Latin America and the Caribbean Division Annual Portfolio Performance Report

Transcription

1 Volume I - Main report and appendices

2

3 VOLUME I: Main Report Table of contents Abbreviations and acronyms vi Project identification numbers and acronyms vii Glossary x Map of Latin America and the Caribbean Region xiii Executive Summary xv I. Overview of the economic and social situation 1 A. Economic outlook 1 B. Social outlook 2 C. The rural sector 3 D. The progress and challenges in LAC rural development 4 II. Country programmes 6 A. RB-COSOPs presented to the EB 6 B. Country programme issues 7 III. Current investment portfolio and operations 9 A. Characteristics 9 B. Operations 13 IV. Current grant portfolio and operations 18 A. Characteristics 18 B. Grant implementation performance 22 C. Linkages to the investment portfolio and knowledge management 22 D. Lessons learned 22 V. Management performance of on-going portfolio 24 A. Project management 24 B. Disbursement performance 25 C. Counterpart funding 27 D. Financial management 27 E. Loan administration 28 F. Procurement 30 G. Compliance with financing covenants 31 H. Audit 31 I. Monitoring and evaluation 32 VI. Results of the on-going portfolio 34 A. Overall implementation progress 34 B. Outputs and outcomes 35 C. Targeting, poverty and gender 38 D. Innovation, learning, knowledge management, replication and scaling-up 39 E. Sustainability 40 VII. Evaluation and self-assessment 42 iii

4 VIII. Portfolio management 44 A. Supervision and implementation support 44 B. Risks 45 C. Portfolio at risk 46 D. Problem Patterns 49 E. Proactivity and reduced risk 50 IX. Conclusions and the way forward 52 List of Figures Chart I - Average IFAD financing per project (on-going portfolio) 9 Chart II - Current portfolio by financing sources 10 Chart III - IFAD financing by lending terms (current portfolio): Chart IV - Grants approved in by thematic areas 20 Chart V - Disbursement by sub-region Chart VI - Areas of relative low performance ( ) 49 List of Tables Table I - LAC and IFAD overall current portfolio (IFAD financing) 9 Table II - Variation of current portfolio financing structure (US$m) 10 Table III - IFAD financing approved by lending terms 11 Table IV - Current portfolio co-financing ratio 12 Table V - Financing approved during the review period 13 Table VI - Financing agreements that became effective during the review period 14 Table VII - Financing agreements signed during the review period 14 Table VIII - Financing agreements not signed or signed and not effective: June Table IX - Age structure of current portfolio 15 Table X - Projects completed during the review period 16 Table XI - Investment projects extended during the review period 16 Table XII - Cancellations during the review period 16 Table XIII - Current and on-going grant portfolio 30 June Table XIV - IFAD financed on-going grants 30 June Table XV - Maturity of current IFAD-financed grant portfolio June Table XVI - Disbursement performance of slow disbursing projects 26 Table XVII - Current IFAD financed portfolio: approved not disbursing projects 27 Table XVIII - Financial management risk ratings Table XIX - Withdrawal application processing data by review period 29 Table XX - Ratings of outputs and outcomes Table XXI - Reduced risk index Appendices Table 1 : RB-COSOP programme: June Table 2: Current investment Portfolio: June Table 3: Current investment portfolio - IFAD financing by sub-region: Table 4: Current investment portfolio - IFAD financing by impact domain and sub-region: Table 5: Current investment portfolio: Table 6: GEF financing: June Table 7: Current investment portfolio by type of co-financier and sub-region (US$'000): June Table 8: Current investment portfolio - co-financing ratio by country: June iv

5 Table 9: Approved IFAD and STF financing: PBAS period (US$'000) 9 Table 10: New investment projects that became effective: Table 11: IFAD financing agreements signed for new investment projects: Table 12: Delays in signing and effectiveness - IFAD financing agreements: Table 13: IFAD financing agreements not signed more than two months after approval: June Table 14: Investment projects completed during the review period: Table 15: Time overrun of investment projects: June Table 16: Project extensions: Table 17: Current grant portfolio: June Table 18: Maturity of current grant portfolio: review period 18 Table 19: On-going grant portfolio by grant policy output: June Table 20: Grant financing approved: review period 20 Table 21: Grants that became effective: review period 20 Table 22: Grant disbursement rates: 30 June Table 23: Grant completed: review period 22 Table 24: Grants closed or cancelled: review period 22 Table 25: Grants with overdue closing dates: June Table 26: GSR ratings of grant projects: June Table 27: PSR ratings of investment projects: June Table 28: Disbursement performance of investment projects - IFAD financing: June Table 29: Loans and DSF grants with disbursement lag of 40% or more: June Table 30: Withdrawal application processing by country: Table 31: Project SOE thresholds: June Table 32: Status of receipt of audit reports due for FY ended in Table 33: Status of 2012 project RIMS reporting delivery: June Table 34: Status of 2012 project RIMS reporting delivery: June Table 35: PSR aggregate ratings of investment portfolio: June Table 36: Results Management Framework country ratings: Table 37: Project output ratings by impact domain: Table 38: Direct supervision and implementation support missions: Table 39: Risk matrix: June Table 40: Summary indicators of investment projects: June Table 41: Investment projects at risk: Table 42: Action plan for improving investment Portfolio Performance: June Table 43: Action plan for improving grant portfolio performance: June VOLUME II: Annexes Part A: Country Programme Reports Part B: Bolivia - COSOP Review Report Part C: Regional Grants v

6 Abbreviations and acronyms AAA Agro Action Allemande AECID Agencia Española de Cooperación Internacional para el Desarrollo AND Andean sub-region AWPB Annual Work Programme and Budget ARTS Audit Reports Tracking System CFS Controller s and Financial Services Division CAMC Mexico, Central America and Caribbean (sub-region) CDB Caribbean Development Bank CAF Development Bank of Latin America (formerly Corporacion Andina de Fomento) CI Cooperating Institution COSOP Country Strategic Opportunities Programme CPIS Country Programme Issues Sheet CPM Country Programme Manager CPMT Country Programme Management Team DHC DSF and HC blend lending terms DO Development Objective DS Direct supervision DSF Debt Sustainability Framework ECLAC Economic Commission for Latin America and the Caribbean FAO Food and Agriculture Organization of the United Nations FLM Flexible Lending Mechanism FM Financial Management FY Financial Year G Grant GDP Gross Domestic Product GEF Global Environment Facility GSR Grant Status Report HC Highly concessional lending terms I Intermediary lending terms IDB Inter-American Development Bank IEPS Instituto de Estudios Peruanos IICA Instituto Inter-Americano de Cooperación Agrícola IMF International Monetary Fund IP Implementation Progress LAC Latin America and the Caribbean LGS Loans and Grant System MCA Millenium Challenge Account MCAC Mexico, Central America and Caribbean sub-region M&E Monitoring and Evaluation MIC Middle Income Country MTR Mid-term Review O Ordinary lending terms PBAS Performance Based Allocation System PCR Project Completion Report PCRV Project Completion Report Validation PD Programme Management Department PDP Project Disbursement profile PMU Project Management Unit PPMS Project and Portfolio Management System PSR Project Status Report PY Project Year QA Quality Assurance QE Quality Enhancement REAF Reunión Especializada de Agricultura Familiar RMF Results Management Framework RIMS Results and Impact Management System SC Southern Cone sub-region SOE Certified Statement of Expenditure STF Spanish Trust Fund TAG Technical Assistance Grant TOR Terms of Reference UCAR Unidad para el Cambio Rural (Argentina) UNDP United Nations Development Programme UNOPS United Nations Office of Project Services WA Withdrawal Application WB The World Bank vi

