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Implementation Completion Report (ICR) Review - Land Fund Project


  
1. Project Data:   
ICR Review Date Posted:
06/14/2006   
PROJ ID:
P054462
Appraisal
Actual
Project Name:
Land Fund Project
Project Costs(US $M)
 77.2  80.1
Country:
Guatemala
Loan/Credit (US $M)
 23.0  23.0
Sector, Major Sect.:
Central government administration, Other social services, Roads and highways, Water supply, General industry and trade sector,
Law and justice and public administration; Health and other social services; Transportation; Water sanitation and flood protection; Industry and trade
Cofinancing (US $M)
   
L/C Number:
L4432      
   
Board Approval (FY)
  99
Partners involved
 
Closing Date
12/31/2002 06/30/2005
         
Evaluator: Panel Reviewer: Division Manager: Division:  
Ridley Nelson
Christopher D. Gerrard Alain A. Barbu IEGSG

2. Project Objectives and Components:

a. Objectives
The development objective of the program, for which the project was the first phase, was to assist the Government of Guatemala to: (a) establish a program to facilitate beneficiaries' access to land; (b) support beneficiaries' access to technical assistance and productive subproject financing; and, (c) improve the legal and institutional framework so that land markets can work more efficiently.The project was the first phase of an APL.

The objectives of the project were to help government to: (a) facilitate beneficiaries access to land; (b) help beneficiaries to access technical assistance and productive subproject financing; and, (c) initiate improvements to the efficiency of land markets. Subsequent phases of the APL were to build on the lessons learned.

In the context of the 1996 Peace Accords, the program supported land-related commitments under the Socioeconomic and Agrarian and Indigenous Peoples sub-accords of that agreement.

b. Components (or Key Conditions in the case of Adjustment Loans):
There were four main components:

  1. Institutional Strengthening (appraisal US$2.0 million (total project costs); actual US$2.0 million) supporting mainly FONTIERRAS (the Land Fund Institute) including the project management unit, social communication programs, training, legal research and M&E.
  2. Community Strengthening (appraisal US$13.3 million; actual US$ 5.4 million), providing pre- and post-land purchase services including legal assistance, preparation of investment proposals, facilitating access to financial markets, and technical advice.
  3. Community Subprojects (appraisal US$9.7 million; actual US$16.5 million) providing complementary social and productive infrastructure e.g. roads, mills, storage, marketing) to maximize opportunity of diversification.
  4. Land Purchase and Lease (appraisal US$52.0 million, actual US$56.0 million), to finance land purchase and leases including initial grants.

c. Comments on Project Cost, Financing, Borrower Contribution, and Dates
Effectiveness was delayed for nearly two years due to the 1999 elections and the transition to the new government. Largely for this reason, the project took six years to implement and closed two and a half years later than the appraisal projection. Government financed all of the land purchase component, since the Bank does not finance land purchases. The cost of the community subprojects component increased to 170% of appraisal estimates, while that of the community strengthening component declined to 41%, largely due to the doubling of the number of farms that were actually transferred in comparison with the appraisal targets (see 4 below).


3. Relevance of Objectives & Design:

Consistent with the borrower's priorities, the 1998 CAS gave priority to two main areas: supporting the Peace Accord and reducing poverty and social exclusion.The objectives and design exhibit high relevance to these Bank and borrower priorities, in particular because of the central importance of the quite specific Peace Accord commitments.

4. Achievement of Objectives (Efficacy) :

Achievement of the objective of facilitating beneficiary access to land was substantial. The target population for this first APL phase was 7,500 families. This was exceeded by over 100% with 15,487 families benefiting. 71,371 hectares of land was distributed. Average time elapsed from acceptance of an application to disbursement was 540 days. With respect to the poverty element of the objective, more than 30% of beneficiaries were indigenous and more than 11% were female-headed households. In pursuit of this outcome, the first Land Fund was established.

Achievement of the objective of supporting beneficiaries access to TA and productive subproject financing was, on balance, substantial, but with qualification. Outcomes in terms of actual productivity increases were not yet evident when the project closed. Given the need to focus on basic needs and the need to restore abandoned land, this might be expected since such processes take time. However, the technical assistance was weak and was delayed. Access to sub-project financing was achieved. The project provided 186 groups of beneficiary farmers with legal and technical assistance to establish their status as fromal entities, negotiate with land owners, register their ownership of land purchased, and organize themselves for productive activites and land use planning on their newly acquired farms.

