PORTFOLIO PERFORMANCE REPORT LATIN AMERICA AND THE CARIBBEAN DIVISION ANNUAL REVIEW MAIN REPORT

Transcription

1 PORTFOLIO PERFORMANCE REPORT LATIN AMERICA AND THE CARIBBEAN DIVISION ANNUAL REVIEW MAIN REPORT Rome, August 2012 INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT

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3 PORTFOLIO PERFORMANCE REPORT LATIN AMERICA AND THE CARIBBEAN DIVISION ANNUAL REVIEW ABBREVIATIONS AND ACRONYMS GLOSSARY EXECUTIVE SUMMARY TABLE OF CONTENTS 1. OVERVIEW OF THE ECONOMIC AND SOCIAL SITUATION 1 Page 2. COUNTRY PROGRAMMES RB-COSOPs presented to the EB Country programme issues 8 3. CURRENT INVESTMENT PORTFOLIO AND OPERATIONS Characteristics Current portfolio by sectors/themes Financing terms Co-financed projects Supplementary financing Quality at entry Approvals Pre-implementation activities Maturity of the portfolio Project completion/loan closing Time overruns and extensions Cancellations Arrears and status of suspended projects CURRENT GRANT PORTFOLIO AND OPERATIONS Grant Strategic Work Plan (DSWP) Types of grants Projects supported Approvals Pre-implementation activities Disbursement performance Maturity of the portfolio Grant completion, closing and cancellation Extensions Audit MANAGEMENT PERFORMANCE OF ONGOING PORTFOLIO Project management Disbursement performance Counterpart funds Loan administration Procurement Covenants Audit Monitoring and Evaluation RESULTS OF THE ONGOING PORTFOLIO Targeting - poverty and gender Overall performance assessment Outputs and outcomes 41 VII X XV

4 7. EVALUATION AND SELF-ASSESSMENT PORTFOLIO MANAGEMENT Supervision and implementation support Risks Portfolio at risk Problem Patterns Proactivity CONCLUSIONS AND THE WAY FORWARD 53 TABLES Table I. Financing approved by lending terms 10 Table II. Current portfolio by sub-region and source of project financing 11 Table III. Financing approved during the review period 13 Table IV. Investment projects that became effective during the review period 14 Table V. Financing agreements signed during the review period 15 Table VI. Agreements with more than two-month delays in signing 15 Table VII. Investment projects not effective more than four months after signing of financing agreement 16 Table VIII. Age structure of current portfolio 16 Table IX. Projects completed during the review period 17 Table X. Projects extended during the review period 17 Table XI. Cancellations effected during the review period 17 Table XII. Ongoing grant portfolio by grant type 20 Table XIII. Ongoing IFAD financed grant portfolio by grant size and scope 20 Table XIV. Grant disbursements Table XV. Disbursement performance of projects 31 Table XVI. Financial management risk ratings (June 2012) 32 Table XVII. Withdrawal application processing data 33 Table XVIII. Ratings of outputs and outcomes 42 Table XIX. Reduced risk index CHARTS Chart I. Current portfolio by lending terms Chart II. QA Review s RMF ratings 2008 to Chart III. LAC grant portfolio according to grant policy output 21 Chart IV. LAC grant approvals Chart V. LAC disbursement by sub-region BOXES Box 1. LAC grant programme strategic objectives Box 2. An innovation model The Africa-Brazil agricultural innovation marketplace 45 iv

5 APPENDIX Table 1. Current LAC investment portfolio as at 30 June Table 2. Current LAC grant portfolio as at 30 June Table 3A. PSR ratings of ongoing projects 4 Table 4A. GSR ratings of ongoing projects 6 Table 5A. Projects with delays in Entry into force 7 Table 6A. Disbursement performance of loans and DSF grants 8 Table 7. Relative share of co-financiers in LAC s portfolio 11 Table 8. Projects completed during the last three review period 12 Table 9. Project extensions during period under review 12 Table 10. Action plan for improving portfolio performance 13 Table 11. RB-COSOP programme 24 Table 12A. Current portfolio by sub-region 24 Table 13. Types of interventions by sub-component type and impact domain 27 Table 14. Current portfolio by source of financing 28 Table LAC lending programme 29 Table 16. Financing agreements effective during review periods to Table 17. Financing agreements signed during review periods to Table 18. Delays in signing and effectiveness 32 Table 19. Projects time overruns 33 Table 20. Ongoing grant portfolio by recipient type 34 Table 21. Ongoing grant portfolio by grant policy output 35 Table 22. Grants approved during the review period 36 Table 23. Grants Approved and not yet Effective as at 30 June Table 24. Grants that became effective during the review period 38 Table 25. Large grants disbursement rates and maturity as at 30 June Table 26A. Maturity of the grant portfolio 40 Table 27. Grants completed during the review period 41 Table 28. Grants closed in the review period, cancellations and closure delays 42 Table 29. Grants with overdue closing dates as at 30 June Table 30. Ongoing grants due for completion during review period 43 Table 31. SOE thresholds as at 30 June v

6 Table 32. Withdrawal application processing by country 44 Table 33. Status of receipt of audit reports due for FY ended in Table 34. Status of 2011 project RIMS reporting delivery 46 Table 35. Aggregate ratings by performance indicator 47 Table 36. Results Management Framework country programme ratings 49 Table 37. Project output / outcome performance by domain grouping Table 38. Status of GEF Projects 50 Table 39. Direct supervision and implementation support missions July 2011 June Table 40. Risk matrix 52 Table 41. Projects at risk: review periods 53 Table 42. Ongoing grant portfolio by grant type and source of financing 54 vi

7 ABBREVIATIONS AND ACRONYMS AECID AWPB ARTS CFS CAMC COSOP CPIS CPM CPMT DHC DO DS DSF ECLAC FAO FLM FM GDP GEF GSR HC I IDB IEPS IICA IMF IP LAC LGS M&E MIC MTR O PBAS PD PDP PMU PPMS PSR PY QA QE REAF RMF RIMS SOE TAG UCAR UNDP UNOPS WB Agencia Española de Cooperación Internacional para el Desarrollo Annual Work Programme and Budget Audit Reports Tracking System Controller s and Financial Services Division Mexico, Central America and Caribbean (sub-region) Country Strategic Opportunities Programme Country Programme Issues Sheet Country Programme Manager Country Programme Management Team DSF and HC Blend Lending Development Objective Direct supervision Debt Sustainability Framework Economic Commission for Latin America and the Caribbean Food and Agriculture Organization of the United Nations Flexible Lending Mechanism Financial Management Gross Domestic Product Global Environment Facility Grant Status Report Highly concessional (lending terms) Intermediary (lending terms) Inter-American Development Bank Instituto de Estudios Peruanos Instituto Inter-Americano de Cooperación Agrícola International Monetary Fund Implementation Progress Latin America and the Caribbean Loans and Grant System Monitoring and Evaluation Middle Income Country Mid-term Review Ordinary (lending terms) Performance Based Allocation System Programme Management Department Project Disbursement profile Project Management Unit Project and Portfolio Management System Project Status Report Project Year Quality Assurance Quality Enhancement Reunión Especializada de Agricultura Familiar Results Management Framework Results and Impact Management System Certified Statement of Expenditure Technical Assistance Grant Unidad para el Cambio Rural (Argentina) United Nations Development Programme United Nations Office of Project Services World Bank vii

8 PROJECT IDENTIFICATION NUMBERS AND ACRONYMS Country Project ID Loan Grant Acronym Project Name Argentina AR PRODERNOA North Western Rural Development Project Argentina AR PRODERPA Patagonia Rural Development Project Argentina AR PRODEAR Rural Areas Development Programme Argentina AR 4-AR PRODERI Inclusive Rural Development Programme Belize BZ RFP Rural Finance Programme Bolivia BO VALE Enhancement of the Peasant Camelid Economy Support Project Bolivia BO PLAN VIDA Plan VIDA-PEEP to Eradicate Extreme Poverty - Phase I Bolivia BO 7-BO ACCESOS Economic Inclusion Programme for Families and Rural Communities in the Territory of the Plurinational State of Bolivia Brazil BR 2 DOM HELDER CAMARA Sustainable Development Project for Agrarian Reform Settlements in the Semi-Arid North-East Brazil BR 850 GENTE DE VALOR Rural Communities Development Project in the Poorest Areas of the State of Bahia Brazil BR VIVA O SEMI ÁRIDO Semi-arid Sustainable Development Project in the State of Piauí Brazil BR PROCASE Cariri and Seridó Sustainable Development Project Colombia CO OPORTUNIDADES Rural Microenterprise Assets Programme: Capitalization, Technical Assistance and Investment Support Colombia CO 10-CO TOP Building Rural Entrepreneurial Capacities Programme: Trust and Opportunity Dominican Republic DO 1-DO PRORURAL OESTE Development Project for Rural Poor Economic Organizations of the Border Region Dominican Republic DO PRORURAL CENTRO & ESTE Rural Economic Development Project in the Central and Eastern Provinces Ecuador EC 804 CORREDOR CENTRAL Development of the Central Corridor Project Ecuador EC 804-EC 21 IBARRA-SAN LORENZO Ibarra-San Lorenzo Development Project Ecuador EC 5-EC BUEN VIVIR RURAL Buen Vivir in Rural Territories Development Project El Salvador SV PREMODER Reconstruction and Rural Modernization Programme El Salvador SV 784 PRODEMORO Rural Development and Modernization Project for the Eastern Region El Salvador SV 6-SV PRODEMOR-CENTRAL Rural Development and Modernization Project for the Central and Paracentral Regions El Salvador SV AMANECER RURAL Rural Territorial Competitiveness Programme Grenada GD MAREP Market Access and Rural Enterprise Development Programme viii

9 Country Project ID Loan Grant Acronym Project Name Guatemala GT PRODEVER Rural Development Programme for Las Verapaces Guatemala GT OCCIDENTE National Rural Development Programme Phase I: the Western Region Guatemala GT ORIENTE National Rural Development Programme: Central and Eastern Regions Guatemala GT 1070 PRODENORTE Sustainable Rural Development Programme for the Northern Region Guatemala GT QUICHÉ Sustainable Rural Development Programme in El Quiché Guyana GY 8015 READ Rural Enterprise and Agricultural Development Project Haiti HT 8096 PAIP Productive Initiatives Support Programme in Rural Areas Haiti HT 8041 PPI-2 Small-scale Irrigation Development Project Honduras HN PROMECOM Project for Enhancing the Rural Economic Competitiveness of Yoro Honduras HN EMPRENDE SUR Sustainable Rural Development Programme for the Southern Region Honduras HN HORIZONTES DEL NORTE Northern Horizons-Competitiveness and Sustainable Rural Development Project in the Northern Zone Mexico MX 28 PRODESNOS Sustainable Development Project for Rural and Indigenous Communities of the Semi-Arid North-West Mexico MX DECOFOS Community-based Forestry Development Project in Southern States (Campeche, Chiapas and Oaxaca) Mexico MX 11-MX LAS MIXTECAS Rural Development Project in the Mixteca Region and the Mazahua zone Nicaragua NI FAT Technical Assistance Fund Programme for the Departments of León, Chinandega and Managua Nicaragua NI 863-NI PROCAVAL Value Chain and Market Access Project for Small-scale Producers Panama PA NGOBE-BUGLE Sustainable Rural Development Project for the Ngöbe-Buglé Territory and Adjoining Districts Panama PA 24 PARTICIPA Participative Development and Rural Modernization Project Paraguay PY 792-PY PARAGUAY RURAL Empowerment of Rural Poor Organizations and Harmonization of Investments Project Paraguay Rural Project Paraguay PY PARAGUAY INCLUSIVO Inclusion of Family Farming in Value Chains Project Peru PE 799-PE 1158 SIERRA SUR Market Strengthening and Livelihood Diversification in the Southern Highlands Project Peru PE 22 SIERRA NORTE Project for Strengthening Assets, Markets and Rural Development Policies in the Northern Highlands Venezuela VE PROSALAFA II Sustainable Rural Development Project for the Semi Arid Zones of Falcon and Lara States Phase II Venezuela VE WARAO Orinoco Delta Warao Support Programme ix

10 GLOSSARY Name Definition Active Country Actual Problem Project Beneficiaries Closing Date Completion Date Component Cooperating Institution A country where one or more projects are under implementation or in the pipeline. Project rated 1, 2 or 3 (6-points rating scale) on one or both of the following criteria: (i) progress achieved in meeting the development objectives; and (ii) project implementation progress. The people, groups or organisations, whether targeted or not, that benefit, directly or indirectly, from the development intervention. The date after which IFAD has the right to cancel any undisbursed balance and close the loan account. The last day of the project implementation period. For projects approved after April 1999, the completion date is determined at loan effectiveness, taking into account the estimated implementation period. Umbrella under which activities are grouped that correlate to project outputs and activities. Components are defined in terms of what the project intends to achieve. The entity responsible for supervising the project and administering the loan/grant(s). Counterpart Funds Financial resources provided by the government or recipient institution/organisation for the implementation of the development intervention. Current Closing Date Current Portfolio Development Objective Disbursement Disbursable Amount Disbursement Lag Disbursement Rate Effectiveness Empowerment The present loan closing date; date as per the most recent extension date or where no extensions have been approved, the same as the original closing date. The current portfolio consists of projects approved but not completed, i.e. projects not signed, not-effective and ongoing. The higher-order objective to which a development intervention is intended to contribute. The payments to recipient countries from allocated loan/grant proceeds. Funds are disbursed on the basis of withdrawal applications, approved by the supervising institution. The value of effective loans (excluding closed loans) as at the end of reporting period minus cumulative disbursement to date. Actual disbursement/expected disbursement. Loans which are 40% or more behind the expected disbursement are classified as having disbursement lag. The percentage disbursed of the original loan amount. [Note: LGS disbursement figures refer to net loan amounts.] The extent to which a development intervention objectives were achieved or are expected to be achieved taking into account their relative importance. The expansion of assets and capabilities of poor people to participate in, negotiate with, influence, control, and hold accountable institutions that affect their lives. It is about people developing self-reliance and being able to make choices and influence decisions. x

11 Name Definition Efficiency Expected Disbursement Gender Equality Gender Mainstreaming Impact Impact Domains Implementation Progress Innovation Inputs Lending Terms Loan Effectiveness Maturity of the Portfolio Non-Active Country Not at risk project Ongoing Portfolio Outputs The extent to which the project achieved, or is expected to achieve, benefits commensurate with resources and inputs (funds, expertise, time, etc.), based on economic and financial analysis or unit costs compared with alternative options and good practices. Cumulative disbursement compared against the median of the % disbursement by quarter for all loans. The extent to which women and men have equal opportunities or life chances to access and control socially valued goods and resources (and therefore benefits of a development project or programme). It implies ensuring that both women s and men s different concerns and experiences are taken in all aspects of a project/programme. The aim is to overcome barriers preventing women and men from having equal access to resources and benefits. Changes in the lives of the rural poor, intended or unintended, to which project interventions have contributed, as well as the likely sustainability of such changes. Domains currently adopted by IFAD Office of Evaluation for categorising and analysing the impact generated by the development intervention. These include: physical assets, food security, environment and common resource base, human assets, social capital, agricultural productivity, institutions and services, financial assets and markets. The physical and financial progress of project activities as well as the progress made towards producing the specified project outputs. The development of improved and cost-effective ways to address problems/opportunities faced by the rural poor. These encompass institutional and technological approaches as well as pro-poor policies and partnership. The financial, human and material resources used for the development intervention. Based on per capita income (World Bank, Atlas method). Since 1994, terms are calculated as fixed percentage of an established floating rate. IFAD lending terms are: highly concessional, intermediate and ordinary. The date on which the conditions of effectiveness have been judged to be satisfactorily met. Analysis of the age of the project portfolio, computed from the date of effectiveness. Country where there are no projects under implementation or in the pipeline. Project rated 4, 5 or 6 on implementation performance and progress toward development objectives and rated 1, 2 or 3 on less than five other PBAS indicators (risk flags ). Portfolio of projects that have been declared effective but not yet completed. Products, capital, goods and services which result from a development intervention or activity. xi

12 Name Definition Performance Pipeline Potential Problem Project Project Duration Project Status Report (PSR) Proactivity Index Project at Risk Quality at Entry Relevance Results/Outcomes Results and Impact Management System (RIMS) Risk Reduction Index Sustainability Target Group Targeting The degree to which a development intervention or a development partner operates according to specific criteria/standards/guidelines or achieved results in accordance with stated goals or plans. Projects for which an Inception Memorandum has been approved (by AP/PD) are considered part of the official pipeline. The pipeline is the group of projects that are under consideration for eventual financing by IFAD. Project rated 4, 5 or 6 on implementation performance and progress toward development objectives but rated 1, 2 or 3 on five or more other PBAS indicators (risk flags ). The number of years that the project has been/will be implemented. Instrument adopted in the portfolio review process for monitoring the implementation performance and progress achieved in the project development interventions. The PSR informs the status of the project in terms of management, gender equality/women s empowerment, targeting performance and its responsiveness to the principles of engagements. Share of projects rated as actual problem in the previous year that have been upgraded, restructured, closed, cancelled or suspended during the current review period. This coincides with the definition of proactivity adopted by the World Bank and can be used for benchmarking IFAD s performance. A project is defined as at risk if it will likely not meet its development objective. Project at risk includes actual problem and potential problem projects (see definitions above). The merit or the worth of a development intervention and its compliance with given standards. Usually applied to development projects at the time they are approved for submission. The extent to which the objectives of a development intervention are consistent with beneficiaries requirements, country needs, global priorities and partners and donors policies. The likely or achieved short-term and medium-term effects of an intervention. Framework adopted by IFAD for measuring and reporting the results achieved by its financed projects. It includes a menu of indicators for describing project activities, immediate and long term results. This is the share of projects rated as actual problem in the previous year that, despite remaining in the actual problem group, are featured by an improved performance. This is calculated by comparing the average score on all PSR flags for the previous year with the average for the current review period. The continuation of benefits from a development intervention after major development assistance has been completed. The likelihood of continued long term benefits. The specific individuals and/or organisations for whose benefits the development intervention is undertaken. A set of purposefully designed actions and measures to ensure, or at least significantly increase the likelihood, that specific groups of poor people (target groups) will benefit from a project or programme. xii

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15 EXECUTIVE SUMMARY 1. During the review year 2011/2012, the LAC portfolio showed significant improvements. The improvements are particularly visible in terms of increased lending portfolio, co-financing ratio, disbursement level, and the risk status of the portfolio. 2. The value of IFAD financing in the investment portfolio rose by 10% from US$ 620 million to US$ 686 million. The overall increase reflects the large amount of financing approved since August US$ 132 million - which is the largest ever in a single review year. Of particular interest is the structural change in the distribution of IFAD s portfolio by lending terms. Over the past ten years, the proportion of ordinary lending in LAC s current portfolio value jumped from around 40% to almost two thirds, while the proportion of highly concessional terms dropped from more than 30% to less than 13%. 3. The seven new investment projects approved during the review year contributed to further reduce the average age of the current portfolio, which has gone through a remarkable rejuvenation since The level of co-financing has increased substantially, mainly thanks to the Spanish Trust Fund, which was instrumental to supplement the low level of PBAS allocations to the region. The improvement is particularly visible in the Andean and the Southern Cone sub-regions where the majority of new operations co-financed with the Spanish Trust Fund are located. 4. Disbursement is another area where major achievements were made. The 12% increase in loan/dsf disbursements over last year brought disbursement to the region 9% above the level of expected disbursement as at end-june 2012, confirming the positive trend since 2008 when the region lagged behind expected disbursement by around 14%. Similar gains have been made in reducing project time overruns. It is noteworthy that the effective implementation of divisional policy to restrain projects extensions resulted in a progressive reduction of the number of extensions from seven in to six in , three in and one this year. 5. The review period ended with two ongoing projects at risk less than at end-june This reflects a meaningful improvement on proportional terms since the seven ongoing projects at risk in June 2012 represent 19% of the 36 projects ongoing at the end of the review year, compared with 27% (nine out of 33 projects) one year ago. 6. Marked achievements have been made in other areas of the portfolio. Average time from approval to effectiveness has dropped to less than 15 months this year compared with 32 months in and 23 months in The proportion of LAC project designs rated 5 or better by Quality Assurance remained above the IFAD overall level on all indicators over the period , except for the Sustainability of Benefits indicator which is at par with average IFAD overall ratings. The time required to process withdrawal applications dropped by 10 days in the second semester of 2011 and by further five days in the first semester of It is noteworthy that the 13 day average WA processing time for the whole review year is less than half of the 29 days that were required in Following efforts in collaboration with ECD to mainstream environment and climate change into investment operations, the GEF portfolio increased from US$ 8.5 M to US$ 16 M and is expected to reach a value of US$ 29 M by June The significant expansion of the regional portfolio, partly due to the additional resources provided through the Spanish Trust Fund, makes new implementation support and supervision approaches necessary also in the face of shrinking budgets. xv

16 The Division will pursue further efficiency gains by looking for ways to improve costeffectiveness. The Division will conduct a number of pilots in different countries to explore avenues for continuing to deliver high value support to IFAD-financed projects in the region whilst reducing average unit costs per project. 8. With the achievements made during the review year , the areas that continue to show relative weaknesses have narrowed. One of the areas where the Division needs to do more is M&E. In the forthcoming review period, the Division will pay particular attention to early implementation support to recently effective projects, better coverage of baseline and impact on completion studies, and better integration of project-level M&E into country programme results frameworks. 9. Since 2009, the Division has made significant progress on improving portfolio management and has learned how to address implementation challenges and to identify more entrenched problems of a structural nature that cannot be resolved on a project-by-project basis. This will help to enhance the effectiveness of IFAD financed projects but measurable results and impact will take time to emerge because the portfolio is now comprised of a majority of very young projects. 10. The Division also recognises that some countries in the region confront structural limitations in achieving higher rates of poverty reduction through more effective policies and programmes. Although during the past two decades, the LAC region has shown a positive trend in terms of both economic growth and poverty reduction, high levels of inequality persist in the region, which affect primarily indigenous groups, those of African descent, and the rural population in general. LAC countries also differ significantly from one another, and performance in terms of economic growth and reduction of poverty levels and income inequalities has been heterogeneous. 11. In the forthcoming review period, the Division intends to gear up to take into account differentiated performances of the region s economies in terms of economic growth, levels of poverty and inequality, and also institutional capacity, to determine the type and the extent of support to LAC countries. The Division will adopt a new approach for developing a pipeline of new generation projects for the forthcoming PBAS period that starts in January This will embrace countries with sizeable allocations, countries which attract external and / or government co-financing, and countries where institutional frameworks are conducive to new ways of working on rural poverty reduction. 12. In addition, the Division intends to intensify learning and innovation in selected innovation-intensive countries with a view to piloting new programme instruments suitable for enhancing IFAD s contribution to poverty reduction and with potential for up-scaling and mainstreaming at national / sectorial policy and strategy levels, with the support of a focused strategic grant programme. This implies greater emphasis on knowledge management and policy dialogue, as well as on the adoption of new lending instruments by IFAD. 13. The process of formulation of new COSOPs planned for in a number of LAC countries will be key to determine priorities and new types of intervention countryby-country and help to move from a project-by-project approach to a more programmatic approach geared towards increasing levels of social inclusion for the region s rural population and marginalised population groups, including indigenous peoples and Afro-descendants. xvi

