PROJECT INFORMATION DOCUMENT (PID)APPRAISAL STAGE

Report No.: AB3305Project Name Lake Titikaka Local Sustainable DevelopmentRegion LATIN AMERICA AND CARIBBEANSector Other industry (25%), Sanitation (20%), Other social services

(25%), Water supply (15%), Solid Waste Management (10%)Project ID P101426Borrower(s) GOVERNMENT OF BOLIVIAImplementing Agency Vice Ministry of TourismEnvironment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined)Date PID Prepared November 2, 2007Date of Appraisal Authorization

October 29, 2007

Date of Board Approval December 20, 2007

1. Country and Sector Background

Bolivia’s options for economic development are largely defined by its geography, nowhere is this more apparent than Lake Titikaka1. The area’s striking geography has resulted in the world’s highest navigable Lake, with unique landforms, flora, and fauna. Lake Titikaka is an important ecosystem and a world-class attraction2. In 2005, tourism was the fourth most important component of Bolivia’s GDP, with a share of 4.6%, generated by national and international tourists3.

The basin is one of the most important archeological resources in South America. Inca cosmology believes that the Lake is the origin of human life; various cultures have continuously lived near the Lake for over 8,000 years. The area provides evidence of one the longest constant relations between humans and nature in the Americas. Ancient traditions are still largely preserved and the rural population surrounding the Lake is almost all indigenous Aymara.

Despite the Lake’s unique natural history and preserved cultural integrity, pollution is starting to threaten the health of the Lake and the sustainability of the communities that depend on the Lake for their livelihoods. The communities surrounding the Lake are among the poorest in the region. Poverty levels have stubbornly remained at 1976 levels – therefore a long-term sustained improvement, based on relevant local economic development, broad based local support, and locally applicable interventions is most likely to succeed. The total population of the 17 municipalities that make up the Lake Titikaka Mancomunidad is approximately 324,400, of which 93% have unmet basic needs. Almost all of the altiplano’s rural population lives in poverty. Morbidity and infant mortality rates are among the worst in the Americas4.

1 Lake Titikaka is part of the hydrologic basin that includes the Desaguadero River, Lake Poopó, and Salar de Coipasa (often referred to as TDPS), located on the Bolivian-Peruvian high plateau (altiplano). This project area is limited to the 17 Bolivian municipalities that make up the Mancomunidad part of the ‘altiplano’.2 Lake Titikaka is a UNESCO World Heritage site, parts of the Lake are designated national reserves under IUCN Category VI, and the entire Lake is a designated Ramsar site of vulnerable ecosystems and ancient cultures. The entire TDPS basin contains six Ramsar sites of global importance. Lake Titikaka has over 25 endemic species.3 Almost half of the international tourists come from Latin-America (49%), followed by European countries (32%) and American (11%). In the first semester of 2006, tourism increased by 21% compared to the same period in 20054 La Paz Prefecture has an infant mortality rate of 115/1000 compared to Haiti’s 94/1000. Morbidity rates are: 49% due to environment related infections; 25% are water borne ailments; 24% due to influenza and common cold.

Although there are various opinions on what pollutants and land-use changes most threaten Lake Titikaka, many of these opinions have little technical support, and some are politically driven. Despite numerous studies on the Lake there is no accepted or consistent baseline data, nor community consensus on priorities for local economic development or ecosystem protection. International donor assistance in the Lake-area is often fragmented and complicated by joint Peru-Bolivia jurisdiction.

Many issues need to be addressed to foster sustainable development of the Lake Titikaka region. For example:

(i) Community Support . Historically communities around the Lake often feel excluded from national economic growth and the political decision making process, and there is increasing impatience with the levels of inequality5. This discontent can be exacerbated when, according to the Government’s National Tourism Plan, community-based tourism, with a 71% market share receives only 5% of the overall tourism revenues. Private operators obtain about 80% of tourist revenues. Much of the community’s discontent stems from a mistrust and misunderstanding of the private sector’s needs and abilities.

(ii) Stakeholder Participation . The Government’s newly development Tourism plan is predicated on broad stakeholder participation. Any new tourism effort needs to garner greater public support and this support needs to be developed in a manner that reflects the unique local cultures and organizations.

(iii) Weak institutional and planning capacity. In 1994 the central government delegated to the municipalities the responsibility of managing their own finances and providing specified public services (Ley de Participación Popular6). This was not matched with a commensurate increase in overall municipal finances or staff capacities. Long term strategic planning is particularly absent and un-checked and inappropriate growth is threatening the Lake and local communities.

(iv) Lack of infrastructure . There is a considerable backlog in infrastructure and basic services such as water supply, sewage, and solid waste management are sporadic and unsustainable. Management of EPSAs (local utilities) is hampered by staff capacities and poor cost recovery.

(v) Very low travel and tourism competitiveness . Along with basic services, tourism infrastructure such as signage, and visitor interpretation facilities and restrooms in main tourist sites around Lake Titikaka (Copacabana, Isla del Sol and Luna, and the ruins of Tiwanaku), is lacking. The lack of facilities constrains tourism development, as seen through: (a) higher transaction costs for tourist operators; (b) disincentives for tourists to stay longer at their final destination as evidenced by the amount of time spent by tourists at the Lake Titikaka region compared to other regions in the country7; and, (c) lack of competitiveness compared to other international tourist destinations. According to the World

5 Bolivia is among the most unequal countries in the most unequal region of the word. This, combined with a low per capita GDP, contributes to the high poverty levels of the country. 6 Popular Participation Law or Ley de Participación Popular (1994) initiated a process of decentralization designed to transfer resources and responsibilities to local governments and strengthen the capacity and participation of municipalities and civil society organizations. The Central government allocates 20% of the national taxes to the municipalities. 7 Lake Titikaka is one of the most visited regions in the country but the amount of time spent by tourists is less then more distant destinations like the Amazonic Triangle and the Cochabamba Tropic

Economic Forum8 Bolivia is ranked very low in global tourism competitiveness (see Table1), when compared to international destinations for the largely international market.

