Document of The World Bank...Report No:ICR0000125 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-30650, IDA-3065A, SWTZ-23549) ON A CREDIT IN THE AMOUNT OF SDR 46.5 MILLION (US$

Document of The World Bank

Report No:ICR0000125

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-30650, IDA-3065A, SWTZ-23549)

ON A

CREDIT IN THE AMOUNT OF SDR 46.5 MILLION (US$ 70.0 MILLION EQUIVALENT)

TO

the Republic of Bolivia

FOR A

Participatory Rural Investment Project

January 11, 2007

Sustainable Development Department Bolivia, Ecuador, Peru and Venezuela Country Management Unit Latin America and the Caribbean Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS( Exchange Rate Effective 12/22/2006 )

Currency Unit = BOB BOB 1.00 = US$ 0.13 US$ 1.00 = BOB 8.00

Fiscal Year

January 1-December 31

ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CV Vigilance Committee (Comité de Vigilancia) DCA Development Credit Agreement EIRR Economic Internal Rate of Return FDC Small Farmer Development Fund (Fondo de Desarrollo Campesino) FIRR Financial Internal Rate of Return

FPS National Fund for Productive and Social Investment (Fondo Nacional de Inversion Productiva y Social)

GOB Government of Bolivia HIPC Highly Indebted Poor Country LCR Latin American and Caribbean Region LDA Administrative Decentralization Law (Ley de Descentralización Administrativa) LDN National Dialogue Law (Ley del Dialogo Nacional) LPP Law of Popular Participation (Ley de Participación Popular) NGO Non-Governmental Organization NPV Net Present Value OTB Territorially-based Grass-roots Organization (Organización Territorial de Base)

PDCR Rural Communities Development Project (Proyecto de Desarrollo de Comunidades Rurales)

PDCR II Participatory Rural Investment Project PDM Municipal Development Plan (Plan de Desarrollo Municipal) PEDEL Local Economic Development Plan (Plan de Desarrollo Económico Local) PGTI Indigenous Territorial Management Plan (Plan de Gestión Territorial Indígena) PNC National Compensation Policy (Política Nacional de Compensación) POA Annual Operational Plan (Plan Operativo Anual) PRSP Poverty Reduction Strategy Paper SDC Swiss Agency for Development and Cooperation

SINCOM Integrated Municipal Accounting System (Sistema Integrado de Contabilidad Municipal)

TCO Indigenous Territorial Land (Tierra Comunitaria de Origen) VD Viceministry of Decentralization VIPFE Vice Ministry of Public Investment and External Financing VMPP Vice Ministry of Popular Participation (Viceministerio de Participación Popular) VMPPFM Vice Ministry of Popular Participation and Municipal Strengthening V MRD Vice Ministry of Rural Development

Vice President: Pamela Cox

Country Director: Marcelo Giugale Sector Manager: Mark E. Cackler

Project Team Leader: David Tuchschneider

Bolivia Participatory Rural Investment Project

CONTENTS

1. Basic Information........................................................................................................ 1

2. Key Dates.................................................................................................................... 1 3. Ratings Summary........................................................................................................ 1 4. Sector and Theme Codes ............................................................................................ 2 5. Bank Staff ................................................................................................................... 2 6. Project Context, Development Objectives and Design............................................... 3 7. Key Factors Affecting Implementation and Outcomes .............................................. 6 8. Assessment of Outcomes .......................................................................................... 14 9. Assessment of Risk to Development Outcome......................................................... 23 10. Assessment of Bank and Borrower Performance ................................................... 24 11. Lessons Learned...................................................................................................... 27 12. Comments on Issues Raised by Borrower/Implementing Agencies/Partners......... 28 Annex 1. Results Framework Analysis......................................................................... 29 Annex 2. Restructuring (if any) .................................................................................... 31 Annex 3. Project Costs and Financing.......................................................................... 32 Annex 4. Outputs by Component.................................................................................. 34 Annex 5. Economic and Financial Analysis (including assumptions in the analysis).. 37 Annex 6. Bank Lending and Implementation Support/Supervision Processes............. 43 Annex 7. Detailed Ratings of Bank and Borrower Performance.................................. 46 Annex 8. Beneficiary Survey Results (if any) .............................................................. 47 Annex 9. Stakeholder Workshop Report and Results (if any)...................................... 48 Annex 10. Summary of Borrower's ICR and/or Comments on Draft ICR ................... 56 Annex 11. Comments of Co financiers and Other Partners/Stakeholders .................... 76 Annex 12. List of Supporting Documents .................................................................... 77

1. Basic Information Country: Bolivia Project Name: Participatory Rural

Investment Project

Project ID: P040085 L/C/TF Number(s): IDA-30650,IDA-3065A,OPEC-04380,SWTZ-23549

ICR Date: 01/31/2007 ICR Type: Core ICR

Lending Instrument: SIL Borrower: REPUBLIC OF BOLIVIA

Original Total Commitment: XDR 46.5M Disbursed Amount: XDR 39.8M

Environmental Category:B Implementing Agencies

Fondo de Inversión Productiva y Social (FPS) Viceministerio de Descentralización (VD, VMPPFM, VDADM) Fondo de Desarrollo Campesino (FDC) Co financiers and Other External Partners

Swiss Agency for Development and Cooperation 2. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 04/23/1997 Effectiveness: 12/04/1998 12/04/1998 Appraisal: 02/12/1998 Restructuring(s): 08/05/2003 Approval: 05/12/1998 Mid-term Review: 09/30/2005 06/04/2001 Closing: 06/30/2004 06/30/2006 3. Ratings Summary 3.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Moderately Unsatisfactory

1

3.2 Quality at Entry and Implementation Performance Indicators Implementation Performance Indicators QAG Assessments (if any) Rating:

Potential Problem Project at any time (Yes/No): No Quality at Entry (QEA): None

Problem Project at any time (Yes/No): Yes Quality of Supervision (QSA): Satisfactory

DO rating before losing/Inactive status:

Moderately Unsatisfactory C

4. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Irrigation and drainage 20 18 General agriculture, fishing and forestry sector 8 Sub-national government administration 25 23 General public administration sector 6 Other social services 15 General transportation sector 20 45 Other industry 20

Original Priority Actual Priority Theme Code (Primary/Secondary) Participation and civic engagement Secondary Secondary Gender Secondary Secondary Indigenous peoples Secondary Primary Rural non-farm income generation Primary Primary 5. Bank Staff

Positions At ICR At Approval

Vice President: Pamela Cox Shahid Javed Burki

Country Director: Marcelo Giugale Isabel M. GuerreroSector Manager: Mark E. Cackler Thomas B. Wiens

Project Team Leader: David Tuchschneider Pierre Werbrouck

ICR Team Leader: David Tuchschneider

ICR Primary Author: Mario Castejon

2

6. Project Context, Development Objectives and Design (this section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative) 6.1 Context at Appraisal (brief summary of country macroeconomic and structural/sector background, rationale for Bank assistance) In 1998, when project preparation came to its end, "optimism was in the air" [Country Assistance Evaluation, 2005]. Many Bolivians and many donors thought that the cumulative effects of over ten years of reforms, and the new government's program to promote private sector development, broaden the benefits of growth, and strengthen Bolivia's public sector institutions, would finally yield strong growth and poverty reduction results. The cumulative impact of political and economic developments in Bolivia from the mid-1980's to the late-1990's was reflected in dramatic changes in external perceptions concerning Bolivia's policies and institutions, and in some dimensions of its development performance. Perceptions of Bolivia's economic and political risk and the country's social indicators reflected important improvements. Poverty remained very high, however. Almost 70 percent of Bolivia's population was poor in 1997, and the poverty gap was 32 percent. In spite of concerns about Bolivia's previous growth and poverty reduction performance, expectations were high entering FY99. The Bank's FY99-03 CAS was grounded in an assessment of economic, social and political prospects that foresaw considerable scope for development progress. Base Case projections envisaged low stable inflation, high (by LCR and Bolivian historical standards) growth (5 percent plus per annum), declining fiscal deficits, declining debt, increasing investment and declining income and non-income poverty. While the CAS noted a series of risks, it appraised Bolivia's prospects as follows: "We believe that the original conditions under which we will be operating in the coming years in Bolivia's are more conducive to achieve results on the ground than in the past. The structural reforms are underway and have the full commitment of the administration." Starting with the Popular Participation (LPP) and Administrative Decentralization (LDA) laws, the Government began to remove the institutional constraints to limit investment in rural areas by creating rural municipalities, devolving decision-making to municipalities (and to a lesser extent to prefectures) and assigning to both an increasing share of public investment resources. It also gave local communities and indigenous groups the legal right to identify and formulate public investments and to participate in and control their implementation. It was expected that the resulting institutionality would improve the provision of infrastructure and services as well as ensure their sustainability. Response to the investment demands generated by the implementation of the LPP and its model of participatory development planning, investment and local administration required an expanded supply of investment resources, as central Government transfers were insufficient to satisfy local needs and demands. In particular, the government identified a shortfall in productive infrastructure and services, as municipalities dedicated most of their resources to social investments. As a follow-on operation to the successful Rural Communities Development Project (Cr. 2772), the project responded to these needs, in line the Bank's CAS at the time, which aimed at fostering opportunity for all, equity and institutional development. The emphasis in the project pointed towards increasing rural growth and incomes by allocating the vast majority of its resources directly to productive investments, in order to enhance the economic opportunities of rural families in selected municipalities, to increase their incomes and improve their livelihoods. The project was expected to have a positive impact on equity, as it aimed at small-scale investments in rural areas where the incidence of poverty was largely concentrated. Project resources were also allocated to strengthen the capacities of relevant local institutions (prefectures, municipalities, communities and their

3

organizations) to manage their own investment and development. 6.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The objective of the project was "to assist the Borrower to promote economic development of rural communities and Eligible Municipalities through sustainable productive investments based on local demand which is generated through participatory planning processes." 6.3 Revised PDO and Key Indicators (as approved by original approving authority), and reasons/justification The PDO and its Key Indicators were not revised. 6.4 Main Beneficiaries, original and revised (briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project) The primary intended target group of the project was the population of 200 of the poorest rural municipalities. Eligible Municipalities had between 3,000 and 50,000 inhabitants and the lowest index of satisfied basic needs. Later, with Swiss funds, eligibility was expanded to municipalities with less than 3,000 inhabitants if they became associated with other municipalities (mancomunidades). Secondary beneficiaries expected to gain directly from project activities included the municipal governments, rural communities, indigenous districts, and NGOs, as well as the implementing agencies themselves: the Vice Ministry of Popular Participation and Municipal Strengthening (VMPPFM, later re-named Vice Ministry of Decentralization - VDADM, VD), the Small-farmer Development Fund (FDC, later replaced by FPS), and the Vice Ministry for Rural Development. 6.5 Original Components (as approved) The project's components were: (a) Rural Investments (est. US$ 66 million, 76% of total cost) to finance pre-investment studies and consulting services, works, goods and equipment for rural investment sub-projects including: (i) improvement of access roads and construction and rehabilitation of bridges; (ii) community small-scale irrigation; (iii) markets and produce storage facilities; (iv) river embankment improvements; (v) natural resources management; (vi) technical assistance to rural producers; and (vii) cultural heritage rehabilitation; and (b) Institutional Strengthening (est. US$ 21.3 million, 24% of total cost) to finance: (i) technical assistance to municipalities, indigenous districts, rural communities and NGOs in municipal management, participatory planning and implementation; subproject planning, preparation, implementation and maintenance; subproject financial management and administration; environmental management and municipal revenue generation; (ii) formal training for staff of municipalities and indigenous districts, in municipal management and non-formal training of municipal councils, vigilance committees and community leaders; and (iii) consultants, office equipment, vehicles and incremental operating costs for prefectures, the Vice-Ministry of Popular Participation and Municipal Strengthening (later VDADM, and VD), FDC (later FPS), and the Vice Ministry for Rural Development.

4

6.6 Revised Components The project components were not formally revised, but the project was restructured via an "amendment and restatement" of the Credit Agreement that included, inter alia, changes in the implementation arrangements, in the implementation targets and in the monitoring indicators by component, as described in the next section. 6.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) An important change in the policy environment in which the project functioned, and which led to changes in design, scope, implementation arrangements, and funding allocation, was the enactment of the National Dialogue Law (LDN) in 2001. As part of the LDN, HIPC II resources started to be transferred to municipalities on the basis of population and poverty formulas. The LDN specified that municipalities could be involved in the provision of productive infrastructure and production support services for producers, and established the right of the producer organizations to participate in the local planning processes. In addition, it set in motion the National Compensation Policy (PNC), which regulated the transfer of additional resources, on the basis of the same formula, to local governments through a new fund, called Fondo de Inversion Productiva y Social (FPS), which subsumed FDC (the original implementing agency of the Rural Investments component) and FIS (Bolivia's Social Investment Fund). The PNC also established counterpart funding rates to be paid by municipal governments and differentiated by municipal poverty level. Community counterparts (in cash, labor or kind) were neither demanded nor accounted for. These policy changes, fully supported by the Bank and the donor community in the context of the PRSP, forced important adjustments to the original project design. Project investment funds, which in the past could be disbursed through individual subprojects executed by NGOs or a group of beneficiaries (producer organizations, women's groups, etc.), or NGO Community Programs, were henceforth to be solely channeled through the municipalities. The local groups would have to present their demands and participate in municipal planning exercises in order to be able to receive support from the project. Also FPS became the sole channel through which funds from the project, and for that matter from all donor-funded projects aimed at municipal competencies, could be delivered to municipalities. As a result, target outcomes, and outcome indicators for the project had to be adjusted during the revision of the Credit Agreement. Another important change in relation to the scale of the project was the injection of additional capital of approximately US$ 1.5 million (CHF 2,079,000) it received in 2000 in the form of a parallel financing grant from the Swiss government. These funds were mostly allocated to the Institutional Strengthening component, and were directed in particular to support the "mancomunidades" (associations) of small municipalities (with less than 3,000 inhabitants), which otherwise could not have participated in the project. As a result, the Institutional Strengthening component was able to work in 246 municipalities (compared to the original target of 200). Swiss funds also allowed interventions to support indigenous districts. The creation of FPS provided an institutional solution to the closure of FDC as a result of corruption earlier on. During the second year of implementation of the project, the task team detected evidence of fraud and corruption within the FDC. This was without a doubt the one event that had the biggest impact on the project, as it had effects in terms of design, scale, implementation arrangements, scheduling and funding allocations. The Rural Investments

5

component of the project was suspended for a period of approximately two years while the allegations of corruption within the FDC were investigated (which ultimately resulted in a number of successful prosecutions and convictions). As a result of the Bank's supervision and investigations, the Government of Bolivia had to refund the Bank approximately US$ 2.77 million of ineligible expenses, and US$ 3.01 million (equivalent to SDR 2.35 million) was cancelled from the credit for misprocurement arising from fraud and corruption and ineligible expenditures. The project was restructured (without going to the Board) in August 2003. FPS became the implementing agency for the Rural Investments component, substituting FDC, which was closed down. Approximately US $3 million from the Rural Investment component were reallocated to the Institutional Strengthening component, the scope of which was extended to cover the development of support services for the transparent use and social control of public municipal resources, as well as technical assistance for municipalities in procurement, and increased monitoring by VD of FPS. Subcontracting of NGOs, financing of municipal programs and direct financing of communities and indigenous districts were dropped because of PNC provisions. The amended and restated Credit Agreement incorporated conditions for FPS to subcontract the administration of productive investments (e.g. small-scale irrigation systems) to improve FPS's technical capacity. Finally, the closing date of the credit was extended to June 2006. Later on, through Bank support, FPS adopted spot improvement as its overall model for financing the improvements in rural roads, an innovation that had far-reaching effects for both he efficiency and efficacy of rural road investments in Bolivia. t

7. Key Factors Affecting Implementation and Outcomes 7.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) The project was designed as a follow-on operation to the Rural Communities Development Project (PDCR I), which had been implemented in Bolivia between January 1996 and July 1998. Lessons learnt from this project and from other demand-driven rural development projects elsewhere were incorporated into the project design. Among the key design options resulting from experience in PDCR I, the Institutional Strengthening component was designed to operate on a demand-driven and market-based modality, as compared to a more top-down approach used in the past. Further, recognizing that local decision-making and capacity-building related to a variety of other needs and functions, this component was designed to work semi-independently from the Rural Investments component. The Rural Investments component was designed to scale up productive investments to provide a better balance to municipalities, which had tended to concentrate on social investments, in contrast to community demands which placed equal emphasis on roads and productive investments. There were, however, some areas where quality at entry could have been improved. For instance, contrary to the Bank's overly optimistic forecast assessment for the FY99-03 CAS-period, the period from mid-1998 turned out to be one of the most difficult Bolivia faced since the mid-1980s. By the end of 2002, Bolivia was in deep political and social crisis. Economic growth rates had fallen (averaging 2.46 percent during the four-year period) as a result of crises in Brazil and Argentina, natural disasters, the effects of eradication of illegal coca production, social unrest and political paralysis. Several times since 2000 the country or large parts of it were brought periodically to a standstill, sometimes weeks at a time, and sometimes violently and resulting in loss of life. Though the extent of the crisis could hardly have been predicted at the time of appraisal, the country's political history and vulnerability to economic shocks could have

6

informed better both the Bank's CAS and the project's risk assessment. With the benefit of hindsight, the exceedingly optimistic economic, political and social outlook at the time of appraisal led to the selection of a key PDO indicator (Sustained 5% annual increase in economic growth in 200 municipalities beyond the life of the project) which had little or no chance of being met. A more contentious issue regarding appraisal relates to corruption in FDC. It is noteworthy that it was recognized by the Bank that FDC had shown a poor implementation record, had experienced corruption in the past and had a history of political interference. However, FDC had been restructured and had participated successfully in the Rural Communities Development Project. In hindsight, the assessment of risks with respect the FDC should have taken more fully into account the persistence of a political culture that facilitated corruption and the increased risks arising from scaling-up and decentralizing its operations. While the Bank team recognized some of these risks and increased its supervision capacity in the field (which ultimately permitted the detection of fraud and corruption), risks could have been mitigated further by incorporating more stringent control mechanisms. 7.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable) Project implementation was carried out in a period of high institutional, social and political instability in Bolivia. Between 1999 and 2006, for instance, the Institutional Strengthening component operated under the administration of six different presidents, ten counterpart ministers, twelve counterpart vice-ministers and nine national project coordinators. In addition there were similar changes at the operational level in the prefectures and municipalities. The project also lived through several changes of key managerial and technical personnel within FPS, at the central and departmental levels. Yet, there were several factors that allowed the project to continue working effectively. One of the most important, was the high degree of ownership on the part of both national government and municipalities, mainly due to the project's role in helping to implement rural development and decentralization strategies, as well as the continuing relevance of the project's objectives, as witnessed by the results of local (municipal) plans and national (PRSP) processes of participatory policy making. In the end, despite its checkered history, the project either met or surpassed most of its expected outputs (see Annex 4). Crucially, it successfully scaled up the government's interventions, reaching close to 80% of all Bolivian municipalities and providing direct benefits to almost 20% of the rural population. Its key shortcoming arises from uncertainties surrounding the quality of municipalities' operation and maintenance arrangements. Rural Investments component Component implementation was strongly marked by the consequences of corruption in some FDC subprojects, initially uncovered in December 2000. Subproject approvals were suspended for a significant period of time while the corresponding investigations by INTIU took place. A formal suspension of disbursements came into effect in December 2001 and was lifted in August 2003, causing component implementation to halt completely. During this time, the task team worked with the government to clean up the subproject portfolio, clarifying the use of funds in FDC, and working out an alternative institutional arrangement which was put in place through an Amendment and Restatement of the Credit Agreement. Once the project was amended, the Rural Investments component suffered further delays until FPS, as new implementing agency for Rural Investments, met the conditions for lifting the suspension of disbursements and readied itself for co financing rural development investments. Municipalities in turn took their time to start the

7

procurement processes once FPS approved their proposed infrastructure subprojects. Furthermore, there were delays in outsourcing the management of the community productive investment subprojects. Subcontracting the administration of these subprojects was a condition introduced in the amendment in order to increase FPS's capacity, improve the quality of its services and diversify risk. Other arrangements included special audit conditions and the creation of an internal control unit in FPS, as well as TA for municipal procurement. As a result of the delays, most investment subprojects were implemented in the last 2 years of the project, as shown in the disbursement profile, and about US$ 2 million could not be disbursed for on-going subprojects when the project reached its closing date. In spite of these limitations, key factors that contributed to successful implementation in the end were: i) the introduction of innovations in rural road financing, and ii) the outsourcing of management of productive subproject financing. The adoption of the spot improvement modality for rural roads by FPS allowed for a 57% drop in unit costs with respect to FDC's interventions (from US$ 10,509 to US$ 4,526 per kilometer). This innovation alone permitted FPS to co finance a total of 1744 kilometers of rural roads, with savings of US$ 10.4 million. With the same amount of money, FDC would have financed only 752 kilometers. Besides lowering unit costs, spot improvements permitted environmentally-friendly interventions and actually proved to be more effective at ensuring year-round access than the previous modality of intervention. From this experience, the project has generated an important body of knowledge, including methodologies for local transportation planning, model engineering prototypes and software for bridge designing (see Annex 12). Outsourcing the management of community irrigation and productive subprojects, through an international competitive selection process allowed FPS to increase its capacity and improve its interventions in these types of investments, without encumbering itself with additional personnel. In spite of delays in the selection process, the selected firm reached its intended targets, improved FPS's presence in the field, and managed to disburse about US$ 8.5 million, which arguably FPS would not have managed to do so by itself. Due to these innovations, results on the ground were remarkable. The Rural Investments component co financed a total of 858 subprojects (565 works subprojects and 293 preinvestment studies) in 226 poor rural municipalities distributed throughout the territory of Bolivia. Works subprojects reached a total of 838,707 direct beneficiaries (of whom 176,000 benefited from more than one intervention). Direct beneficiaries represented 19.5% of the population of the municipalities, 72% of which was identified as indigenous. (No attempt was made to calculate the number of indirect beneficiaries.) Total IDA disbursements reached US$ 35.9 M, thus exceeding both the original target (US$ 33M) as well as the amended target (US$ 35.3 M). Total disbursements for the component (see table below) were slightly short of the PAD target because new provisions enacted by the National Dialogue Law eliminated community counterpart requirements and lowered the average municipal counterpart required from the poorest municipalities.