17 1. OVERVIEW OF THE ECONOMIC AND SOCIAL SITUATION 1. The main messages in this year s overview of the economic and social situation in Latin American and the Caribbean (LAC) are: i. The region as a whole continues to show signs of resilience, a moderate ability to respond to volatile conditions in the global economy. However, in spite of these achievements, it is important to continue to advance a number of reforms in order to ensure the sustainability of social and economic progress. These reforms include, among others, fiscal consolidation and counter-cyclical policies that function as such; in other words, that expand in times of economic contraction and that are dismantled when conditions are more favourable. ii. Creating employment and promoting productivity in the sector, particularly in small-scale farming and rural entrepreneurship, must be a priority in the actions that IFAD takes to provide support in the region. Not only do these represent a source of pro-poor economic growth and sustainability of social policy measures adopted to reduce poverty, but they are also conducive to reducing inequality in the region. iii. The type and the extent of support that IFAD can provide to Latin American and Caribbean countries must be determined by the different performances of the region s economies in terms of economic growth, varying levels of poverty and inequality, and also by their institutional capacity. In this sense, lending instruments are a fundamental tool, but they are not the only one. Policy dialogue, regional and national grants, and strategic planning exercises such as the COSOP must be geared towards increasing levels of social inclusion in Latin America s rural population. 1. Economic outlook 2. The global economy continues to be very volatile. Four years ago this was due to the financial crisis that began in the United States in 2008 and the Great Recession that ensued. In 2012 the risk factors are somewhat different: the European debt crisis and forecasts of an economic slowdown in China. 3. Throughout Latin American and the Caribbean, the Great Recession caused a small relative decrease in its product level (-1.6% in 2009), which demonstrates a certain resistance to withstand external shocks when compared with other regions of the world. Furthermore, the region made an important contribution to global economic growth and recovery; some estimates of this contribution are in the range of 14% Although it is true that the rate of Gross Domestic Product (GDP) growth was significant in 2010 (6.2%), in 2011 and in the first part of 2012 it weakened due to a contraction in domestic demand. In addition, the volatility of financial markets increased the risk premium, which also contributed to an increase in commodity prices In 2011 GDP growth was moderate (4.5%) and for 2012 an even lower rate of growth (3.7%) 2 has been predicted as a result of the uncertainty brought on by the European crisis and the slowdown of growth in China. 5. The performance throughout the region is heterogeneous. In 2011 economic growth in the sub region including Central America and Mexico (4%) was due in great part to the increased dynamism in Panama that was brought on by the expansion of the canal and the construction of the metropolitan railway system. Growth in the Mercosur (4%) was influenced by Paraguay s economic growth and by the contraction of Brazil s 1 IADB (2012) 2 WEO-IMF, April,

18 domestic demand, while the Caribbean sub-region (4.1%) benefitted from the recovery of the tourism sector. The Andean sub-region (5.9%) was favoured by increased dynamism in Peru and Ecuador s economies. 3 According to the International Monetary Fund (IMF) s projections, by the end of 2012 the region as a whole will see an increase in its tendency towards economic recovery and it will grow, on average, by about 4% in This ability to react that the region has demonstrated can be attributed to a combination of factors including, on one hand, a sustained effort in the region to maintain macroeconomic stability; taking advantage of the increase in international commodity prices in order to sustain economic growth, and; pursuing fiscal discipline even in times of crisis. All of these measures have allowed countries to implement counter-cyclical policies, albeit to varying degrees. 7. Although the increase in international prices of primary commodities favoured some countries during the financial crisis, strong dependence on revenue from these export products makes the region relatively vulnerable to changes in the global markets. Thus, for example, it is estimated that a decrease in the price of metals such as copper would affect countries like Peru and Chile, while a decrease in the price of grains would negatively impact economies such as those of Argentina or Brazil. 8. In the fiscal realm, counter-cyclical policy has played a critical role in mitigating the adverse effects of the financial crisis. Public spending in the region increased from 24.1% in 2005 to 28.8% in 2009, while social public spending increased from 15.2% to 17.9% in the same time period However, just as the region s ability to respond to the 2008 crisis has been recognized, today we are being alerted to the possible risks associated with increasing the region s structural deficit, as a result of the governments inability to dismantle expenditure frameworks that should contract after the crisis has passed. The increase in public spending witnessed after the Great Recession is keeping the many countries fiscal deficit above the prudent limit of 3% of GDP 5, relatively weakening their fiscal position if faced with an adverse shock in the future. Overall, the region s fiscal deficit went from 1.2% of GDP to 2.6% of GDP during the past five years In terms of inflation, the region s performance has been acceptable in recent years. The vast majority of countries have limited this variable to a single digit. Monetary policy, in conjunction with other economic policies, has been critical to this achievement. By means of active policy, the region s governments have gradually increased the rate of interest of monetary policy, introduced tariff quotas on imports of certain commodities, and strengthened social protection networks. 11. In spite of its good macroeconomic performance, the region continues to have significant sources of vulnerability that it will need to address in the years ahead. At the forefront are the need to strengthen its fiscal positions in order to meet future crises, the risk associated with significant capital inflows into the region, and its dependence on primary commodities. Even so, it is clear that Latin America and the Caribbean have gone through a period of learning and of improving its economic policy instruments, and 3 Prepared on the basis of WEO-IMF data, April, Mean differences were weighted according to the size of the economy 4 ECLAC-STAT 5 In 2011, the countries in the region with a fiscal deficit greater than 3% of GDP were Argentina, the Bahamas, Barbados, Costa Rica, El Salvador, Grenada, Haiti, Jamaica, Mexico, Saint Lucia, Saint Vincent, and the Grenadines 6 WEO-IMF, April,

19 they have emerged better equipped to meet the challenges that arise from the volatile performance of the global economy. 2. Social outlook 12. In 2011 the total population of Latin America and the Caribbean was approximately 595 M people, of which 20.5% lived in rural areas. In countries for which there is available data, by 2008 approximately 6.5% of people survived on less than US$ 1.25 a day, and 12.4% survived on less than US$ 2 a day In terms of fight against poverty and reducing inequality, the region has shown a positive trend. During the past two decades, the general poverty headcount ratio decreased from 48.4% in 1990 to 31.4% in The extreme poverty headcount went from 22.6% to 12.3% in the same period. These results are attributed, to a great extent, to redistribution efforts, among which conditional transfer types of social protection programs have played a predominant role. Although this decrease took place in both urban and rural areas, the gap between the two continues to be wide. For example, in 2010 the rural poverty rate was two times greater than the urban poverty rate, and four times higher in the case of extreme poverty According to the World Bank s classifications, with the exception of Haiti, all of the region s countries are categorized as high and middle-income countries possessing an average per capital income of US$ 5,176 9 in And according to the 2011 Human Development Index (HDI), Latin American and Caribbean countries are among those with high and medium human development with an average HDI of 0.731, which is above the global average (0.682) However, due to the high levels of inequality that persist in the region, these national averages present a distorted picture of the living conditions in significant territorial spaces and population groups including, notably, indigenous groups, those of African descent, and the rural population in general. 16. While it is true that Latin America and the Caribbean are ranked first in the world in terms of regions with the greatest inequality in 2010 the Gini coefficient was 0.52 recent empirical evidence shows that some countries have begun to reverse this trend. 11 Changes in inequality can be explained mainly by three fundamental factors: a narrowing in the income gap between skilled and low-skilled workers, an increase in policies favouring the poor, and social protection programs such as conditional cash transfer payments in the majority of countries in the region. 17. Even though there is positive news stemming from economic growth, macroeconomic resilience, and poverty and inequality decreases, the region continues to face various challenges. Urban unemployment was 6.8% in , inequality continues to be a significant obstacle for human development, fiscal sustainability must be undertaken in order to maintain the region s ability to act in a counter-cyclical manner in times of economic crisis, and extreme weather events continue to disproportionately impact the most vulnerable social groups. 7 WDI-WB 8 ECLAC-STAT 9 At 2000 constant prices 10 UNDP, From , the countries showing a reduction in the Gini coefficient were Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Honduras, Mexico, Panama, Paraguay, Peru, Uruguay, and Venezuela (ECLAC- STAT) 12 OIT,

20 3. The rural sector 18. The rural sector has become increasingly important in Latin America and the Caribbean in recent years as some countries have benefitted from the increase in global prices of food. In other countries, the net food importers, this increase has not only put food security at risk, it constitutes another source of vulnerability, in addition to extreme weather events. 19. In the last decade, the aggregate value of regional agriculture has been, on average, 8,6% of GDP with values fluctuating between 10% of GDP in the Mercosur, Mexico and Central America, and 7% of GDP in the remaining sub-regions, while the aggregate value of services and of regional industry have been, on average, 62% and 32% of GDP, respectively. Furthermore, the agricultural sector represents a source of employment for 14% the region s labour force, while the services and industry sectors employ 63% and 23% of the labour force, respectively The incorporation of technology in agriculture and in rural areas has helped to increase the productivity of agricultural labour in the region from US$ 2,618 per person in 2000 to US$ 3,684 per person in Labour productivity in this sector is highest in countries with greater relative land endowments, such as Argentina, Uruguay, and Chile, and lower in countries with lesser relative land endowments such as Guatemala, Bolivia, and Nicaragua. 15 However, these gains in the sector s productivity are met with a double challenge. On one hand, the increases are the result of significant participation of commercial agriculture, which is more capital-intensive than it is labour-intensive. In other words, volumes of job creation and/or increases in the agricultural workers real wages are not automatically guaranteed. On the other hand, this dynamic agricultural sector structured by modern technology coexists with rural areas where family farming, which is characterized by lower levels of productivity and a population without access to land, is most prevalent. Recent studies estimate that only 8% of family farmers are totally integrated into value chains and that only 25% have good potential for fully participating in the modern agricultural sector. 21. From a broader perspective, Latin American rural development has been the target of a variety of income-generating strategies among which agricultural income is certainly an important element. It is not the only one, however, and in many cases it is not even the principal means of making a living. This is particularly important for IFAD s target groups, such as youth populations and rural women, for whom the promotion of alternative sources of income is critical in order to ensure the sustainability of the rural environment in which they live. 4. Opportunities for furthering a rural development agenda in the region 22. As mentioned previously, the trends presented in this overview are regional averages. LAC countries, however, differ significantly from one another. There are a number of groupings which could be made in order to fine-tune the analysis. One possibility would be to use three development indicators that are of particular interest to IFAD when assessing the overall performance of the region: rate of economic growth, changes in poverty levels, and changes in income distribution. When analysing the pattern of these variables, five groups of countries emerge: a. Countries that, over several years, have sustained high rates of economic growth and of rural poverty reduction, and that have begun to show improved income distribution. Brazil, Chile, Panama, Peru, and Uruguay belong to this group, in 13 WDI-WB 14 WDI-WB 15 ECLAC,

21 which all three indicators are moving at a good rate in the right direction. The Dominican Republic could also be part of this group, except that it has failed to improve the distribution of income since the late 1990s. In these countries, national conditions are most conducive for IFAD to achieve its strategic objectives. As shown below in this report, these countries have become important co-financiers of IFAD projects, with contributions that often approach or exceed 50% of the projects' total cost. IFAD has great opportunities here for developing alliances that would allow us to substantially increase the impact of our operations. It should place greater emphasis on policy dialogue and knowledge management as instruments for an up-scaled strategy aimed at mainstreaming our experience in those national policies and strategies that are already strong. An example of this in the region is the grant project Knowledge for Change, where a number of rural policy dialogue groups were established in order to advance a rural development agenda in the participating countries. IFAD could also consider inviting some of these countries, where there is a critical mass of human and institutional capital upon which the Fund can draw, to reflect on the particularities of financing rural development in middle-income countries. b. Countries that, over several years, have seen strong economic growth but where rural poverty is not decreasing rapidly enough and income inequality remains unchanged. Colombia, Costa Rica, Guatemala and Honduras are part of this group. In three of these countries, drug-related crime and violence is a major challenge, despite various State actions. The challenge in these countries is to work with governments and other stakeholders to position rural development as a priority for development. In some of these countries - the larger ones, such as Colombia - IFAD is being asked to play a new role with a stronger strategic-policy orientation. In the case of Guatemala, a particular window of opportunity has opened with the new government, which has declared that rural development and social protection will be two pillars of their administration. c. Countries where rural poverty and income inequality have been decreasing over several years, but where the economy is not growing rapidly enough. Bolivia, Ecuador, Nicaragua and Venezuela have put in place strong social inclusion policies that are having a positive impact on the rural poor. However, social progress is based primarily on public policies and budgets, and much less on the kinds of opportunities that can only be created by economic growth. On the one hand, IFAD operations face a favourable political environment that gives high priority to investments in the rural poor. In some countries IFAD has been called upon to support institutional reform processes for the rural sector, such has been the case in Nicaragua and Ecuador. However, on the other hand, it remains a challenge to create solid and sustainable opportunities for poor rural households to move themselves out of poverty when the economies are not expanding. d. Countries that over the past five years or more their economies have not experienced robust economic growth, and that show no or little improvement in terms of rural poverty or income inequality. Mexico, El Salvador and Paraguay are in this category. Conditions are most unfavourable for IFAD under these macro conditions. In this context, IFAD is working with key policy-makers and other stakeholders to design and implement innovative projects that show how rural development can be done in better ways, so that the Fund and the countries can take advantage of this learning on a larger scale when economic conditions improve. Some of these countries, notably Mexico and El Salvador, are increasingly interested in innovating in the way they have traditionally done rural development; this may be a result of the societal pressure to accelerate the pace of development on both the economic and the social fronts. Consequently, IFAD is being asked to help governments, through technical assistance and policy dialogue initiatives, in their quest for better and more innovative ways to promote development in rural areas. e. Countries from English Caribbean sub-region pose several challenges for IFAD. The small size of countries, their high debt burden, limited human capital and low absorptive capacities necessitate that IFAD adopt an innovative approach to its interventions in this sub-region. While IFAD recognizes the pressing need to revitalize 5

22 the agricultural sector in the Caribbean and to address issues of rural poverty and unemployment; the current business model has high cost of design, delivery and administration of a plethora of small loans to individual member states. The Latin America and the Caribbean (LAC) Division is, as a result, exploring a multi-country programme approach to reduce administrative costs. 6

23 2. COUNTRY PROGRAMMES 2.1 RB-COSOPs presented to the EB 23. To date, RB-COSOPs have been approved for nine LAC countries 16. As shown in Table 10 in appendix, three country programme reviews were undertaken the in review year, namely in Brazil, Haiti and Peru, mid-term reviews in the three cases 17. The RB-COSOP for the Dominican Republic has not been reviewed due to the delays experienced in the start-up of the Rural Economic Development Project in the Central and Eastern Provinces (DO 1533). The review of the RB-COSOPs for the Dominican Republic, Haiti and Mexico, are planned for the last quarter of All review workshops were attended by the respective CPM and a broad representation of IFAD stakeholders, including representatives from central and local governments, project staff, NGOs, CSOs, and bi-lateral and multi-lateral external development partners. In Brazil, the review process served as an important platform to bring together IFAD main partners in Brazil to interchange experiences and review progress in the implementation of the country programme. One obstacle relates to delays in bringing approved projects to effectiveness due to relatively complex institutional and legal procedures for borrowers at the state level to receive federal government endorsement before negotiation of financing agreements. IFAD works with the poorest states in Brazil and has been provided continuous support to supplement the lack of capacity that some states have to finalise the process. COSOP review meetings were useful to agree on a joint collaborative form to accelerate internal approval processes. The review workshop also confirmed knowledge management as a major axis of the IFAD country programme in Brazil, and the relevance of the country grant programme comprised of the Knowledge management programme in the North-eastern semi-arid region of Brazil approved in April 2011 and the LAC-Brazil agricultural innovation marketplace approved in December The RB-COSOP review in Haiti was carried out in December 2011, few weeks after the new Government took office. The review confirmed the challenges confronted by the country programme that are rooted on the weakness of government implementing agencies and limited project staff capacities, including in financial management, procurement and M&E, areas for which it is difficult to find qualified professionals. While the review confirmed the relevance and pertinence of current COSOP strategic objectives, it also identified four areas in which the country programme should expand: (i) strengthening a value chain approach to add value to agricultural production and get better access to markets; (ii) focus on upper watersheds and climate change adaptation practices to protect investments in the irrigation systems; (iii) development of rural financial services to fill agriculture financing gap; and (iv) better integration of projects within the national counterpart institutions (mainly Ministry of Agriculture) to ensure ownership and improve effectiveness and coordination at central and field level. 16 Bolivia, Brazil, Dominican Republic, Guatemala, Haiti, Honduras, Mexico, Panama and Peru. These COSOPs were approved from April 2007 to April No RB-COSOP was submitted to the Executive Board during the review period 17 RB-COSOP implementation progress reports for the country programmes reviewed during the current period are enclosed in the respective country section under Part A - Country programme reports in volume II 7

24 2.2 Country programme issues 26. A major systemic issue confronted in the region affecting implementation of IFAD country programmes, concerns institutional instability and high turnover of project authorities / leading agencies and personnel. Changes in ministerial authorities originate instability, often causing replacement of project staff. It also makes it difficult for IFAD to engage in a more profound dialogue on policy and programmatic issues required for a stable definition of priorities for IFAD s country programme in support of the agriculture and rural development sector in the country. The main response of the Division to these risks remains frequent visits and continuous dialogue with finance ministry authorities and a broader range of government institutions. 27. Country programmes in some countries also suffer from weak institutional capacities. In the case of Argentina, some provincial project units experience capacity weaknesses in areas such as strategic and annual planning, M&E, gender and youth, and indigenous people issues and environmental issues. Both the UCAR and IFAD have been providing capacity building support to these provinces. Supervision modalities in Argentina are currently under review, to contain and possibly reduce its rising costs, due to the increasing number of provinces implementing IFAD projects. 28. Although improving since 2010, project implementation in a number of countries continues to be adversely affected by delays in allocating and making available required counterpart funding. Conversely, in a few countries, such as Colombia and Venezuela, IFAD available financing is underutilised due to allocation of government resources in excess of the planned counterpart contribution. 29. Some countries continue to experience significant delays in turning approved projects into ongoing projects. This is due in part to cumbersome lengthy internal administrative processes and to need for Parliament ratification before signing of financing agreements. This issue has been addressed during recent years through constant communication with concerned sector and finance ministries, briefing of key policy-makers and legislators and the provision of straight hands-on support to help meeting requirements in an expedient manner. 8

25 3. CURRENT INVESTMENT PORTFOLIO AND OPERATIONS 3.1 Characteristics 30. As at June 2012, the LAC region had investment operations in member countries for a total value of US$ M in IFAD financing, US$ 66 M above last year and near the 2010 value of US$ M. The current portfolio 19 is comprised by 44 projects, three more compared to last year. The number of ongoing projects increased from 33 to 36, due to the higher number of projects became effective (seven) during the review period compared to those that were completed (four). 31. As shown in Table 12 in appendix, over the last four review periods the share of the Andean sub-region s portfolio, in terms of value, increased to 28% this year compared to 19% in On the other hand, the share of the Southern Cone subregion decreased from 24% to 21% during the same period, and the share of the Central America, Mexico and Caribbean sub-region declined to 49% from 58%. In terms of number of projects, in 2012 the Andean current portfolio has increased from 9 to 12, while the Southern Cone sub-region remained stable at 8 operations, as the Central America, Mexico and Caribbean sub-region that decreased only in one project during the period in analysis, from 25 to 24 operations. 3.2 Current portfolio by sectors/themes 32. Table 13 in appendix shows that during last five review periods there was a progressive increase of the Market and Rural Enterprises Development domain (36% increase) followed by Environmental and Common Resource Social Development (increase by 31% and 16%, respectively). On the contrary, during the same periods, there was a strong decrease in Physical Assets (-58%); Agriculture, Livestock and Fisheries Development (-41%) and Financial Assets. The total share of the latter three domains has decreased from 32% in to 19.6% this review period. This result is due to reduced investments in rural infrastructure, technology transfer and development, and credit. However, initiatives to facilitate access by the rural population to formal financial services are playing an increasingly important role in newly designed projects. 3.3 Financing terms 33. As shown in Table I below, the proportion of loans approved on ordinary terms rose from 41% in the six year period to 68% in the past five years, whilst commitments on intermediate and highly concessional terms dropped from 59% to 31% over the same period. This trend, originated by good macroeconomic performance in various countries in the region, has caused a drastic change of the LAC portfolio lending terms structure. 18 Non-active countries, i.e. countries without projects approved and/or ongoing as at 30 June 2012 include Antigua and Barbuda, Barbados, Chile, Costa Rica, Cuba, Dominica, Jamaica, Suriname, Trinidad and Tobago, and Uruguay 19 The current portfolio consists of projects approved but not completed, i.e. projects not signed, not effective and ongoing 9