7 Project identification numbers and acronyms Country Project ID Bolivia BO VALE Loan Grant Acronym Project title ANDEAN sub-region Bolivia BO PLAN VIDA Bolivia BO 7-BO ACCESOS Colombia CO OPORTUNIDADES Colombia CO 10-CO Ecuador EC 804 Ecuador 1354 Ecuador 1588 Peru EC 804-EC 849-EC 5-EC 602-PE 799-PE 21 TOP CORREDOR CENTRAL IBARRA-SAN LORENZO BUEN VIVIR RURAL 1158 SIERRA SUR Peru PE 22 SIERRA NORTE Peru PE SIERRA Y SELVA ALTA Venezuela VE 23 PROSALAFA II Enhancement of the Peasant Camelid Economy Support Project Plan VIDA-PEEP to Eradicate Extreme Poverty - Phase I Economic Inclusion Programme for Families and Rural Communities in the Territory of the Plurinational State of Bolivia Rural Microenterprise Assets Programme: Capitalization, Technical Assistance and Investment Support Building Rural Entrepreneurial Capacities Programme: Trust and Opportunity Development of the Central Corridor Project Ibarra-San Lorenzo Development Project Buen Vivir in Rural Territories Development Project Market Strengthening and Livelihood Diversification in the Southern Highlands Project Project for Strengthening Assets, Markets and Rural Development Policies in the Northern Highlands Strengthening Local Development in the Highlands and High Rainforest Areas Project Sustainable Rural Development Project for the Semi-Arid Zones of Falcon and Lara States Phase II Venezuela VE WARAO Orinoco Delta Warao Support Programme Integrated and Sustainable Development Project for the Arid Zones in the States of Nueva Esparte and Sucre Mexico, Central America and Caribbean sub-region Venezuela VE PROSANESU Belize BZ RFP Rural Finance Programme Dominican Republic DO 1-DO PRORURAL OESTE Development Project for Rural Poor Economic Organizations of the Border Region Dominican Republic DO PRORURAL CENTRO Y ESTE Rural Economic Development Project in the Central and Eastern Provinces El Salvador SV PREMODER El Salvador SV 784 PRODEMORO Reconstruction and Rural Modernization Programme 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 vii

8 Country Project ID Loan Grant Acronym Project title Guatemala GT PRODEVER Guatemala GT OCCIDENTE Guatemala GT ORIENTE Guatemala GT 1070 PRODENORTE Guatemala GT QUICHÉ Guyana GY 8015 READ Haiti HT 8096 PAIP Rural Development Programme for Las Verapaces National Rural Development Programme Phase I: the Western Region National Rural Development Programme: Central and Eastern Regions Sustainable Rural Development Programme for the Northern Region Sustainable Rural Development Programme in El Quiché Rural Enterprise and Agricultural Development Project Productive Initiatives Support Programme in Rural Areas Haiti HT 8041 PPI 2 Small-scale Irrigation Development Project Haiti PPI 3 Honduras HN PROMECOM Honduras HN EMPRENDE SUR Honduras HN HORIZONTES DEL NORTE Mexico MX PRODESNOS Mexico MX 28 DECOFOS Small Irrigation and Market Access Development Project in the Nippes and Goavienne Region Project for Enhancing the Rural Economic Competitiveness of Yoro Sustainable Rural Development Programme for the Southern Region Northern Horizons-Competitiveness and Sustainable Rural Development Project in the Northern Zone Sustainable Development Project for Rural and Indigenous Communities of the Semi-Arid North- West 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 Nicaragua NI 8071 NICARIBE Panama PA NGOBE-BUGLE Panama PA 24 PARTICIPA Agricultural, Fishery and Forestry Productive Systems Development Programme in RAAN and RAAS Indigenous Territories Sustainable Rural Development Project for the Ngöbe-Buglé Territory and Adjoining Districts Participative Development and Rural Modernization Project viii

9 Country Project ID Loan Grant Acronym Project title Southern Cone sub-region 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 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 Brazil BR Brazil BR VIVA O SEMI ÁRIDO (Piauí) PROCASE (Paraíba) Rural Communities Development Project in the Poorest Areas of the State of Bahia Semi-arid Sustainable Development Project in the State of Piauí Cariri and Seridó Sustainable Development Project Brazil BR Brazil BR DOM TÁVORA (Sergipe) PAULO FREIRE (Ceará) Rural Business for Small Producers Project Productive Development and Capacity-Building 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 ix

10 Glossary Name Active Country Actual Problem Project Beneficiaries Closing Date Completion Date Component Cooperating Institution Counterpart Funds Current Closing Date Current Portfolio Development Objective Disbursement Disbursable Amount Disbursement Lag Disbursement Rate Effectiveness Empowerment Definition 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). Financial resources provided by the government or recipient institution/organisation for the implementation of the development intervention. 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 on-going. 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 behind the expected disbursement by 40% or more, 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 Efficiency Name Expected Disbursement Gender Equality Gender Mainstreaming Impact Impact Domains Implementation Progress Definition 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. Innovation 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. Inputs Lending Terms Loan Effectiveness Maturity of the Portfolio Non-Active Country Not at risk project Ongoing Portfolio Outputs Performance 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. 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. xi

12 Name 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 Definition 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

13 Map of Latin America and the Caribbean Region xiii

14

15 Executive Summary 1. The Division has seen its portfolio grow from 36 in 2011/12 to 42 ongoing projects in 2012/13. The total value of the current portfolio US$is US$1.6 billion with IFAD and co-financing combined. The portfolio of grants, albeit smaller in amount compared to previous cycles, has been strategically aligned with country programmes and dedicated to advancing innovations, strengthening knowledge management and to deepening policy dialogue. At closing of this cycle, IFAD country programmes in the Latin America and the Caribbean (LAC) region are delivering a basket of development services that combine financial and non-financial products in support of small-scale rural farmers and excluded rural communities. 2. In fact, during the cycle, the Division has been able to capitalize on the commitment and many efforts made by the LAC governments to reduce the tremendous economic and social inequality that continue to affect these countries particularly in rural areas, in spite of its middle income country status. Indeed, during the cycle, the demand for investment grew and so did the amount of cofinancing contributed by the governments to IFAD s projects. 3. Throughout the last three years, IFAD and the Division have also evolved. On one hand, the institution is moving beyond replenishment sole resources and is exploring non-traditional resource mobilization schemes that have helped temper the marked reduction of IFAD s replenishment resource allocation. Indeed, the Spanish Trust Fund scheme allowed the Division to be more responsive to the countries demands for pro-poor agriculture and rural development investments. On the other hand the Division has also continued to evolve. By the end of the cycle all IFAD projects are directly supervised by IFAD staff, country presence has expanded and almost 50 per cent of all country programme managers in the Division are out-posted across 5 country office locations. Further decentralization of administrative, financial and programme functions are now in progress. The objective is to increase the impact of country programmes through the provision of hands-on, real time professional support and technical assistance to country programmes; as well as to further build on opportunities for scaling up that might emerge in the countries. 4. In short, at the end of cycle, the Latin America and Caribbean Division is functioning with a different business model. 5. These profound and rapid changes, however, bring a number of challenges that will be the focus of attention during the cycle. First, the Division is faced with a new group of projects that will need to come into effect or that will very soon enter in their first early stages of implementation. Intense implementation support to these new operations must be provided to each individual operation and to the portfolio as a whole. Past experiences has shown that support in the early phases of project implementation is crucial to ensure the successful implementation of the projects at later stages. For this to be effectively attained, project supervision and implementation support budgets must be secured. Supervision and implementation support of the on-going portfolio must be kept within established fiduciary and programmatic corporate standards, tailored in accordance with the needs and capacities of the lending partners. 6. Although the LAC region has weathered well the global financial crisis, its fiscal and debt spaces continue to be prudently managed which, at times limits the timely availability of counterpart funds and the Division s disbursement capacity. This is a second big challenge for the Division. The out-posting of CPMs and the expansion of IFAD s presence in the field should be conducive in intensifying work in this area of intense dialogue with the ministries of agriculture and especially with the ministries of finance is a key factor in mitigating this risk. 7. While being widely recognized by the governments of the region as a prime agency with expertise in working with small scale farmers and in excluded rural communities, IFAD and the LAC Division are faced with the challenge of deepening programme instruments in order to deliver sophisticated knowledge and innovation to the predominant middle-income countries (MICs) of the region. Analytical work and technical assistance are requested by governments who are conscious of xv