(US$ ,000)

COMPONENTS COSTS BY SUBPROJECT TYPE IDA SWISS Municipalities

In-kind Beneficiaries (Mpalities. +

Comms.)* 1.1 Roads, bridges and other municipal infrastructure 22.677 0 4.318 4511

1.2 Small-scale irrigation 8.268 0 1.294 1024 1.3 Community productive investments 3.507 0 679

8

1.4 Other productive (financed from Swiss grant) 0 653 119 202

1.5 Pre-investment 1.267 0 240 1.6 Administrative costs 5.314 0 0 SUB TOTAL 41.033 653 6.650 5.737 TOTAL 54.073

* Estimate Institutional Strengthening component The Institutional Strengthening component played a key role in the implementation of the government's decentralization reforms; in particular, it was the the main vehicle for strengthening rural municipalities and social actors, and for promoting rural development investments on the part of municipal governments. Following in the footsteps of its predecessor (PDCR I), the project embodied a model of participatory management which set the standard for all operations in the sector. Its continuing relevance became clear when it was put in charge of facilitating rural community and small producer group participation in the National Dialogue process (PRSP), which culminated with the enactment of the LDN. The Amendment and Restatement of the Credit Agreement allowed the government the chance to adjust the component in order to accommodate to the LDN. While consolidating and institutionalizing participatory planning, the focus shifted to participatory implementation and, in keeping with the mandates of the LDN, greater emphasis was placed on municipal government accountability and social control. The project designed and validated methodologies which formed the basis for government intervention in several areas. Key innovations designed by the project and introduced after the amendment included support to:

• individual technical assistants on long term municipal contracts (on a steeply declining basis) aimed at improving implementation capacity, 44% of whom have stayed on as municipal personnel after project closing;

• the provision of formal (degree) training by universities to mayors, councilors and community leaders in municipal management and development;

• processes of participatory evaluation and adjustment of municipal plans; • processes of participatory transportation planning, incorporating solid technical criteria

for prioritizing activities, and including operation and maintenance arrangements; • social control activities at both the municipal level (focusing on the provision of adequate

information, Vigilance Committees, budget monitoring) and the investment level (focusing on community involvement in controlling adequate execution of subprojects);

• participatory planning in indigenous territories, including recently titled Tierras Comunitarias de Origen;

• municipal associations (mancomunidades) of very small municipalities to formulate and implement local development plans for wider regions and with the participation of all economic actors; and

• on-demand short-term technical assistance to municipal governments in administration, planning and implementation.

Outputs were either met or surpassed in all activities (see Annex 4), and were held in high regard by beneficiaries (see Annexes 8 and 9). The component reached a total of 246 poor, rural municipalities (76% of all the municipalities in Bolivia). Tens of thousands of people participated in participatory planning or social control activities. More than 28,000 benefited directly from non-formal training in 483 workshops, of which 84 were on gender issues. Almost

9

3,400 individuals (mayors, councilors, municipal technicians and community leaders) participated in 10-month long programs of formal training imparted by 10 universities. Given the breadth and scope of this component, a thorough process of systematization, carried out towards the end of the project with the participation of mayors, councilors and community leaders generated a wealth of socially-agreed lessons. As a result, an important body of methodological knowledge has been generated, which will serve to inform policy making and to improve the quality of interventions in the future by all levels of government and the donor community (see Annex 12). Effect of cancellations Final disbursements were close to the PAD estimates. The apparent contradiction between cancellations and disbursements is explained by the accumulation of project savings due to exchange rate fluctuations. Thus, though cancellations added up to 11.18% of the signed amount in SDR (12.26% in US$ equivalent at the exchange rate prevailing at the end of the grace period), the project disbursed a total of approximately US$ 58.3 million of the IDA credit; that is, a shortfall of only 7% of the original allocation. Further, total disbursements (including counterparts and co financing) added up to 96% of the PAD estimate, mainly because government counterpart contributions added to more than double the PAD estimate (see Annex 3 for a detailed breakdown). The effect of cancellations on outputs was also diminished by improvements in cost-effectiveness, particularly the introduction of spot improvements for rural roads. Absent this innovation, the project would have had to disburse a total of US$ 94.2 million, equivalent to 108% of the total cost estimated in the PAD, just to obtain the same level of outputs. Additional, though smaller, cost-savings accrued from improvements in the cost-effectiveness of interventions in bridges and irrigation, particularly if compared to average costs for Bolivia as a whole, as determined by government benchmarks (see Section 8.3 and Annex 5). 7.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The monitoring of the project, as foreseen at the time of appraisal, was based on two different and independent information systems. The first one was inherited by the project from PDCR I and had been created by FDC and VMPPFM, and the second one was designed at the beginning of the project to capture and process data from a selected representative sample of 30 municipalities served by the project, including a baseline with variables directly related to the project's expected outcomes. It can be said that the first information system worked adequately to guarantee monitoring physical and financial progress of investment subprojects and strengthening contracts, but it did not provide relevant information to show the level of achievement of outcome indicators for both components. The second one, designed to measure impacts, started to be implemented two years after the beginning of the project, but stopped at the gathering of data for the elaboration of the base line when the National Government (in the context of the PRSP, and with Bank advice) decided that the county would have only one official municipal information system to monitor the evolution of poverty. This system was thus shut down, though the alternative was never put in place. Perhaps one of the reasons why the implementation of the information system contemplated in the design started late was the fact that during the 1999-2004 period only 22% of the total subprojects (excluding the pre-investment contracts) were implemented by the project. The remaining 78% were finished during 2005 and 2006. Undoubtedly, the lack of the second information system and the limitations of the first one explain the shortcomings in monitoring outcomes by the project, a fact that was always noted by

10

supervision missions. It is important to note that the chosen project indicators may have negatively influenced the monitoring process. First, the key PDO indicator, besides being overly optimistic, should have been placed rather at the level of the CAS objective, and was in any case impossible to measure. Second, the PAD did not contemplate outcome indicators for the Institutional Strengthening at the PDO level, even though this component aimed at outcomes that could not be reduced to the investment-related objectives. Finally, there was an imbalance between the high level of detail contained in the input and output indicators for the Institutional Strengthening component and the low level required by those for the Rural Investments component. Many of the indicators were too complicated and referred to 200 municipalities, and thus could not have been obtained from a sample of 30 municipalities. In summary, the M&E system served to ensure good levels of physical execution and disbursements, but it contributed little to measure or evaluate the outcomes or impact of the project. The aforementioned shortcomings notably diminished the possibilities of efficient M&E, and made it necessary to contract special consultancies to obtain some of the required information for the closing of the project. 7.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) Fiduciary issues Initially, although financial management arrangements within VMPPFM and the Vice-Ministry of Rural Development were found acceptable, overall project fiduciary performance was seriously affected by the deficiencies found in FDC. Some of those issues were related to a weak internal control environment that among other things not only permitted the inadequate use of credit funds, but was also marked by fraudulent practices in procurement and disbursement processes. This situation was worsened by the deficiencies in accounting records and lack of capacity to deliver acceptable audited financial statements, even for the first year. In view of this situation, specific supervision and control measures, both within the entity and from the Bank, were adopted. Extensive field supervision and specialized reviews (INTIU investigations) carried out by the Bank, ended up showing fraud and corruption as well as other ineligible expenditures. FDC was not able to overcome the series of deficiencies described above and therefore, due to the limitations in the scope, the auditors were not able to provide an opinion on the project's financial information (CY 1999, 2000 and 2001). On an exceptional basis, for the final FDC audit, the Bank agreed with the Bolivian Government to conduct an Agreed-Upon Procedures review on 100% of project expenditures to ensure their compliance with minimum eligibility criteria. This review did not report any other ineligible expenditure. For the Amendment and Restatement of the Credit Agreement, lessons learned from past performance led the Bank to work and agree with the Bolivian government on specific fiduciary arrangements for the implementation of the investments component under FPS. Some of the actions taken included: • A financial management assessment of FPS that resulted in a time-bound action plan to: i) strengthen its internal control environment; ii) establish specific processes and procedures; iii) implement a Project Administration System (SAP) and the Government's integrated financial management system (SIGMA); iv) the use of the Single Treasury Account; v) completion and strengthening of the deconcentration process; and vi) the provision of training to its recently institutionalized staff.

11

• Specially tailored audit TORs were also defined and agreed with the government. These included: quarterly reviews which, beyond a financial revision were expected to perform an integrated review of investment subprojects on a sample basis, following the subproject cycle defined in the Operational Manual adopted by FPS. This review was complemented by the physical inspection of the civil works financed with project proceeds to ensure compliance with technical specifications and consistency between financial and physical progress. The above mentioned mechanisms and supervision by the task team revealed that, during the second year, FPS had weakened its control environment, especially at the departmental level, and had eliminated some controls in the information system. As a result the Bank agreed on a time-bound action plan, including the implementation of a specialized control team, and the financing of specialized consultants to reinstate the controls in the system. At the same time the ineligible expenditures identified by the Bank and audit reports were refunded by the entity. The results of the arrangements described above, strengthened as needed during the last year of project implementation, allowed FPS to satisfactorily comply with the Bank's fiduciary requirements, including the timely submission of unqualified audit reports. On its side the Institutional Strengthening Component also required additional supervision and the implementation of corrective action plans in order to overcome some reporting deficiencies identified, mainly, at the departmental level. Safeguards compliance There were short-lived compliance problems with respect to Environmental Assessment (OP 4.01). Failures to apply environmental guidelines were detected between June and December of 2001. They were a reflection of FDC's institutional culture, and the general disregard for the importance of environmental safeguards. However, upon identification swift corrective action was taken and the environmental guidelines were effectively applied since then. The Environmental Management Guidelines developed at preparation were incorporated into FPS's Operational Manual and applied effectively to the investment program, as well as to investments financed by other Bank and non-Bank projects. A Bank Environment Specialist supported supervision efforts and an FPS Environment Specialist managed the monitoring program. Supervision missions conducted reviews of the effectiveness of clearance procedures and undertook spot-checks of projects in the field, including with respect to prohibitions concerning national parks and other sensitive habitats. The introduction of spot improvement as the modality of intervention in rural roads contributed significantly to reduce the likelihood of negative environmental impacts. 7.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable) Rural investments The project did not develop a systematic approach to ensure the post-completion operation and maintenance of the rural investments it financed. As a condition to approve co financing for municipalities, both FDC and FPS signed agreements with local governments whereby they committed themselves to adequately maintain the provided infrastructure; however, neither FPS nor any other agency of the borrower monitored compliance and no enforcement mechanism exists. During the last two years of project implementation, when the bulk of the investment funds were disbursed, the project attempted to raise awareness and concern in the municipalities

12

and communities on the need to secure the post-project operation and maintenance of the investments. For example, maintenance manuals for small-scale irrigation systems were prepared and transferred to beneficiaries. Transportation planning exercises carried out in 132 municipalities ensured that all local actors visualize the scale of their road networks and the corresponding maintenance burden. In close to 50 municipalities the project organized pilot experiences in operation and maintenance through micro-enterprises, maintenance committees and community maintenance activities. However, the project could not provide post-investment technical assistance, follow-up training, or financial resources to help municipalities to establish institutional and budgetary provisions for operation and maintenance. In spite of this absence of formal arrangements, the likelihood that the financed investments will be maintained is raised by the fact that ownership of executed investments is high, as a result of: (i) the level of involvement of communities in selecting them; (ii) the perceived importance of the selected priorities; and (iii) the local cost incurred by municipalities and communities in executing the investments. In addition, since 1996 municipalities are receiving extra funding, derived from hydrocarbon taxes and royalties, increasing the availability of resources for maintenance. Routine maintenance will most likely be provided by communities in the case of community roads and irrigation infrastructure, as is the custom nowadays. However, without the proper interventions for maintenance, both in financial and technical terms, and the participation of the beneficiaries, these may deteriorate in the future. In the case of roads and bridges, both the estimation of maintenance costs in the ex-ante evaluations and the budgetary allocations by municipalities to face these tasks is evidently low. This situation has shifted part of the burden of maintenance on to the beneficiaries, who have made bigger efforts, albeit insufficient, to cover the needs. Operation and maintenance is not a project issue alone and will require broader policy interventions in the future. The main concern comes from the overall level of municipal infrastructure investments, the stock of which has been growing since the enactment of the LPP. Since the lack of incentives for proper O&M is related to the system of financial transfers from the national government, its involvement in establishing a more adequate framework should be a key priority in the near future. For example, additional transfers to municipalities from hydrocarbon revenues could either be conditioned or earmarked to attain this objective. The follow on operation will work with line ministries (particularly in charge of roads and irrigation) to improve the rules and incentives for proper operation and maintenance. The performance indicators by which this will be evaluated in the future include: i) municipal budgetary allocations for routine maintenance relative to the stock of infrastructure; and ii) existence of appropriate institutional arrangements for operation and maintenance. An evaluation of impact and sustainability of investments could be carried out for the mid-term review of the follow on project. Institutional strengthening At the level of municipal capacity, the Institutional Strengthening component introduced some key innovations which point to enhanced sustainability; many of these have been replicated by other donor-financed projects. The project allowed the Government to move from a supply-driven, central-government managed system of municipal strengthening to a demand-driven, market-based, locally-managed modality. Municipal governments learned to define their needs and to obtain adequate assistance from the market. The effect of this shift can be witnessed in the astounding growth in the available supply of firms, NGOs and individuals selling services to rural municipalities. In addition, about half of the individual technical assistants which were financed by the project have been incorporated as regular municipal staff, thus ensuring the maintenance of technical capacity in-house. Finally, the project's decision to utilize public and

13

private universities to provide formal training to municipal authorities, technical staff and community leaders permitted universities to learn about municipal problems and to acquire capacities to impart training to variegated actors. This in turn permitted these institutions to both incorporate municipal issues into their regular curricula and to expand their offer to local actors beyond the life of the project. Capacity building at the municipal level (as at other levels of government) is still restricted by the lack of a stable civil service which can be insulated from political changes resulting from elections or changes in authorities. At the departmental level, the accumulated experience and actions of the project were gradually transferred to the Prefectures, some of which have carried on providing some services with departmental resources, such as technical assistance in the Departments of Santa Cruz, Pando and Tarija; follow-up and monitoring of some services provided by the project in the Department of La Paz to evaluate the project's impact level; and the identification the demand at the municipal level to elaborate development strategies for the Department of Beni. The accumulated experience is being disseminated in the form of publications delivered to municipal actors, international cooperation organizations, and ministries and vice- ministries. The project's experience in Institutional Strengthening, covering a wide range of topics (from financial administration to indigenous territorial planning) has been systematized. Methodologies and lessons learned produced by the project are being made available at various internet sites linked to municipal and rural development. On the basis of the project outcomes, a follow-on operation has been requested by the government and is under preparation. This new project would be supported by two pillars, which are Institutional Strengthening and Productive Investments, and would incorporate lessons learnt, such as private sector service provision, high levels of local counterpart financing for sustainability, incorporating O&M activities into the design of subprojects and co financing, and nhancing participation through inclusive strategies for traditionally marginalized actors. e

8. Assessment of Outcomes 8.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) The project's objectives, design and implementation are consistent with the current government's priorities, as reflected by the request to finance a follow on operation. The project is well-aligned with the government's National Development Plan (PND), which places great emphasis on spreading the sources of growth to, and increasing the incomes of, the rural and indigenous populations. The PND's Economic strategy aims to improve the opportunities of small producers; its Socio-communitarian strategy relies on improving capacities and assets of poor communities, and on strengthening social participation in the allocation of expenditures and in community control over the proper use of public funds; its Decentralization strategy aims at coordinating local investments by all levels of government. These strategies reflect quite closely the objectives and design of the project. The project's model of simultaneous intervention in both the demand and the supply sides of governance and investment have shown that investments and services can be efficiently targeted at the poorest people in the rural areas, and can serve to empower social organizations in order to improve their members' livelihoods. The follow-on operation has been included in the Bank's Interim Strategy for Bolivia (ISN), as part of the Fostering Jobs Through Growth strategic area. It is also envisioned as an instrument for improving local governance.

14

8.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 4) Given the broad nature of the PDO statement ("economic development of rural municipalities and communities"), and due to the intrinsic difficulties and pertinence of measuring the project's performance against its key indicator ("sustained 5% annual increase in economic growth…"), the assessment of achievement of project objectives relies on breaking up the PDO statement into its constituent parts, namely: i) the creation of productive investments; ii) the sustainability of these investments; and iii) the participatory aspects of demand generation. Productive investments An examination of productive investments in terms of their number and value, their economic benefits, as well as the wider effects of the project on the overall municipal investment program, shows that the project has achieved its intended outcomes:

• The project financed a total of 858 subprojects with a total value of more than US$ 54 million. All the funds were allocated to productive investments. Rural roads, vehicular bridges, pedestrian bridges and irrigation account for nearly 90% of total investments; the remainder covers a range of community subprojects in agriculture, fishing, handicrafts and natural resource management. The introduction of the spot improvement modality for rural roads in FPS permitted cost savings of US$ 10.4 M, while increasing the physical outputs by more than 60% (from 1480 km. to 2372 km.) in relation to the original FDC estimates. Unit cost savings in bridge construction and irrigation ranged from 29 % to 55%. Thus, in term of outputs and value, the project exceeded PAD expectations.

• Another key target exceeded by the project was to raise the number of subprojects with positive economic and financial returns to 80%. In 1988, while the project was under preparation, only 50% of FDC's subprojects achieved positive returns. According to the impact evaluation of FPS's investments, carried out by an independent firm under the guidance of FAO-CP (FPS. Evaluación de Impacto del Componente de Inversiones Rurales del PDCR II), 91% of financed subprojects achieved positive rates of return (economic and financial). Results differed by type of project: 97 % of rural road improvements and bridge construction subprojects achieved positive rates, while 78% of the small-scale irrigation and productive support subprojects showed positive indicators (see Section 8.3 and Annex 5).

• Finally, the project's impact on rural municipalities' overall investment program was also crucial. The target stated in the PAD was a "sustained 5% annual increase in standard quality productive investments (included in Municipal Development Plans) implemented and maintained in 200 poor municipalities starting in the year 2000." As the quality of productive investments could not be verified, this indicator was measured by the total amount of the municipal investment budget dedicated to productive investments. In the 156 municipalities that provided data on the execution of their Annual Operative Plans between 2000 and 2005, annual average growth in productive investments was 7.68 % in real terms, well above target. The project played a key role in this outcome, as activities in the Institutional Strengthening component were geared at formulating and implementing participatory municipal plans (PDM). Specific lines of action which aimed directly at this outcome were: i) PDM formulation and adjustment; ii) participatory budgeting; iii) municipal road planning; iv) social control activities to ensure correspondence between planning and budgets; v) municipal technical assistants;

15

and vi) elaboration of investment profiles and preinvestment studies.

Sustainable investments Stated in the PDO in general terms, sustainability was designed and operationalized in the project solely along its social and environmental dimensions. The project did not aim to institutionalize operation and maintenance systematically, assuming that municipalities would take on the responsibility by themselves. As sustainability cannot be verified along all its constituent dimensions, the ICR team concluded that this outcome was partially unsatisfactory. Sustainability issues encompass the following:

• Social sustainability is provided by the model of participatory demand generation and management (see below). Environmental sustainability was ensured through the application of effective procedures and instruments for subproject identification, ex ante evaluation, and construction. The effectiveness of these procedures has been verified in the field by both the Task team and by an independent consultant (see FPS. Evaluación de Impacto del Componente de Inversiones Rurales del PDCR II).

• The main shortcomings in sustainability lie in the paucity of established formal mechanisms for ensuring appropriate operation and maintenance (O&M). Irrigation and production subprojects (about 33% of investment costs) provide direct benefits to communities and producers, and are more likely to be maintained over the long run by beneficiaries themselves. The project supplied maintenance manuals and technical assistance during the construction phase to help producers organize operation and maintenance. Roads and bridges (about 67% of investment costs) require clearer institutional mechanisms, including budgetary allocations on the part of municipalities, maintenance contracts and/or work-sharing agreements with communities. As a condition to approve subproject co financing, both FDC and FPS demanded that municipalities commit themselves in writing to properly maintain the infrastructure during the operation phase. However, neither FPS nor line agencies follow up compliance. The project supported the formulation of participatory road plans in 152 municipalities, including pilot maintenance activities carried out through community labor or micro-enterprises. Of the 23 maintenance micro-enterprises organized by the project, only 8 were operating at project closing, as were 24 of the 47 maintenance committees, and 31 of the 61 community maintenance activities.

• Experience in the field shows that municipalities and communities will provide some minimum level of routine maintenance, but will mostly intervene to fix problems when these occur, in particular if the infrastructure has been identified by communities themselves and if their benefits are readily appreciated by them. Thus, the absence of systematic routine maintenance may diminish the lifespan of some of the financed subprojects but it is not expected to do so to a disastrous extent. Since 2006, all municipalities receive additional transfers from the central government's hydrocarbon taxes as well as from royalties. This additional stream of resources can be readily directed in the future to fulfill, at least partly, the needs of municipal O&M.

Participatory demand generation All the investment subprojects financed by the project were based on local demand generated through participatory processes. The project went well beyond participatory demand generation and its effects were felt in the whole institutional structure dedicated to rural development. It was, without doubt, the government's key instrument in developing and consolidating a model of participatory management at the local level in rural municipalities:

• Technical assistance to formulate, adjust and improve participatory planning, budgeting, implementation and social control reached the poorest 246 municipalities in Bolivia,

16

close to 80% of all rural municipalities and 23% above the PAD target. • The project designed, validated and implemented a range of methodologies to improve

participation in local development, including: participatory Municipal Development Plans (PDM), participatory evaluation and adjustment of PDMs, participatory municipal road planning, Indigenous Territorial Planning, social control of budget execution, and community oversight of investment projects. These interventions set the standards for other government and donor-funded projects in Bolivia, and provided instruments for local communities to identify, prioritize and even implement an estimated 60% of all municipal investments in rural areas.