26 Percentage of current portfolio value Table I. Financing approved by lending terms Lending Terms (US$'000) % (US$'000) % Ordinary Intermediate Highly Concessional* Total * Operations financed under DSF modality are included. 34. As shown in Chart I below, the proportion of ordinary lending in the current portfolio value has jumped by almost 10% in the last five years and from around 40% to almost two thirds in the past twelve years. Indeed, during the last five years since 2008, half of the 16 LAC countries that received new financing from IFAD met with harder lending terms compared with those that had applied to their respective latest approved project; and in the case of two of them, the change was significant, from highly concessional to ordinary terms. Chart I. Current portfolio by lending terms Ordinary Intermediate Highly Concessional* 3.4 Co-financed projects 35. Efforts made to increase co-financing in LAC portfolio have resulted in US$ 0.89 dollars provided on average by external sources for each dollar invested by IFAD, which is higher compared to US$0.65 last year and US$ 0.55 the year before. As illustrated in Table II. Current portfolio by sub-region and source of project financing, the co-financing ratio improved significantly (almost doubled) in the Andean and Southern Cone sub-regions. In these two sub-regions, during this review year, cofinancing reached US$ 0.66 and US$ 1.42 for each dollar committed by IFAD, compared to US$ 0.38 and US$ 0.72 in the last review period. This is the result of the additional financing provided through the Spanish Trust Fund to five of the seven new operations approved during the review period, of which four are located in the Andean and Southern Cone sub-regions. 10

27 Table II. Current portfolio by sub-region and source of project financing US$ M % US$ M % US$ M % US$ M % US$ M % US$ M % US$ M % US$ M % IFAD Government External Cofinancier LAC Total Co-financing ratios Overall Financier Government External Cofinancier Andean CA & Caribbean Southern Cone Total Andean CA & Caribbean Southern Cone Total NOTE: The co-financing of GEF-FSP-2-BR for US$ 5,843,000 (Land Mngmt in the Sertão) effective since August-07, GEF funding for 1389-Panama (US$ 1.5 million), and 1352-Peru (US$ 1.72 million) were included since not reflected in PPMS. The three cases are/were associated with LAC financing operations. The 2012 figures do not include US$ 8 million 1595-Honduras project, since approval to be co-financed by CABEI is pending. 36. Co-financing details by country and sub-region are presented in Table 14 in appendix. During the period under review, government became the most important financier in the Southern Cone area, providing 43% of total project financing compared with 41% and 16% provided by IFAD and external financiers, respectively. Within the sub-region, in larger MIC countries the contribution of the government is higher representing 48% in Argentina and 41% in Brazil. In the Andean sub-region, government contributions represents 21% of the total financing. This contribution is higher in Ecuador and Bolivia, representing 27% and 24% respectively. Conversely, external co-financiers provide 30% of the project financing in the CAMC sub-region, whereas government financing represent 15% of total financing. In four cases (Dominican Republic, Grenada, Honduras and Panama) more than US$ 1 dollar is mobilized from external co-financiers for each dollar invested by IFAD. 3.5 Supplementary financing 37. The programme Enhancing the Gender-Sensitive Impact of Remittances for Rural Development in Latin America, which was approved by the Spanish Agency for International Cooperation AECID in 2008, took off during last review period. Project 20 implementation started in April 2011 and, after initial difficulties, has gained speed. As a result, 96% of the grant amount had been disbursed by the end of the reporting period. It is foreseen that some originally planned targets will be exceeded by programme completion date in December Progress has also been made on the AECID financed project Knowledge Management in the Northeastern Semi-Arid Region of Brazil 21. The grant in support of this project was approved in April 2011 and became effective in May However, following delays in starting-up the programme related with the selection of the coordination team, corrective measures have been taken and results are expected to emerge during the second half of In the framework of IFAD cooperation with Finland, IFAD has financed (US$ 100,000) the Information Technologies as a tool for poverty reduction: a pilot South-South Cooperation Programme (FN-211). The goal of this project 22 is to test and disseminate the use of ICTs as a tool for rural development, supporting ongoing experiences and developing new initiatives. 40. As part of the divisional post-earthquake initiative in Haiti, during the last review period US$ 0.5 M from the Swedish contribution had been allocated to a technical cooperation programme on food security between Haiti and the Dominican Republic. This programme was approved in November 2011 and entered into force in January Grant COFIN-SP-15 for US$ 1.1 M 21 Grant COFIN-SP-16 for US$ 4.1 M 22 Grant COFIN-FN-1336 for US$ 0.1 M 11

28 Percentage of project designs rated 5 or more Implementation started almost immediately and the first disbursement was effected in March The FAO office in the Dominican Republic coordinates the implementation of this project with support from IFAD loan-funded projects at both sides of the Hispaniola Island. 3.6 Quality at entry 41. Five projects went through the Quality Assurance (QA) process during the review period. All project proposals reviewed were endorsed for submission to the Executive Board (EB), the majority of them as presented to QA with minor changes. As shown in Chart II above, the proportion of LAC projects rated 5 or better remains above the IFAD overall level on all indicators over the period , except for the Sustainability of Benefits indicator which is at par with IFAD ratings. The QA rating on Gender Equity and Target Population for the current review period is slightly below last year s. Chart II. QA Review s RMF ratings 2008 to % 90% 88% 80% 70% 60% 50% 64% 59% 53% 51% 76% 80% 51% 64% 47% 59% 56% 40% 30% 20% 10% 0% Effectiveness of thematic areas LAC Jan 08 - June 12 IFAD overall Jan 08 June 12 LAC Jan 08 - June 11 Projected impact on poverty measures Gender equity and target population Innovation, learning and scaling up 32% 41% 36% Sustainability of benefits RMF 1 RMF 2 RMF 2D RMF 3 RMF 4 Overall 27% 3.7 Approvals 42. As shown in Table III. Fbelow, during the current review period seven investment projects and supplementary operations for two ongoing projects were approved by the Executive Board for a total amount of US$ M in IFAD financing. This amount is the largest amount approved in a single year and represents a remarkable increase compared to the last review period when five projects for a total of US$ 38 M were approved. This exceptional result is below the US$ 201 M projected for approval of IFAD financing during the current review period, due to delays in the submission to the EB of projects in Brazil (originally planned for December 2011 EB session), Haiti and Peru (originally planned for April 2012 EB session), and the decision to cancel the presentation of the Panama and Jamaica pipeline operations. The presentation of the Peru project was postponed to September 2012 at the request of the Ministry of Economy and Finance to enable completion of a feasibility analysis required prior to loan negotiations. The presentation of the new operation in Brazil to the EB was moved because Federal Government authorization to proceed with negotiations was granted to the State of Sergipe only in May 2012 (loan negotiations for this project were concluded in June 2012). At the request of the Government of Haiti, the initially conceived supplementary loan was changed to a new project, which delayed its presentation for EB approval to September

29 43. The agreement between IFAD and Spain establishing the Spanish Trust Fund (STF) enabled access to significant additional financing at a relatively low transaction cost for the Division. The STF was the largest co-financier in the LAC region during the period under review. The total amount of STF financing approved in of approximately US$ 130M is almost equivalent to the amount of the new IFAD-funding approved (US$ 132M) and represented 90% of the total co-financing mobilised during the review period. 44. Efforts in collaboration with the Environment and Climate Division to further expand support to climate change and environment related areas by collaborating, have resulted in additional funding mobilised from the Global Environment Facility (GEF). During this review period a total of US$ 8 M in GEF financing was approved in support of IFAD financed projects in the region. The Division expects the amount of GEF financing to rise up of US$ 28.7 M by the end of the forthcoming review period (see Table 15 in appendix). Country Project Id Project Name Table III. Financing approved during the review period Lending Terms IFAD Approved Financing (USD '000) External Financing (USD '000) Co-financier Project Board Approval Planned Approval Date Project Status New Projects Argentina 1610 PRODERI O STF 15 Sep 11 Sept 11 Ongoing Bolivia 1598 ACCESOS I STF 13 Dec 11 May 11 Not Signed Colombia 1491 TOP O STF 03 Apr 12 Dec 11 Not Signed Ecuador 1588 Buen Vivir Rural O STF 15 Sep 11 May 11 Ongoing Honduras 1595 Horizontes del Norte HC TBD 29 Aug 11 Aug 11 Ongoing Mexico 1597 Las Mixtecas O STF 03 Apr 12 Apr 12 Not Signed Paraguay 1611 Paraguay Inclusivo O Apr 12 Apr 12 Not Signed IFAD Supplemetary Financing to ongoing projects Haiti 1171 PAIP HC Dec 11 Dec 11 Ongoing Nicaragua 1380 PROCAVAL DHC Dec 11 Sept 11 Not Signed Nicaragua 1380 PROCAVAL DHC Dec 11 Sept 11 Not Signed STF Financing to ongoing projects El Salvador 1416 PRODEMOR-CENTRAL O STF 08 Dec 11 Dec 11 Not Effective GEF Financing to ongoing projects Mexico 1412 DECOFOS G GEF 18 Oct 11 Ongoing Peru 1352 Sierra Norte G GEF 08 Jul 11 Ongoing Panama 1389 PARTICIPA G GEF 13 Feb 12 Not signed 3.8 Pre-implementation activities 45. As shown in Table IV below, a total amount of US$ M of financing from different sources (IFAD, STF and GEF) reached effectiveness during the current review period. The number of new investment projects that reached effectiveness increased by two compared to the previous review period and almost doubled from US$ 44 M to US$ 85.2 M in terms of IFAD financing. The 14.9 months average time from approval to effectiveness of IFAD newly financed operations (see Table 16 in appendix) is above the average of the last review year of 13.2 months. This was due to the projects in Bolivia, El Salvador and Guatemala, which reached effectiveness more than 1.5 years after EB approval. Delayed effectiveness in Guatemala and El Salvador were due to lengthy incountry processes, which include ratification by the Congress, compounded this time by change of government in both countries. In the case of project BO 1490, a project revision was required to align the project with revised country priorities; in addition, Total Note: G=grant; TDB = to be determined 13

30 difficulties in the selection process of key project staff increased the time required for its entry into force. 46. The relatively long time between approval and effectiveness for the supplementary financing operation in Paraguay is explained by the fact that the additional funds were intended for investment in the final stage of implementation of the project Paraguay Rural (PY 1333). Table IV. Investment projects that became effective during the review period Country Project Id Project Name Lending Terms Current Financing (USD '000) Project Board Approval Effectiveness Completion Elapsed time to Effec. (months) New Projects Argentina 1610 PRODERI O Sep Dec Dec 17 3 Bolivia 1490 Plan Vida HC Dec Aug Sep Ecuador 1588 Buen Vivir Rural O Sep May Jun 18 8 El Salvador 1568 Amanecer Rural O Dec Jun Jun Guatemala 1473 PRODENORTE O Dec Jan Mar Honduras 1595 Horizontes del Norte HC Aug Feb Mar 18 6 Nicaragua 1505 NICARIBE DHC Dec Jan Mar IFAD Supplemetary Financing to ongoing projects Haiti 1171 PAIP DHC Dec Jan Dec 14 1 Paraguay 1333 Paraguay Rural I Sep Dec Sep STF Financing to ongoing projects Argentina 1610 PRODERI O Sep Dec Dec 17 3 Ecuador 1588 Buen Vivir Rural O Sep May Jun GEF Financing to ongoing projects Ecuador 1354 Ibarra-San Lorenzo G May Nov Mar 17 6 Mexico 1412 DECOFOS G Oct Mar Mar 16 5 Peru 1352 Sierra Norte G Jul Sep Sep TOTAL Note: G=grant financing 47. During the current portfolio review period, six financing agreements for new investment projects were signed for a total value of US$ 77 M. This is a further improvement compared with last review period, when five financing agreements were signed for a total amount of US$ 39 M (see Table 17 in appendix). 48. Delays in signing. The average delay in signing for approved operations during this review period has improved in comparison with previous periods. This indicator stood at 15 months this year, compared with 16 months in (details in Table 5 in appendix). Average delay in signing for IFAD supplementary financing and other external financing (like STF and GEF) is less than seven months, as illustrated in Table VI below. 14

31 Table V. Financing agreements signed during the review period Country Project Id Project Name Lending Terms Current Financing (USD '000) Project Board Approval Signing Elapsed time to Signing (months) New Projects Argentina 1610 PRODERI O Sep Nov 11 2 Ecuador 1588 Buen Vivir Rural O Sep May 12 8 El Salvador 1568 Amanecer Rural O Dec Mar Guatemala 1473 PRODENORTE O Dec Dec Honduras 1595 Horizontes del Norte HC Aug Sep 11 1 Nicaragua 1505 NICARIBE DHC Dec Sep 11 9 IFAD Supplemetary Financing to ongoing projects Haiti 1171 PAIP HC Dec Feb 12 2 STF Financing to ongoing projects Argentina 1610 PRODERI O Sep Nov 11 2 Dominican Republic 1533 PRORURAL CENTRO Y ESTE O May Sep 11 4 Ecuador 1588 Buen Vivir Rural O Sep May 12 8 El Salvador 1416 PRODEMOR-CENTRAL O Dec Apr 12 5 GEF Financing to ongoing projects Ecuador 1354 Ibarra-San Lorenzo G May Nov 11 6 Mexico 1412 DECOFOS G Oct Mar 12 5 Peru 1352 Sierra Norte G Jul Sep 11 3 TOTAL Note: G=grant financing Seven new operations financed mainly under ordinary terms, for a total value of US$ 141 M were yet to be signed more than two months after approval. Signing delays are significant in the case of three projects, two in Brazil (BR 1487 and BR 1486) and one in Guatemala (GT 1519). The loans in support of the projects in Brazil will be provided to the sub-national States of Piauí and Paraíba and require federal guarantees. The Division expects that the procedures to obtain federal government approval according to Brazilian fiscal responsibility law will be completed to enable signing of both financing agreements by the end of The proposal for project GT 1519 has been approved by the country s Monetary Board and sent to Congress for approval during the review year and signing of the financing agreement is now expected by end Table VI. Agreements with more than two-month delays in signing Country Project Id Project Name Lending Terms Current Financing (USD '000) Project Board Approval Time since approval by 30 June 2012 (months) Expected Signing date New Projects Bolivia 1598 ACCESOS I Dec nd Sem 2012 Brazil 1487 Paraiba O Dec rd Quarter 2012 Brazil 1486 Piauí O Sep rd Quarter 2012 Colombia 1491 TOP O Apr 12 3 September 2012 Guatemala 1519 QUICHE O Apr December 2012 Mexico 1597 Las Mixtecas O Apr th Quarter 2012 Paraguay 1611 Paraguay Inclusivo O Apr 12 3 August IFAD Supplemetary Financing to ongoing projects Nicaragua 1380 PROCAVAL DHC Dec 11 7 September 2012 Nicaragua 1380 PROCAVAL DHC Dec 11 7 September STF Financing to ongoing projects Bolivia 1598 ACCESOS I Dec nd Sem 2012 Colombia 1491 TOP O Apr 12 3 September 2012 Mexico 1597 Las Mixtecas O Apr th Quarter GEF Financing to ongoing projects Panama 1389 PARTICIPA G Feb th Quarter TOTAL

32 50. Delays in effectiveness. As at end-june 2012, only one project (DO 1533) was pending effectiveness. The relatively long delay experienced by this project was due to difficulties faced by the borrower to make a large initial deposit of counterpart funds required by the financing agreement because of fiscal constraints. This issue has been solved with the country authorities. At the time of writing this report, the Division has been informed that the IFAD financing as well as STF financing have been registered in the Dominican Republic's Ministry of Finance. Table VII. Investment projects not effective more than four months after signing of financing agreement Country Project Id Project Name Lending Terms IFAD Current Financing (USD '000) Project Board Approval Signing Delay in effectivene ss (months) Expected Effectiveness date New Projects Dominican Republic 1533 Prorural Centro y Este O Apr May September STF Financing Dominican Republic 1533 Prorural Centro y Este O May Sep September Maturity of the portfolio 51. As shown in Table VIII below, the maturity of LAC portfolio remained satisfactory. The improvement since 2009 is remarkable. The proportion of non-effective projects in the current portfolio dropped from 28% in June 2009 to 18% in June 2012, while the same proportion for ongoing projects aged less than three years rose from 33% to 43%, and, in June 2012 the Division had only four projects aged more than six years compared to 11 in June 2009 (or 9% compared with 26%). This is the combined result of an expanded number of projects becoming effective faster and of the divisional policy of containing project extensions, which has been facilitated by fewer time overruns due to more expeditious project implementation assisted by more effective supervision and implementation support. Age structure Number of projects Table VIII. Age structure of current portfolio % % Cumulative Number of projects % % Cumulative Number of projects % % Cumulative Number of projects % % Cumulative Not signed Not effective Ongoing less than 3 years to 6 years years or more Total Project completion/loan closing 52. Four projects were completed during the review period. As shown in Table IX below, the average project duration at completion for the current review period of nine years is above the seven-year average duration of projects completed during the last review period. This result is due to projects in Argentina (AR 1098) and El Salvador (SV 1215) that have been extended three times each, and to the FLM project in Guatemala (GT 1085) which has been completed after 10 years of implementation, as originally planned. 16

33 Table IX. Projects completed during the review period Original Original Current Loan Project Completion Completion Effect Duration Date Date (years) Country Project Id Project Name Years of effectiveness No. of Extensions Argentina 1098 PRODERNOA 04 Mar Mar Dec El Salvador 1215 PREMODER 23 Dec Dec Dec Guatemala 1085 PRODEVER 06 Sep Sep Sep Panama 1199 Ngöbe-Buglé 16 Sep Sep Sep Average Time overruns and extensions 53. Consistent with divisional policy to contain project extensions only one project has been extended during this review year. This is a significant achievement compared with nine projects extended in , four in and two in Project HT 1171 was extended to allow, as originally planned, a full three-year implementation period for the project s third FLM cycle. IFAD resources had been exhausted as a result of the reallocation of US$ 5.8 M to address the 2008 food crises and implementation of the second cycle seriously affected by the January 2010 earthquake and cholera epidemic that followed. In December 2011, the EB approved supplementary financing in support of this project in conjunction with a two-year extension. 54. As shown in Table 19 in appendix, as of June 2012 the current portfolio included two projects showing current completion dates beyond original completion dates. The time overrun status of Project PE 1240 is peculiar as implementation of the project as originally approved in 2002 has been completed successfully and on schedule in June The time overrun status of the project originates from the approval in December 2009 of supplementary financing to upscale the project to new territories over a short second phase until December Country Project Id Table X. Projects extended during the review period Project Name Effectiveness Original Completion Date Current Completion Date as at June 2012 No. of Extensions Extensions during review period Disburs. rate (%) Haiti 1171 PAIP 20-Dec Dec Dec % 3.12 Cancellations 55. As can be seen in Table XI below, cancellations amounted to SDR 2.2 M, which is substantially lower than the cancelled amount (SRD 31 M) during the last period. All cancelled amounts came from loan closure procedures for three projects that had already been completed, being the largest the one related with Nicaragua operation. Table XI. Cancellations effected during the review period Closing Cancelled Ammount Country Project Id Project Name Date (SDRs) (%) Haiti 1070 Food Crops Intensif. II 31-Mar Oct-11 Peru 1240 SIERRA SUR 31-Dec Jun-12 Nicaragua 1256 PRODESEC 30-Jun Jun Transaction date 3.13 Arrears and status of suspended projects 56. Grenada has an overdue unpaid bill of approximately US$ 117,000 since 1 June 2012, placing the country in arrears with IFAD. The Division is following up closely with government in close coordination with CFS. 17

34 4. CURRENT GRANT PORTFOLIO AND OPERATIONS 4.1 Grant Strategic Work Plan (DSWP) 57. In response to the Revised Grant Policy for Grant Financing, in 2011 the Division developed a Grant Strategic Work Plan for the three-year period This plan is based on the recognition that grants serve strategic purposes as they can catalyse processes that help and are supportive of IFAD s mission in the region, a sub-region or a country. It builds on six strategic objectives defined in 2010, and re-confirmed in 2011, following a broad consultative process among divisional staff as well as with key partners in the region. Box 1. LAC grant programme strategic objectives Understand: analyse selected emerging economic and social trends that affect rural societies, as well as the response strategies of the rural poor, in order to derive concrete, practical recommendations for policy and project design and implementation. Innovate: stimulate and support innovation (in approaches, institutions, organizations and technologies) in rural development policies, programs and projects in support of the rural poor. Broker partnerships: Foster new partnerships that are required for achieving IFAD's objectives in the region, sub-region or country. Upscale: Upscale selected innovative approaches generated by IFAD projects to enhance their impact on rural poverty. Inform policy: through dialogue, coalition building and advocacy, promote and support policy changes that create new or better opportunities for the rural poor. Manage knowledge and foster South-South cooperation: mobilize the experience, knowledge and know-how of IFAD partners in support of rural development in LAC and in other developing regions. 58. The work plan defines a programmatic agenda comprised of five themes, that all regional IFAD-financed grants in LAC are aligned to: (a) Entrepreneurial young rural people with a special focus on young women: Grants under this theme work with organizations in government, the private sector and civil society to expand the opportunities and capacities of young rural people to participate more fully in economic development processes that can have a material impact in the development of the rural territories where they live and work. Three large grants fall under this theme: 1250-IEP, on young rural women, approved in 2010; 1305-PROCASUR, on entrepreneurship of the rural youth; and 1369-ACUA that focusses the creation and strengthening of culture-driven enterprises in communities of afro-descendants. Furthermore, a grant to UN-WOMEN called Broadening Economic Opportunities for Rural Women Entrepreneurs in the LAC Region will be presented to the EB in September (b) Scaling-up innovative practice for broader impact on development processes: LAC supports grant projects that can take to the field-level lessons of IFAD's operations and those of other development agents, and turn them into strategies, policies, programs and investments that can have impact in getting rural people out of poverty at a larger scale. At the same time, IFAD is looking to create 18