Table 1. Travel and tourism competitiveness

(vi) Lack of economies of scale . Despite the fact that 80,000 to 100,000 tourists annually visit the Bolivian side of Lake Titikaka, the size of the economy of this part of the Lake is small and spread over a very large geographic area. Communities are relatively small and are dispersed throughout the region and the migration of people to La Paz is considerable. There are few economic activities to provide incentives for retaining or increasing populations.

(vii) Environmental sensitivity . Lake Titikaka is a unique lake in that it is almost a closed system with about 95% of its total influent water evaporating due to strong solar radiation and local breezes. About 80% of the Lake’s water originates in Peru, rivers and streams provide about 45% of the water input to the Lake, the rest is local precipitation. Residence time for the whole Lake is about 70 years. Average water depth is 100 meters with the deepest at 281 meters. The Lake is divided into two lacustrine basins; the “minor lake” (or Huinaimarca) and the “major lake” (or Chucuito) are connected at the Tiquina Straight which is 850 meters wide and about 20 meters deep. Lake levels fluctuate annually by about 1 meter and over the last 100 years have fluctuated from a low of 3806 meters asl in 1943 to a high of 3812 meters asl in 1982. As outlined in the Sate of the Lake report (Annex 14) the Lake’s watershed drains an area of 140,000 km2. The watershed is believed to be undergoing a long term drying trend, most likely from hemispheric climate changes. Glaciers that feed the lake are melting rapidly – the potential overall impact of climate change on the Lake is not yet well understood.

(viii) Threats to the Lake include: climate variability and possible change; inadequate water resources regulations; pollution such as organic loading from human waste, livestock, and industry; sediment loading; invasive species; habitat destruction; heavy metal contamination and industrial pollution from mining; nitrates from fertilizer run-off; land-use changes; and over-fishing. Pollutants enter the Lake from several sources, the largest being the city of El Alto (with more than 500,000 inhabitants), which in addition to municipal waste water, discharges significant quantities of industrial wastes. Two other important sources are the Peruvian cities of Puno (around 100,000 inhabitants) and Juliaca (around 200,000 inhabitants). Nutrient inputs from domestic wastewaters are causing eutrophication at some locations, jeopardizing the Lake ecosystem. As a consequence of poor waste water management, high bacteria levels at some locations pose a threat to public health. Mining activities may result in effluents containing mercury and other toxics, possibly threatening the fishing industry. Additionally, the introduction in the 1940s of non-native fish (trout) to the Lake for commercial farming is depleting the native fish populations as trout have escaped and are significantly influencing native fish population.

(ix) International waters. Lake Titikaka is shared between Peru and Bolivia. A bi-national lake-management agency (ALT) exists, but is not always well-regarded, especially in Bolivia.

8 World Economic Forum, Travel and Competitiveness report 2007. The travel and tourism index measures the factors that make it attractive to develop the travel and tourism industry of individual countries and covers 124 countries. Bolivia ranks 109th.

More than 80% of Lake Titikaka’s water originates in Peru, yet the most threatened smaller and shallower part of the Lake in the south is virtually fully enclosed by Bolivia.

Government’s strategy

Bolivia’s strategy for fostering sustainable development of the Lake Titikaka area includes the development of a strategic vision among communities and stakeholders, through which local economic activities as well as the provision of basic services will be promoted. The Vice Ministry of Tourism views tourism as the overarching and cross-cutting theme that can support development of the region in a holistic manner as stated in the National Tourism Plan (2006-2011). The plan provides a policy framework that prioritizes the development of sustainable tourism on the basis of community-based tourism, as well as indigenous tourism. According to this Plan, the principles by which sustainable tourism is to be encouraged are: stakeholder participation; equitable distribution of economic benefits; the preservation of natural and cultural resources; environmental protection; and improved services and tourist satisfaction.

Bolivia now receives 500,000 international and 930,000 national tourists per year, and the Mancomunidad receives 205,000 and 165,000 of these respectively. As outlined in the Government’s Tourism Strategy, the World Tourism Organization believes that Bolivia has a potential to attract 3.5 million tourists a year. The Government wants to increase tourist arrival by 5% a year. Currently, the central government is working on strategies to mobilize and deploy resources that will increase Bolivia’s competitive advantage in terms of its physical and cultural resources. The goal of increased tourist arrivals often conflicts with broader issues such as slow and costly border crossings for tourists, flight disruptions, international visa requirements, and physiologic challenges from altitude.

A Bolivian inter-agency “Comité Permanente” oversees investments in the Lake Titikaka watershed. The investment needs already identified by the Committee are considerable, with investments required in roads, ports, water and sanitation, housing. Therefore, this relatively modest project would finance critical investments with wide-spread consensus and potential for replication. The Bolivian Government designated the Vice Ministry of Tourism to oversee this Project and proposed that the project strive for ‘sustainable economic and social development’ of Lake Titikaka’s municipalities and enhance environmental protection of the Lake. Since some activities are relatively small-scale and urgently needed, the Project envisages an important role for the Prefecture and individual local municipalities.