16 the need to reduce rural poverty and increase productivity and employment in rural areas, but that do not yet have in place clear strategies or the adequate policies for doing so. The division s grants portfolio aims to close this gap. Policy-oriented work is being financed in collaboration with specialized agencies and think tanks in the region such as CEPAL, RIMISP, universities and research centres. The divisional grants programme is supporting new frontier work in the area of youth, south-south collaboration, M&E. Attaining the seamless integration of the activities and results of the grant portfolio is work in progress and represents an objective of the cycle. 8. Last but not least is IFAD s challenge of mobilizing sufficient resources both within and outside the replenishment to respond to the increasing demands in support of agriculture and rural development for small-scale farmers in LAC. As well reflected in this report, IFAD s funds contribution to the LAC programme has sharply declined during the last three years. In an environment of overall decline of Official Development Assistance (ODA) funds and in view of the growth and average GDP per capita of all LAC countries, an increase of IFAD s resources in the region is no longer in the horizon. Hence, the institution must continue to make progress in seeking alternative financing models able to guarantee its effective engagement with middle-income countries such as those in LAC. 9. The new three years cycle that began in 2013 is therefore a cycle of consolidation of the programme and of its new business model. During the coming years, the almost completely new programme portfolio must gain momentum in terms of implementation of demonstrating programme results and impact. It is a cycle in which decentralization to country office and the increased field presence should be allowed to evolve and consolidate, and in which management systems established by the institution will need to be responsive to, and aligned with: the evolution of our programmes funding basket model, the urgencies of managing half of the Division from Rome, and the need to approach budget management as a composite of IFAD and non-ifad sources of contribution for implementation support, project design and project supervision. 10. LAC s methodology for the Portfolio Review Process involves firstly the review and analysis of the supervision aide memoire by the Portfolio Advisor and secondly a discussion with the concerned CPMs.. Since 2012, the ratings on some of the fiduciary aspects are proposed by CFS Division., The continuous monitoring of portfolio fiduciary aspects is supported through intensive implementation support to project management units by LAC country teams together with increased involvement of CFS staff in project and country program supervision missions. 11. The main sources of information of the Portfolio Review were the Country Programme Issues Sheets (CPIS) together with project/programme reports including Supervision, Mid-Term Review and Completion Reports, and Project and Grant Status Reports (PSRs and GSRs). Other data sources included IFAD s data bases (PPMS, LGS, GRIPS and RIMS online). CFS also provided inputs for the sections on loan/grant closures, cancellations, arrears, disbursements and risk assessments. xvi

17 I. Overview of the economic and social situation 1. The LAC region as a whole will continue to show moderate rates of economic growth in 2013 and 2014 largely due to a global economic slowdown both in developed and emerging economies. However, it is expected that the region will preserve an overall macroeconomic stability and will continue to advance a number of reforms in order to ensure the sustainability of social and economic progress so far achieved. These reforms include, among others, fiscal consolidation and countercyclical policies that function as such; in other words, that expand in times of economic contraction and that are dismantled when conditions are more favourable. 2. Creating employment, promoting productivity in the rural sector, and expanding access to markets for 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. 3. 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. A. Economic outlook 4. 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 recession. In 2012 and 2013 the risk factors were mainly due to the European debt crisis and forecasts of an economic slowdown in China. 5. Throughout Latin American and the Caribbean, the recession caused a small relative decrease in its GDP level (-1.6% in 2009), which demonstrates a certain capacity 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. 7. The performance throughout the region is heterogeneous. In 2011 economic growth in the subregion 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 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; 1 IADB (2012) 2 WEO-IMF, April, Prepared on the basis of WEO-IMF data, April, Mean differences were weighted according to the size of the economy. 1

18 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. 9. 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. 10. 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 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. 13. 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, their clear that Latin America and that the Caribbean have gone through a period of learning and of improving its economic policy instruments, and they have emerged better equipped to meet the challenges that arise from the volatile performance of the global economy. B. Social outlook 14. In 2011 the total population of Latin America and the Caribbean was approximately 595 million, 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 programmes 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. 8 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, WDI-WB 8 ECLAC-STAT 2

19 16. 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 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. 18. 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 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 programmes such as conditional cash transfer payments in the majority of countries in the region. 19. Even though there are 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. C. The rural sector 20. 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, but it also constitutes another source of vulnerability, in addition to extreme weather events. 21. 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 of 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 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 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, WDI-WB 14 WDI-WB 15 ECLAC,

20 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. 23. 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. However, it is not the only one. 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. D. The progress and challenges in LAC rural development 24. As mentioned previously, the trends presented in this overview are regional averages. LAC countries, however, differ significantly from one another. Three development indicators remain relevant to IFAD when assessing the overall performance of the region: the rate of economic growth, changes in poverty levels, and changes in income distribution. 25. Brazil, Peru and Uruguay continued with sustained high rates of economic growth and of rural poverty reduction, and income distribution continued to improve. 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. In these countries IFAD has developed alliances that allow us to substantially increase the impact of our operations. Policy dialogue, knowledge management and south-south collaboration and exchanges have worked as instruments for an up-scaled strategy aimed at mainstreaming our experience in those national policies and strategies that are already strong. 26. Despite rapid economic growth, rural poverty and income inequality remains very high and a major challenge in Colombia, Honduras and Guatemala. In these countries, drug-related crime and violence and weak rural sector institution are a major challenge. In these countries, IFAD continues to work with governments and other stakeholders to position rural development as a priority for local and national development. In Colombia, with the possibility of a peace agreement that places rural development and land as core of the peace agenda, IFAD is being asked to expand its programme of work and to adopt a stronger strategic-policy orientation. In the case of Guatemala, a particular window of opportunity opened with the new government, which declared that rural development and social protection will be two pillars of their administration. Lack of political consensus regarding the reforms necessary to support these programmes, is seriously jeopardizing poverty-reduction and business opportunities for the rural poor. 27. In Bolivia, Ecuador, Nicaragua and Venezuela rural poverty and income inequality have been decreasing over several years. These countries have put in place strong social inclusion policies that are having a positive impact on the rural poor. 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. 28. Mexico, El Salvador and Paraguay continue to show little improvement in terms of reducing rural poverty and income inequality. In Mexico, 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. 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 4