35 opportunities in the field for scaling up good practices. The recently completed grant 1036-IDRC Scaling-Up Campesino Innovations has worked on the identification and up-scaling of successful and innovative practices. The small grant 1292-FUNDABIO has a significant scaling up component, while the two grants 1206 FUNARBE (recently completed) and 1334-FUNARBE are facilitating agricultural research partnerships between scientists of Brazil, Africa and the rest of Latin America. The project PROCASUR is facilitating the scaling-up of successful initiatives on a small scale through the concept of Learning Routes, whereas 1336-FUNDA-K is working on the dissemination and up-scaling of the good results of three IFAD projects in Peru. (c) Policy processes on rural poverty and development: In a region of middleincome countries, it is an essential necessity that IFAD supports projects that put in place, expand or strengthen policy processes directly related to IFAD's mission and objectives. These policy processes include policy analysis, policy dialogue, and policy advocacy, as well as developing capacities in rural development actors to play a more effective role in the policy arena. LAC has been growing its portfolio in this area and has already formed a region-wide network of policy analysis and dialogue initiatives, with 1109-COPROFAM, 1203-RIMISP as well as 1326-CLAEH that is facilitating public policy dialogue on family farming and food security in the southern cone of Latin America on the basis of the successful grant 1056-MERCOSUR supporting the REAF. The grant 1373-UNIANDES that recently entered into effectiveness, has the objective of enhancing the impact of IFAD s operations in LAC by building synergies with CCT programs reaching Ms of rural poor throughout the region. (d) Market inclusion and alliances with the private sector: There is no future for the rural poor if they cannot gain greater and better inclusion in markets, and, in particular, in product and labour markets. And to make this possible, we need to learn to work with those that hold the key to those markets: private firms. In turn, private firms need to improve the way in which they interact with the rural poor so that the end result is greater social and economic inclusion as opposed to sustained or deepened exclusion. In order to pursue this objective, the grant 1256-AGEXPORT was approved in 2010, starting a trend that we expect to continue of more direct interaction with the private sector in the region. A small country grant for women cooperative in Guatemala (1346-4Pinos) was approved in this review period and is aligned with this theme as well through sales to larger agro-industries. (e) Rural poverty, climate change and environmental services: Grants under this theme will help IFAD and other development agents better target regions that are particularly vulnerable to climate change and also were large numbers of poor rural people live. The rationale is to invest smartly in climate change adaptation that reduces poverty, and to make fuller use of environmental services as opportunities for innovative pro-poor development processes. Special emphasis will be placed on new development opportunities emerging from the sustainable management of forests. The recently completed 1266-PRAIA was systematizing highland indigenous peoples knowledge of climate change for the use in future development projects IDLO provide practical pilot efforts to develop, reform and implement climate change related laws and policies for the benefit of the rural poor in Central America. A large regional grant (1303-CONABIO) will, once effective, strengthen the management capacities of communal farms and communities in Mexico, Guatemala and Panama and align the REDD+ and climate change adaptation strategies of these countries. 19

36 4.2 Types of grants 59. In June 2012, the current grant portfolio in the LAC region comprised 32 grants with a total value of US$ 45.3 M (Table 2 in appendix). Of these, 26 grants were ongoing with a total value of US$ 37.7 M while six (US$ 7.6 M) were approved but not yet effective. This is a substantial increase compared to the 30 June 2011 when the value of the current and ongoing portfolios was US$ 32.4 M and 28 M respectively and even more than in 2010 when the corresponding numbers where US$ 22.4 M and US$ 18.7 M respectively. This large growth in the portfolio is mainly due to an increase in grants financed by external sources of financing (GEF, Spanish as well as Finnish supplementary funds). The weight of external financing in the LAC current grant portfolio has risen from 35% in June 2010 to approximately 50% at the end of the current review period. 60. As shown in Table XII below, the average size of ongoing technical assistance grants has increased by 75% since June 2010, standing now at more than US$ 1 M. This was due to the policy applied by the Division towards reducing the number of small grants in the portfolio. Table XII. Ongoing grant portfolio by grant type Amount Average No. of grants Grant type (US$ '000) (US$ '000) Technical Assistance DSF Loan Component External financing Total Source: LGS 61. In terms of grant recipient type, almost half of the value of ongoing grants is allocated to governments, which is an increase from last year, when governments only accounted for some 32%. The increase is mainly due to the entry into force of three GEF grants with a value of US$ 9.4 M. On the other hand the share of nongovernmental organisations/civil society organisations and Intergovernmental/ international organisations have been reduced to 38% and 14% respectively of the portfolio (see Table 20 in appendix). Table XIII. Ongoing IFAD financed grant portfolio by grant size and scope Amount No. of grants Grant type (US$ '000) Amount as % of total Large Regional % 68% 73% Large Country % 16% 14% Sub-total Large Grants % 84% 86% Small Regional % 5% 6% Small Country % 11% 8% Sub-total Small Grants % 16% 14% Total % 100% 100% Source: LAC, based on information from grant agreements and LGS. 62. As shown in Table XIII above, the total value of the ongoing grant portfolio financed from IFAD core grant funds 23 reached US$ 16.6 M at the end of the period 23 Including loan component and DSF stand-alone grants 20

37 under review, which is a slight increase from end-june 2011 and a 35% increase as compared with This increase is mainly due to an increased size of both small and large grants, which is a result of an active decision of the LAC division to have fewer but larger grants, as well as the new threshold for small grants of US$ 500,000 which was established in the grant policy approved by the Executive Board in December The Grant Policy of 2009, outlines 4 grant policy outputs that IFAD grants should be aligned to: (i) Innovative activities promoted and innovative technologies and approaches developed in support of IFAD s target group; (ii) Awareness, advocacy and policy dialogue on issues of importance to poor rural people promoted by, and on behalf of, this target group; (iii) Capacity of partner institutions strengthened to deliver a range of services in support of poor rural people; and (iv) Lesson learning, knowledge management and dissemination of information on issues related to rural poverty reduction promoted among stakeholders within and across regions. Chart III below shows the distribution by grant policy output of the 17 ongoing projects 24, which appears well balanced, strategic and in line with what is expected for a region where 95% of the countries are MIC (see table 21 in appendix). Chart III. LAC Grant Portfolio According to Grant Policy Output US$ 5.6 million (5 grants) US$ 0.5 million (1 grant) US$ 8.2 milion (7 grants) US$ 5.8 million (4 grants) Awareness, advocacy and policy dialogue on issues of importance to poor rural people Capacity of partner institutions strengthened to deliver a range of services in support of poor rural people Innovative activities promoted and innovative technologies and approaches developed in support of IFAD s target group Lesson learning, knowledge management and dissemination of information on issues related to rural poverty reduction 64. It can be seen that lessons learning and knowledge management is the most important output for LAC grants, followed by innovative activities and advocacy and policy dialogue, whereas capacity building of partner institutions is only marginally represented as the main output. This is in line with the DSWP that does not include capacity building as an objective in itself, whereas other areas of the DSWP are heavily influenced by lessons learning and knowledge management as means to reach results on the different themes of the DSWP. 4.3 Projects supported 65. LAC Divisional Strategic Work Plan states that grants should not be designed for the direct and immediate objective of solving poverty of small groups of rural people; they should be catalysts of broader processes: innovation in approaches, policy change, greater effectiveness, up scaling of good practice, greater capacities. These broader outcomes should then lead to greater impact on poverty reduction on a structuralpolitical level. This approach has the implication that fewer investment projects are directly supported by grants in a traditional sense, whereas many grant projects are supporting overall development processes and country programs in a wider sense. 24 Excluding GEF and loan component grants 21

38 66. Naturally, all the loan component grants support their corresponding loan projects, including the loan component grant 850-BR that has an semi-independent objective by focussing on the use of renewable energy in agro-ecological systems in the harsh semi-arid North-eastern region of Brazil, under the umbrella of Project BR 1335 in the state of Bahía. Also the GEF grants are supporting their corresponding loan projects. In Ecuador the GEF project of US$ 2.7 M is promoting the survival of biodiversity and the availability of water resources, with stress on the development of alternatives to help reduce human pressure on biodiversity through the restoration and valuation of fragile ecosystems and landscapes in the project area of the Ibarra-San Lorenzo Project (1354-EC). In Peru, the GEF grant is financing with US$ 1.7 M, in the framework of the Sierra Norte Project (1352-PE), the promotion of sustainable and participatory management of protected areas and communal forested lands in the Northern Andean Highlands. The GEF grant of US$ 5 M in Mexico is promoting improved income and living standards for highly marginalised forest dwellers, through the development of sustainable productive activities in the framework of the Community Forestry Development project (1412-MX). Finally, the GEF-financed Sustainable Land Management in the Semi-Arid Sertão is financed by GEF with US$ 5.8 M and has the overall objective to minimise the causes and negative impacts of land degradation in North-Eastern Brazil in the same project area and using the same methodology as the already closed Dom Helder Camara Project (1101-BR). 67. A few technical assistance grants are directly supporting investment projects. The project 1256-AGEXPORT facilitates market access to smallholders in innovative ways through close interaction with the private sector, especially benefitting the projects SV- 1215, SV-1321, SV-1416, 1274-GT, 1317-GT, 1407-HN, 1535-HN, and NI-1380 in El Salvador, Guatemala, Honduras and Nicaragua. Also the grant 1178-PROCASUR on Learning Routes is directly contributing to the dissemination of good practices among beneficiaries of the projects Oportunidades Rurales (1292-CO), Sierra Sur (1240-PE), Sierra Norte (1352-PE), VALE (1298-BO), Corredor Central (1279-EC) and more than 20 other IFAD investment projects mainly in Latin America and Africa. The entire country portfolio in Brazil is directly benefitting from the knowledge sharing activities of the grant project Knowledge Management in the North-eastern Semi-Arid Region of Brazil (COFIN-SP-16-IICA) which is financed by AECID, though this grant will have an even greater impact when the investment projects in the states of Ceará (1619-BR), Paraíba (1487-BR), Piauí (1486-BR), and Sergipe (1563-BR) will enter into force. Also, grant 1292-FUNDABIO is working on market inclusion and scaling-up innovative practice of for the benefit of the poorest camelid breeders and small artisans, which is supporting the VALE (1298-BO). 68. Grant 1250-IEP on young rural women aim to ensure that policymakers and rural development project managers and staff are better informed on the characteristics, capabilities and expectations of young rural women and take advantage of this new knowledge to improve policy and project design and implementation as well as policy dialogue in the region but especially benefitting IFAD financed projects in Colombia, Ecuador, El Salvador, Guatemala, Nicaragua and Peru. In the same way, the Project Peru as a Learning Territory (1336-FUNDA-K, COFIN-FN-1336-FUNDA-K) will benefit the beneficiaries of ongoing and closed IFAD projects Dom Helder Camara Project (1101- BR), Rural Opportunities (1292-CO), Sierra Sur II (1240-PE) and Sierra Norte (1352-PE) and other IFAD projects through increasing the capacity of rural development practitioners for scaling up innovations developed and validated by IFAD Projects in the Southern Highlands of Peru. Also the grant 1305-PROCASUR that is working on reducing poverty among young people and providing access to new development initiatives for young people to improve their lives. This project is supporting a range of IFAD projects in Brazil, Colombia, Dominican Republic, Ecuador, Guatemala and Peru. Finally, the grant COFIN-SEC-825-FAO, co-financed with Swedish supplementary funds, is contributing towards improving the livelihoods, food security and access to markets of 22

39 poor Haitian families, who reside in the borderlands with the Dominican Republic and will be implemented in close coordination with and benefitting the PPI-2 (1275-HT) and PAIP projects (1171-HT) in Haiti and the PRORURAL Oeste (1479-DO) in the Dominican Republic. 69. On the other hand a number of grants are indirectly supporting projects and country programmes through the strengthening of public entities, facilitation of policy dialogue, or identifying young talents and facilitating the replication of innovations. Of such projects should be mentioned Dialogue on Public Policies on Family farming and Food Security in the Southern Cone (1326-CLAEH), which is facilitating public policy in other sub-regions of LAC and in Africa and thereby is looking to replicate the success of the REAF (The Commission on Family Farming) that has formerly been financed by IFAD. Also the grant 1109-COPROFAM is promoting the interests of family farmers through political platforms. These grants, if successful, will thereby improve the political environment for rural development and could thereby improve the impact of IFAD operations in the beneficiary countries. Another example is the project on Legal Preparedness for Climate Change and Rural Development in Latin America (1344-IDLO) which is reinforcing legal preparedness for climate change in Mexico and Central America, while at the same time helping to secure access to the benefits of climate finance and carbon markets, as a contribution to sustainable rural development. Another grant that will complement the work on climate finance, is the 1303-NAFIN (not yet effective) which will strengthen the management capacities of communal farms (ejidos) and communities in five south and south-eastern Mexican states and in Guatemala and Panama, and establish a forum for dialogue among authorities with respect to farming and forestry policies to align Mesoamerican countries REDD+ and climate change adaptation strategies. 70. The project Enhancing the gender sensitive impact of remittances for rural development in Latin America and the Caribbean (COFIN SP 15 FUNDA-K, financed by the Spanish Agency for International Cooperation AECID with US$ 1.1 M), is promoting social and economic development of rural areas with high rates of migration in Bolivia, Colombia and Peru by fostering an improved use of remittances. Two small grants are providing support to knowledge sharing, south-south cooperation and indirect partner capacity building between EMBRAPA in Brazil and a number of institutions in Africa (TAG 1206 FUNARBE) and Latin America (1334-FUNARBE). Moreover, the only ongoing DSF grant (DSF-8075-NI) is supporting the agricultural census in Nicaragua and thereby providing technical support and capacity building to the National Institute for Development Information (INIDE). The small grant Pinos is providing support to access markets for a women s cooperative in Guatemala. 71. Finally, the portfolio includes an IMI (Initiative for Mainstreaming Innovation) called Investing in poor people or investing in places where poor people live, with the objective of improving the design and implementation of IFAD projects. The initiative has been granted US$ 175,000 from IFAD. 72. Total IFAD financing for the eight large ongoing technical assistance grants is US$ 12.0 M. This amount is matched by co-financing and counterpart funds adding up to approx. US$ 6.6 M, i.e. every IFAD dollar granted raised slightly more than US$ 0.55 from other sources. This amount has decreased compared to last year when co-financing amounted to US$ 0.8 per US$ raised by IFAD, and even more compared to 2010 when the ratio was 1.8 US$ per IFAD dollar raised. One explanation for this is that the IFAD grant amount increased in absolute terms which means that the ratio went down. Nevertheless, this decrease in co-financing does call for reflection in the division, especially as none of the five large technical assistance grants approved during this review period, has secured co-financing from external sources, only counterpart funds and funds from beneficiaries. Nevertheless, this year grant 1203-RIMISP leveraged the 23

40 highest regional co-financing amounting to almost US$ 1.5 M which have been raised from IDRC. 4.4 Approvals 73. In the review period, a total of 17 grants have been approved for a total value of US$ 21.2 M (see Table 22 in appendix), which is considerably more than last period (US$ 12.9 M approved) and significantly more than in (US$ 9.3 approved) and (US$ 2.5 M approved). As shown in Chart IV below, the growth is to some extent due to an increased external financing 25, but mostly due to a steep increase in IFAD financed grants. This steep increase, however, can be explained by the overlapping cycles of the yearly grant allocations that follows the calendar year and the portfolio review that goes from 1 July to 30 June. In this case IFAD grants of US$ 6.3 was approved in the last semester of 2011 and US$ 6.1 M within the first six months of On the other hand only IFAD grants for US$ 3.7 M is foreseen in the rest of , and therefore the amount approved in the next review period is foreseen to decrease. On the other hand, the approval of a GEF grant for Venezuela is foreseen shortly. Chart IV. LAC grant approvals US$ Million 25.0 External Financing IFAD Of the 17 approved grants, five are GEF-financed or loan component grants whereas 11 have independent profiles (one project is receiving two grants 1336-FUNDA- K and FN-1336-FUNDA-K). These 11 are distributed by the four identified grant outputs in the 2009 revised grant policy follows: (i) grants 1305-PROCASUR, 1344-IDLO, Pinos and 1369-ACUA under innovative activities promoted and innovative technologies and approaches developed in support of IFAD s target group : (ii) the grants 1326-CLAEH and 1373-UNIANDES have been approved under the awareness, advocacy and policy dialogue on issues of importance to poor rural people output; (iii) the grant 1303-NAFIN is the only grant that has been approved under capacity of partner institutions strengthened to deliver a range of services in support of poor rural people ; and finally (iv) the grants SEC-825-FAO, 1334-FUNARBE, 1336-FUNDA-K (including FN-1336-FUNDA-K), and 1348-ACICAFOC fall under lesson learning, knowledge management and dissemination of information on issues related to rural poverty reduction promoted among stakeholders within and across regions. 25 The GEF co-financing is as follows: (i) US$ 1.7 M to the Sierra Norte Project (PE 1352) in Peru; (ii) US$ 5.0 M to the DECOFOS Project (MX 1412) in Mexico; and (iii) US$ 1,5 M to the Participa Project (PA 1389) in Panama. Moreover, the LAC division has re-donated US$ 100,000 in Finnish Supplementary funds (FN-1336-FUNDA-K) and US$ 500,000 in Swedish Complementary Funds (SEC-825-FAO) 26 A large grant of US$ 2.5 M to UN_WOMEN called Broadening Economic Opportunities for Rural Women Entrepreneurs in LAC Region will be presented through LOT to the EB in September 2012, whereas three small regional grants of a total value of US$ 1.2 M will be submitted for approval. 24

41 75. When it comes to the sub-regional distribution, only two of the 17 newly approved grants has the centre of their implementation in the Southern Cone or Brazil (1326-CLAEH and 1334-FUNARBE), whereas seven will be implemented mainly in the Andean Region and eight of the grants have their centre of gravity in Central America and the Caribbean. 4.5 Pre-implementation activities 76. At the end of the current review period, three grants 27 with a value of US$ 4.5 M were approved but not yet effective (see 77. Table 23 in appendix). One of these grants was approved in May 2012 (1369- ACUA) and is foreseen to enter into effectiveness on 01 September The GEF grant GEF-FSP-024-PA supporting the Participa Project (PA 1389) was approved in in February 2012 and the effectiveness lag is mainly due to difficulties in the coordination between the Ministry of Agricultural Development (MIDA) that implements the loan project and the National Authority for the Environment (ANAM) that will implement the GEF grant. Nevertheless, the grant is expected to become effective in the 2 nd semester of The US$ 1.2 Grant 1303-NAFIN that will to finance the Programme to Strengthen Community-based Management in Support of the REDD+ Strategy in Mesoamerica (PROFORCO), approved in August 2011, is expected to become effective by end-2012, as the grant agreement is currently under review by CONABIO. This however, will be closely monitored by the LAC division. 78. In the review period 15 grants with a total value of US$ 17.8 M have become effective (see Table 24 in appendix). All except three grants (TAG-1344-IDLO which became effective on 22 December 2011; TAG-1373-UNIANDES that became effective on 22 May 2012; and GEF-FSP-28-MX which became effective on 27 March 2012) started to disburse. At end-june 2012 this group of grants showed an overall average disbursement rate of 49%. The average time from approval to effectiveness 28 has been 1.5 months equivalent to 46 days. This effectiveness lag, however, covers considerable variances between different types of grants. For the 11 stand-alone grants (both IFAD as well as co-financed) the average effectiveness lag has been 0.6 month (equivalent to 19 days), which is a considerable improvement as compared to the last review period where the corresponding effectiveness lag was more than 2 months. This improvement may be attributed to increased attention to the grant portfolio within the Division. For the three GEF grants, the effectiveness lag has been 4.8 months. In the case of the GEF project in Ecuador, that suffered the longest effectiveness lag (more than 6 months), the reason was primarily an institutional restructuring in Ecuador that caused the change in executing agency of the project from the Technical Secretariat of Plan Ecuador to the Ministry of Agriculture. 4.6 Disbursement performance 79. Total grant disbursements in the review period has been US$ 10.6 M distributed on 29 grants. This is an increase of roughly 20% from US$ 8.8 M in the last review period, and an increase of 120% compared to the previous period ( ) when the total disbursement amounted to US$ 4.8 M. Of the total disbursement of 10.6 M, US$ 2.2 (20% of total) have been disbursed under GEF projects, US$ 2.5 M (24% of total) have been disbursed under other co-financed grants, whereas US$ 5.9 M (56%) have been disbursed of IFAD funded grants. The amount disbursed of IFAD financed grants also increased significantly compared to US$ 5.2 M (13%) in the last review period and US$ 3.2 M in the review period (84%). 27 Excluding the three loan component grants that are linked to Projects GT 1519, CO 1471 and MX 1597 pending ratification 28 Excluding the loan component grant 1070-GT which is linked to the investment project PRODENORTE (GT 1473) that faced long delays in being ratified in-country 25

42 80. Of the US$ 5.9 M disbursed of IFAD financed grants, US$ 3.6 have been disbursed to regional grants and US$ 2.3 to country grants. As compared to last year the amount disbursed to IFAD regional grants have decreased by roughly US$ 600,000 whereas the amount disbursed to country grants (small and large) have increased by some US$ 1.3 M. Still, large regional grants make up the biggest part of IFAD grant disbursements, with a share of 45%. On the other hand, of the total grant disbursement, the large country grants have the largest share due to the large disbursements to GEF grants. Table XIV. Grant disbursements Grant type IFAD financed Externally financed Total disbursement IFAD / Total disbursement US$ M % US$ M % US$ M % % Large regional % % % 85% Large country % % % 17% Small regional % % % 66% Small country % % 100% Total % % % 56% 81. Since small grants disburse almost fully in advance, disbursement performance has been assessed only for large grants (see Table 25 in appendix). Most TAGs show satisfactory disbursement rates in relation to their maturity. However, a few large standalone grants show slightly unsatisfactory disbursement rates, e.g. COFIN-SP-16-IICA that disbursed 29% and has it s project completion date falling in March 2013, i.e. within nine months. Last disbursement to this grant was in August Also 1256-AGEXPORT is slightly lagging behind, with a disbursement rate of 28% after more than 15 months of implementation and one year and 9 months to completion. 82. Of the four loan component grants, only LC-1258-PE has not yet disbursed, however, first disbursement is foreseen in October The other three loan components show reasonable disbursement rates. Of the GEF grants, the FSP-2-BR in Brazil has disbursed 100%, whereas the GEF grants in Ecuador and Peru has disbursed 19% and 38% respectively. The GEF project in México has not yet disbursed. 4.7 Maturity of the portfolio 83. The current portfolio has 17 large grants excluding loan components. Of these three will be completed within a year (TAG-1109-COPROFAM, COFIN-SP-15-FUNDA-K, COFIN-SP-16-IICA); five grants have completion date within two years (TAG PROCASUR, TAG-1203-RIMISP, TAG-1250-IEP, GEF-FSP-2-BR, TAG-1256-AGEXPORT); one grant will be completed within 3 years (TAG-1326-CLAEH); whereas five grants will be completed in three years or more (GEF-FSP-22-PER, TAG-1305-PROCASUR, TAG UNIANDES, GEF-FSP-28-MX, GEF-FSP-21-EC). Three large regional grants are approved but not yet effective (GEF-FSP-024-PA, TAG-1303-NAFIN, and TAG ACUA), which will contribute to further rejuvenating and enlarging the ongoing portfolio. 84. As can be seen from Table 26B in appendix, the IFAD-financed grant portfolio has a balanced age structure with 40% of the grant value will be completed within 2 years and the remaining 60% have a longer timeframe. For the externally financed grants, slightly more than 50% of the grant value will be completed within two years whereas the remaining has a longer timeframe. 26