Project Strategy

Several stakeholders expressed concern that a $15 million project intervention is far too limited to have appreciable long term regional impacts. With little effort the pre-identification mission identified at least $60 million in much-needed investments – the needs around the Lake are considerable. The needs are especially high for infrastructure, including wastewater treatment, water supply, solid waste management, and improvements to roads and ports. Given that the needed investments greatly surpass this credit amount, complimentary interventions from other donors, and complimentary action from Peru is also critical to ensure long-term sustainability of the Lake with associated improvements in the quality of life for local populations. Greater investment and support from the private sector is important and the local and international business community is considered a key stakeholder in the region’s development opportunities. This Project will initiate a broader program of regional assistance structured within a Vice-Ministry of Tourism led strategy that will include:

(1) Develop a shared and relevant vision of Lake Titikaka’s challenges and opportunities. The Project will support the Government’s comprehensive ‘Visioning Exercise’ that will develop a fuller understanding of the economic, social and environmental value of the Lake Titikaka basin resources and

the threats it faces, and define and prioritize management needs and actions, and develop a long-term strategy for the region. This program will build on past exercises and will provide stakeholders (domestic and international) an opportunity to discuss their long term vision for the altiplano. This program is likely to progress in phases, with Phase 1 being conducted during project preparation (with a social and institutional risk assessment). During Project implementation, Phase 2 would facilitate an iterative process to obtain a broader consensus on development in the altiplano (largely based on existing studies). The Social Assessment is complemented by a proposed comprehensive social communication campaign that will support the specific implementation of the Project and the broader program objectives. Where practical this vision will be developed with input from Peru. For enhanced understanding and management of the basin’s water resources bi-national institutions and research will be supported and complimentary funding sources sought.

(2) Support a long-term enhancement of quality of life for people living in the TDPS Basin through priority infrastructure investments. Poverty levels have stubbornly remained at 1976 levels – therefore a sustained improvement based on relevant local economic development, broad based community support, and locally applicable interventions is most likely to succeed. The local community needs to be an explicit component of local sustainable development; mobilizing their strong support through the visioning exercise was a key focus of project preparation. Among the expected benefits of the Project are: (a) improved environmental conditions contributing to improving public health and wellbeing; (b) enhanced opportunities for small and micro business; (c) ability to attract and retain tourists, and: (d) improved access to significant cultural heritage through systematic maintenance, preservation, and promotion of cultural resources.

(3) Focus on the sustainable delivery of basic services. Small scale water supply, wastewater collection and treatment, and solid waste management, are critical services needed by local populations and are needed to enhance tourist satisfaction. Consistently surveys of tourist surveys have indicated that the absence of these services is a major shortcoming and increasingly their absence will impact the Lake. The Project proposes a new methodology to monitor the sustainability of service provision (see Annex 3). In addition to funding expanded service provision activities are also included to enhance the EPSAs (local utilities) and provide ongoing feedback on the quality of service provision. These efforts include, for example, cost recovery, staff training, appropriate design and integration across relevant NGOs, varied government departments and levels, and community or user groups.

At a broader level the Project begins to address environmental degradation in and around Lake Titikaka, including depletion of natural resources such as groundwater, forests, soil and fish-stock, loss of biodiversity, and adverse consequences of uncontrolled urbanization. Through Project activities and the communication strategy, environmental impacts such as the “carbon footprint” in selected towns, e.g. Copacabana, will be identified, and through improved infrastructure and provision of basic services, reduced. The Project’s input in issues of environmental degradation is modest, however a critical first-step of evaluation and dissemination will be supported.

(4) Encourage the participation of the private sector and other donors. The Project will encourage and catalyze participation of other partners such as the IFC9, the private sector and other donors to maximize investments. Advocacy activities at both central as well as local levels will be implemented to incorporate key Peruvian stakeholders through the bi-national Lake authority (ALT)10. In addition, as part 9 IFC is considering support in the Lake Titikaka area, in light of the experience of Orient Express in Peru. Based on demand, the IFC can support an eligible business plan for a company that wants to be established in the area. 10 ALT was created in 1993 as an autonomous decision making authority for the watershed system and represents the Peruvian and Bolivian Ministries of Foreign Affairs with the responsibility for environmental and water quality issues. Between 1991 and 1993, ALT developed a flood control Master Plan with the cooperation of the European Union that provides a basic reference and a twenty year framework for development of the TDPS system.

of project preparation, National Geographic Society undertook a geo-tourism study to assess the potential of tourism development in the Lake Titikaka area on both the Peruvian and Bolivian side. Ultimately, the development of a geotourism map that is specific to the entire Lake region will help build community support among residents of both Peru and Bolivia and encourage cross border collaboration. The map will also help to highlight lesser-known destinations and enhance these locations for existing tour operators.

(5) Provide a baseline and credible information for monitoring the Lake. Currently there is no sound baseline on the state of Lake Titikaka’s water resources, or a clear system for water quality testing, monitoring trends, or standardized data collection. A key aspect of the Project is to support the development of a sound baseline system and monitoring program that will highlight the stresses on the Lake and long-term trends that may be threatening the Lake and, where practicable, protect against these stresses. The proposed Project will support Lake Titikaka’s first “State of the Lake Report”, which includes baseline information regarding Lake environmental quality as well as quality of life indicators for the population inhabiting the basin. The State of the Lake Report will be updated annually, most likely by the Binational Authority of Lake Titikaka (ALT), for the duration of the Project to show environmental and economic trends that can also serve as monitoring indicators for overall success of the Project. Upon completion of the proposed Project, the issuance of the State of the Lake Report should be maintained by the governments of Bolivia and Peru.