21 areas. In Paraguay IFAD is being asked to scale up innovative and successful public-private partnership project operations. 29. The English Caribbean sub-region continues to 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 the agricultural sector in the Caribbean and to address issues of rural poverty, youth unemployment and climate change, the current business model has a high cost of design, delivery and administration of a plethora of small loans to individual member states. The Latin America and the Caribbean Division is, as a result, exploring a multi-country programme approach to reduce administrative costs, build synergies across the countries and bring common solutions to similar problems across small island states. 5

22 A. RB-COSOPs presented to the EB New RB-COSOP II. Country programmes 30. The number of countries with an approved RB-COSOP has increased to ten following the presentation of new COSOPs for Honduras 16 and Nicaragua to the Executive Board (EB) in December 2012 (see Table 1 in the appendix). The focus of IFAD strategy in Honduras for the forthcoming COSOP period is on the promotion of rural competitiveness through improved market access and the development of agricultural and non-agricultural small businesses and micro enterprises and strengthening of human and social capital in rural areas. IFAD s new strategy in Nicaragua will support government and farmer organisations efforts to increase growth in the agricultural sector as a vehicle for reducing poverty, with an emphasis on (i) scaling up on-going efforts to improve rural productivity and competitiveness and to strengthen the capacities of Indigenous and Afro-descendant communities on the Caribbean Coast, and (ii) support the development of innovative models, in particular for inclusive development of small rural businesses, especially those led by women and youth, and for small farmer market access. RB-COSOP review and preparation programme 31. The Bolivia RB-COSOP (Results Based Country Strategic Opportunities Programme) was extensively reviewed in Q IV 2012 and realigned on the basis of the progress made towards its targets and the electoral cycle. The review conclusive meeting confirmed the validity of RB-COSOP results management framework and agreed on minor adjustments. Preparation of an RB-COSOP will start in the second semester of 2013 in Ecuador for presentation next year. This first RB-COSOP in Ecuador will benefit from the recently finalised country programme evaluation. The last review of the Peru RB-COSOP took place in March 2012 following the MTR carried out in The Division plans to start the preparation of a new RB-COSOP as soon as a new CPM for the country is appointed for likely presentation during In Brazil, the COSOP review has been moved to Q IV 2013 in order to take into account developments arising from the increase of the country programme following the entry into force of three new investment projects during the review period. The preparation of a new RB-COSOP is planned for 2015 when a new government will be in place following presidential elections in late As regards the Mexico, Central America and Caribbean sub-region, the Division has started preparation of a new RB-COSOP in Mexico following presidential elections held in July This includes a review of the rural poverty situation in the country and Mexico s national rural sector policies and priorities as a basis for determination of the geographic and thematic concentration of the new strategy that will be implemented through the current projects and a new programme that would be identified during the COSOP preparation process that is expected to be completed next year. 34. While there was no review this year of the Dominican Republic COSOP due to the significant delays in the implementation of the on-going project and in the start-up of the new one, a new RB-COSOP for Haiti was approved by OSC in June 2013 and will be presented to the EB in September. The proposed strategy is centred on two complementary axes, improved access to markets, including financial services, and the promotion of climate-smart agricultural practices. 35. As an RB-COSOP was not required, IFAD s strategy in El Salvador is outlined in the design documents of the project AMANECER RURAL 17, and the country programme is implemented and monitored under an RB-COSOP consistent type of results management framework. The Division plans to prepare a COSOP for this country after national elections in In Guatemala, initial consultations with government started in September 2012 and were followed by a number of workshops held in October and a number of studies undertaken by 16 The new RB-COSOP for Honduras replaces the former RB-COSOP that had been approved in April Project ES

23 specialists in different areas. A preliminary strategy document supported by the feedback from the incountry consultations and the working papers documenting the studies was discussed at a CPMT meeting in Rome in December Due to an unexpected prolongation of the bottlenecks originated by parliamentary deliberations on the IFAD programme, the finalisation of the process has been adjourned, pending a re-assessment of the status of the programme in Q III A review of the RB-COSOP in Panama started in March 2013 and is due for completion by end Preliminary findings include the persistence of severe poverty in rural areas despite a successful economic performance over the last years and the need for increasing domestic food production to meet local demand and reduce the national food supply deficit. Stakeholders highlighted the degree of alignment and harmonisation of the COSOP with government policies and strategies, the evolving institutional framework with the emergence of new players, especially with regard to gender and land tenure issues. They also underlined the negative consequences of continuous rotation of staff in the on-going project and recommended a review of the impact of the recently completed 8-year NGOBE-BUGLE project as it developed relevant strategies for women and Indigenous people s empowerment. B. Country programme issues 38. As described in the CPIS published in volume II of this report, institutional instability or weak capacities, compounded by high turnover of project authorities / leading agencies and of project personnel, continued to figure prominently among the issues negatively affecting the performance of country programmes. This was the case of 11 of the 19 countries with active programmes in the region. The countries where this problem has not warranted explicit reference in CPIS are Brazil in the Southern Cone sub-region, El Salvador, Grenada, Honduras and Mexico in the Mexico, Central America and Caribbean sub-region and three (Colombia Peru and Venezuela) of the five countries in the Andean sub-region. The main response of the Division was the provision of implementation support, help in the selection of external technical assistance and the organisation of training where appropriate, combined with continuous dialogue with relevant government institutions to build government ownership and agree on remedial actions and, less often, more comprehensive institutional strengthening programmes, that are nevertheless considered in Guatemala and in Haiti. 39. This year, budgetary constraints, including absence of fiscal to access IFAD and counterpart funding, were at the origin of a slow-down of implementation of on-going projects, or of delayed startup of newly effective projects. The country programme in Argentina suffered from budget constraints at a provincial rather than a central government level. Scarcity, unpredictability of amounts and timing of delivery and actual delays in the provision of counterpart funding adversely affected project operations in Bolivia and in Ecuador, Grenada, Honduras, Paraguay and Peru. Lacking fiscal space is the single most important factor explaining the serious difficulties experienced in the Dominican Republic. The failure to allocate budgetary resources to new projects becoming effective delayed or prevented the start-up of new operations also in El Salvador, Haiti, Mexico, Paraguay and Peru. Incidentally, in two Andean countries, Colombia and Venezuela, IFAD financed projects have been receiving extra government contributions significantly above originally planned levels that led to a slower drawdown of IFAD funds and are, to a certain extent, at the origin of the extension of projects CO 1274 and VE This fiscal space issue warrants special attention as it has grown to a scale that significantly impacts on the pace of project implementation and consequent delivery of outputs and is a major determinant of a slow-down of overall IFAD disbursements to the region during this review period. The Division has intensified monitoring of counterpart funding allocation and delivery, as well as dialogue with country authorities, including ministries of finance, and with members of parliament to gain political support both for the IFAD programme and for rural development in general. 41. Despite obstacles as noted above, the IFAD programme in the region includes many successful investment and non-investment activities. In Brazil, policy dialogue is one of the main axes of the IFAD programme. This has been built during the implementation by the Ministry of Agrarian development of the first phase of the successful Dom Helder Camara project (BR 1101), and, more 7