43 4.8 Grant completion, closing and cancellation 85. During the period under review, 12 grants with a total value of US$ 7.6 M, composed by five large grants and seven small, were completed (see Table 27 in appendix). It can be seen that an amount of approximately US$ 450,000, equivalent to 6% of the grant amount, has not yet been disbursed, though some of this will be disbursed before closure. 86. In this review period, the division has continued its efforts, in close collaboration with CFS, towards timely grant closure. Nevertheless, as shown in Table 28 in appendix, only four grants have been closed on a regular basis during the review period (compared to 17 in last review period and 13 in ). It should also be mentioned that none of the grants with completion dates in the current period has been closed. As shown in Table 29 in appendix, the portfolio currently comprises six grants with overdue closing dates, as compared with three in the last review period. Two grants with closing dates in 2010 remain on the list from last year (966-UY and 1015-INCCA). Table 29 in appendix shows pending action required for the closure of the six grants with overdue closing dates. 87. Moreover, two grants (both to state entities) have been cancelled in the period. The grant TAG-1184-VE of US$ 200,000 with the aim of strengthening the learning networks of the Guillermo Rivas School in Venezuela was cancelled as it didn t become effective within two years of approval. Grant TAG-1258-DO has also been cancelled since the recipient did not submit the required documentation for receiving the first disbursement within one year of the date of effectiveness. Cancelations at grant closure amounted to US$ 73,745, in respect of grant TAG-710-UNOPS. Therefore, a total of US$ 773,745 has been cancelled in the review period (see Table 28 in appendix). 4.9 Extensions 88. During the review period grant extensions were approved for three grants compared with five in WINFA was extended by three months due to the delay in implementation caused by Hurricane Tomas in 2010, which directly affected project activities on the Windward Islands. DSF-8058-IICA was extended by three months as the grant suffered delays in start-up as it took longer time than anticipated to set-up institutional arrangements. Also the grant recipient saw an advantage in having more time to finalise knowledge management activities, which was granted by the division IICA had the completion date extended by three months to finalise grant activities that were delayed due to difficulties in working with very remote communities Audit 89. For most grants of the LAC portfolio audit requirements comprise two sets of documents: audited financial statements of the recipient organization and the audit opinion letter on the statement of expenditures. The majority of grant agreements states that the audited financial statements of recipients organizations have to be submitted to IFAD each fiscal year. If during the same period, the recipient has utilized grant resources and presented a statement of expenditures, an audit opinion letter on the statement of expenditures should also be submitted. 90. The review of LAC grant portfolio in respect of audit requirements has confirmed this is an area of weakness that requires closer follow-up. Most recipients have failed to submit audited financial statements to IFAD within the deadline established in the grant agreements and audit opinion letters are submitted only upon grants closure. Noncompliance of recipients obligations calls for much closer follow-up by IFAD. CFS and LAC need to set-up a follow-up and support system to facilitate full understanding and improved compliance with audit requirements by grant recipients. 27

44 5. MANAGEMENT PERFORMANCE OF ONGOING PORTFOLIO 5.1 Project management 91. As shown in Table 3A in appendix, project management performance ratings deteriorated from the previous review period: the share of projects rated moderately satisfactory or better decreased from 91% in June 2011 to 77% in June 2012, when eight projects 29 rated moderately unsatisfactory (compared with three as of June 2011). 92. During the review period, BZ 1456 continued to experience a slow implementation pace; although challenges and the respective solutions are often identified on time, the PMU has been taking too long to address them. This issue was extensively discussed during the June 2012 supervision mission; the project manager resigned at the beginning of July and government is currently in the process of filling the position. The unsatisfactory rating of BO 1490 is due to delays in the recruitment of personnel following entry into force in August 2011 and the relatively short project duration of four years; the post of administrator was filled in March 2012, the national coordinator is expected to take up his / her position in Q III of 2012 and thereafter the rest of the project team will be selected. 93. In , EC 1297 was affected by fiscal space limitations that restricted the availability of both counterpart funding and loan resources; and by the resignation of the project coordinator in January 2012 and lacking support from IEPS, the lead project agency (LPA). The situation is expected to improve following the appointment of new IEPS management in May Implementation start-up of EC 1354, effective since March 2011, has been delayed by the effects of a government decision to replace SETP with MAGAP as LPA for the project. This required an amendment to the financing agreement which was finalised in September After its establishment in November 2011, the PMU focused on the fulfilment of disbursement conditions which allowed for the first disbursement of the IFAD loan and the GEF project that were effected in April and May 2012 respectively. While implementation of project ES 1416 finally started-up in Q III 2011, progress has been very slow and the project experiences management problems, including protracted procurement and difficulty in mastering the project implementation strategy. 94. Implementation of project PA 1199 was completed in September During its last three months falling under the current review period, the project director remained without delegation of authority for authorising expenditures which also constrained seriously the project wind-up and loan closure processes. Project VE 1404 has been effective since October In mid-2011, lacking management and technical capacities of project management became apparent. Following discussions, the LPA decided to replace the majority of the PMU personnel, and appointed a project director and an administrator ad interim in January As at the end of the current review period, the LPA was pursuing efforts to recruit suitable personnel, which was proving difficult due in part to the remoteness and other characteristics of the lower Orinoco delta where the project operates. 5.2 Disbursement performance 95. Overall, disbursement to the LAC region continued to improve during the period. Total disbursement from loan and DSF grants during the review period amounted to US$ 79 M, an increase of 12% compared with the July 2010 June 2011 period (US$ 69.3 M). This brought the level of disbursement above the level of expected disbursement for the first time. As of June 2012, cumulative disbursement for all loans 29 BZ 1456, BO 1490, EC 1297, EC 1354, ES 1416, GY 1415, PA 1199 and VE

45 Expected disbursement and DSF grants considered in IFAD disbursement lag analysis amounted to SDR M, 9% above expected cumulative disbursement (SDR M). 96. However, the regional disbursement surplus hides significant differences between sub-regions. Whereas the Cono Sur and the Andean sub-regions disbursed respectively SDR 11.2 M (or 29%) and SDR 13 M (or 38%) more than expected, disbursements to the Meso-American and Caribbean sub-region fell behind expected disbursement by SDR 8.9 M (or 8%). Disbursement to the MCAC sub-region started to show a mildly positive trend since June 2010 after remaining around 17% in the four previous years. Chart V. LAC Disbursement by sub-region % 135% 130% 125% 120% Southern Cone Mesoamerica & Caribbean Andean countries LAC overall 133% 136% 138% 129% 115% 110% 110% 109% 105% 100% 106% 102% 100% 95% 90% 85% 80% 75% 93% 92% 90% 92% 92% 86% 86% 87% 88% 85% 82% 83% 83% 78% Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Projects experiencing disbursement problems as at June Six projects under implementation as of June 2012 show cumulative disbursement below expected disbursement by more than 10%, namely AR 1279, DO 1479, GT 1274, GT 1317, ME 1349 and VE Three of these (AR 1279, GT 1274 and ME 1349), are chronic disbursement problem projects which have disbursed below IFAD average from the outset of implementation. 98. Project AR 1279 has been effective since September 2007 and has a completion date of September Implementation picked up markedly since early In the current review period, the project disbursed SDR 2.5 M, in line with IFAD disbursement profile for the first time 31. Consequently, the disbursement gap dropped from 63% in June 2011 to 36% this year. However, the undisbursed loan balance amounts to approximately SDR 9 M. The pace of implementation continued to accelerate in 2012 as 30 Defined as projects more than 18 months into implementation and showing a disbursement lag of 10% or more as at end-june In accordance with IFAD PDP, RURAL type projects disburse on average 16% of the loan in PY 4. In the review period, AR 1279 disbursed 18% of its loan 29

46 the LPA pursues efforts towards enduring project completion on time and full loan disbursement by loan closing date in March The lag for Project DO-1479 in June 2011 was due to restrictions on accessing external debt resources that delayed the start of disbursement until January The disbursed amount as at end-june 2012 of SDR 0.65 M does not include approx. US$ 490,000 of already paid incurred expenditure, expected for submission to IFAD in July. Part of it was pre-financed by the borrower which enabled the recruitment of project staff, the procurement of office and vehicle facilities and project support for the preparation of the first business plans. As of June 2012 five business plans for 3 coffee producers organisations and 2 organic banana farmers associations with a total estimated value of US$ 2.2 M, of which US$ 0.9 M financed by the IFAD loan, had been formulated and were ready for approval; and five more plans (for rice, vegetables, honey and tubers) were under formulation for approval in the 2nd half of the year. After a difficult start it appears that the project is on the right path towards catching up with initial delays and achieving its outputs and outcomes As of 30 June 2011, four and a half years into implementation, the loan in support of project GT 1274 had disbursed only SDR 4.6 M (21%) showing an undisbursed balance of SDR 17 M. During the current review period, the project disbursed only SDR 0.97 M compared with SDR 3.5 M disbursed by IFAD projects of similar type and age. A new government, issued from the general elections held in September 2011 that took office in January 2012, is placing emphasis on agricultural development and approached IFAD to seek support for reactivating its portfolio of projects in the country. In June 2012 the Ministry of Finance requested a two-year extension of the project that is currently due for completion in December The Division is working with the ministries of Agriculture and Finance on a plan for project restructuring that would include a reduction of the loan to a size commensurate with the scope and cost of activities that could be implemented over the proposed additional twoyear implementation period Project GT 1317 is effective since December 2008 and started to disburse in March During the review period it suffered from the same problems as GT This is the only ongoing project in the region that did not disburse during the review period; the last loan disbursement was effected in May 2011 with respect to expenditure incurred up to December The loan is 24% disbursed compared with disbursement of 55% for IFAD projects of the same type and age. To disburse the loan in full by loan closing date of June 2015 this project would need to disburse SDR 3 M annually on average, compared with SDR 0.8 M on average since effectiveness to date Implementation of Project ME 1349 continued to improve following the restructuring of the portfolio agreed with country authorities in During the current review period, disbursement reached SDR 3.1 M, raising the percentage of loan disbursement from 27% last year to 45% in June The undisbursed balance of the loan currently stands at SDR 9.4, or 55% of the loan amount. In April 2012, government requested an 18-month extension of the project that is currently under review in the Division. If approved, this extension would move the project completion date from September 2012 to March 2014 and, if implementation pace follows the recent accelerating trend, increase the likelihood of achieving project objectives and full loan disbursement Project VE 1404 is effective since October 2010 and has an above average sevenyear implementation period. To date it has disbursed only SDR 0.5M of which SDR 0.2 M represent the advance into the special account. As mentioned above (see section 5.1), this project confronts serious management challenges. The Division will field the next DS mission in September 2012 that will include a focus on the implementation arrangements for the project. 30

47 Table XV. Disbursement performance of projects experiencing disbursement problems as at June 2012 Project ID AR 1279 DO 1479 GT 1274 GT 1317 ME 1349 VE 1404 Loan number Disbursement performance rating Disbursement performance rating disbursement lag 83% 59% 72% 2010 disbursement lag 62% 61% 66% 2011 disbursement lag 63% 100% 56% -9% 46% -56% 2012 disbursement lag 36% 56% 57% 31% 28% 50% Loan amount (SDR m) Undisbursed as at 30 June 2012 (SDR m) Undisbursed percentage % 93% 74% 76% 55% 94% Originally planned average annual disbursement (SDR m) Historic average annual disbursement up to June 2012 (SDR m) Disbursement during review period Future average annual disbursement required to fully disburse loan (SDR m) Loan effectiveness Sep-07 May-10 Oct-06 Dec-08 Sep-06 Oct-10 Current loan closing date (LCD) Mar-14 Dec-16 Jun-13 Jun-15 Mar-13 Jun Counterpart funds 104. Only five projects experienced serious shortcomings of counterpart funds during the current review period, confirming the positive trend of counterpart fund availability noted in last year s report. The regional average rating improved slightly to 4.6 from 4.5 last year (4.0 in 2010) All projects experiencing counterpart funding shortcomings are located in the MCAC sub-region (GD 1569, GT 1274, GT 1317, HT 1171 and HN 1407). In the case of project GD 1569 government is late both in refunding an amount equivalent to approx. US$ 18,000 of non-eligible expenditure financed from the project special account and in making available to the project counterpart funding required to implement the 2012 AWPB. As mentioned above, both projects implemented by the ministry of agriculture in Guatemala (GT 1274 and GT 1317) faced serious budgetary restrictions throughout the current review period; this situation has been resolved following the installation of the new authorities that released counterpart funds to both projects in Q Project HT 1171 entered into its third and last phase in January 2012; however, government is yet to release counterpart funding required to implement the phase 3 of the project. As regards project HN 1407, government was also late in releasing counterpart funding required by the project during the review period. 5.4 Loan administration 106. The review period has been characterised by a change to loan administration handling in IFAD. Under the revised loans and grants management business model, which became effective in January 2012, a significant number of PMD 31

48 human resources transferred to the CFS loans and grant unit 32, which was reorganised along regional sections mirroring the organisational structure of PMD, each with a team leader appointed to coordinate team work plans and activities. The first change concerned the introduction of a new workflow for the review and approval of withdrawal applications (WA). This included the elimination of the divisional approving officer function that was transferred to CFS finance officers. Payment orders and paper signed WA checklists for individual WA previously issued by regional divisions became redundant and the whole WA review and approval process fully electronic through the WATS and LGS systems In parallel with the revised WA workflow, CFS introduced the concept of risk based disbursement for loan administration whereby risk ratings are assigned to each project following discussion with the respective CPM on the basis of pre-defined criteria. At the end of the period under review, 40 of the 44 projects that comprised the LAC current portfolio on 30 June 2012 had been classified by risk rating. As shown in Table XVI below, 17 projects (or 43% of the current LAC portfolio) were classified as low risk and 3 (8%) as high risk. Table XVI. Financial management risk ratings (June 2012) No. of FM risk rating % projects Low Risk 17 43% Medium Risk 20 50% High Risk 3 8% Sub-total % Not rated (projects not yet EFF) 4 Total current portfolio In close coordination with and under the guidance of CFS, the Division started to move towards the simplification of disbursement arrangements for borrowers and inhouse processes since This has enabled the adoption of higher ceilings for certified statements of expenditure (SOE) for a number projects, which generated efficiency gains by reducing the amount of photocopied documentation that accompanies withdrawal applications and simplifying the preparation of the WA on the borrower s side and its review by IFAD. By December 2011, simplified arrangements had been finalised for two countries 33. The overall status with respect to SOE thresholds as at 30 June 2012 is shown in Table 31 in appendix. As at the end of the period under review, eight projects in four countries could document expenditure for withdrawal purposes exclusively on the basis of SOE During the review year, the first after the Division took up responsibility for WA review, 29 days on average have been required to complete WA processing in relation to disbursements to the LAC region. As shown in Table XVII below, average processing time has been reduced to 25 days in the review period and further reduced to 15 days in the second semester of This 50% reduction of the time required to process WA is attributable to a combination of factors: increasing quality of WA supporting documentation received from projects (thanks, at least partly, to continued implementation support by the Division), more efficient review process within LAC (due to better distribution of roles within the divisional portfolio unit and an higher productivity of an increasingly experienced Portfolio Officer), as well as continued efforts by CFS and TRE to expedite completion of the disbursement process, including 32 Including the divisional Portfolio Officer who had transferred to LAC in December Argentina and Mexico 34 Except vehicles and equipment in the case of three projects 32

49 close coordination and constant communication between the three. The 50% reduction in processing time from to the second semester of 2011 resulted purely from efficiency gains within IFAD since the number of WA processed during the entire review period is virtually the same as the number of WA processed during the second semester of 2011, 129 and 125 respectively. Table XVII. Withdrawal application processing data II SEM 2011 I SEM Amount WA processed (US$ '000) No. of WA processed WA average amount (US$ '000) Average processing time (days ) Average WA processing times continued to improve in the first semester of 2012, with a further reduction of five days in the time required from WA record in WATS to the value date of disbursement. This improvement, albeit achieved with a smaller number of WA processed in the first semester of 2012 (84 compared with 125 in the last semester of 2011) confirms the potential of the revised disbursement workflow to generate efficiency gains As shown in Table 32 in appendix, which presents additional country-by-country information, WA processing time reductions in the first semester of 2012 were significant for five countries 35. The reduction was particularly impressive for Argentina, from 14 to eight days, especially considering the large amount disbursed (US$ 9.6 M) and that 16 WA have been processed in the first semester of The time required to process disbursements to Haiti, which shows chronic deficiencies in WA documentation and experiences the longest processing times in the region, also improved from 26 days in the last semester of 2011 to 17 days in the period Jan-June Besides Haiti, processing times for eight countries were above the regional average in the first semester of This illustrates the existence of potential for further reductions in average processing time Since taking up responsibility for loan administration, the Division has been emphasising three FM-related areas: (a) increased coverage and better documentation of assessments of financial management capacity; (b) the selection and the definition of the mandate of project auditors and support for the formulation and follow up of action required to implement remedial measures recommended by auditors and by supervision; and (c) ex-post review of supporting documentation in-situ during supervision missions. Under the new operating model, the Division intends to continue fostering collaboration with CFS on these areas in line with inherent divisional responsibilities. 5.5 Procurement 113. The Division continued to improve objectivity and apply strict rating of procurement in the region, facilitated by greater emphasis on implementation support and oversight with the aim of improving efficiency and timeliness of project procurement activities. The regional average procurement rating at end-june 2012 remained almost unchanged at 4.2 compared with 4.3 last year; this probably reflects the consolidation of the project procurement assessment processes initiated when the portfolio moved to 35 Argentina, Ecuador, Haiti, Honduras and Perú 36 Brazil, El Salvador, Grenada, Guyana, Mexico, Nicaragua, Panama and Paraguay 33

50 direct supervision as indicated by the evolution of procurement ratings since June 2009: 4.8, 4.4, 4.3, 4.2 in 2009, 2010, 2011 and 2012 respectively All seven projects ongoing in June 2012 that show unsatisfactory procurement ratings are located in the MCAC sub-region (BZ 1456, ES 1416, GT 1274, GT 1317, HN 1535, HT 1275, PA 1389), which probably reflects a relative weakness of country systems and project staff capacities in this sub-region. In some countries, e.g. El Salvador and Honduras, government agreed to contract UNDP as administrator of procurement and financial transactions. This makes procurement more effective and secure but may have the downside of protracted processes in the absence of close coordination between the parties, which is yet to be reached for projects ES 1416 and HN In the case of BZ 1416, GT 1274, GT 1317 and HT 1275, supervision missions found quality lacking in some procurement processes, associated with lacking internal control systems and project staff capacities. In Panama, procurement is undertaken by the Ministry of Agriculture in accordance to national regulations exclusively, overlooking required compatibility with IFAD requirements. 5.6 Covenants 115. Compliance with loan covenants remains satisfactory overall. Only two projects ongoing in June 2012 rated moderately unsatisfactory on this flag. Project HN 1535 due to delayed delivery of project documentation to IFAD, including AWPB and implementation reports, and PA 1389 for lacking compatibility of procurement procedures with IFAD requirements. Improvements are expected in the near future for both projects. 5.7 Audit 116. As shown in Table 34 in appendix, 22 audit reports (out of 31 due in total) had been received by the time of closing the analysis for this report 37, of which 16 reports were received by 30 June; one of these, concerning project HT 1171, was received more than 90 days beyond due date. The nine audit reports overdue as at 30 July concern projects EC 1297, GT , GT 1274, HT 1275, NI 1380, PY 1333, PE 1352, VE 1252 and VE A legal notice has been sent on project HT 1275 that is now overdue beyond 90 days of due date (31 March 2012) End-of-period PSR ratings on project audit this year have been assigned by the divisional portfolio advisor on the basis of established PSR rating criteria, taking into account supervision mission ratings as updated by the CPM, and, for the first time, CFS proposed ratings and comments on project financial management and audit performance. This has resulted in a regional average audit rating of 4.3, slightly improved from the two previous periods (4.1 in June 2011 and 4.0 in June 2010). The proportion of projects rated moderately satisfactory or better remained stable at 80% (28 projects in June 2012 and 27 projects in June 2011) as did the number of projects moderately unsatisfactory that remained unchanged at seven. Two of the projects rated unsatisfactory on audit are no longer in implementation (projects GT 1085 and PA 1199, both completed in September 2011). The unsatisfactory rating of three of the remaining five projects was due to chronic delayed submission rather than issues with the quality of audit reports (HT 1171, PE 1352 and VE 1252). Two projects (HT 1275 and PA 1389) require particular assistance on the financial management and audit fronts CFS, which has particular responsibility concerning the project audit area, provided the Division with an overall assessment of audit reports for which it had performed a review of audit reports by the third week of June This assessment covered an universe of 16 projects, of which seven were reviewed in detail, i.e. to assess 37 Including scanned versions received by 23 July Final audit report required under loan closing procedures 34