• The project also helped municipalities to increase their capacities to respond to participatory demand generation, by improving capacities to implement annual operating plans. The target established in the PAD for this indicator was an increase from 63% to 80% in the 200 project municipalities. By 2005, the average reached 76%, a small shortfall vis-à-vis the PAD target, but still a significant improvement, especially considering the fact that total municipal incomes grew by 30.25% in real terms in the period under consideration. The ICR team considers that the project also played an important role in achieving this outcome. Key project interventions that increased municipal government capacities include: (i) implementation of municipal administrative systems; (ii) formal training of mayors, councilmen, and local technicians in municipal management; (iii) non-formal training in municipal administration, project management and financing; and (iv) co financing technical assistants in administration, planning and project management.

• Finally, the project enshrined the requirement that all investments co financed under the National Compensation Policy be identified through participatory PDMs. This had an impact over all FPS investments, regardless of the source of financing, and adding to close to US$ 200 million.

8.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return) The financial and economic analysis of the project applied the cost-benefit and cost-efficiency approaches. Cost-Benefit approach Two different types of economic analysis were done with the cost-benefit approach: (a) for the 4 models or types of infrastructure subprojects implemented by the project (i.e. rural roads, vehicular bridges, pedestrian bridges and small-scale irrigation), which represent nearly 90% of total investment; and (b) for the whole project. Economic and financial analysis by subproject type. The economic and financial results obtained for each of the subprojects considered in the simulation are satisfactory. They have an EIRR and a FIRR greater than 12.7 % y 10.1 %, which are the opportunity costs (economic and financial) considered in the evaluation.

Type of Subproject

ENPV US$

% EIRR

FNPV US$

% FIRR

Improvement of rural roads 65,026 26.0 55,775 25.1 Vehicular bridges 88,782 30.5 87,770 31.0

17

Pedestrian bridges 88,782 30.5 87,770 31.0 Small-scale irrigation 95,595 36.5 92,299 34.6

Economic analysis of the overall project. In order to do the economic analysis of the project the results of the 565 works subprojects (improvement of rural roads, vehicular and pedestrian bridges and small-scale irrigation systems) implemented between 1999 and 2006 were all aggregated. By doing so, the economic internal rate of return (EIRR) of the overall project came to 28.8 % and the net present value of the stream of economic revenues (ENPV) was US $21.98 million. Cost Efficiency approach The results for all evaluated cases were positive. The project provided services of a quality equivalent to that of the selected benchmarks, but at a substantially lower cost.

Subproject type

Project Unit

Cost*

VIPFE Unit

Cost**

% Diff.

Cost/Family Project

Cost/Family VIPFE

% Diff.

Improvement of roads 3,650 9,927 - 63 178 413 - 57

Construction of bridges 2,208 2,470 - 11 154 217 - 29 Small-scale irrigation 1,873 2,466 - 24 1.116 2,497 -55

*For roads the unit used is kilometer, for bridges it is meters and for small-scale irrigation it is hectares. **The Vice-Ministry of Public Investment and External Financing (VIPFE) parameters are an average between its established minimum and maximum costs. Comparison to the PAD analysis The analysis in the PAD yielded an EIRR of 37 % and a ENPV of US$ 138.86 million, while the economic evaluation made for the ICR yielded a EIRR of 28.8 % and a ENPV of US $21.98 million. The resulting differences are not due to a lower economic performance of the project with respect to what was expected in the PAD, but to the use of different methodologies. For the appraisal, the cost-benefit approach was used, but for all the types of subprojects the incremental revenues and costs included the revenues and costs of the beneficiary farms. For the ICR the same approach was used, but the incremental economic and financial benefits were estimated on the basis of: (a) for roads and bridges, the reduction of time and the reduction of transportation costs for families and transport-sector beneficiaries; (b) for small-scale irrigation, the increment in production value that beneficiary families would have. The methodology used for the ICR is widely used by the Bank to evaluate rural infrastructure projects around the world, and yields more realistic results. Furthermore the basic data required is easier to obtain and normally is more reliable. The PAD does not include any indicators using the cost-efficiency approach. It only highlights, in the conclusions of Annex 4, some maximum values for the improvement of roads and their operation and maintenance. Sensitivity analysis The period of time considered in both the economic and financial analyses has been 20 years. If we halve this period to 10 years, in order to account for possible maintenance failure, both the EIRR and the FIRR would barely be affected. If we apply the extreme hypothesis that no maintenance will be carried out and the operational life of all works is, as a consequence, reduced to 5 years, the EIRR for the whole project would be reduced from 28.8% to 11.9% and the ENPV from USD 22.0 M to USD -40.2 M. The latter scenario, though is highly unlikely and is only included here for illustrative purposes.

18

8.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating: Moderately Satisfactory Achievement of Objectives The analysis dispensed with the notion that the project, by itself, should have generated a 5% annual increase in economic growth in 200 municipalities. A performance indicator of this nature should not have been selected to measure the project's performance, as the project itself could only have a minor influence in the economic performance of the municipalities. Also, since municipal growth rates are not calculated by any agency in Bolivia, the indicator cannot be measured. For these reasons this particular indicator was not considered appropriate by the ICR team, and is not discussed any further. Assessment of achievement of objectives was done on the basis of breaking up the PDO statement into its constituent parts, yielding the following satisfactory results: 1) The project exceeded its expected investment outcomes in terms of number of subprojects and physical outputs, and came short in the total amount invested. The project improved the results of Bolivia's investment program by raising the proportion of subprojects with positive economic returns well above the intended target. Finally, the project helped municipalities raise the proportion of their investment programs dedicated to productive investments at a rate higher than the PAD target. Overall, the project successfully scaled up productive investments, thus improving the balance between participatory demand and municipal implementation. 2) The project experienced shortcomings in establishing institutional and budgetary arrangements to ensure sustainability of the investments. Though social and environmental sustainability were properly addressed, the project, with the exception of pilot experiences carried out in the framework of road planning, did not generate a systematic approach for O&M. This is an issue which, due to its systemic nature, will need to be addressed through sector policies in the near future, some of which will be supported by the follow on project. 3) Not only did the project generate all its demand through local participatory processes, it became the government's key vehicle for institutionalizing a model of participatory implementation in rural municipalities. The breadth and scope of activities promoting participation, from identification to evaluation, was matched by the project's work at the level of supply, at both the national level (FPS and VD) and the local level (municipalities and prefectures). 4) The project's institutional strengthening component worked in 246 municipalities, 23 % more than the PAD target; its investment program generated direct benefits for more than 800,000 people (of whom 176,000 benefited from more than one intervention). Direct beneficiaries constituted 19.5% of the population of these municipalities, 72% of which was identified as indigenous. Efficiency The project achieved high levels of efficiency. The aggregated result for 565 subprojects yielded an economic rate of return of 28.8 % and a net present value of US$ 22 million. This compares favorably to the PAD's analysis. The project also introduced innovations in road improvements, bridge construction and irrigation which dramatically reduced unit costs with the

19

consequent gains in cost-efficiency. In particular, the introduction of spot improvements allowed the project to increase its outputs by more than 60 % while at the same time improving year-round accessibility and minimizing environmental impacts. Besides economic benefits, beneficiaries stressed the significant improvements in accessibility to health and education services, and the diminished risk to life from river crossings. Relevance The project objectives have become even more relevant at present, as witnessed by their similarity to key government objectives as stated in the National Development Plan. Government has requested a follow on project, which has been included in the Bank Group's ISN and is under preparation at present. Overall Outcome Rating Based on the assessment, the ICR team concludes that, except for the important shortcomings in proving the sustainability of investments, the project has achieved its objectives, its efficiency and its relevance with only minor shortcomings. In conclusion, the Outcome is rated as Moderately Satisfactory. 8.5 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development Poverty Impacts Although the initial target population at the onset of the project was the inhabitants of 200 municipalities, the project worked in 246 municipalities. The annual rate of poverty reduction of rural areas has been estimated at 0.51% during the 1994-2004 periods. Based on the economic analysis, the positive impact on the direct beneficiaries was high. Although the impact of the transport subprojects was accounted to accrue directly to the direct beneficiaries in terms of time and cost saving, as the beneficiary assessment showed, they also improved the access of marginalized communities to health and education services, and reduced accessibility risks (river crossings, unusable roads during rainy periods). Gender Aspects and Social Development During the last decade there have been advances and improvements regarding gender aspects in the Bolivian legislation, mainly in terms of participation and representation of women in public policies. Nevertheless, in practice, the political participation of women is still weak, as a result of discrimination and political violence, mainly in the rural areas. Thus, significant efforts are still needed to ensure equitable and free participation of women in public institutions. The project worked on this issue through the Institutional Strengthening component. It promoted the participation of women in the formal and informal training activities, surpassing initial targets. The VDADM had foreseen providing formal training for 2,500 people, of which 500 were women. At project closing this target had been surpassed. Of a total of 3,392 people participating in formal training, 993 were women. With respect to informal training in municipalities and communities, the VDADM had programmed 150 events, of which 15 were specifically targeted for women. At project closing 483 informal training events had been carried out, of which 184 were on gender issues. The main achievement of the project with respect to the indigenous population was the support to indigenous districts. This service concluded with 16 indigenous territorial management plans (PGTIs) for 16 TCOs (Tierras Comunitarias de Origen) located in the highlands and

20

lowlands, and 20 statutes formulated for their formal functioning. The territorial planning approach was implemented taking into account the cultures of the communities involved. This pioneering experience was discussed in two national workshops and a methodological guide was elaborated in order to facilitate replication by other institutions and future Bank interventions. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) The reality and context of the municipalities and of the Bolivian rural areas has radically changed during the last decade. The institutional culture and capacity generated by the project in Bolivia's rural context can be considered one if its main achievements. The project's main impacts and effects on institutional development were reached at the municipal level. A key success factor for the institutional strengthening in the municipalities and communities were the application of a demand-driven approach to collect and incorporate the communities' needs through the implementation of participatory planning processes (PDMs, PDM adjustments, rural road planning), as well as strengthening the capacities of civil society actors to monitor public expenditures and the execution of investments. The project was instrumental in consolidating a demand-driven, market-based and locally- managed model of institutional strengthening for municipalities. This approach, emulated by many other donor-funded projects, helped to replace the top-down assessment of municipal needs and nationally-controlled provision of technical assistance and training which characterized previous efforts. The effects can be seen in the thousands of individuals and small consulting firms which today sell their services in the rural areas, a marked difference with respect to the situation before the project. At the departmental level, the project worked through "operational units" embedded in the prefectural structures. Learning from previous experiences the project only carried out prefectural institutional strengthening activities in those prefectures where the prefects were willing to make a formal commitment to the project's model of locally driven capacity building and where the prefecture was willing to participate with counterpart funds. These operational units were the backbone of field implementation and constituted the main vehicle for prefectural activities in municipal strengthening. At the national level the project strongly supported i) the development of a municipal planning policy focused on participation and results; ii) provided the government with the opportunity to implement a rural investment program at national level; and iii) created capacity to implement the current policies through participatory methods. The project facilitated the conceptualization of the National Dialogue Law and the Bolivian Poverty Reduction Strategy, supporting a process that generated open and participative spaces for the discussion of public policy, a process which introduced pro-poor distributive measures via the distribution formula of HIPC resources and the national compensation policy (PNC). (c) Other Unintended Outcomes and Impacts (positive or negative, if any) Another significant contribution of the project was in the area of municipal management systems, particularly in accounting. Before the project there was no national system for municipal accounting; thus each municipality had to develop its own accounting tools, and it was impossible to consolidate the information at the national level. The implementation of the SINCOM (Integrated Municipal Accounting System) software was an expected mid-term outcome of the project, which was achieved in the selected

21

municipalities. Project support for SINCOM was suspended after the Ministry of Finance decided to implement a different (and also Bank-financed) system instead (SIGMA). SIGMA never reached beyond the national government and a handful of urban municipalities. What was unintended and unexpected was the fact that due to its functionality, user-friendliness and adequacy with respect the needs and capacities of the rural municipalities, the vast majority of these adopted SINCOM without any project intervention. The use of the spot improvement approach for rural roads was a truly timely contribution to the Bolivian rural context, characterized by low volumes of traffic and difficult topography. The use of this approach generated great cost savings, diminished environmental impacts and established an efficient, needs-based response to individual cases, well beyond expectations. The formal training given by Bolivian universities within the context of the project reached further results than those originally expected. The project was instrumental in creating a previously non-existent link between the universities and the municipalities. The universities found new areas to incorporate in their curricula, and new audience for their courses, degree programs and public outreach. For the "new" students, mostly rural and indigenous, the fact of having access to higher level education was not only highly relevant from the point of view of knowledge acquisition, but it also had positive effects on their confidence and self-esteem. 8.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) The following is a summary of the main findings of various consultation workshops undertaken at municipal, departmental and national level on the Institutional Strengthening component and the Rural Investments component (see, in Annex 12, publications issued by the Viceministry of Decentralization). Institutional Strengthening Component Participatory planning turned out to be one of the best tools for the social inclusion of marginalized groups that traditionally kept outside the public institutions and government framework, increasing their participation capacity in the definition of local development policies, and in identifying and including their priority needs in the municipal plans.

• Technical Assistance. The achievements of the technical assistance services have been many and the impact on municipal management high. Local authorities perceive that the main results and impacts included: i) improvements in technical and financial capacity of the municipality, as well as in the efficacy and savings in municipal management; ii) in most cases the expectations stated in the respective terms of reference were surpassed; iii) improvements in the municipal capacity to attract more funding.

• Rural Road Project Management. The usefulness and relevance of the assistance in subproject management was defined as satisfactory, being more successful in the smaller municipalities with a smaller road network, as the same budget was allocated to each municipality for the formulation of the road plans. The advantages of the road plans have been well appreciated by the beneficiaries. These include: i) their integration in the annual operational plans improves the transparency of priority-setting for transportation, contributing to consolidate good governance; ii) it provides a financial management instrument so the municipalities have better possibilities of securing additional funding; iii) the population considered that the methodology for the setting of priorities for road projects was adequate. It was seen as favorable that the methodology combines various criteria, assigning a relative weight to each in accordance to the municipality's reality.

• Training. The biggest achievement of the training services was to have developed an integrated, formal training program for municipal management, responding to key

22

municipal demands. The program generated academic knowledge, strengthened key local actors, improved performance of municipal competences, and thus improved governance. It has also improved the self-esteem and respect amongst beneficiaries.

Rural Investment component

• Spot improvement. One of the main project contributions was the development and application of the spot improvement approach for rural roads. Many municipal governments valued this initiative due to the following: i) lower maintenance costs, as it becomes easier to react timely to the detected road problem, and solutions don't usually require heavy machinery. The accumulated experiences have allowed the verification of savings in road maintenance of about 50%; ii) employment generation, through the use of trained and organized local labor in activities that complement the peasant economies during post harvest and post planting, allowing for better family income; iii) energizing the local economy, given that the expenses by the municipal government on road conservation works circulates and is spent in the municipal territory; iv) environmental conservation: use of local labor and materials and timely and effective attention to drainage problems, allow for low environmental impact.

• Operation and Maintenance. The following are the main results and reflections derived from pilot experiences on maintenance and conservation of rural roads with community labor on over 50 municipalities on various regions of the country and with different community organizational systems: i) it was detected that municipal governments lack municipal policies or programs with respect to community road maintenance. Although there are some resources available in the municipalities for road maintenance and improvement, these are not efficiently used; ii) experience has shown that rural roads maintenance has to be dealt using a systematic approach. For this task budget funds should be made available through the central government, the municipal governments and beneficiaries; iii) a first step has been given in the recuperation of the community's responsibilities with respect to the roads; iv) it became evident that community work practices in rural road networks had persisted in some municipalities; v) the process to legally form a micro-enterprise is still excessively complex, which hinders and weakens this approach to maintenance.

• Social control in Rural Investment. The following results were found with respect to the social control of works subprojects: i) the main contribution and change relates to the strengthening of the social control exercise at the community level and its consolidation over a tangible good or service that is objectively valued by the beneficiaries; ii) it guarantees social participation in all the investment cycle of the projects, from the contracting processes, the beginning of the works, the actual works and the reception of the finished product.

9. Assessment of Risk to Development Outcome Rating: Moderate The most important risks to the long-term flow of net benefits arise from weaknesses in the established arrangements for infrastructure maintenance. The infrastructure built by the project does not present technical challenges for maintenance; on the contrary, micro-irrigation and spot improvement of rural roads rely on technical standards that are quite manageable with local labor and materials. Irrigation and productive support subprojects are under the control of communities

23

and provide direct benefits to their members, thus presenting a very low risk. The risk increases in the case of larger municipal works, such as vehicular bridges or multi-community roads. Municipalities may not be able to raise sufficient funds and/or in-kind contributions from the beneficiaries to provide for adequate operation and maintenance. However, this risk is attenuated because communities tend to preserve and protect infrastructure works that have been chosen by themselves, reflect their main priorities and are highly regarded in their effects. Also, greater funding is available for municipalities as central government transfers have increased substantially since 2006 due to fresh hydrocarbon revenues. In the case of the Institutional Strengthening component, risks are low. By improving capacities in large numbers of people, and by creating an active market in technical assistance at the local level and in universities, the likelihood that gains in institutional capacity will be maintained in the future and translate into development outcomes is solid. Nevertheless, the paucity in transparent budgeting and formal arrangements for maintenance at the municipal level, coupled with weak sector policies, particularly in rural roads and irrigation, increase the possibility that these risks may materialize in some municipalities or in some investments. Thus, Risk to Development Outcome is rated Moderate, pointing to the need to develop adequate arrangements in the near future to avoid or mitigate these risks. As pointed out before, the follow on operation will support the government in designing and implementing n operation and maintenance strategy in at least some key sub-sectors. a

10. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) 10.1 Bank (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Moderately Satisfactory As mentioned earlier, Quality at Entry was generally adequate, although in hindsight it could be said that the Bank's economic outlook assessment in which the project was inserted was overly optimistic, and thus it was set out to underachieve with respect to its objective. Also, the institutional assessment of FDC and the mitigating actions taken with respect to the history of corruption and political interference of the FDC were not sufficient. At the time of appraisal, however, it would not have been easy to foresee these weaknesses, as the overly optimistic economic outlook was generalized and, secondly, the most recent track record of the FDC, participating in the implementation of the PDCR I, had allowed this institution to improve its image and perhaps help reduce risk perceptions. The key shortcoming in preparation is represented by the broad nature of the PDO statement and the resulting deficiencies in the project's logical framework, which affected the quality of M&E during implementation. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory The close and effective supervision of the project by a task team with a strong field presence was a key contributing factor to the successes of the project. Supervision focused on identifying implementation issues on the ground, providing important information in uncovering irregularities and, ultimately, getting the project back on track, by establishing the conditions needed to lift the suspension, strengthen government commitment, improve quality and prospects for long-term sustainability.

24

A Quality of Supervision Assessment for the Project was undertaken for the FY03-04 period. According to the assessing panel, given the Bank's forceful and effective response to the project crisis during FY01-02, supervision during FY03-04 focused on carrying out the strategy, devised at the time of the suspension of disbursements, and focused on cleaning up the fraud and corruption issues with FDC. This was successfully accomplished by the end of FY03, after which the task team tackled the negotiation of a revised DCA, hammering out a detailed plan (with the Ministry of Finance and government officials in charge of the Dialogue process which led to the LDN) for a new institutional framework for municipal co financing. The task team included local and Washington-based personnel covering a range of specialists, including rural development, rural engineering, financial management and auditing. These were sensitive and lengthy negotiations, which appear to have been handled with skill and persistence. Most of the tasks were completed by the end of FY04 or shortly afterwards. The QAG review concluded that the major shortcoming in supervision was in the area of monitoring and evaluation, and the panel recommended to begin updating the M&E framework, first to address progress under the ongoing institutional component which had not been suspended, and also to devise a plan for tracking progress and impacts of investment subprojects. Though tracking progress in both components was satisfactory, monitoring of outcomes never became part of the day-to-day operation of the project in spite of repeated efforts by the task team. Closing this information gap required a strong effort on the part of both implementing agencies towards the end of the project, and was hampered by failings in the initial design of the M&E framework. Project supervision following the Amendment and Restatement of the DCA was focused on accelerating implementation while assuring quality on the ground. The project's history of corruption led the team to place great emphasis on supervising ground implementation and ensuring that institutional controls and fiduciary rules operated properly. Key innovations, including the modality of spot improvements for rural roads, were introduced by the task team. As the impact evaluation and the procurement and financial audits show, both quality and fiduciary objectives were achieved. Had the team formally changed the PDO and outcome indicators during project restructuring, the rating for supervision could have been raised to Highly Satisfactory. It could also have made final evaluation of the PDO much easier. (c) Justification of Rating for Overall Bank PerformanceRating: Satisfactory The reasonable quality at entry of the Project, as described above, combined with the efforts by the task team, which worked under the most difficult of circumstances, even under threat of personal harm, to resolve the major problems encountered along the way, to steer the project in the right direction and to ensure the achievement of project objectives serve as basis for a Satisfactory rating. 10.2 Borrower (a) Government PerformanceRating: Moderately Unsatisfactory Throughout implementation the government maintained its commitment to the project. Borrower's ownership was strong as demonstrated by the role of the project in several administrations and the higher than expected level of counterpart contributions. The government permanently recognized the magnitude and importance of the project for the Bolivian rural

25

context. Following restructuring, the project was key in the implementation of the National Compensation Policy, which diminished discretion in fund-transfers and regulated the funding allocation to the municipalities according to population and poverty levels. The level of participation and beneficiary involvement, mainly in the Institutional Strengthening component led by the Vice Ministry of Popular Participation was excellent, and key staff of the project was largely untouched during the generally unstable institutional environment under which the project operated. On the negative side, monitoring and evaluation arrangements were limited to physical and financial outputs, ensuring adequate implementation but little feedback on outcomes. The government did not follow an adequate institutional policy, nor did it adopt proper controls at the outset of the project, and did not act in a timely manner to correct the uncovered corruption and fraud problems within the FDC. This led to an external, Bank-led investigation that resulted in the suspension of disbursements under the Rural Investment component and the closing of the FDC. Though the investigation resulted in some successful prosecutions, the less than forceful support in the prosecution of the most egregious corruption cases and of FDC's institutional responsibility in the cases of fraud and corruption are the main reasons to establish the rating as Moderately Unsatisfactory. (b) Implementing Agency or Agencies PerformanceRating: Moderately Unsatisfactory Implementing Agency Performance

Fondo de Inversión Productiva y Social (FPS)

The performance of the FPS is rated Moderately Satisfactory. Following a slow start, the pace of project implementation and the quality control of subprojects were generally adequate; however, FPS lacked an adequate system for monitoring beneficiaries and outcomes, and required strong supervision to ensure compliance with the Credit Agreement and the Operational Manual.