24 recently, facilitated by a project under the grant programme (TAG 1187) that promoted exchange of expertise and knowledge sharing among governments and farmer organisations from Brazil, China, India and South Africa. It has been consolidated during the design of project BR 1620 that is planned for presentation to the EB in December This new project, which will add a new national dimension to the existing base of five large investment projects in the North-Eastern of Brazil under financing agreements directly with sub-national States. The forthcoming project will create a platform for facilitating continuous dialogue on public policies for family farming aimed at enhancing their implementation and scaling up successful innovative experiences generated by IFAD-supported and other national and state level programmes. 42. In El Salvador, the country programme has been increasingly successful in partnership development as evidenced by its degree of harmonisation with initiatives from other development partners, primarily the Millenium Challenge Account (MCA) financed Productive Development Investments, and by the agreement established with Oxford Committee for Famine Relief (OXFAM) America to implement a community savings project and a market study in support of an increased rural business development orientation of project ES The same is the case in Honduras through partnerships with the World Bank (WB) financed COMRURAL and the IDB- financed PRONEGOCIOS programmes, as well as the new U.S. Agency for International Development (USAID) Feed the Future initiative. 8

25 A. III. Current investment portfolio and operations Characteristics 43. As at June 2013, the current investment portfolio comprised 45 projects (see Table 2 in the appendix). The total value of IFAD financing amounted to US$683 million, US$3 million less than in June last year. This loss in value is explained by the difference between the amounts of IFAD financing for the four projects that left the portfolio (US$91.7 million) and for the five projects approved (US$88.3 million). In effect, the average IFAD financing for the projects completed or cancelled this year (US$22.9 million) was 30% above the US$17.7 million average loan size of approved projects. The above reflects a structural change in the distribution of projects by sub-region. As shown in Table 3 in the appendix, the MCAC sub-region share of IFAD financing has dropped from 55% in 2011 to 43% in June 2013, whereas the weight of the Andean and Southern Cone sub-regions increased from 24% to 33% and from 21% to 24% respectively over the same period. This change is primarily the consequence of the Performance Based Allocation System (PBAS) system introduced in While, as noted above, the value of the IFAD financed portion of the current investment portfolio went down, the on-going portfolio in turn raised dramatically during the review period, to 42 projects in June 2013, from 36 last year and 33 in June This resulted primarily from the increase in the number of projects that became effective from seven in to nine this year. There were also more projects extended during this period, five compared with only one last year. In terms of value, the IFAD financed portion of the on-going portfolio has increased by 21% from last year and, more impressively, jumped by 44% since 2006 following a continued upward trend. This sudden increase in the number of on-going projects has implications for the divisional supervision programme. The workload of CPMs has increased as there is need to attend to an additional number of projects. There are also budgetary implications, especially in terms of additional consultant time and travelling, with a peak in 2014 when recently effective projects will require above average support as they are in the start-up phase. 45. The Division will continue to do its best to contain expenditure on supervision and implementation support, but its efforts to improve efficiency are limited by relative small average amount of IFAD financing per project. Chart I beside shows how much the gap between the LAC and the IFAD average amount of IFAD financing per project has grown over the past few years. This is a consequence of the PBAS system. Chart I - Average IFAD financing per project (on-going portfolio) Table I - LAC and IFAD overall current portfolio (IFAD financing) No. of projects Value (US$ m) Variation (%) June 2000 June 2013 June 2000 June 2013 No. of projects Value LAC % IFAD % LAC % 19% 17% 18% 12% 46. Also as a consequence of the PBAS system,the LAC region has experienced a drastic reduction of its share of overall IFAD financing, from 18% in 2000 to 12% in 2012, as shown in Table I beside. While the value of 9

26 Financing amounts (USD million) Latin America and the Caribbean Division IFAD financing in the current portfolio has increased by 107% over the past 13 years for IFAD as whole, it has increased by 36% for the LAC region. 47. Remarkable achievements on the mobilisation of co-financing nevertheless placed the Division in a much more favourable situation in terms of total amount of resources made available to the region to finance IFAD s unique kind of poverty reduction interventions. As shown in Table II below, while the IFAD financed portion of the regional current portfolio increased modestly by 10% from 2011, external co-financing, excluding government co-financing and funds from other domestic sources, has almost doubled since In others words, in terms of project financing, at the closing of the 2012 cycle, the LAC division has a different business model. This new business model also has implications in the way of approaching and managing the administrative budget of the Division. Costs for project design and project supervision is made up of several sources of funding adding complexity to the traditional way budgets eased to be managed. Table II - Variation of current portfolio financing structure (US$m) IFAD financing External co-financing MCAC AND S. Cone Total MCAC AND S. Cone Total Total LAC 2010/ / Variation (USD m) Variation (%) -14% 71% 12% 10% 3% 1353% 993% 93% 27% Chart II - Current portfolio by financing sources 48. This enabled a 27% growth of the gross current portfolio that reached the mark 355 of US$1 billion this year. A very large 223 proportion (86%) of the US$318 million of external co-financing 200 is provided from three sources, namely GEF, OFID and STF 0 External financing (details in Table 8 MCAC AND SC MCAC AND SC Table 7 in the appendix). This has significant implications for the programme of work of External financing the Division since the financial administration and the supervision for these three sources is under IFAD responsibility. Although the MCAC sub-region retains the largest share at almost 50% of the regional total, its amount of co-financing has remained virtually unchanged at about US$150 million. The Andean subregion shows the largest increase. Chart II above illustrates how significantly the financing structure of the regional portfolio has changed in the past few years. Current portfolio by sectors/themes 49. Table 4 in the appendix shows a notable increment in the Market and Rural Enterprises Development domain, which currently represents around one third of the IFAD financing for investment projects. During the last five review periods this domain increased by 28%, from US$153 million in 2009 to US$195 million this year. This is mainly due to the growing role that the business 10

27 development activities are playing in newly designed projects, especially in the Central America and Caribbean sub-region, whose share is 29% this year compared to 20% in The Social Development domain also experienced important variations during the period (17% increase), which represents 27% this year compared to 24% in This is the result of resources provided to facilitate development of funds in rural areas, with special emphasis in the Andean and the Southern Cone sub-regions. During the same period, there was a decrease in Agriculture, Livestock and Fisheries Development (-26% decrease) as a result of reduced investments in technology transfer and development, and training. 50. During the period in analysis, the Environment and Common Resources domain shows a slight negative variation (-2% decrease). This is explained by increasing co-financing from Global Environment Facility (GEF). Financing terms 51. Although heterogeneous, good macroeconomic performance in the region has affected the portfolio lending terms structure (see Chart III beside). At present, almost 70% of the current portfolio is under ordinary lending terms. While the proportion of highly concessional terms remained stable until 2009 when it started to decrease gently, the share of intermediate lending terms dropped from 16% to 8% in the last five years. Chart III - IFAD financing by lending terms (current portfolio): Table III - IFAD financing approved by lending terms 52. The structural change in the portfolio is Lending Terms also reflected in the (US$ '000) % (US$ '000) % evolution of the IFAD Ordinary % % financing by lending Intermediate % % terms. As shown in Table Highly Concessional and % % III beside, the proportion DSF of loans approved on Total ordinary terms increased from 42% in the five year period to 75% in the latest five years, while those approved on intermediate and highly concessional terms dropped from 57% to 25% over the same period. Co-financed projects 53. The further co-financing increase in LAC portfolio has resulted in US$1.01 provided on average by external sources for each dollar invested by IFAD, which is higher compared to US$0.89 last year and US$0.55 in This ratio is the result of increased co-financing provided by governments, especially in the Andean sub-region, where government co-financing reached US$0.49 for each dollar committed by IFAD, compared with US$0.35 last year. 54. As illustrated in Table IV below, IFAD financing further decreased its share from 61% in 2011 and 52% last year to 50% this year, while total external financiers contribution remained stable this year at 23% as the year before, nevertheless, at sub-regional level, the external co-financing increased in the Andean Sub-region from US$0.30 last year to US$0.42 this year. This is the combined result of the external financing provided by the Spanish Trust Fund (STF), Corporacion Andina de Fomento (CAF) and (GEF). 11