51 the quality of audit work and of financial reporting, identify specific issues that require mitigating action and determine the risk level on the basis of the combined assessment of quality of audit work and financial reporting 39. The breakdown by sub-region 40 matches the sub-regional share of project audit reports due by June 2012; despite the small number of projects in the LAC regional, the Division considers the findings of CFS representative of the whole portfolio The use of International Standards on Auditing (ISA) or International Standards of Supreme Audit Institutions (ISSAI) is extensive: 12 out of the 16 audit reports sample reviewed by CFS for FY 2011 or 75%, compared with 72% in 2010; CFS and LAC intend to continue pursuing efforts towards promoting the use of international standards, including by incorporating appropriate reference in auditors TOR The proportion of unqualified audit reports in respect of FY 2010 (88%) appears to have remained stable in FY 2011 as 13 out of the 16 reports reviewed (or 81%) were clean of qualifications on all opinions; as in previous years, there were no adverse opinion or disclaimer of opinion in any of the 16 reports already reviewed. However, some of the FY 2011 audit reports reviewed include the auditor s opinion on the WA schedule and the special account under the opinion on the project financial statements, whereas CFS recommends that auditors always provide a set of three separate opinions as required by the Audit Guidelines. This is another issue that can be addressed when reviewing auditors TOR In terms of internal control environment, 11 of the 16 reports point out issues that would require action to mitigate risks. However, in some cases there is inconsistency between the unqualified auditor s opinion and the materiality of the internal control issues signalled in the audit report. When this kind of issue arises, the CFS Finance Officer and the LAC CPM should jointly review the control issues raised in the auditor s report towards agreeing on the contents of the remedial action plan to be required by IFAD and how to oversee its implementation CFS review noted that accounting standards used for financial statements preparation are not fully in line with internationally accepted best practice in most cases as only two projects out of 16 reviewed used International Public Sector Accounting Standards (IPSAS) 41. Although use of national standards is acceptable to IFAD, CFS intends to promote the use of International Financial Reporting Standards (IFRS) or IPSAS compliant templates for financial statements preparation. This issue can also be addressed when reviewing auditors TOR Four out of the seven audit reports reviewed in detail by CFS were classified as Green or low risk (BZ 1456, ES 1321, ES 1416 and PE 1240), two as Yellow or medium risk (NI 1256 and PA 1199) and one as Red or high risk (PA 1389). Common internal control issues identified by CFS across the different projects include: (i) weak cash management - payments executed without following proper procedures; (ii) accounting records not maintained properly - expenditures not properly booked/ overpayments/doubtful expenses; (iii) weak book-keeping capacity, incorrect set up of the accounting system, issues on record of invoices received and paid; (iv) weak management of project human resources in terms of training, contractual arrangements and social security; (v) inefficient management of the procurement process; and (vi) weak management of projects, improper execution and monitoring of activities by management. 39 Currently, CFS completes the detailed review of audit reports within 60 days of date of receipt 40 Two in the Cono Sur sub-region, three in the Andean sub-region and 11 in the Meso-America and Caribbean sub-region 41 the remainder use national standards or a modified version of national/international standards 35

52 124. During the review period CFS also started to rate audit firms used by projects for external audit 42. Auditors in 14 countries have been assessed as recommended or neutral, while assessments are yet to be done for auditors in five countries During the forthcoming review period, the Division intends to continue to collaborate with CFS on improving effectiveness of financial management arrangements at project level and on the deployment of ARTS to all projects in the region. Project level M&E 5.8 Monitoring and Evaluation 126. The Division continued to pay due importance to M&E, namely by maintaining the rule of including an M&E specialist in every supervision mission, to help in objective measurement of implementation progress and results and in improving project M&E systems through methodological advice and hands-on assistance to PMUs. This closer proximity to project staff facilitates understanding of the problems confronted in-country to put in place and operate project M&E systems, and also led to stricter rating of the PSR M&E indicator The number of projects assessed as capable of reporting at least at activity / output level rose to 25 from 23 in June last year. Ratings on the M&E systems of four other projects (BO 1298, GT 1317, GY 1415 and VE 1404) assessed as moderately satisfactory or better in 2011 were downgraded to moderately unsatisfactory during the review period. This was mainly due to more objective and strict assessment of the performance of project M&E systems with regard to availability and skills of PMU staff with M&E-related functions, the quality of RIMS reporting and the adequacy of data provided in progress reports and for implementation review/supervision purposes 44. Progress in measuring results and impact 128. IFAD-financed projects in the LAC region maintained last year s overall good level of compliance with RIMS 1st and 2nd level reporting. As for 2010, RIMS 1 st level data for 2011 was due for 29 projects and was delivered by 26 projects (or 90% compliance). One of the three projects that did not deliver RIMS first level report is PA 1199 that left the portfolio upon completion in September Project DO 1479 had no activities/outputs to report since it started implementation in the field only in January The third project - VE has been operating without an M&E system due to the absence of an M&E person in the PMU and was unable to report on RIMS indicators. Second level data for 2011 was delivered by 14 of the 16 projects for which it was due this year. This corresponds to an 88% compliance rate, above the 72% of last year and considerably higher than for 2009 when 65% of projects reported on RIMS 2nd level The quality of reporting also continued to improve; partly due to better follow up and support during supervision and implementation support missions; and also following the initiative to forward the final 2010 RIMS reports to the respective PMUs accompanied 42 The rating is based on the weighted average of the assessments given to the Auditor s performance during the review of the Audit Reports of Fiscal Years 2009, 2010 and 2011 (when applicable). When an Audit Firm is Recommended it means that the weighted average of the assessments given to the Auditor s performance is Satisfactory, when an Audit Firm is Neutral it means that the weighted average of the assessments given to the Auditor s performance is Mostly Satisfactory, while when an Audit Firm is Not Recommended it means that the weighted average of the assessments given to the Auditor s performance is either Partially Satisfactory or Unsatisfactory 43 Dominican Republic, Ecuador, Grenada, Honduras and Panama 44 M&E PSR ratings for three other projects that maintained a satisfactory rating (CO 1294, GY 1415 and NI 1120) were downgraded from 5 to 4 (or 3 in the case of project GY 1415) during the period under review, which provided further evidence of the increasingly strict assessment of project M&E systems in the LAC region 36

53 by the definitions in the RIMS Manual with a request for further verification and correction where appropriate, which contributed to improve the consistency and integrity of RIMS data delivered by LAC projects in The Division also made efforts to maintain high the quality of data entered into the corporate RIMS online system. The country programme officer and CPAs in charge of data input reviewed reports received from projects carefully and, before proceeding to online data input, tried to clarify any inconsistencies and correct errors in consultation with project staff, M&E consultants who had participated in supervision / implementation support missions and CPM It is noteworthy the high correlation of projects that provide evidence-based information supporting 2nd level assessments and those that have adequate log-frames from design that were updated during supervision and mid-term reviews. Projects that inherited from design simple and concise log-frames that include a good summary of the assumptions risks that need to be managed, find it easier to set up its monitoring systems from the outset of implementation The quality of RIMS reporting is also naturally correlated to the performance of project M&E systems. Not every project recognises the value of RIMS indicators for developing a comprehensive M&E system capable of generating information that both embraces output, outcome and impact, is based on SMART indicators 45 that can be measured and independently verified, and are useful for planning and decision-making purposes One area where the Division is yet to make tangible progress concerns the availability and quality of baseline and completion date that is needed for project staff to report on progress during implementation and on impact on completion both in-country and to IFAD. Baseline data collection is not always undertaken during design or becomes outdate when there is long time gap between design and implementation start-up. The potential for using data already generated within country statistical systems is often overlooked at both design and implementation stages. Using data generated in-country reduces costs to projects, raises the likelihood of continued availability of relevant comparable data over time, and fosters alignment with mainstream country systems and government commitment to improve such systems The Division intends to intensify efforts to improve M&E processes at project, country and divisional levels in order to improve project performance by focusing projects on delivering outputs and achieving outcomes and impact, improve its ability to document and report on the impact of IFAD-financed operations in the LAC region, and to share lessons and reflect on them to inform future policy and strategy planning at project, country and regional levels In the forthcoming review period, the Division will pay particular attention to: i. providing early implementation support to recently effective projects for refining / updating design log-frames, including the risks/assumptions column, and for finalising the design and putting in place functional project M&E systems; ii. the conduction of / collection of data for baseline studies, including coverage of RIMS 3rd level indicators, and of impact studies/surveys on completion; iii. projects before mid-term point to specifically agree on the details of methods and distribution of responsibilities for data collection required for evidence-supported 2nd level RIMS reporting; 45 Specific, measurable, attainable, relevant and time-bound 37

54 iv. supporting projects to improve activity-output-outcome reporting in periodical progress reports, updates for joint review / supervision mission purposes and completion reports; v. promote a risk analysis culture by emphasising identification and management of factors beyond the control of the project that may impact on the achievement of the outputs or the achievement of outcomes, even if all outputs are achieved; and vi. improving its ability to integrate project-level M&E in a country systemic approach that makes explicit the linkages between individual project achievements and the country programme results framework, including its grants, knowledge management and policy-related dimensions, both for countries with and without an RB-COSOP. 38

55 6. RESULTS OF THE ONGOING PORTFOLIO 6.1 Targeting - poverty and gender 136. There was little variation in regional average ratings for poverty, targeting and gender from the last review period. While the average targeting approach and gender focus ratings remained unchanged at 4.6 and 4.7 respectively, the poverty focus average rating improved slightly to 4.7 from 4.6 last year. The proportion of projects rated 4 or better on poverty focus remained high and unchanged at 97%, whereas it decreased for the gender and targeting indicators, from 85% to 77% and from 94% to 91% respectively Only one project rated moderately unsatisfactory on poverty targeting this year, project ES 1416, the same single project rated unsatisfactory in Project ES 1215 (completed in September 2011) joined projects NI 1120 and BR 1335 in the select group of projects with highly satisfactory performance on poverty focus. This project rated highly satisfactory also on gender focus. Project ES 1215 developed a dual strategy of gender inclusion in rural modernisation processes driven by the project that included affirmative action towards inserting women in community development activities previously controlled exclusively by men. Most of such activities were oriented to promoting gender inclusive associative income generating business ventures that generated profits which were invested in household improvements to nutrition, education, health and asset building. This strategy is being adapted for adoption by the other IFAD financed projects in El Salvador Six of the eight projects rated unsatisfactory on gender are located in three countries: Bolivia, Guatemala and Honduras. Project BO 1298, effective since November 2009, is yet to develop a gender strategy The December 2011 supervision mission paid special attention to the performance status from a gender perspective and left detailed recommendations for promoting gender equity through women organisations. Project BO 1490 has experienced serious delays in establishing its PMU and yet to start the selection process of most of the staff, which is a pre-requisite for the development of a gender responsive implementation strategy Projects HN 1407 (effective since November 2008) and HN 1535 (under implementation for less than 18 months) lack a gender strategy and are yet to start the selection process of a gender specialist to join the PMU. Last December supervision mission to projects GT 1274 (completion date in September 2012) and GT 1317 (under implementation since December 2008) pointed out serious shortcomings in how both projects have been addressing gender/women s empowerment issues. These include the absence of affirmative action to promote women s access to project services and of project staff commitment to gender equality and women s empowerment. The mission made a number of recommendations including on gender training for technical and administrative project staff and for the formulation of an action plan for gender differentiated strategies that promote women s access to and control of productive activities. Overall implementation progress 6.2 Overall performance assessment 140. The period under review started with eight projects rated unsatisfactory on overall implementation progress and ended with seven projects in the same status. As the number of ongoing rated projects increased from 33 last year to 35 this year, the proportion of projects rated moderately satisfactory or better raised to 80% as at June 2012 from 76% in June

56 141. While three projects maintained last year s status of unsatisfactory overall implementation progress (ES 1416, GT 1274 and GT 1317), four of the projects rated unsatisfactory last year accomplished improvements that warranted upgrade to moderately satisfactory overall implementation performance (AR 1279, DO 1479, HT 1275 and HN 1407). The eighth project rated unsatisfactory on overall implementation progress last year (PA 1199) left the portfolio on completion date in September Three projects were rated unsatisfactory on overall implementation progress for the first time this year. These are projects BO 1490 and EC 1354, which have been declared effective not long ago, in August and March 2011 respectively; and project VE 1404, under implementation since end-2010, which was at a barely satisfactory status at the end of last review period Six of the seven best performing projects last year continued to perform above average during the period under review. These include two projects completed during the review period (ES 1215 and GT 1085) and four ongoing projects namely BR 1335, CO 1294, PY 1333 and PE Two other projects were assessed at the end of the period under review as being on target and expected to achieve major outputs and outcomes without significant delays: young project ME 1412, effective since March 2011, which started up quickly and made good progress during the implementation period; and seven-year project NI 1380, in year four of implementation, which has overcome the problems experienced initially and is now effectively reaching out an increasing number of poor households; by the time of the May 2012 supervision mission, this project had incorporated more than 50,000 target group members in income diversification and food security improvement activities under the overall strategy of inclusion in dynamic value chains, of whom 52% are women; the value of transfers to participating beneficiary organisations had reached US$ 3.1 M or almost 2/3 of the total value of approved agreements. Physical and financial assets and food security 144. As shown in Table 35 in appendix, 78% of the projects (or 25 out of 32 rated on this indicator) were assessed as having generated tangible increases in the physical and financial assets of target groups, about the same proportion as last year (77%). The relative low average is correlated to the accumulated implementation progress made by individual projects at the end of the review that was modest in the case of seven projects: DO 1479, ES 1416, GT 1274, GT 1317, GY 1415, PA 1389 and VE The same rule applies to the food security indicator. Likelihood of achieving the development objective 145. As at end-june 2012, 33 out of 35 ongoing projects are likely to achieve its intended outcomes and development impact and only two of the 35 ongoing projects reviewed this year were assessed as not likely to achieve its intended outcomes and development impact. These are projects GT 1274 and GT 1317, which rated unsatisfactory on Likelihood of achieving the development objective also last year. One of the six projects rated unsatisfactory on this aggregate indicator left the portfolio in September 2011 upon completion (PA 1199). The other three unsatisfactory projects as at June 2011 (AR 1279, HN 1407 and HT 1275) have since improved the pace and the quality of implementation and show good prospects of meeting their respective development objectives at least partially. 40

57 6.3 Outputs and outcomes Contribution to IFAD s Results Management Framework 146. Reporting on the development results and impact of country programmes relative to the objectives of IFAD s Results Management Framework (RMF) improved compared with last year. The RMF section of the Country Programme Issues Sheet (CPIS), which last year was available for only 15 of the 20 countries with active portfolios in the review period was rated for all 19 countries this year According to their respective CPIS, country programmes in seven countries, namely Brazil, Colombia, El Salvador, Honduras, Nicaragua, Paraguay and Peru, met most targets related to generation of increases in the incomes of the rural poor 46 (see Table 36 in appendix) As regards RMF Objective 2 (improved food security), IFAD country programmes in Argentina, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Nicaragua and Paraguay were assessed in the CPIS as making made tangible contributions to increasing food security of the rural poor and meet most related targets On RMF Objective 3 Empowerment, IFAD-supported projects in the region have made tangible advances in building capacities of poor rural men and women to strengthen their own organisations and gain control over economic relations in nine countries 47, with particular success in Haiti and Paraguay. CPM also rated highly the extent to which IFAD country programmes in the region respond to the aid effectiveness agenda The extent to which country systems and procedures are used, and country programmes are harmonised with other donors, was assessed as satisfactory 48 in of the 19 countries where IFAD has an active portfolio in the region The results of the 2012 Annual client feedback survey became available after the Division had completed the performance analysis and this report was being finalised 50. However, a few preliminary comments on the survey results and on how they compare with the Divisional performance assessment on RMF indicators are warranted given the priority accorded by the Division to strengthen its client orientation and responsiveness This year the survey covered eight LA countries, five from the CMAC sub-region 51, two from the Andean sub-region 52 and one from the Southern cone 53. The response rate for LAC matches the overall IFAD average at a relatively low 53% 54. As compared with other regions, LAC is above IFAD overall average client ratings on all three quadrants 46 Rating of 5 on RMF Objective 1 (increased incomes) 47 Argentina, Brazil, Ecuador, Haiti, Honduras, Nicaragua, Panama, Paraguay and Venezuela 48 Rating of 5 on RMF Objective 4 (aid effectiveness agenda) 49 Argentina, Bolivia, Dominican Republic, Ecuador, El Salvador, Haiti, Honduras, Nicaragua, Panama and Perú. 50 The IFAD client feedback survey is an internet based survey to ascertain IFAD s performance in a country through an independent review of progress by asking anonymous responses to a number of questions to a group of stakeholders identified by the CPM and approved by the Divisional Director. The survey has been completed once a year until 2010 and every other year afterwards 51 Belize, Guatemala, Haiti, Honduras and Mexico 52 Bolivia and Perú 53 Brazil 54 In LAC 100 of the 187 enquired people in eight countries replied, whilst 538 of 1006 responded from the 37 countries globally 41

58 (aid effectiveness, IFAD's impact on poverty, policy influence), albeit marginally except on the impact on poverty rating where it is 6% above IFAD average It is interesting to note that client ratings from all LAC countries included in this year s survey, with the exception of Haiti, are more favourable than IFAD assessment as reflected in CPIS ratings. In effect, average client ratings for LAC on all quadrants stand above 5 whilst RMF country programme ratings (as shown in Table 36 in appendix) range from 4.50 on increased incomes and improved food security to 4.57 on empowerment and aid effectiveness agenda. Project outputs and outcomes 154. As regards, individual project performance, the average rating and the proportion of project components rated moderately satisfactory or better have improved compared with last year. The overall regional average rating on project outputs and outcomes rose slightly to 4.04 from 4.02 (3.90 in June 2010, see Table XVIII below). The proportion of components rated moderately satisfactory or better (rated 4 or more) raised from 72% last year to 76% this year (65% in 2010). Four projects rated unsatisfactory on all components in terms of outputs achieved (ES 1416, GT 1274, GT 1317, VE 1404) contributed to lower the regional average. Table XVIII. Ratings of outputs and outcomes average rating rating 1 1 1% rating 2 3 3% 4 4% 7 7% rating % 24 24% 26 27% rating % 42 42% 34 35% rating % 24 24% 23 24% rating 6 4 4% 5 5% 5 5% No. of components rated % % % rating 3 or less 24 24% 28 28% 34 35% rating 4 or more 74 76% 71 72% 62 65% No. of projects reviewed Note: excludes components dedicated solely to project management 155. As shown in Table 37 in appendix, the financial services area remains the least performing of the portfolio, showing an average rating of 3.56 in 2012, compared with 3.92 last year. The average rating for the four other clusters is at a satisfactory level, ranging from a marginally satisfactory 4.03 on human and social development to 4.75 on knowledge management and policy Implementation is mostly on target in the majority of LAC projects as regards activities falling under the physical assets, production, market and enterprise development cluster, including nine projects that are expected to realise most of the desired outcomes The more positive assessment of LAC stakeholders should be interpreted as meaning that IFAD compares well with other external development partners in the same countries rather than IFAD impact on poverty is higher in LAC relative to other regions (which cannot be inferred from the survey) 56 AR 1279, BR 1335, CO 1294, ME 1349, NI 1120, NI 1380, PY 1333, PE 1240 and VE

59 157. There are five projects - beyond the four rated unsatisfactory overall on achievement of desired outputs and outcomes - which experience problems and which, on the basis of implementation progress to date, are expected to realise only few desired outcomes. These are projects DO 1479, GD 1569, GY 1415, HT 1275 and PA The situation is similar concerning the human and social development domain, with the exception of three projects: projects GY 1415 and HT 1275 that show satisfactory performance and project BZ 1456 where the degree of realisation of desired outcomes is correlated to the speed of implementation during the remaining four years of implementation The ongoing IFAD-financed portfolio that includes project components falling under the Environment and natural resource management comprises seven projects located in Ecuador, El Salvador, Mexico, Peru and Venezuela 57. The average rating for this cluster has been increasing since the Division started the output/outcome analysis by impact domain in 2010: this year s average was 4.29 compared with 4.25 and 4.13 in 2011 and 2010 respectively As mentioned in last year s report, the Division is pursuing efforts towards mainstreaming environment and climate change into its investment operations as well as under the grant programme (see chapter 4 above), in order to respond to increasing demand from borrowing member countries, upscale successful interventions, take advantage of new financing mechanisms, and create and adapt innovations relevant to improve the livelihoods of IFAD target groups in an environmentally sustainable way. With the support of the regional climate and environment specialist assigned in March 2011, the Division has intensified action to identify and prepare investment proposals for additional natural resource management and climate-change related interventions. As shown in Table 39 in appendix, three new operations have been approved during the review period with GEF incremental funding of US$ 8.2 M. These are associated with ongoing IFAD-financed projects in Mexico, Panama and Peru. Three other proposals amounting to a total of US$ 12.3 M are at different stages of preparation, one pending GEF approval and two with QE planned for September The value of the current GEF portfolio at the end of the period under review has increased to US$ 16.8 M compared with US$ 8.5 M in June 2011 and is expected to rise to about US$ 29 M over the forthcoming review period. As at least four of the five approved GEF-financed projects will be in implementation for more than six months at the end of the forthcoming review period, and given the importance environment- and climate change-related issues for the livelihoods of the rural poor in the LAC region, the Division intends to include GEF-financed projects as an integral part of its portfolio management and review processes as from next year The only project that has been under implementation throughout the review period (BR GEF-2 under project BR 1101 completed for the IFAD part in December 2009), continued to perform satisfactorily. This project has demonstrated that longerterm environmental benefits and immediate results in terms of improved household incomes can be generated simultaneously. One of the lessons learned is the importance of short-term income-related benefits in the incentive framework for smallholders to adopt environmentally sustainable practices that require longer to yield benefits at household level. Some of the most successful interventions of the project were the promotion of organic cotton production and the introduction of eco-stoves, bio-digesters and animal traction, which generated tangible benefits, in a short period. In contrast, planned activities related to carbon sequestration and pilot payment schemes for environmental services in watersheds did not meet with success. The good performance of the GEF financed project in Brazil is due partly to being an offshoot of the successful 57 Projects EC 1297, ES 1321, ES 1416, ME 1349, PE 1240, PE 1352 and VE

