition of Critical
Areas
Identify advantages of various Land
Uses
150
100
100
20
8
100
20
150
8
100
100
100
500 178 20 698
Component III
New Payments for Environmental Services for Tourism (PES-BD): Scenic Beauty and Biological
Diversity
Design a similar Approach for a Trigger
PES – BD program mainly supported by
170 170 a regular contribution of the Tourism
Sector Fund
0 0 170 170
27
Activities GOM PHRD PDF –
B
Total
US$
Component IV
Integrated Environmental Services Pilots to mainstream biodiversity conservation objectives in
Carbon Sequestration and Land Management initiatives, promoted by other agencies, with potential synergies.
10 10 Design Independent Evaluation of
Forest Ecosystem Management
Design Indicators and Means to Verify
Contract Compliance
Design of Forest Certification Programs
2 Design of Indicators and Means of
Verification
Develop Studies for Preferred Forest
Management Practices to Attain Desired
Impacts
Design and Implementation of Best
Practices Demonstration Plots
Design of GIS tools
3
Develop Remote Sensing and Systems of Spatial Analysis (GIS)
4
10
10
10
100
10
10
2
10
3
100
4
Design of Direct and Indirect Field
Monitoring Tools
Evaluate of Impacts, Synergies and Cost
Sharing
Design and Develop a Comparative
Study that enhance linkages among
Biodiversity, Land Degradation and
Carbon Sequestration
Other Studies
4
4
20
0
4
4
0
20
Component V
Project Coordination, Monitoring and Evaluation
Identify Fund Management Strategies and Requirements
Develop Funds, Cost and Management
Requirements
Total
17
3
3
540
160
17
17
515
0
0
350
177
17
3
20
1’405
Activities Outputs
Component I
Promotion of Markets for Environmental Services: Development of institutions, Regulatory
Framework and Public Awareness and Support Certification
Design the Plan for Capacity Building
Design of Institutional and implementation arrangements for the PES
Capacity Building Plan
Institutional arrangements: procurement and disbursement arrangements
Asses Environmental Services Regulatory
Framework
Identify Potential Markets
Asses of Technical needs for marketing
Plan to develop initiatives to adequate the
Regulatory Framework
Markets Inventory
Guidelines for marketing development
28
Asses of needs for Monitoring and Certification
Institutions
Plan to develop independent Monitoring and
Certification Institutions
Evaluate Economic Instruments and Incentives Economic Strategy and Incentives Guidelines
Asses Economic Valuation Methodologies Updated Economic Guidelines
Component II
Mexican Forestry Fund: Payment for Environmental Services of Water
Design of Institutional and Contractual
Arrangements
Identify needs for harmonize the Legal
Framework
Legal arrangements such as covenants, guarantees, insurance, and payments systems
Legal study in order to identify synergies and gaps within the current legal frame at federal and local levels
Inventory Identify Eligible Areas and Activities
Review of existing studies on valuation of Prioritization of Environmental Services
Natural Resources (water, forests, biodiversity)
Develop the Social Assessment Social Assessment
Technical Assistance to Improve Conservation
Practice and Use
Technical Assistance directed towards Forest
Management for each Environmental Service
Improve the Operational Rules for the Mexican
Forestry Fund
Identification and Definition of Critical Areas
Identify advantages of various Land Uses
Workshop
Methodology to produce the required environmental services
Operational Rules
Map of critical areas
Comparative study among different land uses in Mexico
Component III
New Payments for Environmental Services for Tourism (PES-BD): Scenic Beauty and
Biological Diversity
Design a similar Approach for a Trigger PES –
BD program mainly supported by a regular contribution of the Tourism Sector Fund
Concept Note for Environmental Services for
Tourism Project (including scenic beauty and biological diversity).
29
Activities Outputs
Component IV
Integrated Environmental Services Pilots to mainstream biodiversity conservation objectives in
Carbon Sequestration and Land Management initiatives, promoted by other agencies, with potential synergies.