28 Table IV - Current portfolio co-financing ratio Financier USD m % USD m % USD m % USD m % USD m % USD m % USD m % USD m % IFAD Government External Cofinancier LAC Total Co-financing ratio Overall Government External Cofinancier Andean MCAC Southern Cone Total Andean MCAC Southern Cone Total NOTE: Amounts include GEF financing yet to be recorded in PPMS (for projects BR 1101, HN 1595 and VE 1252) 55. As shown in Table 8 in the appendix, Government financing has continued to grow in importance, now representing 20% or more of total project financing in eight countries, with determinant proportions in Argentina (48%) and Brazil (43%). Quality at entry 56. Four projects 18 went through the Quality Assurance (QA) process this year. Two of them (projects CU 1677 and HN 1682) were reviewed under IFAD IX results management framework indicators. These four projects were reviewed by three different QA external advisers, the same adviser having reviewed projects HN 1682 and VE The IFAD Chief Development Strategist chaired all QA meetings. In all projects, the QA review confirmed the likelihood of achieving their respective development objectives. The QA chair endorsed the design of all four projects, with a requirement for to address some of the recommendations during negotiations or during implementation in the case of the projects in Haiti and Honduras. The two other projects received green light to proceed with minor changes specified in the QA minutes. While the overall quality of project design was rated moderately satisfactory for Cuba and Honduras, QA assigned score 5 to the design documentation for projects in Haiti and Venezuela. All projects rated moderately satisfactory or better in alignment and institutional implementation capacity. The Cuba, Haiti and Venezuela projects scored five on these two indicators, the design for Cuba being recognised exemplary (score 6) in terms of alignment with the context of the host country reality. Project VE 1609 also received the highest score (6) in the Results Management Framework (RMF) gender indicator. Interestingly, the gender best practices incorporated in the design of these projects received no reference in the QA minutes. 57. In accordance with the data received from the QA secretariat, the most recurrent issue in the design of the above four projects according to the QA relates to logframes. In one case, the project log-frame needed to be modified for consistency with a revised formulation of the project development objective agreed during the QA review process. The issue and recommendation in the other case related to the agreement reached during the QA process on refining project outreach indicators. 58. The economic analysis has been highlighted for two projects also. In one project, the recommendation was to reassess increase in the income of a type of project beneficiary in order to reconcile beneficiary income increases as part of project objectives with incremental incomes used in the financial analysis of crop models; and to recalculate the economic rate of return to include the full cost of soil and water conservation and related watershed management activities. For the other project the recommendation was more comprehensive and entailed the revision of the financial and economic calculations and sensitivity analysis on the basis of alternative crop production projections and more reasonable yield estimates. 59. Finally, environmental issues have been raised in two project designs. In one case, the QA process highlighted the need for additional funding for soil and water conservation activities. In the other, the agreed recommendation focused on incorporating in the main text of the project design 18 Projects CU 1677, HN 1682, HT 1532 and VE

29 report the principal findings and recommendations presented in the annex to the main report on environment. B. Operations Approvals 60. In addition to two GEF grants in support of on-going projects, five new investment projects with a total amount of US$88.3 million in IFAD financing have been approved in the second semester of Table V - Financing approved during the review period Country Project ID Project Lending terms Amount of IFAD financing (USD '000) Amount of External Financing (USD '000) IFAD financing - new projects Co-financier Approval date Project status (June 2013) Brazil 1563 DOM TÁVORA (Sergipe) O Sep 12 Not Signed Brazil 1619 PAULO FREIRE (Ceará) O STF 21 Sep 12 Ongoing Haiti 1532 PPI 3 DSF IICA 08 Sep 12 Ongoing Peru 1498 SIERRA Y SELVA ALTA O Sep 12 Ongoing Venezuela 1609 PROSANESU O STF/CAF 10 Dec 12 Not Signed GEF cofinancing Honduras 1595 HORIZONTES DEL NORTE G GEF 16 Feb 13 Not Signed Venezuela 1292 PROSALAFA II G GEF 27 Sep 12 Ongoing Total As shown in Table 9 in the appendix, a total amount of US$289 million of IFAD financing has been delivered during the triennium. However, the increased regional demand of resources could be met thanks to the availability of the Spanish Trust Fund that provided financing for US$169 million, equivalent to 37% of total amount of US$458.2 million approved in Pre-implementation activities 62. Nine new projects, with a combined value of US$185.6 million, became effective during the review period, two projects more than last year and more than double the equivalent amount in The average effectiveness lag has increased from 14.9 to 16.0 months due to one project in the Dominican Republic and two in Brazil, which had been approved in The average effectiveness lag for the other six projects was a highly satisfactory 7.1 months. Including IFAD additional financing and STF and GEF co-financing, a total of 16 financing agreements became effective during the review period, four more than last year; their combined value amounts to US$253 million, up from US$170 million last year. 13