60 D. Helder Camara project (BR 1101) and having maintained its effective managerial and administrative systems including staff; partly to strong country ownership expressed in terms of continued technical and financial support to the GEF component The large majority of projects (28 out of 33 under review) include activities in the human and social development cluster, which is second to physical assets, agriculture, marketing and enterprise development cluster in the number of components. The portfolio includes eight projects in six countries (Argentina, Dominican Republic, El Salvador, Guatemala, Honduras and Venezuela) that experience difficulties in achieving outputs/outcomes in the human and social capital development area. The most successful interventions under this domain are located in Brazil, Colombia, Uruguay and Paraguay Main outputs under the knowledge management and policy cluster are expected to be achieved at a rate of 70% or more by all four projects that include separate knowledge management components: CO 1294, PA 1389, PY 1333 and PE 1204, with relevance for the Colombia and Perú projects that expect to achieve all major outputs on time. Innovation, learning, knowledge management, replication and scaling-up 164. This year, 27 projects (or 82%) rated moderately satisfactory or better on innovation and learning, compared to 24 projects (75%) last year. The number of projects rated satisfactory or highly satisfactory 58 has decreased from 13 to 10. This reflects a more accurate and demanding assessment, including finer scrutiny of the line between creation, adaptation and adoption of innovations and of the learning and lesson / knowledge dissemination mechanisms in place The PCRV published by IOE during this review period include explicit reference to innovations introduced by some recently completed projects. The main innovation introduced by GREP (project Grenada Rural Enterprise Project GD 1181, completed in June 2009) was its participatory nature, giving project clients control over investment planning, implementation and monitoring. This went a step further than other projects in the Caribbean region and it was not standard practice in the institutions that were responsible for providing services to small poor farmers. Some sub-projects (e.g. the sea moss initiative) have also introduced innovative approaches in organizing the delivery of technical assistance, promoting participatory approached that fosters empowerment and entrepreneurship The PCRV also recognised the potential for replication in other rural development projects in the country of GREP participatory approach for community development. At project completion, due to the delays experienced in project implementation, the approaches for business development developed by GREP still required further refinement in terms of identification of appropriate institutions to provide required services, introduction of microenterprise income-generating activities in community action plans and identification of funding sources. The completion process of GD 1181 included a systematization workshop as well as four systematization studies which analyse and reflect on successful community participation experiences and document successful implementation methods that could be used at the wider Caribbean level as inputs for implementation of other projects In the case of PRONADEL (Honduras National programme for Local development HN 1198 also completed in 2009), the PCR identifies the CRAC approach for the set-up of saving and credit association networks as a major innovative feature of the project, 58 Rated 5 or 6 44

61 which was replicated in the new Emprende Sur project in Honduras (project HN 1535) approved in September The Division has been paying increasing attention to exploring the potential for innovation, replication and scaling up, not only within IFAD-financed portfolio or in the region but also across regions and development partners. One of the ongoing ventures in this area concerns the innovation marketplace, a mechanism designed to involve researchers from different countries in joint efforts to devise solutions to some of the challenges faced by smallholder farmers, rapidly, efficiently and at a low cost. Specifically, its purpose is to enhance the agricultural innovation and development processes through partnerships between research institutes, from Brazil (especially EMBRAPA) and other countries, to develop new useful productive approaches, smallholder friendly technologies and increases in food production. This initiative (supported by IFAD grant 1206) started in 2010 in collaboration with DFID and the World Bank, with the Africa-Brazil agricultural innovation marketplace. Box 2. An innovation model The Africa-Brazil agricultural innovation marketplace Research institutions are selected and awarded funding to implement research projects on a competitive basis through a simple process that includes the following steps: African agricultural researchers identify a problem or a bottleneck for smallholder agriculture in their home country; the Programme helps to bring together African and Brazilian researchers, who jointly prepare a project proposal to address the identified problems taking advantage of best practices in Brazil or through the development and/or adaptation of productive technologies; the Programme selects the best projects through a competitive process and finances each project with up to US$ 80,000 for their implementation; an Agricultural Innovation Marketplace Forum, takes place each year with participation of the researchers involved in the projects, to promote knowledge sharing based on the experiences of the projects under implementation This practical and innovative South-South Cooperation model has been considered successful and replicable by stakeholders and has also yielded experience on South-South Cooperation. The project has been up-scaled and replicated, using the same methodology and intervention mechanisms but targeted at Latin American research institutions, under IFAD grant project 1334 LAC-Brazil Agricultural Innovative Marketplace approved in December The Learning Routes approach is another example of a virtuous innovation learning scaling-up cycle. Initiated in Latin America, and more recently expanded to Africa and Asia, the Learning Routes have contributed to promote spaces for dialogue, exchange and alliances for cross fertilization among IFAD projects and to other public and private actors. An example in Latin America is the adoption of the successful experience gained from Popular Banks in Brazil to promote savings of rural poor women by institutions in Colombia that fight extreme poverty, such as Acción Social, which, through the Women Savers Program in Action, currently includes 3,000 women savers as direct beneficiaries and US$ 3 M approved in loans. 45

62 171. At the same time, inter-regional exchanges among projects from LAC and other regions have shown significant levels of effectiveness and impact in terms of adoption and scaling of innovations, as is the case of PAPSTA KWAMP in Rwanda and IMPP project in Vietnam, where the mechanism for competitive allocation of public resources (CLAR) developed in Peru was recognised as valuable to foster decentralization and promote partnerships with local organizations. In Vietnam, the IMPP project has implemented a pilot initiative in Ha Tinh with the participation of 50 local governments. In Rwanda, PAPSTA y KWAMP has organized nine public contests in six different districts with the participation of around 2,000 small farmers The rural women financial inclusion approach developed in Peru (see section 6.3 above) is being up-scaled in-country, where the recently created Ministry of Development and Social Inclusion is using it as a reference point for new generation social inclusion policies; and in other LAC countries such as Colombia where it aims to reach part of the country s 2.5 M beneficiaries of Conditional Cash Transfers programs The Division is aware of the need to couple innovation with knowledge management, especially when applying promising but not fully tested new methodologies. During the review period, the Division designed a new grant proposal for the economic empowerment of poor rural women in the LAC region. The objectives of this programme 59 are to (i) investigate more effective approaches and processes for building the capacity of excluded rural women to better manage and commercialize their business enterprises; and (ii) explore effective techniques for enhancing women s voice and power to influence local development priorities, operations and processes, and relevant policies. The programme will have one of its two components almost entirely devoted to learning and knowledge management. The voice and knowledge component will provide a vehicle for the generation, systematisation and dissemination of best practices and knowledge on women s economic empowerment. Outputs under this component will include knowledge products, a manual / toolkit on how to promote women-run enterprises in rural areas and publications ( voices from the field ) to capture and disseminate women's economic and political empowerment processes. Lessons will be shared with participating institutions and other stakeholders in the LAC region through reports, workshops and other dissemination events. This three-year project will be implemented by UN Women 60, which bodes well for up-scaling emerging successful approaches given its dual role of coordinating the whole United Nations system in its work on gender equality and women empowerment and of providing support to help UN member states to formulate policies and standards for gender equality and women s empowerment. Sustainability 174. As for other portfolio performance areas, the Division has applied added rigour in assessing individual project prospects for sustainability. As at end-june 2012, 20 of the 31 ongoing projects in June 2012 that were reviewed this year show moderately satisfactory or better prospects for sustainability, while eleven projects 61 show unsatisfactory average sustainability ratings and remained a matter of concern in terms of sustainability. Overall prospects to continue to deliver benefits after completion has been assessed as recognisably positive for eight projects 62. It is interesting to note that the whole portfolio in Brazil, Colombia, Nicaragua, Paraguay and Peru show positive sustainability prospects. 59 BEO Broadening economic opportunities for rural women entrepreneurs in LAC region, submitted for approval in July The United Nations Entity for Gender Equality and the Empowerment of Women 61 Projects AR 1279, BO 1490, ES 1416, GT 1274, GT 1317, GY 1415, HT 1275, HN 1407, HN 1535, PA 1389 and VE Projects BR 1335, CO 1294, NI 1120, NI 1380, PY 1333, PE 1240, PE 1352 and VE

63 175. As already mentioned in last year s report, attention to sustainability is critical from the start-up of project implementation. Experience shows that IFAD financed projects in the LAC region experience problems with developing capacities of both beneficiary and government institutions, with selecting and effectively managing the providers of critical services to target groups and rarely work on an exit strategy from the outset of implementation. The Division intends to pursue already initiated efforts on these fronts, which although slow to produce visible results are already reflected in the improvement of the quality and realism of exit strategies in four projects, namely CO 1294, GY 1415, HN 1407 and PY

64 7. EVALUATION AND SELF-ASSESSMENT 176. During the period under review, IOE published four completion report validation briefs (PCRV) in respect of projects in the LAC region 63. These documents serve to inform on the development effectiveness of IFAD s operations, and are used by IFAD management to benchmark performance of the project portfolio and set targets for the future in the Results Measurement Framework. The Division uses PCR and PCRV to extract knowledge in order to improve the design and the implementation of IFADfunded projects in the region. Some of the findings reflect recurrent weaknesses of projects in the region and can be applied for future project design and implementation Project designs should be simple and include few components, especially in countries experiencing political instability or other challenging contexts and limited institutional capacities. The level of complexity and the expertise required for implementation should be adapted to the management capacity and experience of the local staff. Project designs should avoid weak assumptions on methodological changes or adjustments that public institutions will make to adapt to the specific needs or operational strategies indicated in IFAD project designs A key issue, raised in all PCRV, concerns the challenge that unavailability of quantitative data poses for the assessment of the project effectiveness in relation to increased incomes and the achievement of project objectives. Where quantitative information is unavailable or is limited to indicators at the output level, not always comparable with set targets, projects are forced to draw on anecdotal evidence that undermines the credibility of their arguments. This can only be resolved by early establishment of sound M&E systems at project level. On the positive side, some of the projects reviewed by IOE have implemented stakeholder workshops or beneficiary satisfaction survey to offset quantitative data shortages. This adds a participatory dimension but opinions cannot be independently verified One of the PCRV also notes that the assessment of effectiveness is highly dependent on the quality of the log-frame. First, that it represents a coherent expression of programme objectives, second that it includes SMART indicators for relevant segments of the target population and expected outcomes and impacts. 63 PCRVs were published during the period under review for projects GD 559, HN , HT 1070 and NI 1256; these projects were completed between December 2009 and June

65 8. PORTFOLIO MANAGEMENT 8.1 Supervision and implementation support 180. Table 39 in appendix shows the supervision and implementation support missions carried out during the review period as recorded in PPMS. A total of 101 implementation support (IS) or direct supervision (DS) missions 64 covering 46 different investment projects were carried out between July 2011 and June In the previous review period, the number of missions totalled 85 in respect of 36 projects. The average number of missions per project (all types combined) decreased slightly from 2.4 to 2.2 compared with the last review year. The number of projects that received three or more missions in the year is also lower than in the last review period: 15 projects or about one third of projects that received missions in compared with 17 projects or almost half in This is not a sign of declining intensity of supervision and implementation support relative to project needs. It signals rather the positive effects of direct supervision, which has facilitated the resolution of outstanding problems inherited at the time of taking up direct supervision responsibility and the gradual improvement of project compliance with IFAD requirements. It also reflects improving ability to plan and manage the supervision / implementation support continuum in an increasingly efficient manner The Division is aware of the need to pursue efficiency gains on all fronts, including with regard to variable supervision and implementation costs, to endure budgetary restraints in a context of expanding ongoing portfolio. This has led to an internal reflection within the Division and initial discussions with in-house and country counterparts on ways and means to improve cost-effectiveness of IFAD s implementation support and supervision efforts towards enhancing projects results and impact in compliance with IFAD requirements The Division intends to conduct a number of pilots during the forthcoming review period to explore different avenues for continuing to deliver high value support to IFADfinanced projects in the region whilst reducing average unit costs per project. This will include maximising the use of tele- and video-conferencing, fine-tuning the scope and composition of missions on the basis of careful prioritisation of issues / areas to address in each particular mission (or to address by other means not requiring travelling), increased use of local consultants, efforts towards greater direct involvement of lead project agencies and other concerned project parties and co-financiers on both the operational and the financial dimensions of project supervision and implementation support Decentralisation should play an increasingly significant part, starting from Central America where the first fully equipped country and sub-regional office installed in Guatemala is expected to be fully operational by early As could efforts towards helping projects to improve quality and timeliness of project reporting, both operational and financial, including external audits, which, if auditors are issued with appropriate TOR and well selected, can provide valuable information on risks at zero cost to IFAD Another front that could generate benefits in terms of both cost and effectiveness relates to strengthened analysis of risks, at both design and implementation stages, as it can help prevent later emergence of problems always costly to resolve, or facilitate a faster response when a previously identified risk turns into a problem. Other good practices that the Division will continue to promote include ensuring timely conduction of 64 Including missions classified as FLM inter-phase review, mid-term review, start-up and project completion missions 49

66 start-up missions and of mid-term reviews, really at project mid-term and not later or project reviews early in implementation if implementation problems persist after one year from start-up; early restructuring projects that show signs of persistent underperformance; and containing extension of chronic problem projects assessed as unlikely to achieve its goals. 8.2 Risks 185. Table 40 in appendix summarises the prevalent risks areas registered in the PSR exercise, either explicitly indicated in the risk section of the PSR or in other PSR sections. The data presented is intended to be indicative as the risk analysis based on PSR data is not comprehensive and depends of different degrees of risk perception of country programme managers. Notwithstanding the above, PSR information indicates as most common risk areas: 1) lacking organizational/managerial capacity/human resources of PMU/LPA; 2) lacking organizational/human capability of beneficiary organizations; 3) lacking/weak implementation strategy (including exit strategy); and 4) leak planning and/or M&E capability. 8.3 Portfolio at risk 186. Notwithstanding that the Division continued to apply rigour in the performance assessment and rating of individual projects, the review period ended with two ongoing projects at risk less than at end-june 2011, seven compared with nine The risk status of the LAC portfolio has improved over last year not only by the two fewer projects at risk but mainly on proportional terms: the nine ongoing projects at risk in June 2011 represented 27% of the 33 of projects in the ongoing portfolio at the same date; this proportion decreased to 19% in June 2012 when the ongoing portfolio comprised 36 projects The seven projects-at-risk as at June 2012 comprise three projects that maintained the actual-problem-risk rating of last year and four projects that entered the project-at risk category during the period under review (Table 41 in the appendix). These are projects GT 1274, a chronic problem-project classified as actual-problem-project since , and projects ES 1416 and GT 1317, which entered the project-at-risk category during the review period; and projects BO 1298, EC 1354, PA 1389 and VE 1404, classified as problems-at-risk for the first time this year One of the six projects that left the project-at-risk category during the period under review 65 ended its life upon completion in September 2011 after staying as actualproblem-project for eight consecutive review periods since The other five were upgraded to the not-at-risk category during the review period: AR 1279, DO 1479, HN 1407, HT 1275 and NI Problem Patterns 190. The most common problem across the regional portfolio concerns weaknesses regarding log-frame quality and design and implementation of M&E systems at both project and country programme levels, which impacts on the ability to adequately plan and monitor results and impacts, including under the IFAD RIMS framework. This is one area of focus of direct supervision Other areas of relatively low performance this year include institution building and responsiveness of service providers, which have been discussed above under the section on sustainability, chapter Project PA

67 Average PSR ratings Chart VI. Areas of low performance ( ) Disbursement rate Exit strategy Performance of M&E Coherence between AWPB & implementation Institution building 192. Efforts initiated in previous review periods started to pay off in terms of improved project performance in three other areas of recent historical low performance in the region, namely disbursement rate, coherence between AWPB and implementation and timeliness and quality of exit strategy. Progress is notably visible in terms of disbursement, which rose from US$ 69 M to US$ 78 M compared with the review period. This reflected positively on the disbursement rate ratings. On the basis of the same new disbursement rating criteria inaugurated last year that had placed the regional average rating below 3.4, the regional average rating for disbursement is at a moderately satisfactory level 4.11 as at June Disbursement levels, as with most other factors of project performance, are under the influence of IFAD to a limited extent only. Nevertheless, disbursement is one of the proxies of project overall performance and recent improvements reflect an overall better health of IFAD s portfolio in the LAC region. This, in part, can be linked to the uptake of direct supervision and pro-active portfolio management since Proactivity 193. The pro-activity index 66 for the LAC region in the review period is 63%. This compares with 50%, 40% and zero in the three previous review periods since This significant improvement can be attributed to increasingly faster and more effective reaction to challenges confronted by ongoing projects since the Division took up direct supervision of the whole LAC portfolio in The reduced risk index 67 is 33% since only one (project ES 1416) of the three projects that were classified as actual-problem-projects last year and remained in the actual-problem group (projects ES 1416, 1274 and GT 1317) is featured by an improved performance during the review period. Performance of project ES 1416 started to improve rapidly since the beginning of The next supervision mission planned for November 2012 will update the review of the implementation status of the project, which is one of the strong candidates for upgrade out of the project-at-risk category during the forthcoming review period. 66 The pro-activity index is the share of projects rated as actual-problem in the previous review period that have been upgraded, restructured, closed, cancelled or suspended during the current review period 67 The reduced risk index is the share of projects rated as actual-problem-projects in the previous year that, despite remaining in the actual-problem group, are featured by an improved performance; this is calculated by comparing the average score on all PSR flags for the previous year with the average for the current review period 51

68 195. The two projects in Guatemala constitute a more serious problem, especially project GT Soon after the instalment of the new government, the Division approached the new authorities and started a process of joint examination of the challenges confronted by the IFAD programme in the country. This was still in process at the time of writing this report. During the third quarter of 2012, the Division expects to arrive at an agreement with the borrower on the terms on which the large country programme in Guatemala can be restructured in a way that responds to the huge poverty reduction challenges prevailing in the country. Country Project ID Effectiveness Table XIX. Reduced risk index Completion IP DO Average score all flags El Salvador Dec Dec Guatemala Oct Dec Guatemala Dec Dec Trend 196. As already mentioned in last year s report, the Division views the definitions of the pro-activity and reduced risk indexes as too narrow as they only capture certain changes with exclusive regard to projects in actual-problem status. The Division has been managing its portfolio comprehensively through actions that are intended at causing structural improvements. A broader definition of the indexes would allow for a more comprehensive understanding of the level of pro-activity in managing the portfolio as a whole. 52

69 9. CONCLUSIONS AND THE WAY FORWARD 197. During the past two decades, the LAC region has shown a positive trend in terms of both economic growth and poverty reduction, including resilience to withstand the great recession originated by the 2008 financial crisis. The general poverty headcount ratio decreased from 48% to 31% between 1990 and 2010, and the extreme poverty headcount dropped from 23% to 12% in the same period. However, due to the high levels of inequality that persist in the region, these national averages present a distorted picture of the living conditions in significant territorial spaces and population groups including, notably, indigenous groups, those of African descent, and the rural population in general LAC countries also differ significantly from one another, and performance in terms of economic growth and reduction of poverty levels and income inequalities has been heterogeneous. In the forthcoming review period, the Division intends to gear up to take into account differentiated performances of the region s economies in terms of economic growth, levels of poverty and inequality, and also by their institutional capacity, to determine the type and the extent of support to LAC countries As for the LAC portfolio, marked improvements have been achieved during the review year. The improvements are particularly visible in terms of increased lending portfolio, co-financing ratio, disbursement level, and the risk status of the portfolio In the current review period, the value of IFAD financing in the investment portfolio rose by 10% from June 2011, from US$ 620 million to US$ 686 million. This was the result, to a large extent, of the relatively large amount of IFAD financing approved (US$ 132 million), which is the largest ever in a single review year. Three quarters of the total loan amount approved in have been provided on ordinary terms and less than 8% on highly concessional terms. This makes the structural change of the distribution of IFAD s lending portfolio increasingly visible. Over the past ten years, the proportion of ordinary lending in LAC s current portfolio value jumped from around 40% to almost two thirds, and the proportion of highly concessional terms dropped from more than 30% to less than 13% over the same period The number of new investment project approvals in the year contributed to further reduce the average age of the current portfolio, which has gone through a remarkable rejuvenation since This is illustrated by the proportion of ongoing projects aged less than three years which rose from 33% to 43%, and by the reduction in the number of projects aged more than six years that dropped from 11 (or 26%) in June 2009 to four (or 9%) in June This is the combined result of an expanding number of approved projects and which become effective faster, and of the divisional policy of containing project extensions, which has enabled the Division to bring down the number of projects on time overrun from nine in June 2009 to two in June The co-financing ratio of the current portfolio also improved significantly in the review year. Overall, for each US dollar committed by IFAD, external financing sources provide US$ 0.91 as at June 2012, compared with US$ 0.65 last year and US$ 0.55 the year before. This improvement is particularly visible in the Andean and the Southern Cone sub-regions where the majority of new operations co-financed with the Spanish Trust Fund are located The positive disbursement trend, which started following the uptake of direct supervision by the Division in , continued to intensify during the review period. Total disbursement from loan and DSF grants to the region during the review period amounted to US$ 78 million, which represents a 12% increase over the last 53

70 review year. This improvement brought the level of overall disbursement to the region 9% above the level of expected disbursement, and is a remarkable improvement compared with 4-5 years ago when the region lagged behind expected disbursement by around 15% Notwithstanding that the Division continued to apply rigour in the performance assessment and rating of individual projects, the review period ended with two ongoing projects at risk less than at end-june This reflects a meaningful improvement on proportional terms since the seven ongoing projects at risk in June 2012 represent 19% of the 36 projects ongoing at the end of the review year, compared with 27% (nine out of 33 projects) one year ago Notable achievements were made in other areas of the portfolio. Average time from approval to effectiveness has dropped to less than 15 months this year compared with 32 months in and 23 months in The proportion of LAC project designs rated 5 or better by Quality Assurance remained above the IFAD overall level on all indicators over the period , except for the Sustainability of Benefits indicator which is at par with average IFAD ratings. Efforts in collaboration with the Environment and Climate Division to mainstream environment and climate change into investment operations resulted in the approval of US$ 8 million in GEF financing this year. The Division expects the amount of GEF financing to rise up of US$ 28.7 million by the end of the forthcoming review period, from US$ 8.5 million at the beginning of this review year. The time required to process withdrawal applications dropped by 10 days in the second semester of 2011, and by further five days in the first semester of The 13 day average WA processing time for the whole review year is less than half of the 29 days required in , the first complete review period following uptake of loan responsibilities by the Division With the achievements made during the review year , the areas that continue to show relative weaknesses have narrowed. One of the areas where the Division needs to do more is M&E. In the forthcoming review period, the Division will pay particular attention to a number of areas, including early implementation support to recently effective projects, better coverage of baseline and impact on completion studies, and better integration of project-level M&E into country programme results frameworks. These are explained in section 5.8 above The significant expansion of the regional portfolio, thanks partly to the additional resources provided through the Spanish Trust Fund, makes new implementation and supervision approaches necessary given the need for more intensive high quality supervision arising from the expanded current portfolio. In this regard, the Division has made significant progress on improving portfolio management and project supervision and has learned how to address implementation challenges and to identify more entrenched problems of a structural nature that cannot be resolved on a project-byproject basis. This should help to enhance the effectiveness of IFAD financed projects but measurable results and impact will take time to emerge since the portfolio is now comprised of a majority of very young projects (two thirds less than three years, of which almost one third not yet effective) The Division will pursue further efficiency gains by looking for ways to improve cost-effectiveness. An intra-divisional reflection and initial discussions within house and in-country have started during the review year. The Division will start to conduct a number of pilots in different countries to explore avenues for continuing to deliver high value support to IFAD-financed projects in the region whilst reducing average unit costs per project The second but not last thrust encompasses the adoption of a differentiated approach to determine the type and the extent of support to LAC countries, as 54