Viceministerio de Descentralización (VD, VMPPFM, VDADM)

The performance of the VMPPFM (later VDADM and VD) is rated as Satisfactory. The team in charge of the Institutional Strengthening component carried out the required actions to support project activities. The pace of project implementation was usually adequate and many of the outcomes outstanding.

Fondo de Desarrollo Campesino (FDC)

The performance of the FDC is rated Highly Unsatisfactory due to its involvement in corruption and fraud during the implementation of the project.

(c) Justification of Rating for Overall Borrower PerformanceRating: Moderately Unsatisfactory The lack of an adequate M&E framework in both implementing agencies, government's response in the corruption and fraud case, and delays in implementation are the main reasons to owngrade overall borrower performance to Moderately Unsatisfactory. d

26

11. Lessons Learned (both project-specific and of wide general application) Institutional Strengthening component

− A demand-driven, market-based model of institutional strengthening generates wider social capacities, increases the number of suppliers and improves local actors' managerial capacities. − Restricting the participatory planning process to the municipal territory may not necessarily be conducive to optimal decision-making. For rural infrastructure such as roads and bridges it may be necessary to take into account a supra-municipal territorial base, both to take advantage of scale and network effects and also to share costs. − The coherence between the longer-term municipal development plans (PDMs) and the annual operational plans (POA) are not necessarily automatic. Concerted efforts are needed to guarantee coherence between planning and implementation. − The complexity of the M&E indicators needs to be related to the institutional capacity of the user. Difficulties in monitoring during the life of the project could be explained by the fact that the chosen indicators might have been too complex for the users, and in some cases even impossible to obtain. A more flexible and simple mechanism could have produced better results. Another related lesson is that ample beneficiary participation in a project may help mitigate the lack of M&E during its implementation. − Outsourcing training services to formal and established training institutions, such as universities, could result in a more sustainable institutionality for supplying these services in the future. Universities improve their regular curricula by incorporating municipal and rural-based contents, and also increase the supply of courses and degrees relevant for local development.

Rural Investments component

− Participatory demand identification needs to be complemented with solid technical inputs in order to ensure adequate ranking of development priorities for the communities. The project's support for municipal road plans showcases how communities can arrive at municipally-ranked priorities on the basis of technical, economic and financial considerations. − The spot improvement approach for low-volume rural roads reduces unit costs, reduces environmental impacts and has a greater likelihood of ensuring year-round access than traditional approaches. Stronger linkages need to be made between rural road construction, rehabilitation and maintenance within municipal development and operating plans, and network consideration need to be built into decision-making processes at the local levels. − Reductions in transportation costs across all sectors and activities prove that rural roads can be justified on the basis of improving access to services (health, education, etc.) and not necessarily on the basis of production increases. − It should not be assumed that municipalities will allocate sufficient resources for the cost of operation and maintenance of rural infrastructure built or rehabilitated with the project. The cost of operation and maintenance should be taken into account in the project costs at the pre-investment stage or should be included as a special account in the municipalities' expenditure plans. Otherwise the municipalities may not be able to afford this expenditure as part of their annual budgets. − There is substantial room for improvement in FPS' efficiency. As the experience with "emergency" subprojects showed, the subproject cycle can be simplified, identification focused on technical aspects and implementation more clearly delegated to municipalities.

27

General

− The relative independence between both project components mitigated the risk of project collapse when one of the components experienced major implementation difficulties. If the Institutional Strengthening component had depended on the Rural Investments component the project would have come to a halt when the latter came to standstill. Both components complemented each other but did not depend on one another. − Outsourcing could be more efficient to deal with the lack of capacity of a particular institution than institutional strengthening. This is supported by the successful contracting of a management entity to administer the irrigation and productive support portfolio in the absence of capacities to do so in FPS. - Results dissemination is not automatic. Many of the methodologies used and created by the Project were not adequately disseminated. Higher visibility would have allowed further discussions on public policies, or broader involvement of other donors.

12. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies (b) Co financiers (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

28

Annex 1. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the project was "to assist the Borrower to promote economic development of rural communities and Eligible Municipalities through sustainable productive investments based on local demand which is generated through participatory planning processes." Revised Project Development Objectives (as approved by original approving authority) The PDO and its Key Indicators were not revised. (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from approval

documents)

Formally Revised Target

Values

Actual Value Achieved at Completion or Target

Years

Indicator 1 : Sustained increase in standard quality productive investments implemented and maintained in 200 poor municipalities starting in the year 2000

Value (quantitative or Qualitative)

Bob. 124.2 million

5% annual increase in 200 poor municipalities

On average, productive investments rose at an annual rate of 7.68%

Date achieved 12/31/2000 06/30/2006 12/31/2005 Comments (incl. % achievement)

Percentage achievements were, on average, more than 50% higher than expected. The indicator was measured through the total amount, in constant prices, spent by 156 municipalities on productive investments.

Indicator 2 : Sustained annual increase in economic growth in 200 municipalities beyond the life of the project


Not available 5% annual increase Not available


This indicator is not measurable, as no GDP data is gathered at the municipal level. Agricultural GDP, an imperfect proxy, growth in the 2000-2005 period averaged close to 3.6% per year in real terms.

Indicator 3 : Increase of the implementation rate of the municipal investment program in 200 project municipalities


63% 80% 76%


Average in 156 municipalities, 2000-2005. Value achieved smaller by 4% from PAD target; however, real municipal incomes grew by more than 30% in the period.

Indicator 4 : Number of subprojects with positive economic and financial impact. Value (quantitative or Qualitative)

50% of all subprojects 80% of all subprojects 91%

Date achieved 12/31/1997 12/31/1999 06/30/2006 Comments Achievement exceeded the target by 11%.

29

(incl. % achievement) Indicator 5 : Increase in the implementation rate of the municipal investment programs Value (quantitative or Qualitative)

63% 80% 76%

Date achieved 12/31/1997 12/31/2003 12/31/2005 Comments (incl. % chievement)

There was a 4% shortfall in meeting this outcome indicator; however, it is important to note that municipal budgets grew on average by more than 30% in the period. a

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from approval

documents)

Formally Revised Target Values

Actual Value Achieved at Completion or Target

Years Indicator 1 : N-A Value (quantitative or Qualitative)

Date achieved Comments (incl. % achievement)

Indicator 2 : N-A Value (quantitative or Qualitative)

Date achieved Comments (incl. % chievement)

a

30

Annex 2. Restructuring (if any)

ISR Ratings at Restructuring Restructuring

Date(s)

Board Approved PDO

Change IP DO

Amount Disbursed at Restructuring in USD

M

Reason for Restructuring & Key

Changes Made 08/05/2003 N U U 23.30 See Section 6.7

31

Annex 3. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate (USD M)

Actual/Latest Estimate (USD M)

Percentage of Appraisal

RURAL INVESTMENTS 59.39 54.07 91.04 INSTITUTIONAL STRENGTHENING 19.96 29.73 148.95

Total Baseline Cost 79.35 83.80 Physical Contingencies 3.97 Price Contingencies 3.97

Total Project Costs 87.29 Front-end fee PPF 0.00 0.00 0.00 Front-end fee IBRD 0.00 0.00 0.00

Total Financing Required 87.29 83.80

(b) Financing

Source of Funds Type of Co financing

Appraisal Estimate (USD

M)

Actual/Latest Estimate (USD M)

Percentage of Appraisal

Borrower Counterpart 0.86 1.84 213.95

Local Communities Counterpart + O&M 9.67 7.65 79.11

International Development Association (IDA) 62.83 58.20 92.63

Local Govts. (Prov., District, City) of Borrowing Country Counterpart 13.01 13.96 107.30

OPEC FUND 0.00 0.00 SWITZERLAND: OFF. OF FOR.ECON. AFF.& SWISS AGEN.OF

EV. & CO Parallel 0.90 2.15 238.89

D (c) Disbursement Profile

32

33

Annex 4. Outputs by Component

TABLE 1

OUTPUTS SUMMARY

Rural Investment Component

No. of Municipalities

benefited No. of sub projects executed

Type of subprojects No. of direct beneficiaries

187 roads, 2372 km. in total

198 vehicular bridges, 3580 lineal mt. in total

43 pedestrian bridges, 2910 lineal mt. in total

19.5% of the total population of the

226 municipalities covered 177 Irrigation projects; 3993 additional

hectares irrigated 226 858

134 subprojects on agriculture, fisheries, handicrafts and management of natural

resources

838,707 including more than 176,000 people who

benefited from more than one

subproject

72% of beneficiaries self

identified as indigenous

Institutional Strengthening ComponentNo. of

Municipalities covered

No. of TA & Training

contracts Type of

intervention Beneficiaries Technical

Assistance 173 municipalities, 75 of which incorporated consultants as staff at end

of project Formal Training 3392 beneficiaries, of which 993 wer women e

10 universities participated 169 Participatory Municipal Development Plans/Adjustments

189 Participatory Annual Operating Plans 39 Indigenous Development Plans (PDDI, PGTI)

152 Municipal Road Plans Social Control TA and training: 211 Surveillance Committees, 1055

people representing >1500 communities

1896 profiles and 159 final preinvestment subprojects designed

246 1914 Governance

Non-formal Training: 483 workshops, of which 84 were on gender issues; with 28.090 participants

34

TABLE 2

SELECTED PROJECT IMPLEMENTATION MONITORING INDICATORS

FROM AGREED DCA (MAY 20, 1998; REVISED AUGUST 5, 2003)

Activities Impl. Agency Monitoring Indicators Goal in

DCA Revised in

AmendmentTotal

Executed Component I: Rural Investments A.1 Works FDC Amounts disbursed ($ 000) 33000 10800 10800 Beneficiary contributions (FDC) 6600 1150 1150 FPS Amounts disbursed ($ 000) 15800 17084

FPS Amounts disbursed ($ 000) via outsourcing 8200 7989

Beneficiary contributions (FPS) 4800 3248 A.3 Technical assistance FDC No. of contracts 150 413 (FPS) A.4 Pre-investment studies FDC No. of studies 1000 163 159

A.5 Swiss Fund FPS Amounts disbursed ($ 000) via outsourcing 500 500 653

Management Services Entities Contracts FPS Amounts disbursed ($ 000) 820 1384

Activities Impl. Agency Monitoring Indicators

Goal in

DCA Revised in

AmendmentTotal

Executed Component II: Institutional strengthening B.1. Municipal strengthening VDADM B.1.1.PDM formulation VDADM No. of additional PDMs 66 17 17 PDM Formulation for ¨mancomunidades¨ VDADM No. of PDMs of ¨mancomunidades¨ 6 4 PDM Adjustment VDADM No. of PDMs adjusted 104 148 B.1.2.Technical assistance to PDM implementation VDADM

No. of municipalities with executing agencies 200 15 15

VDADM No. of municipalities with Participative POAs formulated 17 153

VDADM

No. of municipalities in ¨mancomunidades¨ with Participative POAs formulated 6 36

VDADM No. of municipalities with technical assistants 50 155 173

B.1.3.Implemantation of municipal administrative systems

VDADM No. of systems installed 50 13 14

VDADM Financial Information systems 36 36 VDADM Municipal revenues system (SIIM) 91 93 B.1.5 Indigenous districts VDADM No. of PDDI formulated 30 36 39 VDADM No. of PDDI implemented 1 21 B.1.6 Profile Elaboration with indigenous people, gender or cultural heritage focus

VDADM No. of profiles 1000,

100 1404, 5 1404, 5

35

B.1.7 Municipal council strengthening VDADM No. of municipal councils 85 89 B.1.8. Social control VDADM No. of CVs, OTBs executing social

control 206 211 B.2 Community Strengthening B.2.1. Community subprojects profiles with indigenous peoples, gender or cultural heritage focus

VDR No. of profiles 300,

30

492, 38, 80

492, 38, 80

B.2.2. Community based information and monitoring system

VDADM No. of community implemented 30 30 30

B.3. Training B.3.1 Formal training, of whom women VDADM No. of person trained 2500 ,

500 2000 ,

500 3392, 993

VDADM No. of environmental training programs 10 10 5

B.3.2 Non formal training, of which on women issues VDADM No. of training sessions 150 ,

15 117, 10

483, 184

B.3.3 Training of community leaders, of which for women and indigenous peoples

VDR No. of training sessions 102 ,

10 18 18 B.3.3 Training of community leaders, women and indigenous peoples

FDC No. of training sessions 50 9 9

B.4 VPEPP Strengthening B.4.1 Consultants VDADM No. of person-year 60 70 115 B.5 FDC/FPS Strengthening B.5.1 Project Unit FDC No. of person-year of consultants 20 11 11 Number of projects complying with FDC's processing schedule

FDC % of projects accepted by FDC 70% 60 60

B.5.2 Training Unit FDC No. of person-year of consultants 5 2 2 B.5.3 Environmental Unit FDC/FPS No. of person-months of consultants 72 72 88

FDC/FPSGuidelines for environmental analysis established by Manual 1

FDC/FPS No. of environmental audits 4 2 2 FPS % Monitoring (audits if necessary) 10% 12% B.5.4 Departmental offices FDC/FPS No. of person-year of consultants 45 45 31 B.5.5 Indigenous people and women's program FDC/FPS

% of subprojects implemented included in indigenous district development plans 8% 6% 6%

FDC/FPS% of subprojects implemented with gender focus 5% 3% 1%

Employment of technical investment officers FDC No. of technical investment officers 50 50 80 Technical Audits FDC/FPS No. of audits 4 3 10 In-depth evaluation of 20 subprojects FDC/FPS No. of subprojects studied 100 30 31 B.6 Strengthening of prefectures VDADM No. of person-year of consultants 130 200 231 B.6 Strengthening of VDR VDR No. of person-year of consultants 8 8 6

36

Annex 5. Economic and Financial Analysis (including assumptions in the analysis) The economic and financial analysis of the project applied the cost-benefit and cost-efficiency methodologies or ratios. The incremental economic and financial benefits assessed the following factors: a) for the road and bridge subprojects, a reduction of time and a reduction of transportation costs for families and transport-sector beneficiaries in the project situation as compared to the current situation; b) for the subprojects in small-scale irrigation, an increase of the production value for the beneficiary families in the project situation as compared to the current situation. The incremental costs were estimated on the basis of the costs of every type of project works related to investment, operation and maintenance. Both the revenues and incremental economic costs are exempt from the so-called transfer payments, and are therefore net of taxes and other charges applicable on transactions. On the contrary, the financial analysis was performed applying market prices, i.e. including taxes and social charges. The dollar-boliviano exchange rate used in the calculation is: USD 1 = Bs 8. The annual incremental cost and revenue flows have been discounted at a rate of 12.7 % per year for the economic evaluation and 10.1 % for the financial evaluation. The period of time considered in both analyses has been 20 years. Two different types of economic analyses were carried out: one for 4 models or types of subprojects related to infrastructure works (rural roads, vehicular bridges, pedestrian bridges and small-scale irrigation) and another one for the overall project. The financial analysis has been performed only for the 4 models or types of subprojects related to infrastructure works. The cost-efficiency analysis was performed by comparing the unit costs and the costs per beneficiary family of the works carried out by the project to the average national values specified by the Vice-Ministry of Public Investment and External Funding (VIPFE). Cost-Benefit ratio Economic analysis of subproject types. The models or types of subprojects analyzed and their average size were determined on the basis of the actually executed amounts in the project, in the entire country, in 1999-2005. In this period the project executed the following 858 investment subprojects:

Type of Investment Subproject Quantity Amount (millions US$) * Rural Roads Improvement 187 21,1 Construction of Vehicular bridges 158 10,2 Construction of Pedestrian bridges 43 2,2 Construction of Micro Irrigation Systems 177 10.6 Agricultural Development 101 4.2 Pre investment 159 1.5 Other productive 33 0.9

Total 858 50,7

* Includes: the investment cost and expenses related to operation and maintenance. The total amount includes: the IDA credit, Swiss funds, official counterpart contributions and estimated in kind contributions of the municipalities and beneficiaries. The table above shows that the project has made investments in 7 different types of works. The most important in terms of costs (investments and costs for operation and maintenance) were: improvement of rural roads, construction of vehicular bridges, construction of pedestrian bridges and the construction of small-scale irrigation systems. These four types of works account for almost 90% of the total investments.

37

The pre-investments do not cover works, but consultancies related to the preparation of studies or ex ante evaluations for the financed subprojects. For performing the simulations of the analysis, the following 4 models of subprojects or types and sizes of works to be evaluated were taken, as for the other types of investments there are no trustworthy data to asses the situation with and without the project.

• Improvement of Rural Roads, 18 kilometers with a cost of USD 71,781. • Construction of a Vehicular Bridge of 32 meters with a cost of USD 73,935. • Construction of a Pedestrian Bridge of 32 meters with a cost of USD 73,935. • Construction of a Small-scale Irrigation System of 31 hectares with a total cost of USS 54,857.

The key characteristics of these 4 models of subprojects adopted for simulation of the results, and the basic data thereof, have been extracted from the tables of the report on the impact of the Rural Investment component of the project prepared by a consulting firm (FPS. Evaluación de Impacto del Componente de Inversiones Rurales del PDCR II). Improvement of rural roads: The considered standard work was the improvement of 18 kilometers of poorly maintained rural roads, the average economic value of the initial investment of which was USD 3,987 per kilometer. As from year 1, an annual maintenance cost of USD 9,630 (USD 535 per km) was also included. No operating expenses were considered. The incremental income was calculated considering the time saved by each of the 369 beneficiary families of the subproject and the reduction of transportation costs. Construction of Vehicular or Pedestrian Bridges: The considered standard work was construction of a bridge of 32 meters long, the average economic value of the initial investment of which was USD 2,310 per meter. As from year 1, an annual maintenance cost of USD 2,065 was also included. No operating expenses were considered. The incremental income was calculated considering the time saved by each of the 458 beneficiary families of the subproject and the reduction of transportation costs. Construction of the Small-Scale Irrigation System: The considered standard work was construction of a water intake, piping and distribution system on an area of 31 hectares, the average economic value of the initial investment of which was USD 1,770 per hectare (including the cost of the works and the environmental impact mitigation measures). As from year 1, an annual operational and maintenance cost of USD 2,441 (USD 79 per ha) was also included. No operating expenses were considered. The incremental income was calculated considering the increase of the value of the total production (self-consumption plus sales) of each of the 52 families benefited with the subproject. ResultsThe economic results obtained for each subproject considered in the simulation are satisfactory, as they show an EIRR considerably greater than 12.7%, which is the economic opportunity cost considered in the evaluation.

Type of Subproject

ENPV US$

%

EIRR Rural Roads Improvement 65,026 26.0 Construction of Vehicular bridges 88,782 30.5 Construction of Pedestrian bridges 88,782 30.5 Construction of Micro Irrigation Systems 95,595 36.5

38

Detailed overview of the economic analysis of every subproject – in USD

Subproject and Concept Year 0 Year 1 to 20 ENPV

Rural Roads Improvement Incremental Income 0 27,063 to 31,215 192,449 Incremental Costs 71.781 9,630 127,423 Cash Flow -71.781 17,433 to 21,585 65,026

EIRR 26.0 % ENPV 65,026

Construction of Vehicular bridges Incremental Income 0 23,474 a 27,496 168,376 Incremental Costs 73,935 2,065 79,594 Cash Flow -73,935 21,409 to 25,431 88,782

EIRR 30.5 % ENPV 88,782

Construction of Pedestrian bridges Incremental Income 0 23,471 to 27,496 168,376 Incremental Costs 73,935 2,065 79,594 Cash Flow -73,935 21,406 to 25,431 88,782

EIRR 30.5 % ENPV 88,782

Construction of Micro Irrigation Systems Incremental Income 0 13,000 to 26,000 160,628 Incremental Costs 54,857 2,441 65,033 Cash Flow -54.857 10,559 a 23,559 95,595

EIRR 36.5 % ENPV 95,595

Economic Analysis of the Project In order to make the economic analysis of the project, the economic results of the 565 subprojects (improvement of rural roads, construction of vehicular and pedestrian bridges, construction of small-scale irrigation systems) implemented between 1999 and 2006 were all aggregated, which was done based on the following annual distribution of subprojects:

Type of Subproject 1999 2000 2001 2002 2003 2004 2005 2006 Rural Roads Improvement 7 21 5 2 52 100 Construction of bridges 1 31 2 4 59 104 Construction of Micro Irrigation Systems 3 29 6 9 130

The annual incremental investment costs resulting from the aggregation were compared to the annual investment costs of the project in the Rural Investments component and any differences were adjusted to equal both values. Following this procedure, the EIRR of the overall project is 28.8 % and the net present value of the stream of economic revenues USD 21,978,670. Economic performance of the project is good, particularly when taking into account that the project was implemented in communities where, on average more than 72% of the population is indigenous and lives in a highly marginal situation.

39

Detailed overview of the economic analysis of the project in US$ Concepts/Years 1 2 3 4 5 6

Incremental Income 0 1.294.921 2.626.489 2.733.230 2.762.490 2.940.300 Incremental Costs 2.115.444 4.943.070 478.317 478.317 917.619 9.149.184

Component Balance Cost 291.163 660.220 0 0 60.464 1.189.642

Cash Flow -2.406.607 -3.678.369 2.148.172 2.254.913 1.784.407 -7.398.526

Concepts/Years 7 8 9 10 11 12

Incremental Income 5.882.368 12.917.188 14.775.010 14.945.864 15.119.810 15.267.159 Incremental Costs 23.151.592 2.647.932 2.647.932 2.647.932 2.647.932 2.647.932 Component Balance Cost 3.027.836 0 0 0 0 0 Cash Flow -20.297.060 10.269.256 12.127.078 12.297.932 12.471.878 12.619.227

Concepts/Years 13 14 15 16 17 a 20 ENPV Incremental Income 15.413.682 15.562.860 15.714.745 15.866.422 15.965.820 54.568.038 Incremental Costs 2.647.932 2.647.932 2.647.932 2.647.932 2.647.932 29.796.419 Component Balance Cost 0 0 0 0 0 2.792.949 Cash Flow 12.765.750 12.914.928 13.066.813 13.218.490 13.317.888 21.978.670

EIRR 28.8 % Financial analysis of subproject types. The financial results obtained for each of the subproject types considered in the simulation are also satisfactory with a FIRR greater than 10.1%, which is the financial opportunity cost considered in the evaluation.