2. Objectives

The Project’s development objective is to contribute to local sustainable development in the Bolivian part of the Lake Titikaka watershed.  This will include:  (ii) facilitating local activities that support tourism development and cultural preservation in the communities surrounding the Lake, and (ii) improving basic water and sanitation services.

The Project will specifically support improvements in local tourism services and cultural heritage protection as indicated by a minimum 10% improvement over the 2007 baseline geotourism survey. The Project will also support the sustainable provision of basic services (water supply, wastewater collection and treatment, solid waste management) to 150,000 people (with improvements for 100,000 and new services for 50,000 beneficiaries). Other broader objectives such as, contributing to the protection of the Lake’s long-term water quality and ecological integrity, greater social inclusion and participation, improved quality of life, increased tourist arrivals, agreement on a ‘shared vision’ for the Lake, will be supported and monitored but can not be fully attributed to the Project.  The Project’s contribution to local sustainable development is modest but provides an important starting point.  Follow-on and parallel activities will be identified during Project implementation, and integration with similar Peruvian efforts encouraged.

The objectives will be attained through:

(i) Consultation among the local stakeholders during early preparation and throughout the Project to establish a shared vision of the Lake Titikaka basin and to ensure that the Project design and implementation reflect community priorities.

(ii) Targeted municipal infrastructure investments such as small-scale water, waste water treatment, and solid waste.

(iii) Targeted cultural heritage investments and municipal tourism activities that improve the current tourism sites and experiences.

(iv) The creation and annual updating of the Lake Titikaka State of the Lake Report, which will summarize water quality and natural habitat indicators in addition to quality of life indicators for the inhabitants of the Lake Titikaka Basin.

(v) Institutional strengthening for the Vice Ministry of Tourism and municipalities regarding tourism needs, the development of a tourism strategy, and urban planning for those municipalities in the Lake basin that represent rapid population growth and impacts for tourism and the health of the Lake.

(vi) Enhanced dialogue within and among the scientific, policy and regulatory communities that oversee Lake management, and where possible targeted capacity building in key institutions.

3. Rationale for Bank Involvement

The Bank’s 2006 Interim Strategy Note for Bolivia supports the Government’s 2006-2010 National Development Plan (NDP). The main strategic areas of the NDP are: (i) Fostering jobs through inclusive growth; (ii) Providing better services to the poor; and greater social inclusion through improved public service provision; and (iii) Enhancing good governance and transparency. These objectives are particularly relevant in the altiplano area as poverty rates have not appreciably improved since 1976.

The Bank is mobilizing parallel assistance such as trust fund supported studies, an International-Waters GEF project, and scientific support from the European Space Agency. The Bank will evaluate and publicize relevant successes in Peru and Bolivia and the Bank will also facilitate a broader dialogue on the Lake between Peru and Bolivia. This includes mobilization of international experts.

Bolivia is an IDA borrower with limited borrowing capacity and limited access to international finance, therefore the Government expects that with the Bank’s relatively modest support through this project, additional donor and community funds will be leveraged to compliment and expand the overall scope of work. The Bank can bring specific knowledge in social development, waste water management, infrastructure provision, cultural heritage, sanitation, and housing, therefore this relatively modest project would finance critical investments with wide-spread consensus and environmental protection. Currently, the Bank is involved in other sustainable tourism projects in the Andean region and is now discussing with the Peruvian Government the possibility of including the Lake Titikaka area in a second tourism project and the environmental DPL.

4. Description

The project has three main components: (1) Support to Tourism Development and Cultural Protection; (2) Basic Services; and (3) Institutional Strengthening and Project Management. The following table presents the estimated project costs including the Project Preparation Fund (US $950,000) that the Bolivian Government requested.

Table 2. Project estimated costs and financing

Component Indicative Costs

(US $ M)

% of Total

Bank Financing (US $ M)

% Bank Financing

1. Support to Tourism Development and Cultural protection

$9.0 37.5 $8.2 41

2. Basic Services $10.6 44.1 $7.6 383) Institutional Strengthening and Project Management

$4.4 21.6 $4.2 21

TOTAL $24.0 100 $20.00 100Total Financing Required $24.0 100 $20.00 100

The project has three main components: (1) Support to Tourism Development (and Cultural protection); (2) Basic Services; and (3) Institutional Strengthening and Project Management. Project components include: Component 1: Support to Tourism Development and Cultural Protection This component will support activities that promote quality of life, strengthen cultural identity, provide critical tourism infrastructure, and improve economic development for local communities within the Lake Titikaka Basin. Key investments include:

1.1) Tourism Development Support: The objective of this sub-component is to enhance both current and potential tourism development in prioritized areas through relatively small-scale investments in: signage and accessibility infrastructure to facilitate both tourism reception and local ease of access; scenic byways and lookout facilities with public amenities; visitor interpretation centers; community-based initiatives such as, arts and crafts centers, organization and promotion of indigenous cultural events (music and dance), village and home-stay, camping facilities, gastronomy, improvement of existing tourism services, and development of new tourism products based on current local initiatives and market demand studies. This subcomponent will assist both municipalities and communities around the Lake identified during Project preparation as having the need to improve their existing tourism development, as well as those that have the potential to embrace tourism as an agent of sustainable development. While this sub component is demand-based and all eligible populations could access Project resources, the Project will encourage a phased geographic targeting of the Lake’s four prioritized tourism zones and their respective circuits, which is consistent with the Government’s overall tourism development strategy for the Lake´s region. Tourism studies for each of the four zones were carried out during preparation and priorities defined consensually for the region as part of the first phase of the Government’s comprehensive ‘Visioning Exercise’.