71 mentioned in Paragraph 198 above. This approach will be adopted to develop a pipeline of new generation projects for the forthcoming PBAS period that starts in January It will embrace countries with sizeable allocations, countries which attract external and / or government co-financing and countries where institutional conditions are conducive to new ways of working on rural poverty reduction In addition, the Division intends to intensify learning and innovation in selected innovation-intensive countries with a view to piloting new programme instruments suitable for enhancing IFAD s contribution to poverty and with potential for up-scaling and mainstreaming at national / sectorial policy and strategy levels, with the support of a focused strategic grant programme. This implies greater emphasis on knowledge management and policy dialogue, as well as on the adoption of new lending instruments by IFAD The process of formulation of new COSOPs planned for in a number of LAC countries will be key to determine priorities and new types of intervention countryby-country and help to move from a project-by-project approach to a more programmatic approach geared towards increasing levels of social inclusion for the region s rural population and marginalised population groups including, indigenous peoples and Afro-descendants. 55

72 56

73 APPENDIX

74

75 Table 1. Current LAC investment portfolio as at 30 June 2012 Status Country Project Board Loan Date Project Loan Approval Signing of Comp. Closing Date Date Effect. Date Date Ongoing 1 Argentina 1279 Patagonia Rural Development Project 02 Dec Nov Sep Sep Mar 14 Argentina 1364 Rural Areas Development Programme 14 Dec Oct Dec Dec Jun 16 Argentina 1610 Inclusive Rural Development Programme 15 Sep Nov Dec Dec Jun 18 Belize 1456 Rural Finance Programme 17 Dec May Sep Sep Mar 17 Bolivia 1298 Enhancement of the Peasant Camelid Economy Support Project 14 Dec Nov Nov Dec Jun 16 Bolivia 1490 Plan VIDA-PEEP to Eradicate Extreme Poverty - Phase I 17 Dec Mar Aug Sep Mar 16 Brazil 1335 Rural Communities Development Project in the Poorest Areas of the State 20 Apr Jul Dec Dec Jun 13 of Bahia Colombia 1294 Rural Microenterprise Assets Programme: Capitalization, Technical 14 Sep Feb Jun Jun Dec 13 Assistance and Investment Support Dominican Republic 1479 Development Project for Rural Poor Economic Organizations of the Border 30 Apr Jun May Jun Dec 16 Region Ecuador 1297 Development of the Central Corridor Project 02 Dec Mar Sep Sep Mar 14 Ecuador 1354 Ibarra-San Lorenzo Corridor Territorial Development Project 15 Sep Mar Mar Mar Sep 17 Ecuador 1588 Buen Vivir in Rural Territories Programme 15 Sep May May Jun Dec 18 El Salvador 1321 Rural Development and Modernization Project for the Eastern Region 19 Apr Jan Dec Dec Jun 17 El Salvador 1416 Rural Development and Modernization Project for the Central and 12 Sep Apr Dec Dec Jun 16 Paracentral Regions LOT El Salvador 1568 Rural Territorial Competitiveness Programme 15 Dec Mar Jun Jun Dec 17 Grenada 1569 Market Access and Rural Entrerprise Development Programme Mar Mar Mar Sep 17 Guatemala 1274 National Rural Development Programme Phase I: the Western Region 11 Sep Apr Oct Dec Jun 13 Guatemala 1317 National Rural Development Programme: Central and Eastern Regions 02 Dec Jun Dec Dec Jun 15 Guatemala 1473 Sustainable Rural Development Programme for the Northern Region 17 Dec Dec Jan Mar Sep 18 Guyana 1415 Rural Enterprise and Agricultural Development Project 13 Dec Jul Jan Mar Sep 15 Haiti 1171 Productive Initiatives Support Programme in Rural Areas 23 Apr Jun Dec Dec Jun 15 Haiti 1275 Small-scale Irrigation Development Project 14 Dec May Nov Dec Jun 16 Honduras 1407 Project for Enhancing the Rural Economic Competitiveness of Yoro 13 Dec Mar Nov Dec Jun 16 (PROMECOM) Honduras 1535 Sustainable Rural Development Programme for the Southern Region 16 Sep Feb (Emprende Sur)

76 Status Country Project Board Loan Date Project Loan Approval Signing of Comp. Closing Date Date Effect. Date Date 2 Honduras 1595 Northern Horizons-Competitiveness and Sustainable Rural Development 29 Aug Sep Feb Mar Sep 18 Project in the Northern Zone Mexico 1349 Sustainable Development Project for Rural and Indigenous Communities 08 Sep Mar Sep Sep Mar 13 of the Semi-Arid North-West Mexico 1412 Community-based Forestry Development Project in Southern States 15 Sep Mar Mar Mar Sep 16 (Campeche, Chiapas and Oaxaca) Nicaragua 1120 Technical Assistance Fund Programme for the Departments of León, 09 Dec May Jun Jun Dec 13 Chinandega and Managua Nicaragua 1380 Inclusion of Small-Scale Producers in Value Chains and Market Access 12 Sep Jan Aug Sep Mar 16 Project Nicaragua 1505 Agricultural, Fishery and Forestry Productive Systems Development 15 Dec Sep Jan Mar Sep 17 Programme in RAAN and RAAS Indigenous Territories Panama 1389 Participative Development and Rural Modernization Project 24 Apr Jul Mar Mar Sep 16 Paraguay 1333 Empowerment of Rural Poor Organizations and Harmonization of 19 Apr Jun Aug Sep Mar 14 Investments (Paraguay Rural) Project Peru 1240 Market Strengthening & Livelihood Diversification in the 11 Dec Oct Apr Dec Jun 14 Southern Highlands Project Peru 1352 Project for Strengthening Assets, Markets and Rural Development Policies 13 Dec Feb Sep Sep Mar 15 in the Northern Highlands Venezuela 1252 Sustainable Rural Development Project for the Semi Arid Zones of Falcon 18 Dec Dec Jul Sep Mar 13 and Lara States Phase II Venezuela 1404 Orinoco Delta Warao Support Programme 17 Dec Dec Oct Dec Jun 18 No. of Projects - 36 Not Signed Bolivia 1598 Economic Inclusion Programme for Families and Rural Communities in the 13 Dec 11 Territory of the Plurinational State of Bolivia Brazil 1486 Semi-arid Sustainable Development Project in the State of Piauí 15 Sep 09 Brazil 1487 Cariri and Seridó Sustainable Development Project 17 Dec 09 Colombia 1491 Building Rural Entrepreneurial Capacities Programme: Trust and 03 Apr 12 Opportunity Guatemala 1519 Sustainable Rural Development Programme in El Quiché 22 Apr 10 Mexico 1597 Rural Development Project in the Mixteca Region and the Mazahua Zone 03 Apr 12 Paraguay 1611 Inclusion of Family Farming in Value Chains Project 02 Apr 12 No. of Projects - 7 Not Effective Dominican Republic 1533 Rural Economic Development Project in the Central and Eastern Provinces 22 Apr May 10 Total No. of Projects - 44 Source: PPMS No. of Projects - 1

77 3 Table 2. Current LAC grant portfolio as at 30 June 2012 Project Grant No. Approval Effective Completion Closing Enhancing the Gender-sensitive Impact of Remittances for Rural Dev. in LAC COFIN-SP-15-FUNDA-K 20 Aug Dec Dec Jun Knowledge Management in the North eastern Semi-Arid Region of Brazil COFIN-SP-16-IICA 27 Apr May Mar Sep Knowledge Sharing on Food Security in Haiti/Dominican Republic COFIN-SEC-825-FAO 02 Nov Jan Mar Sep Peru as a Learning Territory COFIN-FN-1336-FUNDA-K 17 Apr Apr Dec Sep Sustainable Land Management in the semiarid - Sertão Project GEF-FSP-2-BR 14 Dec Aug Sep Mar Sust. Mgmt. of Biodiversity and Water in Ibarra-San Lorenzo, Ecuador GEF-FSP-21-EC 04 May Nov Mar Sep Sustainable Mgmt of Protected Areas of the Northern Highlands of Peru GEF-FSP-22-PER 08 Jul Sep Sep Jun Proyecto de Mitigación del Cambio Climático en el Sur de México GEF-FSP-28-MX 18 Oct Mar Mar Sep PRODEMORO, El Salvador (Loan 666-SV) LC-784-SV 19 Apr Dec Dec Jun Gente de Valor, Brazil (Loan 696-BR) LC-850-BR 20 Apr Sep Sep Mar PRODENORTE, Guatemala (Loan 770-GT) LC-1070-GT 17 Dec Jan Mar Sep Sierra Sur, Peru (Loan 602-PE and 799-PE) LC-1158-PE 17 Dec Aug Dec Jun NI - Apoyo al IV Censo Agropecuario DSF-8075-NI 23 Dec May Dec Jun Strengthening of Farmer Organisations to Promote Policy Dialogue TAG-1109-COPROFAM 30 Apr Nov Dec Jun Learning Routes Programme II TAG-1178-PROCASUR 17 Dec Apr Jun Dec Knowledge for Change: Policy processes for poverty impact TAG-1203-RIMISP 22 Apr May Jun Dec Young Rural Women in LAC in the 21st Century TAG-1250-IEP 05 Dec Apr Jun Dec Market Access Programme for Rural Associative SME's in Central America TAG-1256-AGEXPORT 15 Dec Mar Mar Sep Building and Scaling-Up Knowledge on High Andean Livestock TAG-1292-FUNDABIO 27 Jun Jul Sep Jun Promoting Young People's Entrepreneurship in Poor Rural Areas of LAC TAG-1305-PROCASUR 29 Aug Nov Dec Jun Public Policy Dialogue on Family Farming in the Southern Cone of LAC TAG-1326-CLAEH 27 Nov Nov Mar Sep LAC-Brazil Agricultural Innovation Marketplace TAG-1334-FUNARBE 05 Dec Dec Dec Sep Peru as a Learning Territory TAG-1336-FUNDA-K 03 Dec Dec Dec Sep Legal Preparedness for Climate Change and Rural Development in LAC TAG-1344-IDLO 20 Dec Dec Feb Nov Cooperativa de Mujeres 4Pinos TAG Pinos 20 Dec Dec Dec Sep Programme on Conditional Cash Transfers and Rural Development in LAC TAG-1373-UNIANDES 05 May May Jun Dec Subtotal on-going (26 grants) 37.7 Sustainable and climate-friendly dev. in Veraguas Province, Panama GEF-FSP-024-PA 13 Feb Quiché, Guatemala (Loan 812-GT) LC-1201-GT 15 Dec Trust and Opportunity Project, Colombia (Loan 871-CO) LC-1360-CO 03 Apr Dev. of the Mixteca and Mazahua (Loan 872-MX) LC-1361-MX 03 Apr Strengthening Community-Based Mgmt of the REDD+ Strategy in Mesoamerica TAG-1303-NAFIN 29 Aug Programme to Strengthen Rural Afro-descendant Communities in LAC TAG-1369-ACUA 05 May Subtotal approved not effective (6 grants) 7.6 Total Current Portfolio (32 grants) 45.3 Amount (million US$)

78 Country Project ID Current completion Imp. Prog Dev. Obj. Phys. & Fin. Assets Food Sec. Fin. Manag Disb. Rate Count. Funds Table 3A. PSR ratings of ongoing projects Overall assessment & risk profile Fiduciary aspects Project implementation progress Loan Coven. Proc. Audits Proj. Manag. M&E AWPB & Imp. Gender Focus Pov. Focus Target Appr. Innov & Learning Outputs and outcomes (component ratings) C.1 C.2 C.3 C.4 C.5 Inst. Building Emp. Sustainability Benef Partic Service Provid. Exit Strat. Scal. up & Replic. 4 Argentina Dec Argentina Sep Argentina Dec Argentina Dec Belize Sep Bolivia Dec Bolivia Sep Brazil Dec Colombia Jun Domin. Rep Jun Ecuador Sep Ecuador Mar El Salvador Dec El Salvador Dec El Salvador Dec Grenada Mar Guatemala Sep Guatemala Dec Guatemala Dec Guyana Mar Haiti Dec Haiti Dec Honduras Dec Honduras Mar Mexico Sep Mexico Mar Nicaragua Jun Nicaragua Sep Panama Sep Panama Mar Paraguay Sep Peru Dec Peru Sep Venezuela Sep Venezuela Dec Regional average

79 5 Country Project ID Date of entry into force Project completion date No. of supervision missions Last supervision date Table 3B. Summary indicators MTR date Pre / post MTR No. of extensions Implem. Progress rating Likelihood of achieving D.O. rating No. of PBAS risk flags rated 3 or less PAR value Argentina Mar Dec May Jul-06 Post MTR Not at risk Argentina Sep Sep May Mar-09 Post MTR Not at risk Argentina Dec Dec May 12 Pre MTR 4 4 Not at risk Argentina Dec Dec 17 Pre MTR 4 4 Not at risk Belize Sep Sep Jun 12 Pre MTR Not at risk Bolivia Nov Dec Jun 12 Pre MTR Not at risk Bolivia Aug Sep 15 Pre MTR 3 4 Actual problem Brazil Dec Dec May Jan-11 Post MTR 5 5 Not at risk Colombia Jun Jun Apr Oct-10 Post MTR 5 5 Not at risk Dom. Rep May Jun Apr 11 Pre MTR Not at risk Ecuador Sep Sep Jun Dec-10 Post MTR Not at risk Ecuador Mar Mar 17 Pre MTR 3 4 Actual problem El Salvador Dec Dec Nov 11 Post MTR Not at risk El Salvador Dec Dec Apr 12 Pre MTR 4 4 Not at risk El Salvador Dec Dec Apr 12 Pre MTR Actual problem Grenada Mar Mar Mar 12 Pre MTR 4 4 Not at risk Guatemala Sep Sep Jun Jul 06 Post MTR Not at risk Guatemala Oct Dec Dec May 11 Post MTR Actual problem Guatemala Dec Dec Dec 11 Post MTR Actual problem Guyana Jan Mar Feb Apr 12 Pre MTR Not at risk Haiti Dec Dec Jun May 11 Post MTR 1 * Not at risk Haiti Nov Dec Sep Mar 12 Pre MTR Not at risk Honduras Nov Dec Feb 12 Pre MTR Not at risk Honduras Feb Mar Feb 12 Pre MTR 4 4 Not at risk Mexico Sep Sep Oct 11 Post MTR Not at risk Mexico Mar Mar Oct 11 Pre MTR 5 4 Not at risk Nicaragua Jun Jun May Jun 09 Post MTR 4 4 Not at risk Nicaragua Aug Sep May Sep 11 Pre MTR 5 5 Not at risk Panama Sep Sep Oct Dec 08 Post MTR Actual problem Panama Mar Mar Mar 12 Pre MTR Potential problem Paraguay Aug Sep Mar Jul 11 Post MTR 5 6 Not at risk Peru Apr Dec Jun Sep 09 Post MTR 1 * 5 5 Not at risk Peru Sep Sep Dec 11 Pre MTR Not at risk Venezuela Jul Sep Apr Jul 09 Post MTR Not at risk Venezuela Oct Dec Sep 11 Pre MTR Actual problem * Project implementation period extended in conjunction with approval of IFAD supplementary financing

80 Table 4A. GSR ratings of ongoing projects 1109-COPROFAM 1178-PROCASUR 1203-RIMISP 1250-IEP AGEXPORT PROCASUR 1326-CLAEH Performance Co-financing Coherence with AWPB Disbursement Q/T Financial Q/T Technical Knowledge Sharing & Mgmt Linkages to portfolio Relevance to target group Innovations Gender Focus Implementation Progress Development Objectives Scaling up Average rating Table 4B. GSR Ratings of projects completed in the current review period TAG-537-CARUTA TAG-1036-IDRC TAG-1056-MERCOSUR TAG-1169-CIAT Performance Co-financing Coherence with AWPB Disbursement Q/T Financial Q/T Technical Knowledge Sharing & Mg Linkages to portfolio Relevance to target grou Innovations Gender Focus Implementation Progres Development Objectives Scaling up Average rating

81 Table 5A. Projects with delays in entry into force 7 Country Project Id Project Name Table 5B. Projects with delays in signing Lending Terms IFAD Current Financing (USD '000) Approval Date Time since approval by 30 June 2012(months) Expected Signing date Bolivia 1598 ACCESOS I Dec nd Sem 2012 Guatemala 1519 QUICHE O Apr December 2012 Colombia 1491 TOP O Apr September 2012 Brazil 1487 Paraiba O Dec rd Quarter 2012 Brazil 1486 Piauí O Sep rd Quarter 2012 Mexico 1597 Las Mixtecas O Apr th Quarter 2012 Paraguay 1611 Paraguay Inclusivo (PPI) O Apr August

82 Table 6A. Disbursement performance of loans and DSF grants Project ID Project name Loan / DSF No. Entry into force Project completion Loan / DSF amount (SDR M) Cum. Disb. (SDR M) Expected Disb. (SDR M) % Disbursed Expected % disb. Disb. LAG Calc. ARGENTINA 1098 PRODERNOA Mar Dec % 93% -7% 1279 PRODERPA Sep Sep % 51% 36% 1364 PRODEAR Dec Dec % 22% -33% 1610 PRODERI Dec Dec % 5% -905% % 49% -7% BELIZE 1456 RFP Sep Sep % 25% 8% % 25% 8% BOLIVIA 1298 VALE Nov Dec % 22% -188% 1490 PLAN VIDA FASE I Aug Sep % 6% -120% % 14% -173% BRAZIL GENTE DE VALOR Dec Dec % 59% -49% % 59% -49% COLOMBIA 1294 OPORTUNIDADES Jun Jun % 53% -49% % 53% -49% DOMINICAN REPUBLIC 1479 PRORURAL OESTE May Jun % 16% 56% % 16% 56% ECUADOR 1297 CORREDOR CENTRAL Sep Sep % 51% -8% 1354 IBARRA-SAN LORENZO Mar % 9% -5% 1354 IBARRA-SAN LORENZO Mar % 9% -5% 1354 IBARRA-SAN LORENZO 30 Mar % 9% -5% 1588 BUEN VIVIR May Jun % 0% % 20% -8%

83 Project ID Project name Loan / DSF No. Entry into force Project completion Loan / DSF amount (SDR M) Cum. Disb. (SDR M) Expected Disb. (SDR M) % Disbursed Expected % disb. Disb. LAG Calc. EL SALVADOR 1215 PRODERMOR Dec Dec % 94% -7% 1321 PRODEMORO Dec Dec % 35% -14% 1416 PRODEMOR-CENTRAL Dec Dec % 22% -12% 1568 AMANECER RURAL Jun Jun % 0% % 44% -8% GRENADA 1569 MAREP Mar Mar % 9% -96% % 9% -96% GUATEMALA 1085 PRODEVER Sep Sep % 95% -4% 1274 OCCIDENTE Oct Dec % 59% 57% 1317 ORIENTE Dec Dec % 35% 31% 1473 PRODERNORTE Jan Mar % 0% -1728% % 48% 27% GUYANA 1415 READ Jan % 32% 2% 1415 READ Jan % 32% 2% 1415 READ 31 Mar % 32% 2% % 32% 2% HONDURAS 1407 PROMECOM Nov Dec % 35% 9% 1535 EMPRENDE SUR Feb Mar % 9% -2% 1595 HORIZONTES DEL NORTE Feb Mar % 0% % 15% 7% HAITI 1171 PAIP Dec % 94% -7% 1171 PAIP Jan % 0% 1171 PAIP 31 Dec % 73% -7% 1275 PPI Nov % 35% 6% 1275 PPI Jan % 18% -183% 1275 PPI-2 31 Dec % 30% -28% % 58% -11%

84 MEXICO 1349 PRODESNOS Sep Sep % 62% 28% 1412 DESARROLLO SUR Mar Mar % 9% -31% % 54% 26% NICARAGUA 1120 PROGRAMA FAT Jun Jun % 95% 10% 1380 PROVACAL Aug % 38% -25% 1380 PROVACAL 8009A 09 Jul % 38% -25% 1380 PROVACAL 30 Sep % 38% -25% 1505 NICARIBE Jan % 0% -2556% 1505 NICARIBE Jan % 0% -2556% 1505 NICARIBE 31 Mar % 0% -2556% % 56% -1% PANAMA 1199 NGOBE-BUGLE II Sep Sep % 91% 17% 1389 PARTICIPA Mar Mar % 18% -11% % 78% 16% 10 PERU 1240 SIERRA SUR Apr % 78% -24% 1240 SIERRA SUR II Sep % 14% -80% 1240 SIERRA SUR 31 Dec % 59% -28% 1352 SIERRA NORTE Sep Sep % 25% -62% % 25% -62% % 47% -34% PARAGUAY 1333 PARAGUAY RURAL Aug % 51% -93% 1333 PARAGUAY RURAL Dec % 5% 100% 1333 PARAGUAY RURAL 30 Sep % 41% -88% % 41% -88% VENEZUELA 1252 PROSALAFA II Jul Sep % 62% -46% 1404 WARAO Oct Dec % 11% 50% % 39% -33% Total 47 loans / DSF grants % 45% -9% Expected disbursement is calculated from the IFAD model, as at 30/6/2012. Percentage disbursement is calculated against the loan amount net of cancellations. Projects with closed loans have been excluded. Source: LGS/PPMS

85 Table 6B. Loans with disbursement lag of 40% or more Table 7. Relative share of co-financiers in LAC s portfolio (US$ 000) Type of Cofinancier Andean CA & Caribbean Southern Cone Grand Total % 11 Cooperating Institutions BCIE CAF CDB Total % Multilateral Organizations OPEC Fund Global Enviromental Facility World Bank Total % Bilateral Organizations/Funds Spanish Fund Switzerland/SDC Total % Others Domestic Financial Institutions International & Local NGOs - Private Sector Total % Grand Total %