30 Table VI - Financing agreements that became effective during the review period Country Project ID Project No. of fin. agreem. Lending terms Amount (USD '000) Approval date Effectiveness date Completion date Elapsed time to Effec. (months) IFAD financing - new projects (9 projects) Brazil 1486 VIVA O SEM I ÁRIDO (Piauí) O Sep Apr Jun Brazil 1487 PROCASE (Paraíba) O Dec Oct Dec Brazil 1619 PAULO FREIRE (Ceará) O Sep Jun Jun 19 9 Colombia 1491 TOP 1 O Apr Dec Dec 17 8 Dominican Republic 1533 PRORURAL CENTRO Y ESTE O Apr Sep Sep Haiti 1532 PPI 3 DSF Sep Oct Dec 17 2 Mexico 1597 LAS M IXTECAS 2 O Apr Nov Dec 18 8 Paraguay 1611 PARAGUAY INCLUSIVO O Apr Feb Mar Peru 1498 SIERRA Y SELVA ALTA O Sep Feb Mar 18 5 IFAD additional financing Nicaragua 1380 PROCAVAL DHC Dec Dec STF cofinancing Colombia 1491 TOP 1 O Apr Dec Dec 17 8 Dominican Republic 1533 PRORURAL CENTRO Y ESTE O Apr Sep Sep Mexico 1597 LAS M IXTECAS O Apr Nov Dec 18 8 GEF cofinancing Panama 1389 PARTICIPA G Feb May Dec Venezuela 1292 PROSALAFA II G Sep Jun Jun 17 9 TOTAL average 10 Financing of project CO 1491 is provided under two separate financing agreements, one for the IFAD and the STF loans, the other for the IFAD grant Financing of project ME 1597 is provided under three separate financing agreements, one each for for the IFAD and the STF loans, and a third for the IFAD grant 63. The number and value of financing agreements signed during the review period has also increased significantly from last year, as shown in Table VII below: about US$200 million in respect of IFAD financing for 10 projects, and US$49 million for STF and GEF co-financing. Table VII - Financing agreements signed during the review period Country Project ID Project No. of fin. agreem. Lending terms Amount (USD '000) Approval date Signing date Signing lag (months) New projects Bolivia 1598 ACCESOS I Dec Mar Brazil 1486 VIVA O SEM I ÁRIDO (Piauí) O Sep Apr Brazil 1487 PROCASE O Dec Oct Brazil 1619 PAULO FREIRE (Ceará) O Sep Jun 13 9 Colombia 1491 TOP 1 O Apr Sep 12 6 Haiti 1532 PPI 3 D Sep Oct 12 2 Mexico 1597 LAS M IXTECAS 2 O Apr Nov 12 8 Paraguay 1611 PARAGUAY INCLUSIVO O Apr Aug 12 4 Peru 1498 SIERRA Y SELVA ALTA O Sep Feb 13 5 IFAD additional financing Nicaragua 1380 PROCAVAL DHC Dec Jul 12 7 STF cofinancing Brazil 1619 PAULO FREIRE (Ceará) O Sep Jun 13 9 Colombia 1491 TOP 1 O Apr Sep 12 6 Mexico 1597 LAS M IXTECAS O Apr Nov 12 8 GEF cofinancing Panama 1389 PARTICIPA G Feb May Venezuela 1292 PROSALAFA II G Sep Jun 13 9 TOTAL average 12 Financing of project CO 1491 is provided under two separate financing agreements, one for the IFAD and the STF loans, the other for the IFAD grant Financing of project M E 1597 is provided under three separate financing agreements, one each for for the IFAD and the STF loans, and a third for the IFAD grant 14

31 64. As a result of the progress made in the finalization of pre-implementation activities, the Division starts the review period with a stock of approved IFAD financing pending signing or effectiveness of respective financing agreements of three projects for a combined value of US$41 million; this compares with seven projects worth US$138 million in IFAD financing last year. Table VIII - Financing agreements not signed or signed and not effective: June 2013 Maturity of the portfolio 65. As shown in Table IX below, the proportion of non-effective projects dropped dramatically from 25% in 2009/10 to 7% this period, due to the entry into force of nine projects. As a result, the share of on-going projects aged less than 1.5 years increased from 18% to 29%. Extensions that were granted to five projects (for six, nine and twelve months) did not have a significant impact on the overall portfolio maturity, since 50% of the portfolio is aged less than three years. The rejuvenation of the investment portfolio is further illustrated by the significant increase of the proportion of the current portfolio aged less than five years, from 48% in June 2010 to 76% at the end of this review period. Table IX - Age structure of current portfolio Age structure Number of projects % % Cumulative Number of projects % % Cumulative Number of projects Projects extended, completed and closed 66. Only three projects were completed, due to extensions approved for three projects with completion date falling in the review period. Average project duration has continued to decrease, to eight years from nine years in , notwithstanding the completion of a large duration Flexible Lending Mechanism (FLM) project (NI 1120). % % Cumulative Number of projects Not signed / Not effective Ongoing less than 1.5 year to less than 3 years to less than 5 years to less than 7 years years or more Total current portfolio % % Cumulative 15

32 Table X - Projects completed during the review period Country Project ID Project Name IFAD financing (USD m) Effectiveness Date Original completion date Time overruns and extensions 67. This year, the number of extensions granted to investment projects increased to five. With the exception of project VE 1252, extensions were granted for 12 months or less. Projects AR 1279 and CO 1294 were extended for six months in order to ensure sustainability of beneficiary sub-projects. Projects MX 1349, EC 1297 and VE 1252 were extended by nine, 15 and 12 months respectively, to facilitate the consolidation and orderly winding-up of project implementation. Table XI - Investment projects extended during the review period Original project duration (years) Current completion date Duration at completion (years) Brazil 1335 GENTE DE VALOR Dec Dec Dec 12 6 Guatemala 1274 OCCIDENTE Oct Dec Dec 12 6 Nicaragua 1120 FAT Jun Jun Jun Country Project ID Project 74.7 Average 8 8 Effectiveness date Original Current completion completion Date date No. of extensions In the review period Total Length of extension in the review period (months) No. of extensions Project time overrun June 2013 (months) Argentina 1279 PRODERPA 10 Sep Sep Mar Colombia 1294 OPORTUNIDADES 28 Jun Jun Dec Ecuador 1297 CORREDOR CENTRAL 25 Sep Sep Jun Mexico 1349 PRODESNOS 01 Sep Sep Dec Venezuela 1252 PROSALAFA II 20 Jul Sep Sep As shown in Table 15 in the appendix, at the end of this review period, the investment portfolio included seven projects in time overrun, which, combined, have been extended for a length of time equivalent to 3% of the overall duration of the investment portfolio as a whole. Cancellations 69. Cancellations of IFAD financing for investment projects amounted to SDR 15.3 million. As shown in Table XII. below, 70% of this amount relates to project GT 1519, which has been cancelled after remaining for more than two years from approval without ratification required by Guatemalan law. Table XII - Cancellations during the review period Country Loan No. Project Id Project Name Closing Date Cancelled Amount (SDR) (%) Transaction Date El Salvador 579-SV 1215 PREMODER 30 Jun Nov 12 Guatemala 518-GT 1085 PRODEVER 31 Mar Oct 12 Guatemala 812-GT 1519 QUICHE Jul 13 Panama 580-PA 1199 NGOBE-BUGLE 31 Mar May 13 Uruguay 555-UY 1161 URUGUAY RURAL 30 Sep Mar Project GT 1519 was cancelled due to delays in ratification by Congress of the approved financing agreement 16

33 Arrears and status of suspended projects 70. The persistent efforts to resolve the long outstanding issue of Cuba arrears culminated in September 2012 with EB approval of an agreement on debt settlement, which was signed in October Despite the difficult economic situation in the country, which caused delays ranging from 27 to 152 days in debt service for payments during the review period, the government of Grenada has been ensuring payment of all amounts due to IFAD. Long lasting delayed submission of the audit report caused the suspension of project VE 1404 in February