Eligible subprojects will sustain and enhance both current and potential cultural, social, economic and environmental assets to preserve the living character of the communities that surround the Lake. Financing will be provided through two categories of activities related to tourism: a) Municipal Investments; and b) Community subprojects that include projects identified in the four tourism zones and their key circuits. Community subprojects will be undertaken by the community with the support of an intermediary (NGO) or firms that will be hired to work with the community to design and implement new projects. The community component is consistent with the community consultation conducted during project preparation and will be refined as community groups are facilitated by the contracted intermediary. These community activities do not fall under local municipal jurisdiction. The Municipal tourism investment component is consistent with existing local legislation and Municipal planning and priorities.

1.2) Cultural Heritage Program: This component aims to protect the integrity of sacred sites, heritage monuments and the unique natural areas of Lake Titikaka. Most of the sites and cultural monuments designated and listed as ‘important national heritage’ by the Vice-Ministry of Cultures are now at risk —e.g. Isla del Sol, Isla de la Luna and Copacabana. In addition to protection of cultural heritage

monuments in Isla del Sol, and Isla de la Luna, this component includes restoration of pre-Hispanic agricultural landscapes, restoration of pre-Hispanic trails and restoration of artistic and historic assets in colonial churches.

1.3) Support to productive activities: Similar to the Bank Financed Rural Alliance Project, but focused only on activities related to tourism, this component will support small scale local economic development through grant financing of sub-projects. These could include handicrafts, textiles, cultural events that are linked to tourism activities around the Lake. The relatively modest component would begin with strategic pilot activities and studies.

1.4) Administrative Cost for FPS: This component will finance the administrative cost to oversee the financial and procurement aspects of the tourist infrastructure in component 1. FPS will provide assistance to the municipalities to implement the projects as part of the FPS’s cycle process from the pre-investment stage, execution, to the supervision of the project.

Component 2: Basic ServicesThis component will facilitate access to improved services and infrastructure in prioritized municipalities and communities within the Lake Basin through the Vice Ministry of Tourism and Basic Services. Proposed activities include:

2.1) Community Water and Sanitation: The project will support small-scale water and sanitation infrastructure for the Lake’s rural communities. Communities will be selected using criteria that include an evaluation of the current situation and current threats to water sources from pollution, demand from communities, readiness, commitment by municipalities to co-finance, geographical clustering, and potential benefits on critical tourist circuits. The intervention will be supported by specialized NGOs or firms hired by municipalities that will work with a cluster of communities. These will work closely with FPS and the municipalities to ensure that community concerns and demands are reflected in the design and construction and operation of facilities. The project will also finance post-construction follow-up including training and on-the-job support with tailored training for the Water User’s Associations.

2.2) Sewerage and Waste Water Treatment: The project will support the development of sanitation facilities for communities and extension and rehabilitation of existing sewerage networks. Five municipalities (Copacabana, Tiquina, Achacachi, Tiwanaku and Viacha) are included in the project, (see below). All of the cities, with the exception of Viacha, are significant tourist zones and serviced populations can increase dramatically during peak tourist periods. For example, additional peak populations in Copacabana and Tiwanaku can exceed 20,000 people during festival periods, and providing adequate water, wastewater, and sanitation services are essential to improving tourist potential and enhancing the quality of life for residents.

The wastewater component covers all five cities. The project will finance the improvement of the collection network to ensure 100% coverage. Currently, only Achacachi has semi-functional facultative wastewater lagoons. The project will finance low-cost and appropriate wastewater treatment systems. Potential treatment systems include larger and well-engineered lagoons, and use of post-treatment wetland polishing ponds to help remove nutrients.

2.3) Solid Waste: The project will finance solid waste investments in Tiwuanaku, Copacabana, and Achacachi. Viacha will use other sources of financing for its solid waste project. Proper solid waste management is also essential to reduce blockage of wastewater collection pipes which is now a major problem. A study is underway to consider the feasibility of multi-municipal landfills in Copacabana (Tito, Yupanqui, and Tiquina) and Tiwanaku (Guaiqui and Taraco). The project will finance improvements in collection, street cleaning, transportation, recycling, and final disposal in sanitary landfills. The landfills

will be designed for low-cost operation, relying mainly on manual labor and minimizing the use of heavy equipment during operations. Each environmental assessment that will be undertaken before solid waste activities occur will determine if any waste pickers are present and could potentially be impacted and if so, programs to assist them will be developed and implemented as part of the activity.

2.4) Administrative Cost for FPS: This component will finance the administrative cost to oversee the financial and procurement aspects of the basic services in component 2. FPS will provide assistance to the municipalities to implement the projects as part of the FPS’s cycle process from the pre-investment stage, execution, to the supervision of the project.

Component 3: Institutional Strengthening and Project ManagementThis component will enhance the land-use planning and management capacity of municipalities within the Lake Titikaka Basin through the regional and municipal strategic plans. The component will also enhance the development and annual updating of technical and social data - the Lake’s water quality and natural habitat, as well as quality of life indicators for the communities surrounding the Lake. This will be supported through the creation of an annual “State of the Lake” Report.