Design Independent Evaluation of Forest
Ecosystem Management
M&E Protocol
Indicators Guideline Design Indicators and Means to Verify Contract
Compliance
Design of Forest Certification Programs Complete Methodology for a Certification
Program
Design of Indicators and Means of Verification Methodology and database of verification indicators
Develop Studies for Preferred Forest
Management Practices to Attain Desired Impacts
Complementary Studies
Monitoring and Evaluation Protocol Design and Implementation of Best Practices
Demonstration Plots
Design of GIS tools GIS tools completed
Develop Remote Sensing and Systems of
Spatial Analysis (GIS)
Design of Direct and Indirect Field Monitoring
Tools
Evaluate of Impacts, Synergies and Cost Sharing
Design and Develop a Comparative Study that enhance linkages among Biodiversity, Land
Degradation and Carbon Sequestration
GIS design completed
Monitoring and Evaluation tools
Incremental Cost Analysis
Comparative study of environmental services pilot projects in Mexico mainstream biodiversity conservation objectives
Other Studies To be determined during the preparation process
Component V
Project Coordination, Monitoring and Evaluation
Identify Fund Management Strategies and
Requirements
Management Guidelines
Project Budget (Cost Tab) Develop Funds, Cost and Management
Requirements
30
PDF - B ACTIVITIES CHRONOGRAM
Component 1 :Promotion of Markets for Environmental Services
PY01 1 2 3 4 5 6 7 8 9 10
Scope: Development of institutions, Regulatory Framework and Public Awareness and
Support Certification
Design the Plan for Capacity Building
11 12
Technical Assistance for marketing
Design of Institutional and implementation arrangements for the PES
Asses of needs for Monitoring and Certification
Institutions
Asses Environmental Services Regulatory
Framework
Evaluate Economic Instruments and Incentives
Develop Economic Study
Component 2: Mexican Forestry Fund: Payment for Environmental Services of Water (N.A.)
PY01 1 2 3 4 5 6 7 8 9 10 11 12
Component 3 : New Payments for Environmental Services for Tourism (PES-BD)
PY01 1 2 3 4 5 6 7 8 9 10
Design a similar Approach for a Trigger PES – BD program mainly supported by a regular
11 contribution of the Tourism Sector Fund
Scope: The project design has to incorporate local taxes, migration taxes, airport taxes, and volunatry contributions of the tourism among other resources
Component 4: Integrated Environmental Services Pilots
PY01 1 2 3 4 5 6
Biodiversity, Land Degradation and Carbon Sequestration
7
Design and Develop a Comparative Study that enhance linkages among
8 9 10 11
Scope: Enhancing linkages between Biodiversity, Land Degradation and Carbon Sequestration to maximize synergies that generate local and global environmental benefits
12
12
Component 5: Project Coordination, Monitoring and Evaluation (N.A.)
PY01 1 2 3 4 5 6 7 8
ANNEX 1 Priority Terrestrial Regions
9 10 11 12
31
32
-Cont-
Annex 1
Priority Mountain Zones
33
-Cont-
Annex 1
Priority Hydrological Areas
34
ANNEX 2 Federal National Protected Areas
35
-Cont-
Annex 2
Natural Protected Areas
(Million hectares )
36
ANNEX 3 Governmental Letter & translation
Unofficial translation:
Isabel Guerrero
Country Director
37
The World Bank
As you may know, the National Forestry Commission (Conafor), with the assistance of the
World Bank is preparing a proposal for a GEF Project that will support the “Program of
Environm ental Services of the Forest”.
In this sense I wish to request that the Bank makes the necessary arrangements for obtaining a
GEF grant to support preparation activities of the above mentioned proposal.
Thanking you in advance for your consideration to our request, I to take the opportunity to send you my kindest regards.
Ricardo Ochoa
Finance Ministry
GEF Focal Point i Bank-Netherlands Water Partnership Program, Watershed Management Window, Technical Note, July 2001. ii Pagiola, Stefano. 2002. “Paying for Water Services in Central America: Learning from Costa Rica.” World Bank,
Environment Department, Washington, D.C. Chpt 3 in: Selling Forest Environmental Services: Market-based Mechanisms for
Conservation , edited by Stefano Pagiola, Joshua Bishop, and Natasha Landell-Mills, Earthscan, London, 2002. iii Andrew Nelson and Kenneth M. Chomitz. “The Forest-Hydrology-Poverty Nexus in Central America: An Heuristic
Analysis. Draft working paper, The World Bank, October 2002. iv Diamond, N., Platais, G. 2003. Participatory Conservation, The World Bank, Washington DC.
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