Financial results of each type of subproject

Type of Subproject FNPV US$

% FIRR

Rural Roads Improvement 55,775 25.1 Construction of Vehicular bridges 87,770 31.0 Construction of Pedestrian bridges 87,770 31.0 Construction of Micro Irrigation Systems 92,299 34.6

Detailed overview of the financial overview of each subproject type – in US$

Subproject and Concept Year 0 Year 1 to 20 FNPV

Rural Roads Improvement Incremental Income 0 27063 to 31215 192449 Incremental Costs 65717 11860 136674 Cash Flow -65717 15203 to 19.55 55775

FIRR 25.1 % FNPV 55,775

40

Construction of Vehicular bridges Incremental Income 0 23474 to 27496 168376 Incremental Costs 70656 2664 80606 Cash Flow -73935 20810 to 24832 87770

FIRR 31.0 % FNPV 87,770

Construction of Pedestrian bridges Incremental Income 0 23474 to 27496 168376 Incremental Costs 70656 2664 80606 Cash Flow -73935 20810 a 24832 87770

FIRR 31.0 % FNPV 87,770

Construction of Micro Irrigation Systems Incremental Income 0 13000 to 26000 160628 Incremental Costs 58048 2509 68329 Cash Flow -54.857 10.491 a 23.491 92.299

FIRR 34.6 % FNPV 92,299

Cost-Efficiency methodology.

The project does not only show a good financial and economic performance applying the cost-benefit ratio, but also when using the cost-efficiency ratio. The cost-efficiency analysis was based on a comparison of the unit cost and the cost per beneficiary family of the works carried out by the project to the national averages specified by the Vice-Ministry of Public Investment and External Financing (VIPFE). As shown in the table below, in all cases the project results were positive. This means that the project has provided services of a quality equivalent to that of other similar projects that are or have been executed in the country, but at a sensibly lower cost.

Type of Subprojects Project Cost Unit*

VIPFE Cost Unit*

% Dif.

Project Family

Cost

VIPFE Family

Cost

% Dif.

Rural Roads Improvement 3650 9927 - 63 178 413 - 57 Construction of bridges 2208 2470 - 11 154 217 - 29 Construction of Micro Irrigation Systems

1873 2466 - 24 1116 2497 -55

• For subprojects in roads, the used unit is kilometer, for bridges meter and for small-scale irrigation hectare. The VIPFE parameters are an average between the established minimum and maximum costs.

Efficiency was highest in the project regarding the improvement of rural roads. This highly positive result obtained by the project is related to application of the spot improvement approach (puntos y tramos). This approach is cheaper than traditional approaches and uses technologies that are more adequate to the volume of traffic and topographic conditions prevalent in rural areas in the country. Sensitivity analysis The period of time considered in both the economic and financial analyses has been 20 years. If we halve this period to 10 years, in order to account for possible maintenance failure, both the EIRR and the FIRR would barely be affected. If we apply the extreme hypothesis that no maintenance will be carried out and the operational life of all works will be reduced to 5 years, the EIRR for the whole project is reduced from 28.8% to 11.9% and the ENPV from USD 22.0 M to USD -40.2 M. The latter scenario, though is highly unlikely and is only included here for illustrative purposes.

41

Conclusions and recommendations It is clear that the project is economically and financially viable with a significant level of efficiency. Besides, these results become more relevant when we take into account that the project was executed in communities where more than 72% of the population is indigenous and lives in a highly marginal situation. It is important to consider that the accumulated expenses for operation and maintenance between 1999 and 2006 for the 565 subprojects in roads, bridges and small-scale irrigation, totaled USD 7.4 million and that, from 2007, these expenses – an annual amount of USD 3.2 million – will have to be covered by the municipalities and beneficiaries. Therefore, we recommend that this type of projects include a component focusing on social and technical sustainability that gives advice, provides training, legalizes, supervises and gives support in raising the funds required for operation and maintenance of the executed works. Comparison to the PAD analysis The PAD foresaw an economic internal rate of return (EIRR) of 37% and an economic net present value of the stream of economic revenues (ENPV) of USD 138,860,000, while the economic evaluation made for the ICR yields an EIRR of 28.8% and an ENPV of USD 21,978,670. The resulting differences are not due to a lower performance of the project with respect to what was expected in the appraisal. The fundamental reason for these differences is related to the use of different methodologies in the ICR and the Appraisal. For the appraisal, the cost-benefit approach was used, but for all the types of subprojects the incremental revenues and costs included the revenues and production costs of the beneficiary farms. For the ICR the same approach was used, but the incremental economic and financial benefits were estimated on the basis of: (a) for roads and bridges, the reduction of time and the reduction of transportation costs for families and transport-sector beneficiaries in the project situation as compared to the current situation; (b) for small-scale irrigation, the increment in production value that beneficiary families would have in the project situation as compared to the current situation. The methodology used for the ICR is that used by the World Bank to evaluate rural infrastructure projects around the world, and yields more realistic results. Furthermore, the basic data required are easier to obtain and normally more reliable. The PAD did not include any indicators using the cost-efficiency approach. It only highlights – in the conclusions of Annex 4 – some maximum values for the improvement of roads and their operation and

aintenance. m

42

Annex 6. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members

Names Title Unit Responsibility/SpecialtyLendingJose Baldivia Consultant LCCBO NGO Assessment Ana Cristina Betancourt Consultant WBISD Beneficiaries AssessmentMaria E. Castro-Munoz Sr Social Scientist LCSSO Social Assessment

Carlos G. Gregorio Consultant LCSPS Econ. And Fin. Evaluation

Howard A. Jones Consultant LCSEN Financial Assessment Hideki Kagohashi Consultant LCCBO Project Costs Roberto C. Laver Consultant LCSUW Lawyer Thao Le Nguyen Senior Finance Officer LOAG2 Disbursements Maria Teresa Szauer Umana Consultant LCSSD Environment Assessment

David Tuchschneider Senior Rural Development Spec LCSAR Task Manager in Bolivia

Jorge E. Uquillas Rodas Sr Sociologist AFTS1 Indig. Peoples Assessment

Martien Van Nieuwkoop Lead Rural Development Special SASAR Advisor

Pierre Werbrouck Sr Agric. Economist LCSAR Task Team Leader in HQ

Supervision/ICRKeisgner De Jesus Alfaro Sr Procurement Spec. LCSPT Procurement Jose Baldivia Consultant LCCBO Consultant Ricardo Calla Consultant LCCBO Consultant

Maria Donoso Clark Lead Social Development Spec ECSSD Sector Leader

Alvaro Larrea Procurement Spec. LCSPT Procurement George Campos Ledec Lead Ecologist LCSEN Environment

Lourdes Consuelo Linares Financial Management Specialist LCSFM Financial Management

Ruth Llanos Social Development and Civil S LCSSO Civil Society/Social Dev.

Patricia Mc Kenzie Sr Financial Management Spec OPCFM Financial Management

Xiomara A. Morel Senior Finance Officer LOAG1 Disbursements Jose Luis Oblitas Consultant LCCBO Procurement Vladimir Pary E T Consultant LCSAR Supervision Rocio Recalde E T Temporary LCSSD Team Assistant Andrea L. J. Silverman Consultant LCSAR Task Manager

David Tuchschneider Senior Rural Development Spec LCSAR Task Manager

Pierre Werbrouck Sr Agric. Economist LCSAR Task Manager

43

(b) Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP Actual Disbursements (USD

M) 1 07/01/1998 Satisfactory Satisfactory 0.00 2 12/17/1998 Satisfactory Satisfactory 0.00 3 06/25/1999 Satisfactory Satisfactory 5.75 4 12/22/1999 Satisfactory Satisfactory 10.35 5 04/27/2000 Satisfactory Satisfactory 14.16 6 12/11/2000 Satisfactory Unsatisfactory 17.46 7 06/25/2001 Satisfactory Unsatisfactory 19.86 8 12/13/2001 Satisfactory Unsatisfactory 22.13 9 05/29/2002 Satisfactory Unsatisfactory 21.72 10 10/08/2002 Satisfactory Unsatisfactory 22.92 11 03/01/2003 Unsatisfactory Unsatisfactory 22.75 12 11/11/2003 Unsatisfactory Unsatisfactory 24.00 13 12/19/2003 Satisfactory Satisfactory 24.05 14 03/17/2004 Satisfactory Satisfactory 26.49 15 06/10/2004 Satisfactory Satisfactory 26.79 16 06/15/2004 Satisfactory Satisfactory 26.79 17 12/03/2004 Satisfactory Satisfactory 29.02 18 04/15/2005 Moderately Satisfactory Unsatisfactory 31.49

19 06/29/2005 Moderately Unsatisfactory Unsatisfactory 34.82

20 10/27/2005 Moderately Satisfactory Moderately Satisfactory 40.00

21 05/20/2006 Satisfactory Satisfactory 52.21

22 06/29/2006 Moderately Unsatisfactory

Moderately Satisfactory 56.01

(c) Staff Time and Cost

Staff Time and Cost (Bank Budget Only)

Stage of Project Cycle No. of staff weeks

USD Thousands (including travel and

consultant costs)

Lending FY97 3.42 FY98 267.81 FY99 0.00 FY00 0.00 FY01 0.00 FY02 0.00 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00

Total: 271.23

44

Supervision/ICR FY97 0.00 FY98 3.78 FY99 66.51 FY00 20 54.23 FY01 34 73.71 FY02 19 47.16 FY03 30 72.53 FY04 28 95.63 FY05 34 62.52 FY06 66 113.36 FY07 19 52.93

Total: 250 642.36

45

Annex 7. Detailed Ratings of Bank and Borrower Performance

Bank Ratings Borrower Ratings

Ensuring Quality at Entry: Moderately Satisfactory Government: Moderately Unsatisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

Moderately Unsatisfactory

Overall Bank erformance:P Satisfactory Overall Borrower

Performance:Moderately Unsatisfactory

46

Annex 8. Beneficiary Survey Results (if any) A consulting firm performed a series of beneficiary surveys in a sample of 73 subprojects covering the entire country, and different types of projects (FPS. Evaluación de Impacto del Componente de Inversiones Rurales del PDCR II. August 2006. Prepared by SAXgr.). The principal findings of the qualitative analysis are summarized below. The social valuation performed through the surveys takes into account five factors: 1. Degree of beneficiary participation and social consensus. In general, participation of the beneficiaries is significant. The evaluation measured participation in the different phases of the project cycle. Beneficiary participation was the highest in the project selection phase. 2. Access to collective consumption goods and services. Beneficiaries noted that access to goods such as health and education increases in road and bridge projects. In nine out of every ten projects, the implementation of bridges and/or the upgrade of roads improved the access to health services. This conclusion is valid regardless of the location and size of the investment. The implementation of bridges and/or the upgrade of roads have a positive impact on the access to education in seven out of every ten projects. In addition, the project beneficiaries appreciate changes in their daily life such as a deeper sense of security, the enhanced availability of vehicles for transportation and increased inter-community communication. 3. Social Equity. The evaluation of the collected data does not show any signs that the projects discriminate between social groups as regards the access to benefits. Execution of the projects does not seem to emphasize or promote social inequity. The beneficiaries admit that the project benefits (roads, small-scale irrigation and productive projects) have reached the population in general, regardless of people's sex, age or ethnic origin. It is clear that in the investment phase, projects provided good employment opportunities for young people. 4. Social capital and cultural identity. Conservation of Cultural Values: The statistics prepared on the basis of the project show that in nine out of every ten subprojects, the project did not cause any changes in the cultural values regardless of location, investment size, and type of project. Nonetheless, in the case of road projects it is necessary to consider the indirect impacts such as the increase of migration and growth of settlement areas, which in turn may give rise to cultural changes. Solidarity and Reciprocity: In this case, it is also necessary to establish differences according to the type of project. This is relevant for productive projects and mainly small-scale irrigation projects, which are based on solidarity and reciprocity among the beneficiaries. The survey has shown that in eight out of every ten cases the projects have strengthened the links of solidarity and reciprocity. In the irrigation systems, 100% of the studied cases confirmed that the project will contribute to strengthen solidarity and reciprocity links. 5. Social control in execution and operation of the projects. The lack of support in formal organization for O&M was seen in 53 out of the 73 projects. The projects that were most seriously affected by this deficiency were the road projects, followed by the small-scale irrigation projects. Without any doubt, organizational strengthening is one of the most important and sensitive aspects. Although some important initiatives were implemented (coaching / guidance and training), the results are not evident yet as the organized participation of beneficiaries is

romoted in the last project phase and not throughout the project cycle. p

47

Annex 9. Stakeholder Workshop Report and Results (if any) The following table summarizes the results of a two-day workshop held in La Paz on October 5-6, 2006, with the participation of 127 persons, including mayors, municipal council members, municipal technicians, representatives on the National Confederation of Municipalities, prefectural technicians, and national government authorities.

ÁREA DE GOBERNABILIDAD Pregunta: ¿Cuáles sus percepciones sobre los servicios del PDCR II en el área de gobernabilidad?

1. Apoyo en planificación: Aspectos positivos Aspectos negativos Conclusiones Recomendaciones a futuro

- Se proporcionó asistencia técnica para los PDM - Formulación de PDM con participación de la sociedad civil - Apoyo en la formulación de PDM y POA - Elaboración de planes viales - Seguimiento a la ejecución de PDM mediante sus técnicos - Se proporcionó capacitación a diferentes actores - Se identificaron y priorizaron las demandas de las comunidades - Promoción del desarrollo económico de las comunidades y municipios rurales a través de inversiones productivas sostenibles - El Comité de Vigilancia, mediante el PDM tiene, mayor oportunidad de efectuar seguimiento a la ejecución de sus proyectos priorizados - Fue positiva la elaboración de proyectos y perfiles de proyectos - Seguimiento desde el inicio hasta el fin, durante todo el proceso

- Insuficiente capacitación y seguimiento a los facilitadores - Metodología de priorización con deficiencias - PDM orientados con mayor inversión a proyectos de infraestructura física - En algunos municipios la participación fue más limitada y el trabajo más técnico en los PDM - Se contrató servicios para elaborar PDM y no se capacitó a los gobiernos municipales en ello (a partir de 2001) -Insuficiente seguimiento a entidades ejecutoras (PDM) de parte de algunos municipios - Entonces, se tuvo PDM de baja calidad en algunos casos - Faltó socializar más los PDM - En algunos departamentos hubo problemas en la relación municipios-prefectura, por motivos políticos

- Se valora el trabajo del PDCR sobre todo en planificación y control social - La presencia del PDCR II ha sido positiva, sin embargo, existieron falencias en: capacita ción, seguimiento a la asistencia técnica, seguimiento a los ejecutores

Para planificación: - Los proyectos que se prioricen deben respetar el POA que se realiza en cada gestión - Mejorar la metodología de capacitación y asistencia téc- nica para planificación participativa - Realizar ajuste de la guía de PDM - Se debe tomar en cuenta a todos los actores y seguir apoyando con AT, para más y mejores proyectos En general: - El PDCR III debe apoyar el desarrollo productivo - Se debe ampliar el área de cobertura del proyecto - Profundizar la capacitación a la sociedad civil para proyectos productivos que generen ingresos - El PDCR III debe intervenirdirectamente, sin pasar por las prefecturas

48

2. Apoyo en control social: Aspectos positivos Aspectos negativos Conclusiones Recomendaciones a futuro

- Encuentro entre GM y sociedad civil - Hubo capacitación a comités de vigilancia, OTB y comités de obras - La sociedad civil conoce su papel a desempeñar dentro de su municipio - El comité de vigilancia conoce su rol - El control social ha mejorado el seguimiento de proyectos

- Insuficiente seguimiento de los capacitados en la aplicación de sus conocimientos al resto de la población - En algunos municipios la capacitación a la sociedad civil fue insuficiente

- Se valora el trabajo del PDCR sobre todo en planificación y control social - La presencia del PDCR II ha sido positiva, sin embargo, existieron falencias en: capacitación, seguimiento a la asistencia técnica, seguimiento a los ejecutores

En control social: - Capacitar a la sociedad civil en el tema de control social - Capacitación permanente, conforme se renueva el comité de vigilancia En general: - El PDCR II logró capacitar a la sociedad civil con algunas diferencias entre municipios. Sin embargo, se debe continuar capacitando a la sociedad civil - El sistema educativo debería recoger temas de control social

3. Apoyo en sistemas de gestión:

Aspectos positivos Aspectos negativos Conclusiones Recomendaciones a futuro - La capacitación en el manejo del SINCOM en el curso de diplomado a los técnicos y a concejos municipales ha elevado la eficiencia en la gestión, transparentando sus acciones y mejorando sus recursos humanos - Se han instalado sistemas de gestión (software SINCOM) - Ello permite el manejo de cuentas claras en el gobierno municipal - El manejo del software permite información rápida y confiable - Se capacitó a la parte contable en control de recursos, ingresos y egresos - El Sistema de Impuestos Municipales (SIM) regulariza e incrementa los recursos propios - Se capacitó a los concejales para mejorar la

Relativos al PDCR II: - No existe control o seguimiento a los siste-mas financieros implementados - Constante cambio de técnicos del PDCR II - Problemas en los sistemas por las caracte-rísticas de cada municipio - En algunos departamen-tos la capacitación a algunos municipios no fue positiva (*) - El SIM registra dos veces o más el empadro-namiento de bienes inmuebles Relativos a los GM: - No tener permanencia del personal capacitado - Poca información del comité de vigilancia en manejo de recursos - Falta de capacitación periódica a los actores municipales en sistemas de gestión - Falta de adecuado seguimiento de los GM a

- Faltó monitoreo con junto entre GM y PDCR a la implementación de los sistemas de gestión - El proyecto orientó a mejorar la gestión municipal en algunos munici pios - El PDCR ha cumplido con sus objetivos en los municipios

Para el PDCR: - Disminuir las contrapartes para los GM del área rural, para contar con profesionales capaces de dar seguimiento a los sistemas

- Seguir manteniendo el apoyo

técnico en la perspectiva de institucionalizar la capacita- ción - Que se promocione a profesionales locales y se capacite en gestión municipal - Profundizar las capacidades al interior de la sociedad civil y de los actores locales nuevos - Constante actualización y capacitación en gestión - El PDCR debe seleccionar de acuerdo a capacidades y competencias - Asistencia técnica permanente y relación general entre departamentos para una mejor gestión en municipios - La asistencia del PDCR debe ser constante para lograr una

49

gestión - Entonces, la gestión de capacidades municipales están fortalecidas en sus relaciones sociales y políticas

la implementación del PDCR - Al concluir el proyecto los técnicos capacitados buscan otras oportunidad de trabajo y el GM queda como al inicio - Falta de presupuesto del municipio ocasiona fuga de personal calificado - La capacidad de GM dificulta la contratación de profesionales capaces - Falta de capacitación a los comités de vigilancia sobre los sistemas de gestión municipal

buena gestión - Al final de cada gestión anual el PDCR debería evaluar al GM - Que las capacitaciones sean abiertas a todos los interesados - Mayor supervisión a los capacitadores Para PDCR y GM: - Evitar cambios del personal facilitador, tanto en el PDCR como de autoridades de gestión Para el gobierno central: - El gobierno central debe considerar presupuesto para la capacitación a líderes locales - Implementación de un sistema nacional de capacitación para la gestión municipal y departamental

(*) No hubo acuerdo sobre este punto

ÁREA DE CAPACITACIÓN Pregunta: ¿Cuáles sus percepciones sobre los servicios del PDCR II en el área de capacitación?

Aspectos positivos Aspectos negativos Conclusiones Recomendaciones a futuro - Mejora de competencias de los funcionarios y actores municipales en: control social, planificación y gestión municipal - Contribuye en la aplicación de los sistemas de contratación de bienes y servicios, contratación de personal a nivel de municipio - Participación de personas con diferente grado de instrucción en un mismo evento de capacitación - Capacitación en sedes regionalizadas o mancomunidades - Mayor participación en los eventos de capacitación por el apoyo del PDCR II a través de becas - Buen desenvolvimiento del funcionario en su área de trabajo

- Revisión de tesis, proyectos de grado, tesinas, etc. en un tiempo muy largo - Poco apoyo de algunas autoridades municipales a los técnicos participantes en los eventos de capacitación - La inasistencia de algunos participantes por falta de tiempo y de recursos económicos

- El servicio de capacitación ha contribuido al mejoramiento de la gestión municipal a través del desarrollo de capacidades institucionales en gerencia municipal, participación, control social, planificación y finanzas municipales

Para el PDCR: - El proceso de formación modular semipresencial y diferencia-do debe continuar - Generar procesos de capacitación a profesional del medio en el ámbito municipal para que trabajen en su municipio - El PDCR debe fomentar la institucionalización del personal en los municipios - El próximo PDCR debe considerar diferentes niveles de formación, capacitación, diplomados, etc. Para los GM: - Garantizar la permanencia de los funcionarios municipales capacitados En general: - La capacitación de los actores municipales y sociales debe ser una política

50

- Introducción de la temática municipal en el sistema universitario - Fortalece la gestión municipal con recursos humanos capacitados

de Estado - Profundizar los procesos de apoyo a la inclusión de la problemática municipal en la curricula de pregrado de las universidades

ÁREA DE GESTIÓN INDÍGENA

Pregunta: ¿Cuáles sus percepciones sobre los servicios del PDCR II en el área de gestión indígena?