3.1) Capacity building for Viceministry of Tourism Municipalities and Communities, Institutional strengthening for Prefecture, VM Culture, VM Basic Services and VM Hydrological Basins: This component will support the following activities:

3.1.1) Institutional strengthening for Vice Ministry of Tourism: This component will support the development of targeted tourism studies that support a long-term program for tourism development in the Lake Titikaka Basin. This component also includes consulting services for a marketing strategy to promote Bolivia’s international tourism potential, training in communications, assistance in internet booking of guest houses, and technology for VMT.

3.1.2) Institutional strengthening for Municipalities: The Project will support municipal strengthening through the development of strategic and land-use plans for all of the municipalities in the region. These plans will establish strategic guidelines for medium and long-term sustainable development of the municipalities, in conjunction with the existing guidelines of the National Development Plan 2006-2010, the Tourism Sector Plan, and the Regional Strategic Vision.

In addition, the project will finance technical assistance to ensure sustainable service provision. Only Viacha and Achacachi have water companies (EPSA); water services for the other municipalities are governed by a “Water Committee.” Under the existing and proposed new water law, all municipalities are required to formally establish water companies. A key goal under the project is to put all water, wastewater, and solid waste services under a single company (EPSA or ENAPAS), and ensure that user fees cover at least O&M costs.

3.1.3) Capacity building for communities: This component will finance assistance for local communities in project management. It will strengthen community organizations and producer organizations to participate in tourism development. The communities’ existing social networks will be used and strengthened by focusing on specific community accepted activities such as tourism facilities development. An intermediary will be retained to facilitate community involvement in subproject identification and implementation by using participatory and intercultural methods.

3.1.4) Institutional strengthening for Prefecture and Government Agencies: The Project will support institutional capacity building and management strengthening for several of the entities involved with the execution of the Project, including the Prefecture and Vice Ministries of Basic Services, Culture and

Hydrological Basin. International agencies such as the National Geographic Society, NGS 11, and the International Joint Commission, IJC12 could assist with this capacity building. An advisory group on Lake Management, with representatives from Bolivia and relevant international experts is planned.

3.2) Monitoring and Evaluation of the strategic vision, complementary studies and project management: The project will support the following activities:

3.2.1) State of the Lake Report: Through a World Bank Netherlands Water Partnership Program Trust Fund, the Bank supported the development of a framework for Lake Titikaka’s first State of the Lake Report. The Report summarized all existing Lake data, including sources of contamination, habitat degradation and an additional water modeling exercise, also contracted through the trust fund, which shows impacts of current pollution trends. The Vice Ministry of Tourism’s preparation team developed the Social State of the Lake section within this report that highlights the social conditions and quality of life indicators for the municipalities of the region. The Project will continue to support this effort through the annual updating of both the technical and social data in the report. The annual updating of this report will initially be executed by the Government of Bolivia.

3.2.2) Social Communication Strategy: This SCS, which compliments the Project’s Social Assessment, will serve each component of the project (cross-components). Special emphasis will be placed on communication activities with indigenous peoples to increase their potential for participation in the project and to create a better context for communications which will increase the potential for the project’s overall acceptance. The SCS will include activities implemented and described under the project. The SCS will also address specific social, environmental and economic concerns as they may arise during project implementation (including translations into Aymara language).

3.2.3) Project management: This component is particularly important given that this is the first time the Vice Ministry of Tourism executes a Bank financed Project. This component will enhance the management and execution of the Project, including standard operating costs, Project Coordinating Unit fees (PCU) and third party auditing.

5. FinancingSource: ($m.)BORROWER/RECIPIENT 4.0International Development Association (IDA) 20.0

Total 24.0

6. Implementation

The Project will be implemented by the Ministry of Production and Micro enterprise (MPM), through its Vice-ministry of Tourism (VMT). VMT will operate the Project under the supervision of MPM and the Inter-institutional Committee for the Sustainable Development of Lake Titikaka (ICSDLT)13. The investments in infrastructure (water and sanitation, and those related to tourism activities undertaken by the Municipalities) will be administered by the Social and Productive Investment Fund (FPS) 14.

11 The US-based NGS is active in the region and preliminary agreement has NGS preparing a Destination Mapping exercise, consistent with similar Machu Pichu activities.12 The Canada-US IJC manages the Great Lakes and can provide a useful model, and training facilities for ALT.13 This Committee includes the Ministry of Water, the Ministry of Production and Micro-enterprise and the Ministry of Planning.14 With the exception of very specific investments in Productive and Tourism Infrastructure which will be managed by the PCU.

The Ministry of Production and Micro enterprise (MPM): The MPM will be responsible for coordinating the execution of the Project with all members of the ICSDLT, delegating internally to the VMT operational responsibility for the execution of the sub-projects, approving the operational manual (OM) and any modifications, approving the Annual Operating Plan (POA) and ensuring the project’s budget registration, processing together with VMT, amendments to the Credit Agreement, and reviewing annual evaluations and impact studies.

The Vice-ministry of Tourism (VMT): VMT through its Project Coordinating Unit (“PCU”) will be in charge of Project coordination, the implementation of the institutional strengthening program, the development and execution of Bolivia’s tourism strategy for Lake Titikaka. It will also have the following responsibilities: the effective coordination with the ICSDLT, the MPM and its vice-ministries and other public entities with activities related to the Project (Vice-Ministry of Cultural Development, Vice-Ministry of Environment and Territorial Organization, Customs Services, Immigration Services), the coordination of infrastructure investment activities trough FPS, and coordination of the Project with the Municipalities in Lake Titikaka, the preparation of an annual update of the “the State of the Lake” and the procurement of VMT components. When necessary, inter-institutional technical committees (with FPS, the Viceministry of Basic Sanitation and/or the Viceministry of Cultures) will be established for the selection of projects, the revision of TOR’s, the revision of project designs, the approval of projects and the periodic revision of execution arrangements. See Diagram No. 1 for Implementation Flow for the VMT-PCU projects.