Achievement of the objective of initiating improvements to the efficiency of land markets was modest, as noted in the ICR. The project supported large-scale processing of land purchases and established databases with some public access. However, there was increased political intervention, costs were relatively high, and the program was only able to reach a modest share of the demand.

5. Efficiency:

Efficiency is uncertain at this stage but is rated as modest on the current limited evidence. Productivity has been slow to increase, partly for reasons given above. However, the projections for increases in income in the partial economic analysis of the ICR appear optimistic in two of the four cases modelled, calling for about 100% increases in income over debt service over 4 years in one case and about 500% in the other case. Moreover, there are some questions raised in the ICR about the loan repayment capacity for some farm types. Increased productivity, even under the better agricultural environments, has been slower than projected in the assessment of the optimistic 23% ERR at appraisal. However, in assessing this, allowance must be made for the fall in coffee prices which may rebound longer-term. Finally, the FONTIERRAS program of which this project was a part was perceived by government as costly, suggesting government concern about efficiency, and the government is now seeking a less costly program with increased involvement of commercial banks through guarantee funds.
6. M&E Design, Implementation, & Utilization:

An M&E system was established and appears to have functioned satisfactorily. It provided key project performance indicators, including information on cost-effectiveness and the characteristics of project beneficiaries. It also provided an independent study on the conditions of beneficiaries. But there was no systematic attempt to assess project impacts.
7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative):

There are some suggestions that land expropriation processes needed improvement. But there is not enough evidence in the ICR to assess whether any elements of this raise questions about any aspect of project-associated resettlement safeguards.

8. Ratings:
ICR
ICR Review
Reason for Disagreement/Comments
Outcome: 
SatisfactorySatisfactoryThe more than satisfactory achievement of the first objective offsets the less satisfactory achievements of the second and third objectives.
Institutional Dev.: 
ModestModestThe ICR rates this "Satisfactory" in the text, "Substantial" in the Annex ratings, but "Modest" in the summary page ratings (which is the rating quoted here). This review finds that the limited evidence as it stands points to Modest, partly due to the association in this case between institutional development and sustainability. But the project did contribute to the establishment of the legal and implementation framework for land access, and established MIS-based processes,
Sustainability: 
LikelyNon-evaluableThe APL 2 is not proceeding due to concerns about borrower commitment. Some households are still in the process of receiving grants and although government has committed, through an Action Plan, to continue support, there remain uncertainties. The refinancing of the Land Fund is a key to longer-term financial sustainability yet this has not yet been fully addressed and there are outstanding legal issues over contracts. Furthermore, as noted in the ICR, there was a failure to implement the needed complementary interventions of the Peace Accord including a rural development strategy and transparent policies on expropriation. All these issues leave doubts about sustainability which has a strong institutional element.
Bank Perf.: 
SatisfactorySatisfactory
Borrower Perf.: 
SatisfactorySatisfactory
Quality of ICR: 
Satisfactory

NOTES:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness.

9. Lessons:

The ICR offers a number of useful lessons of wider applicability which this review endorses:
  1. The willing seller/willing buyer approach to land redistribution supported by the project needs to be complemented by other policies such as regularization of land ownership, land taxation, and other interventions to create a dynamic market for land in the country..
  2. Simply providing credit to puchase land is insufficient to increase beneficiaries' incomes. This should be complemented by technical assistance to raise productivity, especially where extension is weak, and a fixed grant assistance allowing the option to convert some funds from land purchase to productive investments.
  3. Beneficiaries should have full control of and responsibility for the use of credits and grants.
  4. Support for basic needs should be carefully assessed and provided for upon the initial settlement of families in the acquired farms in order to free up the use of funds for productive investments.
  5. Computerized financial management systems are important to avoid excessive demands on staff which increases the risk of errors.
  6. M&E needs to be in place in advance of implementation and needs to include a focus on project impacts.
  7. Land market information systems are very challenging and require a well-established and well-financed agency.

10. Assessment Recommended?  No

          Why?  

11. Comments on Quality of ICR:

The ICR is very clear and the outcomes are well linked to the objectives. However, it is somewhat less strong on the economic analysis which, alongside sustainability, remains a key question in this project. The argument that the community strengthening component achieved its objectives is unpersuasive given that less than half the appraisal estimate was spent on this component.

(ES-Rev4B-Dec/05)
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