Aspectos positivos Aspectos negativos Conclusiones Recomendaciones a futuro

- Participación directa de las organizaciones indígenas - Participación de autoridades originarias, cabildo y comuni dades - Experiencia piloto que permitió activar la participación y fortalecer la unidad - Buen nivel de relaciona-miento y coordinación entre la TCO y el GM - El apoyo técnico metodológico fortalece a la organización indígena - Permite conocer la realidad de nuestro territorio - A partir del PGTI se empiezan a preocupar por el medio ambiente (áreas degradadas) - Los gobiernos municipales que cuentan con PGTI están mejorando los servicios priorizados por las comunidades

- No existió permanencia de los técnicos en los municipios - Los PGTI no son reconocidos por autoridades departamentales y nacionales - Este nivel de planificación no está contemplado en el SISPLAN - Ha creado expectativas que no siempre tienen apoyo en la ejecución - Incertidumbre sobre los procesos de autonomía indígena - El retraso de los financiamiento del proceso de la elaboración de los diferentes planes - Que el PGTI no sea válido para prefecturas y entidades nacionales - No está tomada en cuenta la parte de los financiamientos - Se realizaron en una fase muy tardía del PDCR II

- El servicio brindado fortaleció a la organización indígena - Se tiene el PGTI como instrumento de gestión - Los PGTI son concretos en sus demandas - A pesar de sus falencias, tiene más cosas positivas que negativas - El PDCR II ha iniciado un proceso de fortalecimiento de las TCO - El PDCRII ha logrado impacto técnico de fortalecimiento muni-cipal, que debería continuar - Como experiencia piloto se tiene como resultado el PGTI, el cual se constituye en una herramienta e instrumento de gestión del desarrollo - Apoya en el proceso a la integración de los actores como tales - Fortalece el ámbito de la participación ante las instancias estatales y ONG - El programa es bueno pero no logró llegar a todo el sector indígena. Debería ser más amplio

- Apoyo a las TCO con los mismos equipos del PDCR II - Brindar financiamiento para la implementación de planes y proyectos - Mayor presupuesto a inversión en PGTI (discriminación positiva) - Que se tenga en cuenta el carácter técnico del PDCR II para la ejecución de otra fase - Involucrar a los actores locales como consultores - Realizar una fase de concientización previa al iniciar otros PGTI - En los distritos indígenas y TCO concluir los PGTI - Capacitar a técnicos de la zona para evitar vulnerabilidad en temas sociales, culturales, etc. al elaborar los PGTI - Que se ejecuten los planes y proyectos incluidos en los PGTI - Promover la participación de las comunidades indígenas - El PDCR II debería continuar para fortalecer a los municipios

51

ÁREA DE MANCOMUNIDADES Pregunta: ¿Cuáles sus percepciones sobre los servicios del PDCR II en el área de mancomunidades?


En general: - A través del PDCR II se logró mancomunar a muchos municipios del país En planificación: - Apoyo en la formulación de PEDEL - El PEDEL nos permite trabajar en coordinación con otras instituciones - Con la planificación se permite identificar la vocación productiva de la mancomunidad (por ej. el turismo) - El incentivo al ecoturismo ha dado a las comunidades fuentes de ingreso, ha motivado el sentimiento de integración - Apoyo en la elaboración de planes viales - El PDCR ha apoyado a elaborar PDM de todos los municipios de la mancomunidad En sistemas de gestión: - Ha contribuido con la implementación del SIM (Llica-Tahua) - El PDCR capacitó en manejo del SINCOM - El PDCR II nos ha apoyado en la implementación de los sistemas, principalmente el SIM, con el cual se incrementaron los ingresos propios En asistencia técnica: - Apoyó con AT mancomunada (gerentes) - Se fortaleció técnicamente a algunas mancomunidades En capacitación: - Se brindó capacitación formal a los alcaldes de la mancomunidad

- Seguimiento insuficiente a los diferentes servicios fi-nanciados por el PDCR - Faltó seguimiento a la capacitación - En algunos casos hubo cambio de los técnicos del PDCR por ingerencia política - Algunos técnicos no tienen capacidad para orientar sobre mancomunidad - Faltó socializar la política de fortalecimiento a nivel de mancomunidades - Reducido tiempo de intervención en tema de mancomunidad - No se llegó a todas las mancomunidades

- Se valora positivamente el apoyo del PDCR en las mancomunidades de intervención, sin embargo, el área de cobertura y el tiempo de intervención fueron muy reducidos

- Que se dé mayor importancia a aquellos municipios pequeños en el tema de mancomunidad - El deseo de mancomunarse debe partir de la propia voluntad de los municipios - Ajustar la metodología de la formulación de los PDM mancomunados - El PDCR III deberá llegar a todos los municipios manco-munados - Mayor seguimiento e inversión a las mancomunidades

52

- Brindó capacitaciones a autoridades originarias, sin distinción de grado profesional - Apoyó en gestión municipal con cursos, diplomado a los técnicos y autoridades del gobierno municipal En inversiones: - PDCR II financió con BID la construcción del centro de atención al turista (CAT), mancomunidad de Incahuasi - El PDCR II ha apoyado a realizar estudios de proyectos mancomunados para facilitar la búsqueda de financiamiento

ÁREA DE ASISTENCIA TÉCNICA

Pregunta: ¿Cuáles sus percepciones sobre los servicios del PDCR II en el área de asistencia técnica?


- Mejoró grandemente la capacidad de gestión municipal - El municipio contó con asistencia técnica, lo que mejoró su capacidad institucional - El asistente técnico cumplió trabajos más allá de los términos de referencia de su contrato - Brindó recursos humanos calificados para la gestión municipal - El AT es un actor que ha intervenido y mejorado los procesos de planificación participativa - El AT cubrió deficiencias del municipio en determinada área - Con el servicio el

- No existieron AT en todas las áreas que los municipios requerían - Algunos AT fueron puntuales para cobrar y no para estar en su trabajo - Algunos AT no tuvieron presencia continua en el trabajo del área asignada - A veces los AT no cumplieron a cabalidad los términos de referencia establecidos en su contrato - Los AT tuvieron contratos por muy poco tiempo

- Los servicios prestados por el AT a través del PDCR demostraron que los municipios tienen falencias en gestión municipal - Se tuvo asistencia técnica confiable con una buena participación por los actores locales y autori-dades municipales - Con el servicio de AT se han obtenido resultados positivos en cuanto a la gestión municipal - Con el servicio de AT se ha desarrollado una planificación según las necesidades - Se concluye que la AT ha contribuido a mejorar la capacidad institucional del

- Que en el próximo PDCR mediante el servicio de AT se puedan contratar personas calificadas de la región cercana al muni-cipio - El PDCR debe continuar porque son más las cosas positivas que negativas - Generar bolsas de trabajo para profesionales que asistan a los municipios de menores recursos económicos - Que los AT no ganen más que el alcalde - Que en el siguiente PDCR continúe el servicio de AT y que las contrapartes municipales sean de acuerdo al nivel de

53

municipio contó con profesionales capacitados y los obtuvo con menos recursos - Permitió al municipio contar con profesionales más calificados - El AT fue contratado en función a la necesidad del municipio - El AT fue responsable como fiscal de obra - El municipio tuvo un rol protagónico en el proceso de contratación de AT - El AT trabajó como un actor conciliador con todos los actores municipios - Los municipios que contaron con AT generalmente tuvieron una buena gestión municipal

municipio - Se ha fortalecido a los municipios con profesionales calificados - El PDCR II demostró que los municipios no siempre cuentan con el personal calificado para asumir una gestión municipal - Con el PDCR II en los municipios hay más relación con otras insti-tuciones para la ejecución de otros proyectos - La asistencia técnica es importante para lograr una eficiente gestión municipal - Actualmente los municipios no cuentan con asistente técnico profesional por falta de recursos económicos

la población, para que estos municipios paguen menos

ÁREA DE INVERSIÓN

Pregunta: ¿Cuáles sus percepciones sobre los servicios del PDCR II en el área de inversión?


- Los proyectos de mejoramiento de caminos por puntos y tramos generan pocos impactos ambientales - El costo de la inversión para proyectos por puntos y tramos tiende a ser bajo con relación a un diseño integral - La construcción delegada fue un éxito - La construcción delegada incrementa la contraparte comunal - Se trabajó con proyectos identificados en los PDM - Se dio ayuda a la ejecución de obras priorizadas por el municipio - Apoyo ágil en la contratación de las obras hacia los

- Demora en la ejecución de las obras - Poca coordinación entre supervisor, fiscal y empresas demora y perjudica la ejecución de la obra - En la etapa de la licitación, aspectos o puntos no claros demo-ran la adjudicación - El supervisor de infraestructura no siempre tiene las mejo-res condiciones para supervisar los componentes de capa-citación en O&M y el componente ambiental o el plan vial - Existe favoritismo frente a empresas contratistas

- El PDCR II ha mejorado las condiciones de vida y facilitado el progreso - El recurso económico que invirtió el PDCR II en los municipios tuvo un efecto multiplicador en las comunidades - Siendo que la capacitación en O&M, planes viales y medio ambiente, componentes importantes para la sostenibilidad del proyecto, se requiere un tratamiento particular - El apoyo técnico ha fortalecido a los municipios

- Que los recursos del PDCR III sean adminis-trados por los municipios, previa capacitación, de acuerdo a los montos a administrar, sujetos a evaluación - Considerar un sistema de evaluación institucional a los GM para las transferencias directas de recursos - Tener en cuenta la simplificación de procedimientos para otra fase - La capacitación en O&M a los comunarios es buena, pero debería desarrollarse instrumentos más precisos (TdR, manuales, etc.) - Procurar que las inversiones de distri-

54

municipios - En algunos proyectos el proceso de contratación fue ágil, con normas del Banco Mundial

buyan de manera equitativa a nivel na-cional, considerando diferentes criterios: NBI, eficiencia, disponibilidad, etc. y a la población fronteriza (entre municipios) - En la construcción delegada se debe dar un adelanto con garantía del municipio u otra institución - Mayor asesoramiento en los trámites de licitación - Asistencia técnica a los técnicos del munici-pio en procesos de contratación - Definir la responsabilidad de la ejecución de la infraestructura en una sola persona (fiscal, supervisor o seguidor) - Buscar mecanismo para evitar favoritismo a empresas - Que el nuevo PDCR III funcione a largo plazo para concluir los programas y proyectos de beneficio a los municipios - Mayor inversión por el PDCR III para ejecu-tar proyectos priorizados.

55

Annex 10. Summary of Borrower's ICR and/or Comments on Draft ICR

SUMMARY OF BORROWER'S ICR

Evaluation of program objectives The evaluation of the Project performance indicators related to the CAS Objectives and the Project Objectives and Outcomes was based on the Logical Framework included in the PAD. The achieved results are detailed in the following: CAS Objective: Economic growth for poverty reduction and institution building. Indicators:

• 5% reduction of population below the poverty line. • Annual GDP growth of 7% per year starting in the year 2000. • Sustained 5% annual increase in economic growth in 200 municipalities throughout the

project lifecycle. Analysis of achievement of the objective:

• As regards the first indicator, according to the poverty line method, the incidence of "moderate poverty" in 1999 - 2004 has increased at an average annual rate of 1.45%; an increase of 3.28% in the urban area and a decrease of 0.51% in the rural area.

• As regards the second indicator, average annual GDP growth was 3% in 2000 – 2005. • As regards the third indicator, because of the inexistence of official data on the municipal

GDP or an annualized series on the per capita income for the 200 target municipalities, the decision was made to use the average annual growth rate of the agricultural GDP at constant prices, which was 3.59% in 2000 – 2005.

Project Development Objective: Sustained economic development of rural municipalities and rural communities through sustainable productive investments based on the local demand generated through participatory planning processes. Indicators:

• Sustained 5% annual increase in standard quality productive investments (included in Municipal Development Plans) implemented and maintained in 200 municipalities starting in the year 2000.

• Execution of the municipal investment program in 5 years will increase from 63% to 80% in the 200 project municipalities.

Analysis of achievement of the objective:

• For the first indicator, based on the information of all municipalities that have PDMs, we have seen that 156 municipalities register data on POA execution in the last five years. These data show an annual growth rate of public investments in productive rural development equivalent to 7.68%. The base year for calculating this rate was the year 2000 with USD 124.2 million and the final year 2005 with USD 179.8 million, both at constant prices of 2000. This analysis was made for 5 years.

• For the second indicator execution of the municipal POA investment program as at 2005 was on average 76%. The POA/PDM relation reaches an average of 43% as at 2005. Execution of the PDM projects averaged 56% as at the year 2005.

56

Project Outputs: 1. Productive investments responding to local demands are planned, implemented and maintained. Indicator

• Productive investments complying with engineering, environmental and social standards for an amount of USD 60 million implemented and maintained over a period of 5 years in municipalities and communities which have followed participatory planning processes.

Analysis of achievement of the objective: Locally planned, executed and maintained productive investments totaled USD 55.8 million, as per the following detailed overview:

LAST ESTIMATE (in thousand USD) Project Costs by Component

IDA SDC Local Munic.

In kind Munic.

In kind Benef.

1.1 Basic Infrastructure 22,677 0 4,318 3,838 2,5851.2 Irrigation 8,268 0 1,294 1,0241.3 Other productive components 3,507 0 679 1.4 Pre-investment 1,267 0 240 1.5 Municipal programs 0 0 0 1.6 Administrative costs 5,166 0 0 1.7 Guarantee funds / other productive items 0 653 119 202

SUB TOTAL 40,885 653 6,650 3,838 3,811

• The Project was executed by the FDC between May 1998 and March 2001 (3 years) and by the FPS between January 2004 and June 2006 (2.5 years), totaling an effective executing period of 5.5 years.

• The evaluation of all projects covered the i) technical, ii) environmental, iii) socio-economic, iv) social and v) institutional aspects, as defined in the FPS' Comprehensive Ex Ante Evaluation Manual. Besides, all projects are the result of the participatory planning processes through insertion in the respective PDMs.

2. The Vice-Ministry of Popular Participation and Municipal Strengthening, the Small Farmer Development Fund, Prefectures, Municipalities, Vigilance Committees, Non-Governmental Organizations, Rural Organizations are strengthened to efficiently provide their institutional services. Indicators VMPPFM Strengthening•• The VMPPFM implements the participatory rural investment project (PDCR-II) on schedule and within the agreed technical parameters. FDC Strengthening•• FDC's annual disbursements for subprojects which have a positive economic return, are environmentally sustainable and benefit the poor, increase from at least USD 15 million in 1999 to at least USD 30 million in 2004. •• Environmental Unit established and operating, capable of screening and assessing

57

environmental category A subprojects by December 31, 1999. •• The number of subprojects finishing on time increase from at least 25% in 1999 to at least 50% in 2004. •• The number of projects with positive economic and financial impact increased from 50% in 1998 to at least 80% in 1999. Prefectural Strengthening•• The project operational units in the prefectures implement at least 80% of their annual operational plans within established quality parameters. Municipality Strengthening•• Annual increase of 5% in the own revenues of participating municipalities. Vigilance Committees•• Within three years, 70% of the vigilance committees in participating municipalities approve the municipal annual operation plans (POAs). Analysis of achievement of the objective: VMPPFM Strengthening•• The implementation schedule was complied with within the agreed technical parameters for the period 1999 � 2006, with a total execution of 95% of the allocated resources. FDC Strengthening•• In 1999 � 2001, FDC disbursements totaled USD 10.8 million. Due to delays in the Project, the accumulated FPS disbursement rate is as follows: 17% in 2004, 42% in 2005 and 41% in 2006. The disbursed amounts are USD 5.13; 12.4 and 12.1 million, totaling USD 29.6 million. •• The FPS Environmental Unit has a preventive environmental policy, which recommended that seven projects not meeting the IDA safeguard policies, be refused for funding.•• Due to delays in the project for taking up again the investment component, the rate of projects finished by the FPS, shows the following progress level: 2% in 2004, 24% in 2005 and 74% in 2006, totaling 100% of the portfolio. FDC Evaluation: •• The Economic - Financial Section of the FDC Results Report of the Ex Post Evaluation of Rural Investment Projects (Informe de Resultados de la Evaluación ex post de Proyectos de Inversión Rural (FDC/PDCR-II): Parte Económica Financiera (December 2000), points out that: "80% of the evaluated projects show positive indicators in the economic - financial evaluation". Comprehensive Ex Post Evaluation (FPS): •• The FPS Results Report of the Comprehensive Ex Post Evaluation of PDCR-II Projects (Informe de Resultados de la Evaluación Integral Ex Post a Proyectos del PDCR-II) (March 2006) concludes that 81% of the sampled projects are catalogued as good projects from a socio-economic point of view. External Socio-Economic Evaluation (SAXgr) •• In relation to the socio-economic impact assessment, based on the attained results, the consultancy firm points out that "97% of the road infrastructure subprojects show a positive

58

SNPV; in the micro irrigation and productive support projects this percentage is 78%". Considering the IRR "it is higher than the discount rate in 97% of the cases, while for micro irrigation and productive support this value is 78%". Prefecture Strengthening•• The 9 Departmental Operational Units and the 2 Regional Operational Units of the Institutional Strengthening component have executed their Annual Operation Plan on average in 82% between 1999 and 2005. Municipality Strengthening•• The municipalities in the area covered by the Institutional Strengthening component have increased their own revenue level at an annual growth rate of 23% in the studied period (1999 - 2004). •• Fifty-seven percent (57%) of the municipalities have improved their leveraging level at an average annual rate of 13% in the studied period (1999 � 2004). Vigilance Committees•• By the year 2005, 86% of the Vigilance Committees in participating municipalities have issued opinions on the annual operation plans, in conformity with existing norms. •• In 2005, 75% of the Vigilance Committees account for the Social Control fund, which they receive from the municipalities to cover their operating expenses.

Outcomes by component The analysis of outputs by component was based on the Monitoring Indicator Matrix, which was adjusted in the Amendment of Credit Agreement IDA 3065-BO (August 2003). The outcomes are detailed below. (See Table 2 in Annex A) Logical Framework and Indicator Matrix). INSTITUTIONAL STRENGTHENING COMPONENT: The Institutional Strengthening Component was implemented on an ongoing basis between January 1999 and June 2006. Hence, this component was implemented during 7.5 years in the project. Municipal and Community Strengthening Services Between 1999 and 2006, the Institutional Strengthening Component of the Project intervened in 246 municipalities from the entire country, providing 34 different municipal and communal services, grouped as follows: i) Technical Assistance, with 9 services, ii) Training, with 2 services, iii) Project Management, with 3 services, and iv) Good Governance, with 20 services. (See a more detailed overview in Tables 3 and 4 and Annex A Logical Framework and Indicator Matrix) For implementing the 34 municipal and communal services in the mentioned areas, 1,914 agreements were signed and an approximate investment of USD 14.2 million was made, 76% of which provided by the project and 24% by the local project partners. The principal results achieved through the different implemented services were: Technical Assistance:•• Application of the Technical Assistance Service has created a group of professionals specialized in municipal management topics, who are now available on the municipal management services market. •• The services have simultaneously satisfied the demand for technical assistance of the municipalities and the mancomunidades prioritized by the Project. The highest level of coverage was achieved in the year 2005, when the services were implemented in 173 municipalities (81% coverage of the PDCR-II) from the entire country. In this sense, this area was one of the most

59

important project areas, considering the achieved sustainability, demand and results. •• The position of Technical Assistant was institutionalized in the municipalities, which helped to enhance sustainability of the decentralization process. This person connects the municipal executive and legislative branches with civil society. Seventy-five (75) professional Technical Assistants have been assimilated by their municipalities, i.e. 44% of the participating municipalities. •• The total cost of the Technical Assistance service is covered in 51% by the project and 49% by the municipalities (progressive increase). This service enjoyed the highest counterpart contribution from the municipalities, ensuring sustainability. Training•• A semi-presential training modality was developed, which enhanced the participation of municipal stakeholders without the training hampering their executive functions. Besides, the training content reflected the prioritized municipal demands. •• A total number of 3,392 municipal stakeholders were trained, 2,399 men and 993 women: 23% were Mayors and Councilors, 39% Municipal Technicians and 38% representatives from Vigilance Committees and OTBs. They were trained in 103 Formal Training courses held in the nine departments of the country, covering 246 municipalities and therefore 100% of the project target area. •• The training of human resources was institutionalized (Mayors, Councilors, Municipal Technicians and members of Vigilance Committees) through the 10 Universities participating in the service provision. •• A pilot Virtual Training course was developed to generate a constant updating process, training 160 municipal and social stakeholders in Municipal Public Management. •• Through the non-formal training service, 483 courses-workshops (184 with the gender approach) were developed, training 28,090 municipal stakeholders. Project Management Area•• A total number of 1,896 project profiles was developed in 151 municipalities, 1,404 (74%) of which correspond to municipal projects and 492 (26%) to community projects. These profiles helped the municipalities for pre-investments and investments in road infrastructure and productive projects. •• Approximately 1,000 community leaders were trained in productive project management, which enhanced community participation in the project cycle. •• In the entire country, 550 technicians were trained in works supervision and control. •• Thirty-four (34) Vigilance Committees were benefited with assistance for social control of the works. This process led to the creation of 135 works committees in the communities, which effectively controlled execution of the infrastructure projects. Good Governance AreaPlanning: •• Support was given for the formulation of 17 Municipal Development Plans and 4 Development Plans of Mancomunidades. •• 148 plans were adjusted (104 Municipal Development Plans, 5 Strategic Local Economic Development Plans and 39 Road Plans). •• Support was given for the formulation of 39 Indigenous Development Plans (24 Indigenous District Development Plans and 15 Indigenous Land Management Plans). •• Support was given for the implementation of 21 Indigenous Development Plans (1 PDDI and 20 Normative Frameworks for TCOs).