Productive and Social Investment Fund (Fondo de Inversion Productiva y Social) - FPS: FPS will be the agency in charge of implementing the Project investments in water, basic sanitation and solid waste management, as well as those investments in infrastructure for Municipal Tourism Investments15. FPS will rely on the municipalities for the execution of the projects, i.e. the municipalities will carry out all procurement activities and will be in charge of signing the contracts for investments in infrastructure. FPS will focus on: (a) securing the technical quality of projects and (b) securing the compliance with safeguards and fiduciary requirements. FPS will provide technical and fiduciary assistance to Municipalities during the assessment, implementation and supervision of projects.

The Bank recently concluded an “Operational Review of FPS” and this review has led to the establishment of an Action Plan that, once implemented, will further enhance the capacity of FPS. FPS will operate under an Institutional Agreement signed with the Vice-ministry of Tourism. In order to secure the technical quality of infrastructure projects designs in basic sanitation; FPS, the Viceministry of Basic Sanitation and the UCP will conform a quality review committee to access these subprojects. Once reviewed, UCP will send the subprojects to FPS for their implementation. VMT trough the PCU will monitor FPS and will disburse payments for eligible operational costs on the bases of agreed criterion. See Diagram No. 3 for FPS implementation flow.

FPS will manage the Project funds and the counterpart funds for investments in infrastructure. Municipalities will transfer the required counterpart funds for these investments to FPS. FPS will use these funds to pay the firms (contractor and supervision) based on the terms defined in each specific contract.

The Prefecture of La Paz: The Prefecture of La Paz (PLP) has many capabilities in relation to the protection and sustainable development of Lake Titikaka. They also recently acquired a higher degree of political autonomy as prefects are now elected, rather than designated by the national government. The PLP has more resources derived from the national distribution of hydrocarbon royalties. The Vice-

15 With the exception of the specific project mentioned earlier.

ministry of Tourism and the Prefecture of La Paz will sign an agreement that will establish the conditions for coordinated interventions in the Lake Titikaka area, particularly in relation to investments in infrastructure and overall regional planning.

Indigenous and Campesino Communities and the Association of Producers: The main beneficiaries of the Project will be the communities and association producers in the Lake Titikaka region, thus the coordination with these groups is particularly important for the Project. Indigenous and Campesino communities have legal rights, as Territorial Base Organizations (“grassroots organizations” OTBs), over the identification and prioritization of municipal investments. Associations of producers also have rights to participate in the prioritization of these investments, although they are not as influential as OTBs. Among the key activities of these organizations within the Project are the following: cooperating with the local governments and the municipalities to define priorities, participating in activities related to capacity building, participating in the identification of possible investments and in the formulation of pre-investment studies, participating in the implementation of specific project.

7. Sustainability

Proposed infrastructure and institutional interventions support the environmental sustainability of the Lake while serving as a prerequisite for long-term economic development from increased tourism activities around the Lake. Infrastructure works related to small-scale water and sanitation investments, as well as institutional capacity building supported through the Project, will lead to greater environmental sustainability of the Lake.

Social sustainability for residents around the Lake is supported through the Project’s focus on culturally appropriate interventions. The community was an integral part of Project design and will be the key actor during implementation.

8. Lessons Learned from Past Operations in the Country/Sector

The design of the proposed Project reflects the lessons learned from Peru’s Vilcanota Valley Rehabilitation and Maintenance Project in Peru and the Copan Tourism Project in Honduras. The funds provided by the Bank are used for strategic and catalytic investments to leverage investments by other donors and the private sector. As in Copan, the management of small-scale funding activities will be delegated to a credible intermediary. A review of Bank tourism projects in Latin America and lessons learned are included in a summary table in Annex 1. Lessons from other projects include:

Strengthening the FPS. The Bank financed Rural Alliance Project (PDCR) used the Government agency Fondo Nacional de Inversion Productiva y Social (FPS) for disbursing the funds to the participating municipalities. During the preparation of the proposed Project, a study was carried out by the Bank’s CMU to evaluate the capacity of FPS in implementing Bank projects. The findings and recommendations are incorporated in the Project design to strengthen FPS to undertake municipal investments in infrastructure and basic services. (See Annex 7)

Strengthening the Municipalities. Experience from the Rural Alliance Project (PDCR) shows that municipal capacity for implementing Bank projects is still weak. The proposed Project includes a component for strengthening the Municipalities through technical assistance in land-use planning, procurement and financial issues.

Close multi-sector collaboration in strategic areas. Close coordination among different sectors is necessary between investments in tourism and cultural heritage activities and other specific sector investments in infrastructure such as sanitation and solid waste management. An Inter-institutional Committee consisting of the Vice Ministry of Tourism, Vice Ministry of Culture, Vice Ministry of Basic Services, the Prefecture and municipalities will be created for overseeing Project activities. The Project will benefit from the dialogue between sectors by prioritizing interventions in strategic areas with a more visible and rapid impact. The Committee will be chaired by the Vice-Ministry of Tourism and will be integrated with the existing ‘Comite Interinstitutional.’

Water should be managed at the lowest appropriate level: The Dublin principle established in 1992 suggests that those that are more closely affected or benefited by water provision services should effectively participate in its management. In this Project, the formation and strengthening of the Water User’s Association is consistent with Bolivian Law and complies with the good practices in other countries. For the Project towns there is wide-spread support for strengthening the existing EPSAs (and creating new ones).

Community Participation is needed for successful interventions: Experience from different projects around the world shows that neglecting community input on the design and construction of facilities results in a lack of ownership and poor management of the infrastructure. National rural water supply and sanitation programs in Paraguay, Perú and Ecuador involve a participatory approach were the communities are consulted prior to the intervention about their intention and commitment to participate, as well as their willingness to form the appropriate community institutions to sustain the water systems in the long run. Community participation, particularly women’s, is a key input to determine the location of facilities, as well as the level of service demanded. Community empowerment ultimately improves sustainability of the systems. The proposed Project intends to include the community’s input and include them as well in the Project monitoring.

Providing rural supply and sanitation requires a demand response approach. Best practices in Rural Water Supply and Sanitation show that it is best to provide only the level of service that communities demand, and can afford and sustain. The demand response approach would be applied in the Project through two criteria. Only communities that express a demand would be prioritized, and before commitments are made, localities would be informed as to what participating in the Project would entail. The consultant firms and Project staff will develop a menu of technical options and level of services to match community demands, local customs related to water and sanitation, as well as the cultural and ancestral belief system.

Operation and maintenance should drive the selection of the wastewater treatment technology : The majority of the wastewater treatment plants fail to provide services for their expected lifetime due to the inability of local operators to meet technical demands and consistently pay operational costs. In the Project, careful consideration will be paid to ensure that there is a match between the technology selected and the local operator ability to undertake the maintenance and operation of the treatment plants. Training of local staff on operation and maintenance of the treatment plants would be provided as part of the Project.

9. Safeguard Policies (including public consultation)

Safeguard Policies Triggered by the Project Yes NoEnvironmental Assessment (OP/BP 4.01) [X] [ ]Natural Habitats (OP/BP 4.04) [X] [ ]Pest Management (OP 4.09) [ ] [X]

Physical Cultural Resources (OP/BP 4.11) [X] [ ]Involuntary Resettlement (OP/BP 4.12) [X] [X]Indigenous Peoples (OP/BP 4.10) [X] [ ]Forests (OP/BP 4.36) [ ] [X]Safety of Dams (OP/BP 4.37) [ ] [X]Projects in Disputed Areas (OP/BP 7.60)* [ ] [X]Projects on International Waterways (OP/BP 7.50) [X] [ ]

10. List of Factual Technical Documents

Documents Related to on Lake Titikaka- Background

1 Lessons for Managing Lake Basins for Sustainable Use; Report No. 32877, The World Bank, December 2005.

2 Lake Titikaka Basin, Bolivia and Peru; The Binational Autonomous Authority of Lake Titikaka (ALT); Published in the United Nation’s 1st World Water Development Report 2003.

3 Lake Titikaka Experience and Lessons Learned Brief; Mario Franciso Revollo, SERECO, La Paz, Bolivia; Maximo Liberman Cruz, La Paz, Bolivia, and Alberto Lescano Rivero, CEDAS, Puno, Peru.

Documents Related to Environmental Assessment/Water Resource Management/Safeguards Issues

4 Mancomunidad de Municipios del Lago Titikaka, Situación Ambiental; Gerencia General Mancomunidad del Lago Titikaka, abril 2006.

5 Assessing the Performance of International Water Management at Lake Titikaka; Jörg Rieckermann, Helge Daebel, Mariska Ronteltap, and Thomas Bernauer; Swiss Federal Institute of Aquatic Science and Technology (EAWAG) and Swiss Federal Institute of Technology (ETH), Center for Comparative and International Studies, Zurich, Switzerland, April 2006.

6 Water for People Water for Life, United Nations World Development Report, Executive Summary; UNESCO Publishing and Berghahn Books, 2006.

7 A Hydrodynamic Model for Lake Titikaka; Beatriz Villegas, Consulting Engineer, Medellin Colombia, and Phillip J. W. Roberts, Consulting Engineer, Atlanta, GA, USA; August 3, 2007.

8 Managing Lakes and their Basins for Sustainable Use. A Report for Lake Basin Managers and Stakeholders. International Lake Environment Committee Foundation, 2005.

Documents Related to Tourism and Cultural Heritage

9 Plan Sub-Sectorial de Desarrollo del Turismo Comunitario, Viceministerio de Turismo, Gobierno Nacional Bolivia.

* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

10 Tourism Presentation by Departamento del Departamento de La Paz, Dirección de Desarrollo Productivo, Unidad de Turismo, 2007.

11 Geotourism Needs Assessment-Lake Titikaka: Assessing the Geotourism Needs, Threats and Opportunities of the bi-national Titikaka Región, National Geographic Society, Center for Sustainable Destinations, July 31, 2007.

12 Turismo Comunitario en Bolivia: Hacia la Construcción de un Turismo Sostenible de Base Comunitaria, Ministerio de Producción y Microempresa, Viceministerio de Turismo, 2007.

11. Contact pointContact: Daniel A. HoornwegTitle: Sr Environmental Engr.Tel: (202) 458-4731Fax: (202) 614-0739Email: dhoornweg@worldbank.org

12. For more information contact:The InfoShopThe World Bank1818 H Street, NWWashington, D.C. 20433Telephone: (202) 458-4500Fax: (202) 522-1500Email: pic@worldbank.orgWeb: http://www.worldbank.org/infoshop