60

•• 153 Municipalities and 36 Mancomunidades received assistance for preparing their Annual Operation Plans. Social Control: •• Management Capacity-building activities for the Municipal Council were supported in 89 Municipal Governments. In this sense, 460 (men and women) Councilors were trained and received assistance. Besides, the project supported the development of 89 Internal Regulations and Process Manuals for the Municipal Councils. •• With further support for social control, 211 Vigilance Committees and 1,500 communities were trained in management of the Social Control Fund and in the Roles of the social watchmen in municipal governance and investment control. Municipal Management Systems: •• The Municipal Financial Information service was implemented in 36 Municipal Governments, generating 109 Management Reports, an average of 2 reports per year. Positive opinions were issued on the public rendering of accounts. •• The Integrated Municipal Income System (SIIM) was implemented in 93 municipalities. In the first year, this gave rise to an average increase of revenues by 47%, followed by an annual increase of 23% in 1999 � 2004. •• Fourteen (14) Municipal Governments received support through Municipal Administrative Management Systems (SIIM/SINCOM/SAP/SABS), thus increasing their management capacity and own revenues. •• It is important to underline that the Project supported annual updates of the Integrated Municipal Accounting System (SINCOM), and the distribution of and training in this system in rural municipalities, in coordination with the Vice-Ministries involved in the project. This way, this system became the only system in effect for managing municipal resources in the entire country. Services for Strengthening Prefectures and Vice-Ministries The Institutional Strengthening activities for the Prefectures focused on providing a team of technical consultants and the necessary logistical support in the nine Prefectures of the Country to ensure implementation of the project at the departmental and municipal levels. In relation to Strengthening of the Vice-Ministries, the provided assistance focused on: i) Consultancy services in technical and administrative fields, and provision of the necessary logistics to ensure execution of the Project in the country, and ii) Specific consultancy services for institutional strengthening of the Vice-Ministries involved in the project. It is important to underline that on the basis of the strategic lines defined by the Vice-Ministries, the Project provided technical and financial support in the execution and implementation of many national processes, particularly the following ones: i) Municipal Democratic Transition Program – 1999, ii) National Dialogue – 2000, iii) National Dialogue Productive Bolivia – 2001, iv) National Dialogue Law – 2001, v) Bolivian Poverty Reduction Strategy – 2001, vi) National Agriculture, Livestock and Rural Development Strategy – 2003, vii) Transparent Transition Program – 2004, viii) Formulation of Departmental Development Plans 2003 – 2005, and ix) Support for the Plan for Collective Construction of the Future of our Country – 2006. INVESTMENT COMPONENT: Execution of the investment component was discontinuous. Two phases can be identified; the first one was developed between January 1999 and 2001 and the second one in 2003 – 2006. This component was therefore implemented during 5.5 years in the project.

61

Portfolio of Agreements Initially, the investment component of the Participatory Rural Investment Project (PDCR-II) was executed through the Small Farmer Development Fund (FDC). Later, this component was executed through the National Productive and Social Investment Fund (FPS). This component funded 858 subprojects with a total amount of USD 43.2 million: USD 36.4 million from the project, USD 6.6 million from the local partners and USD 0.2 million in kind contributions. For analysis purposes, the portfolio was divided into the following lines: i) The portfolio executed through the FDC, which is equivalent to 31% (including FDC-UNDP, projects started by the FDC and concluded by the FPS), ii) FPS, i.e. the regular projects executed until June 30, 2006, equivalent to 38% of the portfolio, iii) FPS (unfinished projects), i.e. projects which - with funding from IDA 3065-BO - for different reasons had not been concluded by June 30, 2006, and which could be finished with OPEC resources or resources from other available sources identified by the FPS. These projects account for 2% of the portfolio, iv) FPS – Emergency, which refers to the Program for the Reconstruction and Rehabilitation of Areas Affected by Natural Disasters that was implemented to mitigate the adverse effects of the rainy season in 2005 – 2006; equivalent to 5% of the portfolio, v) FPS-FUPAD, 22%, which corresponds to projects executed through the Managing Entity (FUPAD), and vi) FPS-FUPAD-COSUDE: projects executed through the Managing Entity (FUPAD) with total or partial funding from COSUDE, and which account for 2% of the portfolio. In percentage, the distribution per type of project is as follows: a) pre-investment projects accounted for only 4% of the total portfolio and were mostly executed by the FDC, b) in the projects in support of production (handicrafts, natural resources management and conservation, agriculture development, animal husbandry development, fishery development and others), there were no significant components related to infrastructure; rather, the central pillars of these projects were technical assistance, training, coaching / guidance and market insertion. Therefore, the concepts of local economic development, competitiveness, productivity, efficiency and quality in the different phases of the productive cycle account for 10 % of the portfolio c) Micro-irrigation accounts for 24% of the portfolio, and d) road infrastructure for 62% of the portfolio, with roads accounting for 30%, vehicle bridges 25% and footbridges 7%.

Ethnic Groups and Beneficiaries

The 858 subprojects executed under the investment component of the PDCR-II have benefited 1,034,900 persons, many of whom were benefited with more than one subproject. The following beneficiary ethnic groups were identified: Quechuas, with 399,272 men and women, particularly in Cochabamba, Potosí and Chuquisaca; Aymaras, as the second majority ethnic group in La Paz and Oruro; Chiquitanos, with 43,159 beneficiaries in the entire country, especially in Santa Cruz; Mojenos, in Beni and Santa Cruz; and finally, other –equally important - indigenous groups in Santa Cruz and Beni, such as the Tacanas and Chimanes. Considering that the Project interventions were centered in the rural area and in the poorest municipalities (which at the same time have the highest indigenous population), we should underline the significance of the PDCR-II in helping to reduce rural poverty.

Indicators by Component As regards the projects co funded by the FPS, data were collected per type of project by means of quantifying the outcome indicators, which gave rise to the following numbers [1]: •• Upgrade of 2,372 Km of rural roads under the program. With the FDC and within the framework of a comprehensive intervention approach in rural roads, the average cost per kilometer was USD 9,615. The investment cost per kilometer of upgraded roads has improved under the 'points and segments' approach of the FPS with an average cost of USD 4,409. •• Of this total length of upgraded rural roads, the FPS intervened in the upgrading of

62

1,744 Km of rural roads, with the construction of 1,790 drains equivalent to 9.8 lineal Km, the construction of 816 Km of longitudinal drainage ditches and 21,825 m3 of walls for the benefit of 222,000 persons, i.e. equivalent to around 316 households per project. •• Construction of 198 vehicle bridges with a total length of 3,584 m, benefiting 66,935 rural households. The average cost of the FDC was 3,847 USD/m. This cost was optimized by the FPS to 2,546 USD/m. •• Construction of 43 footbridges with a total length of 2,910 lineal meters, benefiting 11,250 households. The average cost per lineal meter was 980 USD/m under FDC management and 700 USD/m under FPS management. •• Construction and/or upgrade of 177 irrigation projects, covering an additional 3,993 hectares. The activities consisted of the construction of 233 intake works, 226 storage works, 210,552 lineal m of open canals and 253,645 lineal m of pipes. •• Execution of 134 projects in support of the production, in which the annual household income increased by USD 403.

Assessment of the Effects and Impacts of the PDCR-II Investment Component •• Ex Post Program Evaluation by the FDC: The Economic - Financial Section of the FDC Results Report of the Ex Post Evaluation of Rural Investment Projects (Informe de Resultados de la Evaluación ex post de Proyectos de Inversión Rural (FDC/PDCR-II): Parte Económica – Financiera) (December 2000) states that "80% of the evaluated projects show positive indicators in the economic - financial evaluation". •• Comprehensive Ex Post Program Evaluation by the FPS: The FPS Results Report of the Comprehensive Ex Post Evaluation (Evaluación Integral Ex Post) of a sample of 21 projects points out that 76% show good results and 24% regular results. Not one was rated as insufficient. In general terms, the Program result is GOOD. •• External Socio-Economic Evaluation of the Program by SAXgr: In relation to the socio-economic impact assessment, this consultancy firm points out that "97% of the road infrastructure subprojects show a positive SNPV; in the micro irrigation and productive support projects this number is 78%". Considering the IRR "it is higher than the discount rate in 97% of the cases, while for micro irrigation and productive support this value is 78%". Budget execution: •• According to the stipulations contained in the Agreement and the Amendment of the Credit Agreement IDA 3065-BO, execution of the Participatory Rural Investment Project (PDCR-II) was funded with resource allocations from: i) Loans (IDA and COSUDE), ii) Central Government Counterpart Contributions (Treasury), iii) Local Counterpart Resources (Prefectures and Municipalities) and iv) Counterpart Contributions from Beneficiaries. •• Considering all sources of funding, budget execution of the Project totaled USD 83.8 million, equivalent to 96% of the estimate defined in the Project preparation document which was USD 87.3 million. As regards budget execution by Component, 67% (USD 56.0 million) corresponds to the Rural Investment Component implemented through the different parts assigned to the FDC and FPS, and 33% (USD 27.3 million) to the Institutional Strengthening Component implemented through the different parts assigned to the VD, VDR and a small part to the FPS, including the resources used for preparing the project. As regards execution by source, the funds were distributed as follows: i) Credit 72% (USD 60.2 million), ii) Central Government 2% (USD 1.8 million), Prefectures 5% (USD 3.9 million), Municipalities 17% (USD 13.8 million), and Contributions from Beneficiaries 5% (USD 3.8 million). It is important to underline that 37% of the municipal contribution and 100% of the contribution from beneficiaries were in kind. •• On the other hand, total execution of the resources allocated by the IDA Credit [3] was

63

USD 58.2 million, equivalent to 93% and by COSUDE USD 2.1 million, equivalent to 103% of the originally assigned budget. A detailed overview of budget execution in the Project, by component, funding source and expense category is included in Tables 1 to 6 of Annex B Budget Execution Tables. PERFORMANCE ASSESSMENT OF THE IMPLEMENTING AGENCIES (VD, VDR, FDC, FPS, VIPFE, PREFECTURES AND MUNICIPALITIES) IDENTIFICATION PHASE •• In this phase, participation of the VMPPFM (today the VD) was fundamental, as this vice-ministry was the implementing agency responsible for managing the project based on the experience and results of the PDCR, which was executed between 1996 and 1998, within the framework of an approach favoring continuity and deepening of the activities related to municipal strengthening and productive investments. •• Participation of the VDR in the Project identification phase was limited as the project was based on the results and experience gained in the PDCR, the final phase of which was executed exclusively by the VD. •• The VIPFE participated in the identification phase within the framework of its legal attributions, enabling satisfactory compliance of the prior conditions to start preparing the project.•• In this phase, the FDC participated very actively and contributed important experiences of the pre-investment and investment processes in the PDCR and in other projects managed by this entity. •• Participation of the Prefectures and Municipalities in the identification phase was limited to the provision of information on some experiences gained in execution of the PDCR. PREPARATION PHASE •• The Project preparation phase was led by the VMPPFM and the FDC that, on the basis of the experiences and results of the PDCR and with a vision of continuity, were able to structure a conceptual and methodological proposal for the PDCR-II based on: i) Interaction and participation, ii) The institutional context, iii) The generation of instruments, and iv) Management of the territory as the physical basis for implementing the actions focusing the different stakeholders. It is important to point out that in the preparation phase the decision was made that the Institutional Strengthening Component should be executed almost entirely by the VMPPFM and the Rural Investment Component by the FDC, which reflects the importance of these implementing agencies in the preparatory phase.

• Participation of the VDR in this phase centered on the development of proposals for the provision of technical assistance and training to the communities and associations of small-scale producers for them to access resources from the project and other funding entities, which was consolidated with final assignation of the responsibility for the execution of these services.

• Participation of the VIPFE in this phase was set within the framework of its attributions aimed at facilitating the steps required for signing and putting into operation the Credit Agreement. It is important to underline that the entire process was followed satisfactorily, and so the project started on schedule.

• In this phase, participation of the Prefectures and Municipalities was limited to the provision of information and support to the different project preparatory and assessment missions organized by the VD and the World Bank.

64

IMPLEMENTATION PHASE •• Participation of the VD in the implementing phase was satisfactory, having complied with the goals defined in the different Project parts assigned to it, as can be seen in the indicator tracking table included in the annexes. In general, the actions executed by this Vice-Ministry supported i) Consolidation of the Popular Participation and Decentralization laws, ii) Institutional Strengthening for Execution, iii) Support for policies of the National Compensation Policy (PNC) and the Bolivian Poverty Reduction Strategy, iv) the generated institutional capacity, v) induction to the development of other municipal strengthening projects, and vi) the articulation of activities at the central level with the departmental and municipal levels. •• The participation of the VDR in the implementing phase was set within the framework of the project parts assigned to it, the conceptual and methodological framework of which was developed with support from the National Coordination and executed through the UODs (Departmental Operational Units) and UORs (Regional Operational Units). The goals were attained satisfactorily. On the other hand, the VDR participated in defining the type of rural development projects funded by the FPS within the framework of the Project, as well as in the formulation of public policy lines and strategies for the agriculture, animal husbandry and rural sector, whereby support for formulation of the ENDAR stood out (2003). •• The FDC as the entity responsible for execution of the first phase of the investment component partially complied with the defined pre-investment and investment goals. However, due to institutional problems, this component was suspended temporarily in 2001. In this phase, the most outstanding work was in pre-investment, as designed in the Project. The second phase of this component was executed by the FPS, the work of which permitted compliance with the investment goals defined by the Project. Only a small portfolio of projects could not be concluded, the outstanding balance of which will be covered with money from other sources managed by this entity. •• The participation of the VIPFE in this phase was satisfactory and centered on follow-up of the physical and financial Project execution, participation in regular evaluation missions and the mid-term evaluation mission that was coordinated with the World Bank, as well as in the process for negotiation and signing of the Amendment of the Credit Agreement (August 2003). •• In general, the performance of all Departmental Prefectures was adequate; nonetheless, there were some difficulties causing delays in implementation of the Project through the UODs and UORs, and which were related to: i) Delays in the deposit of financial counterpart resources, ii) Frequent counterpart staff turnover, iii) Insufficient and untimely logistical support (offices, payment of services, others), and iv) Institutional changes in the Prefectures (Prefects and Directions). •• In general, participation of the Municipalities was adequate, though there were some difficulties related to: i) application of the Project procedure for identifying the demand, ii) application of the Project norms and procedures for the procurement of municipal services, iii) delays in the deposit of counterpart contributions, and iv) the weak institutional capacity for follow-up and monitoring of municipal services. •• As regards the Mancomunidades, their participation was good even though there were some difficulties related to: i) the application of Project norms and procedures for the procurement of services for the Mancomunidades, ii) Delays in decision–making by the Board of the Mancomunidad, iii) Delays in the deposit of counterpart contributions, and iv) the regular institutional capacity for follow-up and monitoring of the services of the mancomunidades.

65

PERFORMANCE ASSESSMENT OF THE FUNDING AGENCIES (WORLD BANK AND COSUDE) IDENTIFICATION PHASE •• The World Bank used the PDCR results as the basis, as well as the lessons learned in the pilot municipal planning phase as an instrument to deal with local demands for productive investments, and also supported further deepening of the popular participation process. In this sense, the identification mission performed in September and October 1997 with World Bank staff enabled preparation of the second Project phase in conjunction with national authorities from the VMPPFM, the FDC and the VDR, with which a consensus was reached on the priorities for the CAS. •• The participation of COSUDE was limited to its contributing some general ideas and experiences. PREPARATION PHASE •• Through different missions, the World Bank supported the identification of elements to be included in the Project purpose, the approaches to support consolidation of the popular participation and decentralization laws, public policymaking based on the services generated by the Project, the mass orientation towards productive investments to improve farmers' opportunities, improvement of the positive impact on equity and contributions to institutional development, the improvement and increase of the capacity of prefectures, municipalities and rural communities to manage their own development investments. •• The World Bank supported the national strategic options, increasing the national and prefectural resources, co financing municipal priorities and reverting the growing trend of unbalance between social and productive investments. Besides, the municipalities and communities were provided with incentives and resources to co finance demands aimed at generating growth conditions for possible private investments. •• COSUDE was involved on specific moments for developing the conceptual frameworks of the services related to the mancomunidades and indigenous peoples. IMPLEMENTATION PHASE •• For implementing the project, the World Bank supported consolidation of the Rural Investment component administered by the FDC (later replaced by the FPS) and the Institutional Strengthening component administered by the Vice-Ministries (VD and VDR), within the clear perspective of transferring responsibilities for managing the subprojects to the municipalities, improving the sense of ownership, enhancing the flexibility of operational guides, decentralization of the processes for approving subprojects, procurement and disbursements at the regional level. •• As regards the Institutional Strengthening component, initially support was given to develop the Project as part of the different Vice-Ministry units aimed at generating ownership and internal strengthening in the Vice-Ministries. However, because of the high turnover due to political factors, the Bank strongly supported creation of the Implementing Unit with specific responsibilities as regards the project objectives. •• During implementation of the Investment Component, in 2001 the Bank detected ineligible projects and suspended the resource flow, which resulted in temporary suspension of this component and the start of an investigation, which concluded with the national government

66

returning the resources. This situation caused delays for the project and a reorientation of the actions to the Institutional Strengthening component, focusing more attention on enhanced transparency in the use of municipal public resources and training social controllers. •• Towards the end of the Project (June 2003), the duration of the Project was extended and the Investment component was restored, this time leaving the responsibility in the hands of the FPS. Through an amendment of the agreement, the goals and project tracking indicators were adjusted, besides an adjustment of the amounts destined to the two components. •• When the Institutional Strengthening component was restored, the services in support of investments were also restored and pilot services were designed in the fields of Indigenous Peoples, Road Planning and Local Economic Development. •• The Bank's participation in this second phase was decisive to consolidate municipal investments, works procurement processes, social control of the works and mass formal training of the different municipal stakeholders and to allocate resources to specialized technical assistance. In the final phase, resources not assigned by the Bank were obtained for disaster relief programs. •• During implementation of the Project, there were several critical phases related to the change of government authorities. In this sense, the Ministry responsible for this Project changed on five occasions, the Vice-Ministry on twelve occasions. This situation caused delays, staff changes, changes in the policies and priorities. Still, the Bank's position helped to maintain the Project institutionality and to again invigorate the actions and fund flow. •• In this project phase, COSUDE particularly supported development of an operational

framework for the services and investments related to the mancomunidades and indigenous peoples. On the other hand, COSUDE participated in all supervisory missions and the mid-term evaluation mission, providing important input to general development of the Project.

OVERALL ASSESSMENT: Institutional Strengthening •• The World Bank was present in the project design and the supervisory missions at the

national, municipal and communal levels, which helped to adjust and provide feedback on the project actions.

•• The meetings to explain the scope and progress of the Project to new ministry authorities each time the government changed helped to ensure a certain institutional continuity of the Project, and to enhance ownership among the new ministerial executive teams.

•• The support for the financial project administration was vital for the different adjustments in the expenditure categories, generating an adequate fund flow to cover payments in the different services.

•• The support provided for generating new municipal and communal services was important to adequately respond to the demands of municipalities and communities.

•• The separate administration of the components with a limited information flow has caused imbalances in processing of the consolidated information, in achievement of the objectives and in a limited operational articulation.

•• In the first five years of the project, management follow-up and supervision of the project were performed from the World Bank's headquarters with some concrete missions. As from 2004, the Project Manager worked from Bolivia, a positive aspect that helped to accelerate project execution.

•• Monitoring of the Project was gradually extended, until it even covered routine actions of the municipal services, which sometimes caused confusion as regards the financial agency's role.

67

Rural Investment Component •• The World Bank's participation and support in implementation increased in the phase

executed by the National Productive and Social Investment Fund (FPS). •• The formulation and approval of the FPS Operations Manual, and the subsequent

negotiation of the amendment of the Credit Agreement in 2002 and 2003, took a long time and were characterized by the Bank's slowness in obtaining the "go-ahead" and approval of manuals, guides and other operational instruments.

•• The negotiation of the Amendment of the Credit Agreement was conditioned to incorporation of the project management modality for the micro irrigation and production support portfolio, without considering the institutional and technical justification with a stagnant project portfolio while the management hiring process was concluded.

•• The prior Bank revision of projects exceeding USD 150,000 limited approval of the projects contained in the different procurement plans and caused delays in the procurement processes.

•• As from approval of the second procurement plan, operational dynamics of the Bank became more proactive, with the quicker approval and go-ahead of FUPAD projects. Besides, support was given for funding of the Monitoring and Control Unit (UMC), reestablishment of the controls in the Project Administration System (SAP) and for specific equipment for monitoring and control of the departmental offices and the national office. •• A second part of the Bank support was translated in the creation of the Institutional Strengthening Unit. •• In general, the Bank's support for the Rural Investment component (FPS) was positive, however, in the FPS' opinion, two aspects could be improved in future interventions: i) the operational relations between the FPS and the Bank should be based on consensuses and not be restricted to unilateral initiatives, and ii) a better understanding of the rural reality as regards the terms for executing infrastructure works, especially in the final project periods. •• Finally, participation of the Swiss Cooperation (COSUDE) was minimal and was indeed limited to COSUDE's attendance to some meetings of the supervisory missions organized by the IDA.

LESSONS LEARNED

INSTITUTIONAL STRENGTHENING COMPONENT: •• Identification and Preparation based on Previous Experiences: The process to identify and prepare a project is greatly facilitated when it is conceived as the continuation of a previous phase, as is the case of the PDCR-II, which was identified and prepared on the basis of the achievements, outcomes and technical-logistical support of the PDCR. This situation helped to reduce the time for project identification and preparation. •• Decentralization and deconcentration of the project actions: The creation of a Project implementing Unit with a National Coordination instance and the decentralization of the services to the UODs and UORs were adequate and helped to maintain a regionalized implementing rhythm. •• Project flexibility and versatility: which makes it possible to: i) adjust the operational design according to changes in the project environment, ii) enhance autonomic technical, operational and administrative management by the Implementing Agencies, iii) define the follow-up and control channels of the Implementing Agencies based on Performance Agreements, and iv) define follow-up and control channels of the beneficiaries through accountability mechanisms.•• Innovation: The Project acquired sensitivity on the perception of processes and changes

in municipal dynamics, which were helpful for the project to innovate forms and modalities

68

of technical assistance and training to adequately consider the complexity of municipal issues, such as the Social Control of Works, Planning in TCOs, etc.

•• Service outsourcing: This was decisive for the simultaneous and parallel implementation of the different services and to achieve the Project results and indicators. Besides, outsourcing helped to create a specialized municipal service market at the local level.

•• Services on demand: The identification of the demand for assistance at the municipal level helped to efficiently allocate the resources, directly related to community needs and priorities, and hence to ensure timely and adequate interventions.

•• Validation of the demands for investments: The incorporation of a process for validating the project ideas and profiles helped to more precisely identify the characteristics and scope of the demand for investments of the municipal and communal projects resulting from participatory processes, based on which continuity or suspension of the projects was decided on, thus avoiding that the municipalities and communities would incur in higher expenses.

•• Pedagogic effect in the municipal administration and collective learning: As this project focuses exclusively on the municipal sphere, the implementation of the 34 services covering all municipal management areas, enabled collective "learning by doing" of the municipal actors in different actions, such as the project cycle, technical assistance, training, financial systems and participatory planning.

•• National coverage: In view of the fact that the project was aimed at consolidating and further supporting the popular participation process, and the application of Government policies and strategies, the project coverage was very ample and implementation of the project was fomented through the constant presence of TAs in the municipalities.

•• Local contributions: According to the agreements signed at the national and departmental levels, the allocation of counterpart resources for operation of the technical and administrative project structure was good, with an adequate resource flow. The municipal counterpart contributions for execution of the services varied, e.g. sometimes only part of the counterpart contribution was made available and/or periodic deposits. In the case of the Technical Assistants (TAs), the municipal counterpart contribution gradually increased until completely funding this service as part of the municipal payroll.

•• Absence of periodic systematization and dissemination processes: For a project of the size and with the coverage of the PDCR-II, where new experiences are constantly generated because of the varied nature of the interventions in all geographical and ethnical areas of the country, the fact that there were no permanent systematization and dissemination processes from the beginning, has had a negative impact in terms of invisibility of the project, as in many cases other institutional actors unduly appropriated the achievements, modalities and developed instruments.

•• Stability of the technical team at the national and departmental levels: The changes at the level of the ministries and departments (prefectures) caused often traumatic changes in the staff structure (2002) with changes of up to 80% of the personnel. Also in the prefectures, the change of prefects had an impact on changes in key employees. In this sense, conditions should be generated to maintain an administrative technical team that ensures project implementation.

RURAL INVESTMENT COMPONENT •• Overall Assessment: One of the most important contributions of the FPS through the PDCR-II is the integrality approach applied in the preparation and evaluation, which among other things aimed at ensuring the good quality of the investments and creating the best possible conditions to ensure sustainability of the projects. The said evaluation must be carried out by multidisciplinary teams and must consider technical, socio-economic and financial,

69

environmental, social and institutional aspects. In addition, the environmental procedure applied by the FPS ensured that once the environmental impacts were defined and the corresponding mitigation measures proposed, the cost of the latter would be automatically incorporated into the overall works budget, thus guaranteeing availability of the economic resources required for implementation. •• Execution through Managing Entities: The experience of executing projects through a Managing Entity specialized in managing projects in support of production and micro irrigation, was positive and helped to improve the FPS' installed capacity to administer a larger portfolio of productive projects. •• Direct Transfers to Communities: With the objective of promoting organizational and management capacity-building of small projects administered by the rural communities, the modality of direct non-reimbursable transfers for projects with an investment range of USD 3,000 to 20,000 with a communal counterpart contribution of 20% was validated. The results were satisfactory. A set of instruments for executing and supervising the projects was developed and validated. •• Coaching / guidance for micro irrigation projects: Another important experience with good results was the introduction in all micro irrigation projects of a coaching component to support administration of the project by the irrigation organizations in accordance with adequate technical and sustainability parameters. This way, the FPS did not only focus on execution of the project infrastructure, but it also incorporated elements to foment organizational strengthening and irrigation management capacity-building in the beneficiary population. •• Upgrades of Rural Roads using the 'points and segments' approach: Another important innovation was the design and execution of rural road improvement projects under the 'points and segments' approach. This environment-friendly modality ensures accessibility between two points with an average investment cost of USD 4,500/Km, approximately one third of the cost of an integral intervention in rural roads. •• Road Planning: Another innovation developed by the two Project components in answer to the absence of public policies for the upgrade, operation and maintenance of rural roads and the lack of information, inventories and the need to determine the composition of the rural roads network in the Municipality or Mancomunidad, was the introduction of the service in support of Road Planning, which helped to generate a participatory methodology for the Road Plans of Municipalities and Mancomunidades. In this context, the investment component (FPS) incorporated the design of Municipal Road plans as a component in the road project budget, the results of which were satisfactory. •• Beneficiary Satisfaction System: The introduction of the Beneficiary Satisfaction System (SSAB), a process that seeks the relation of direct satisfaction between the service provider (contractor) and the client (benefited community), helped to significantly improve community participation and social control throughout execution of the projects with responsibility and commitment. •• Works Supervision: With the purpose of ensuring an effective project supervision, the entity executing the program must be the one hiring the technicians for supervising the works, sharing the control responsibility with the Municipal Governments through an alliance focused on strengthening them. •• Monitoring and Evaluation System: In order to be able to adequately evaluate the program results and impacts, the monitoring and evaluation indicators must be adequately designed so that it would be possible to obtain information for measuring the indicators and making the respective adjustments. At the same time, it is important to mention that all monitoring work is incomplete unless it

70

enjoys decisive support from the maximum executive authority to ensure the timely implementation of corrective actions. INSTITUTIONAL AND OPERATIONAL FRAMEWORK FOR IMPLEMENTATION OF

A NEW OPERATION With inauguration of the new government, at the national level the new Project phase will be part of the strategic plans of the VD, which responds to the Ministry of the Presidency, and will therefore be the operational instrument of this Vice-Ministry. At the local level, the Project must be related to the new regions established in the new decentralization policy, with links to the communities so as to lay a direct link between the state and the social grassroots levels. INSTITUTIONAL AND OPERATIONAL FRAMEWORK FOR IMPLEMENTING A NEW OPERATION Institutional Strengthening Component •• The experience developed by the PDCR-II and the Project actions was gradually transferred to the Prefectures, which have continued to provide some of the services with departmental resources, e.g. Technical assistance in the Departments of Santa Cruz, Pando and Tarija, follow-up and monitoring of some services implemented by the project in the department of La Paz to asses the project impact, the generation of municipal demands to define development strategies in the department of Beni. At the municipal level, many services have been appropriated, e.g. planning, the technical assistants who continue to provide their services with municipal resources. •• The Formal Training service is being assimilated by public and private Universities, with short courses and diploma courses for different municipal stakeholders. •• Based on the results achieved by the PDCR-II, and taking advantage of the lessons learned in the new national context, the next intervention phase would be based on two pillars, namely institutional strengthening and productive investments, with an emphasis on service outsourcing, local counterpart contributions to ensure sustainability, and an improved citizen participation with strategies that include traditionally excluded actors. •• The experience generated by the project will be the basis to design new projects focusing on local development in communities, municipalities and mancomunidades; the results obtained so far are being disseminated in publications that are shared with municipal stakeholders, international donor agencies, ministries and vice-ministries. All documents and information produced by the project is available on different web pages linked to municipal issues and rural development. •• At the level of the prefectures, the institutional strengthening services and other prefectural units in conjunction with the associations of municipalities, mancomunidades and universities have started to implement actions to ensure continuity of the different services implemented by the project, besides follow-up and monitoring of the results obtained by the project to ensure continuity of the municipal and communal support. Rural Investment Component •• An integrated Rural Development intervention with 2 or 3 types of projects (roads + productive) is recommended in the poorest sectors of the municipalities, taking advantage of economies of scale and the chaining of benefits. Thus, if the ex ante evaluation of a road project considers that it is necessary to complement the project with a productive development project; this recommendation should become a condition for approving the project. •• When managing rural development projects, it is important to distinguish between interventions enhancing competitive economies and interventions enhancing food security, as the treatment and operations of these interventions must be differentiated. Likewise, the second group

71

must consider the interventions that facilitate the access to other public services, particularly social services. •• The awareness-raising and training in government control has generated satisfactory results, and should therefore be continued in every year. •• For designing a new program, the components "Environment", "Road planning", Training in O&M", "Beneficiary Satisfaction", "Technical Assistance" and "Coaching" should be separated, aimed at optimizing these actions and ensuring project sustainability. •• The efficiency and effectiveness of the execution of road projects under the 'points and segments' approach in some lowland areas and flood-prone areas of the highlands must be analyzed, as in these areas it is recommended to carry out integral interventions or interventions of another type, which are also recommendable in zones with intense vehicle flows related to high production and commercialization levels of agricultural and livestock products. In this regard, it is important to remember that the World Bank has offered the FPS the possibility to apply alternative techniques in exceptional cases. •• Social control and monitoring of the technical quality must be implemented with responsibility and commitment to the project objectives so as not to hamper normal execution of the project. Consequently, the SSAB, training in O&M and coaching of the micro irrigation projects must develop methodologies and instruments that enable an enlargement and/or adjustment of the project objectives that are being executed. INPUT AS FEEDBACK FOR PUBLIC POLICIES •• The actions implemented by the PDCR-II will be the basis for public policymaking, taking into account various services implemented by the project: In Training municipal actors, the institutions such as Universities that have supported this process, have appropriated this training modality, incorporating the used methodologies and topics into their study plans and courses. They should coordinate with the Ministry of Education for generating a sustainable training strategy. Also on the basis of the services in support of social control, focused on the creation of communal works committees, the parties implementing public infrastructure works could be obliged to coordinate and concert all implementing phases with the beneficiary communities, which should be a requirement in the bid specifications. •• On the other hand, as regards technical assistance, policies could be designed to support the provision of gradually increasing counterpart contributions to ensure sustainability of the process. •• In the intervention in TCOs, as regards the experience with participatory planning, policies could be designed for land management, supporting the development of political management instruments for the benefit of indigenous peoples in their interrelation with municipalities, prefectures, companies, NGOs and other institutions. •• For improving rural roads within the framework of sustainability of the investment, the 'points and segments' modality could be adopted as the national policy, as the most adequate alternative for maintaining the rural road infrastructure.

72

BORROWER'S COMMENTS ON DRAFT ICR

La Paz, 18 DIC 2006 VIPFE/DGFE/NEG-04795/2006

Señora Connie Luff Representante Residente BANCO MUNDIAL Presente

Ref.: CONVENIO DE CRÉDITO 3065-BO PROYECTO DE INVERSIÓN RURAL PARTICIPATIVA

Señora Representante: Adjunto a la presente, copia de las notas MP-VD No. 683106 y FPS/D.E./No.292/06, mediante las cuales el Viceministerio de Descentralización y el Fondo Nacional de Inversión Productiva y Social (FPS), entidades ejecutoras del convenio de crédito de referencia hacen conocer sus comentarios al borrador del Informe de Cierre del mismo. Al respecto, agradeceré incluir los comentarios citados antes de emitir la versión final del documento. Con este motivo, saludo a usted con la mayor atención. Luis F. Baudoin Viceministro de Inversión Pública y Financiamiento Externo Ministerio de Planificación del Desarrollo

73

La Paz 13 de diciembre de 2006 Señor Lic. Hernando Larrázabal Ministro de Planificación del Desarrollo Presente.-

REF.: Informe de cierre del Provecto de Inversión Rural Participativa Distinguido Ministro: El Banco Mundial nos hizo llegar copia de la nota BO/RRD/702/2006 dirigida a su autoridad, en la que remite el informe de referencia. Hemos revisado este documento y solicitamos que incluya el siguiente comentario en la sección correspondiente: "Los problemas de corrupción detectados en el Fondo de Desarrollo Campesino (FDC), así como la insuficiente energía puesta por el gobierno en su investigación y prosecución de las demandas penales y civiles que correspondían, son la principal razón por la cual el ICR califica el desempeño del Estado boliviano lamentablemente como "Moderadamente Insatisfactorio" (sección 10.2 del informe). Es importante remarcar que estos hechos corresponden al periodo 1999-2001, durante la administración gubernamental de Hugo Banzer, a quien sucedió entre 2001 y 2002 Jorge Quiroga Ramírez, su Vicepresidente. El año 2002 asumió la conducción del gobierno Gonzalo Sánchez de Lozada, y tras la insurrección popular de octubre de 2003 se sucedieron aun dos gestiones de gobierno, antes de las elecciones nacionales de diciembre de 2005. El gobierno del Presidente de la Republica, Evo Morales, surgido de la victoria electoral en este último proceso democrático, lamenta profundamente el daño que aquellas administraciones gubernamentales han significado para el país en general y para el desarrollo del proyecto en particular. Han sido protagonistas de hechos de corrupción, pero además con las características de involucrar recursos públicos, segundo que éstos recursos provienen de un crédito que deberá ser pagado por todos los bolivianos, tercero que los destinatarios de los fondos y proyectos debían ser las comunidades rurales e indígenas de los municipios mas pobres del país, y finalmente aquellos gobiernos encubrieron a los autores. Es decisión del Gobierno Nacional luchar contra la corrupción y la impunidad, para que no se vuelvan a dar hechos como los mencionados en el informe."

74

Por otro lado, no tenemos ninguna objeción a que el documento sea publicado y puesto a disposición de cualquier interesado. Con este motivo, aprovecho para enviarle un saludo cordial. Atentamente, Fabián II Yaksic Feraudy Viceministro de Descentralización Ministerio de la Presidencia

-----o----- La Paz. 5 de diciembre de 2006

FPS/D.F./No.292/06 Señor Lic. Luís F. Baudoin O. Viceministro de Inversión Pública y Financiamiento Externo Presente

Ref.: CONVENIO DE CRÉDITO 3065-80 PROYECTO DE INVERSIÓN RURAL PARTICIPATIVA

Señor Viceministro: En respuesta a la carta VIPFE/DGFE/NEG-04526/2006, expreso mi conformidad con el tenor del informe de cierre del convenio de crédito de referencia, elaborado por el Banco Mundial. Asimismo solicito considerar la inclusión del siguiente comentario. "El FPS en el marco de la PNC y respetando el Convenio de Crédito IDA 3065-BO ha ejecutado los proyectos financiados par el PDCRII dentro del ciclo de proyecto aprobado. En ese sentido el FPS a través de las transferencias condicionadas ha coadyuvado en la implementación de las políticas nacionales y sectoriales a nivel municipal. Para ello, ha empleado los criterios de elegibilidad establecidos por los diferentes sectores, lo que muchas veces no ha sido adecuadamente entendido por los Gobiernos Municipales, motivo por el cual injustamente se ha señalado al Fondo de exigir muchos requisitos burocráticos. Como contraste de lo expresado, con el "Programa de Emergencia" se ha demostrado -con requerimientos menos burocráticos aunque exigentes- el alcance de un resultado adecuado y de que el FPS puede mostrar altos niveles de eficiencia en la implementación de los programas a su cargo". Con este motivo saludo a usted, muy atentamente, Msc. Lic. Vladimir Sánchez E. Director Ejecutivo F ondo Nal. De Inversión Productiva y Social

75

Annex 11. Comments of Co financiers and Other Partners/Stakeholders Comments from the Swiss Agency for Development and Cooperation (SDC)

on the Participatory Rural Investment Project SDC co financed both the Rural communities Development Project (PDCR) and the Participatory Rural Investment Project (PDCR II). Its main reason to do so was to align to the Popular Participation Reform which SDC considered not only as a decentralization instrument but as a strategy to confront poverty problems and most importantly rural poverty (it organized the social demand, it redistributed resources and decisions, it involved social actors and widen their participation, it re defined the municipality as a territorially manageable frame of reference). The PDCR was an instrument of this public policy (Popular Participation), since its starting phase (94-97), and then the project overcame its contraction phase (97-99), and continued in its phase of recovery since the "Dialogue 2000", to its present phase of uncertainty. This global objective of being a pertinent, useful, and opportune policy instrument was achieved by the PDCR generally in an efficient and effective way. This was the balance made by SDC after the PDCR I, so we decided to be associated with PDCR II, and it is the balance we make now in thinking about the possibility of continuing this relation in a third phase. SDC's relationship with the Bank can be qualified as supplemental. The relatively modest Swiss support was destined to specific areas within the main objective (instruments for the administrative management of the municipalities, support indigenous districts, municipal associations) and fit within the Bank's broader financing. Also resources for financing a Guarantee Fund were reserved, which within the Bank's scheme was not allowed. Finally the Swiss resources were not provided as grants, not loans. SDC accompanied the process of follow-up and monitoring made by the Bank. Even though this was more focused on the areas previously mentioned, it was an excellent opportunity for SDC to be able to coordinate, get acquainted with and give suggestions within the global package. It was also an opportunity to relate, in the field, to other SDC projects in related fields such as ATICA and AGRUCO. This aspect was taken as an advantage for the possible synergies between SDC and the Bank. The positioning and strategic perspective implemented by the project was very suitable for thesituation, despite the institutional climate and political instability the country went through, especially during the last decade. To merge in the heart of a major reform, to have national departmental and local presence, and to focus specially on capacity building, have been wise policies supported by the project. In fact, this project has been one of the very few programs --if not the only one-- that has thrived through this macro-meso-micro approach. I was involved during the year 2000, with the National Dialogue and also with the experience of the Statistical Municipal Atlas supported by SDC. This effort was very important, especially at a central level. It was practically because of the project that the Vice ministry of Popular Participation had the organic capacity to reach all the municipalities in the country. The overall balance of the project's actions is favorable. There is no doubt that there is an evaluation exercise pending on what is left to do, specially with two major issues: the public and private institutionalization which is needed to ensure the consolidation of the Popular Participation reform and the sustainability in terms of not only covering expenses, but social appropriation of the whole process, strong organizations and institutional autonomies. Finally, an element that contributed to a correct and effective operation was the fact that the World Bank team was located in Bolivia. I have played a part in other co financing efforts between SDC and the World Bank (FIS-FSE-EMSO) and clearly the Bank's decision to decentralize its operations to the field office and have a close involvement was very fortunate. That was one of the reasons why SDC gave resources to that local team.

C omment prepared by Carlos Carafa (SDC, La Paz)

76

Annex 12. List of Supporting Documents 1. FAO. Evaluación Económica y Financiera deL Proyecto de Inversión Rural del Fondo de Desarrollo Campesino – Reporte 98/0 02 CP-BOL. Enero de 1998. 2. FONDO NACIONAL DE INVERSION PRODUCTIVA Y SOCIAL-FPS. Evaluación de Impacto del Componente de Inversiones Rurales del PD CR II. Agosto de 2006. Prepared by SAXgr. 3. FONDO NACIONAL DE INVERSION PRODUCTIVA Y SOCIAL-FPS. Evaluación Integral Ex-Post a Proyectos del PDCR II. Marzo 2006. 4. FONDO NACIONAL DE INVERSION PRODUCTIVA Y SOCIAL-FPS. Informe de Cierre del Componente de Inversiones Rurales (PDCR-II). Septiembre 2006. 5. THE WORLD BANK. Aide Memoir, Pre-evaluation Mission. Nov 13-Dec 3, 1997. 6. THE WORLD BANK. Aide Memoir, Evaluation Mission. Jan 27-Feb 11, 1998. 7. THE WORLD BANK. Aide Memoir, Supervision Mission. June 1999. 8. THE WORLD BANK. Aide Memoir, Mid-Term Review. Jun 4-22, 2001. 9. THE WORLD BANK. Aide Memoir, Supervision Mission. May 15-24, 2002. 10. THE WORLD BANK. Aide Memoir, Supervision Mission. Sep 09-13, 2002. 11. THE WORLD BANK. Aide Memoir, Supervision Mission. Jan 15-17, 2003. 12. THE WORLD BANK. Aide Memoir, Supervision Mission. Mar 8-21, 2003. 13. THE WORLD BANK. Aide Memoir, Supervision Mission. Jul 15-23, 2003. 14. THE WORLD BANK. Aide Memoir, Supervision Mission. May 12-20, 2004. 15. THE WORLD BANK. Aide Memoir, Supervision Mission. Nov 15-22, 2004. 16. THE WORLD BANK. Aide Memoir, Supervision Mission. Sep 12-23, 2005. 17. THE WORLD BANK. Aide Memoir, Supervision Mission. May 2-10, 2006. 18. THE WORLD BANK. Country Assistance Strategy, Bolivia 1998. Report No. 17890-BO. May 21, 1998. 19. THE WORLD BANK. Country Assistance Strategy, Bolivia 2004/2005. Report No. 26838-BO. January 8, 2004. 20. THE WORLD BANK. Country Assistance Evaluation, Bolivia – Report No 33493, September 2005. 21. THE WORLD BANK. Quality of Supervision Assessment (QSA6). Participatory Rural Investment Project. September 2004. 22. THE WORLD BANK. Project Appraisal Document, Report # 17610-BO. April 1998. 23. VICEMINISTERIO DE DESCENTRALIZACION, PROYECTO DE INVERSION RURAL PARTICIPATIVA. Guía metodológica para la formulación de planes de gestión territorial indígena en TCOs. 2006. 24. VICEMINISTERIO DE DESCENTRALIZACION, PROYECTO DE INVERSION RURAL PARTICIPATIVA. Hacia un nuevo enfoque de gestión de c aminos rurales. 2006. 25. VICEMINISTERIO DE DESCENTRALIZACION, PROYECTO DE INVERSION RURAL PARTICIPATIVA. Informe de Cierre (1999-2006), Componente de Fortalecimiento Institucional. Septiembre 2006.

77

26. VICEMINISTERIO DE DESCENTRALIZACION, PROYECTO DE INVERSION RURAL PARTICIPATIVA. Manual del Vigilante. 2006. 27. VICEMINISTERIO DE DESCENTRALIZACION, PROYECTO DE INVERSION RURAL PARTICIPATIVA. Memoria Institucional. 2006. 28. VICEMINISTERIO DE DESCENTRALIZACION, PROYECTO DE INVERSION RURAL PARTICIPATIVA. Servicio de Capacitacion formal. 2006. 29. VICEMINISTERIO DE DESCENTRALIZACION, PROYECTO DE INVERSION RURAL PARTICIPATIVA. Obras de arte tipo para caminos rurales. 2006. 30. VICEMINISTERIO DE DESCENTRALIZACION, PROYECTO DE INVERSION RURAL PARTICIPATIVA. Asistencia técnica. 2006. 31. VICEMINISTERIO DE DESCENTRALIZACION, PROYECTO DE INVERSION RURAL

ARTICIPATIVA. Gobernabilidad municipal. 2006. P

78

79