34 A. Characteristics IV. Current grant portfolio and operations Current portfolio 71. As shown in Table XIII below, in June 2013, the current grant portfolio comprised 30 grants 19 with a total approved value of US$46.2 million (details in Table 17 in the appendix). This compares with 32 grants and US$45.3 million in June For the first time, this year there was no approved grant pending signature or effectiveness at the end of the review period. Table XIII - Current and on-going grant portfolio 30 June Grant type No. of grants Amount (USD '000) Average (USD '000) Relative weight Technical Assistance % 43% 37% 36% DSF % 4% 1% 0% Loan Component % 7% 6% 10% External financing % 47% 56% 54% Total % 100% 100% 100% Grant types 72. As regards IFAD financed grants, the portfolio value continued to increase and reached US$21.1 million in June 2013, up from US$12.3 million in June 2010, an increase of 72% over the past three years (see Table XIV below). It is however bound to decline in the future because grant resources allocated to the region have drastically dropped. Despite full use by the Division of the US$7.2 million 2012 grant allocation, the grant budget approved for the region for 2013 is only US$4 million. Table XIV - IFAD financed on-going grants 30 June Grant type No. of grants Amount (USD '000) Average (USD '000) Relative weight Large Regional % 68% 73% 65% Large Country % 16% 14% 17% Sub-total Large Grants % 84% 86% 82% Small Regional % 5% 6% 10% Small Country % 11% 8% 7% Sub-total Small Grants % 16% 14% 18% Total % 100% 100% 100% Grants size 73. As shown in Table XIV above, the proportion of regional grants in the IFAD financed portion of the grant portfolio has remained virtually unchanged at around 75%, the bulk of it represented by large grants. Average grant size continued to rise and reached US$1 million, or a respectable 63% increase over the US$615,000 in June This trend is consistent with the Division s decision to have fewer but larger grants in order to concentrate the grant portfolio in less but more focused areas and to facilitate and reduce the costs of managing the grant portfolio. Maturity 74. Table XV below illustrates the favourable maturity status of the IFAD-financed part of the grant portfolio at the end of the review period. 20 In effect in 2013, 81 %, of the portfolio is less than two years old (up from 74% in 2012) and only one grant, down from three last year, has been effective for three years or more. Keeping the grant implementation period short helps to contain management costs to IFAD. 19 Including IFAD-financed grants, i.e. regional and country TAG, loan-component and DSF stand-alone grants, as well as GEF and other externally financed grants. 20 See Table 18 in the appendix for maturity of the overall grant portfolio and external financing 18

35 Table XV - Maturity of current IFAD-financed grant portfolio June Strategic orientation of the grant portfolio 75. As shown in Table 19 in the appendix, which presents the distribution of the 19 on-going IFADfinanced grant projects 21 by grant policy output 22, the Lessons Learning and Knowledge Management and Innovative Activities area predominates in the regional grant portfolio, followed by Advocacy and Policy Dialogue. 76. In 2011, in response to the Revised Grant Policy for Grant Financing, the Division developed a Grant Strategic Work Plan (DSWP) 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. Chart IV below shows the evolution of the regional grants portfolio by thematic area. Two themes stand out while analysing the regional grants that were and will be approved under the current LAC DSWP. Out of nearly US$18 million (including the 2013 pipeline), US$6.5 million (i.e. 36%) are allocated to four grants that concentrate on the Young Rural People with a Special Focus on Women thematic area, while US$6.3 million (i.e. 35%) are allocated to five grants that focus on the area of Policy Processes on Rural Poverty and Development. These areas are indeed particularly relevant in the context of region as the majority of the countries are classified as middle-income countries but still experience high level of inequality. 77. Four grants dealing with Entrepreneurial Young Rural People, with a Special Focus on Young Women are: grants 1385-UN Women (approved in August 2012) that aims at strengthening and broadening economic and financial opportunities for rural women in Central America; grant ACUA (approved in May 2012), which advocates for the reduction of structural poverty affecting Afrodescendant population, focusing on young and women particularly in the Andean sub-region and in Brazil; grant 1305-Procasur (approved in August 2011) that promotes young people's entrepreneurship in poor rural areas in several countries of Central and South America; and grant 1250-IEP called Nuevas Trenzas, which aimed at understanding the nature and drivers of gender inequalities in Latin America, and at providing empirical evidence on the type of public policies and rural development interventions that can help to foster social inclusion of poor young women. In addition, a small regional grant (for US$0.25 million) currently under preparation, will work in fostering inclusion of rural youth in investment operations by identifying and supporting the implementation of products and services that suit their aspirations and life strategies. 78. The regional portfolio has been growing in the area of Policy Processes on Rural Poverty and Development and there are currently four on-going grants: two large grants, namely 1326-CLAEH and 1371-UNIANDES, which were approved in November 2011 and May 2012 respectively, and two small grants (1415-ICEFI and 1428-CEPAL, both approved in December 2012). Three of them focus on the provision of evidenced-based analysis and inputs for the formulation of public policy and for feeding dialogue on issues relevant to rural development, such as the synergies between conditional cash transfer and rural development programmes in the case of grant 1373-Uniandes; the role of fiscal policy in rural development (1415-ICEFI) and the relevance of rural development and food security 21 Excluding GEF and loan component grants. 22 IFAD s grant policy, outlines four outputs that IFAD-financed grants should be aligned with: (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. 19

36 indicators in policy design (1428-CEPAL). Grant 1326-CLAEH is directly facilitating public policy dialogue on family farming and food security issues in the Southern Cone. In addition, the most recently approved large grant (1449-RIMISP) will promote policy process for large-scale impact and facilitate evidence-based policy to support policy and institutional changes that create more conducive environments for the rural poor to overcome poverty. Chart IV - Grants approved in by thematic areas Approvals and pre-implementation activities 79. Five grants, with a combined value of US$7.3 million, have been approved during the review period, considerably less than the 17 grants and US$21.2 million approved in the period. This was caused by the drop of the divisional grant allocation noted above. All five grants approved since July 2012 and five of the six grants that were pending effectiveness at the end of the last review period became effective during this review period. The sixth grant, a loan component grant for investment project GT 1519, was cancelled in conjunction with the cancellation of the main project. As noted above, the Division starts the upcoming review period without any approved grant in need for additional action to make it effective. 80. The overall average effectiveness lag of 7.9 months during this review period was considerably above the average of the last review periods. In the case of TAG grants, this was due to protracted post-approval negotiations with the recipients of grants TAG-1303 and TAG-1385 in order to finalise the agreements. Four other grants, two GEF-financed and two loan component grants, show effectiveness lags of three months or more. Although GEF grants tend to take longer to become effective than TAG grants, the delay was unusually long (16.5 months) in the case of grant GEF-FSP- 024-PA. The lesson learned here is that the Division should try to do better in completing preimplementation arrangements, including preparation by the recipient and IFAD s review and endorsement of the first AWPB, before the grant is submitted for approval. Grant disbursement 81. At the end of the review period, seven of the ten IFAD-financed large TAG grants showed a disbursement percentage below the percentage of time elapsed since effectiveness date. Three of them (TAG-1369-ACUA, TAG-1373-UNIANDES and TAG-1250-IEP) had submitted withdrawal applications, during before the end of June and these were expected to be approved shortly. Grant 20

37 COFIN-SP-16-IICA has experienced delays because of a combination of unexpected complexity in engaging a vast array of civil society organisations in the envisaged highly participatory approach to project implementation, compounded by grant recipient cumbersome administrative regulations. 82. With 75% of its three-year original implementation period elapsed, grant TAG AGEXPORT had disbursed only 28% of its US$2 million by June The considerable slow-down of project implementation was attributed to design shortcomings. The Guatemala-based CPM has been pursuing intensive discussions with the grant recipient, in coordination with the managers of the investment projects in the four Central American participating countries, to make adjustments required for implementation to pick up. 83. In the case of TAG 1303 and TAG-1385, which became effective in June and April 2013 respectively, both with a considerable effectiveness lag, the Division should pay special attention to preventing further prolongation of the delay in the start-up of implementation. The same degree of interest should be devoted to GEF financed grant in Panama (GEF-FSP-24), approved in February 2012 that reached effectiveness only in June Extensions 84. Four grant projects 23 that were due for completion during the review period have been extended. This compares with three extensions last year and five in Implementation was fully successful for both TAG-1250 and TAG The small TAG-1250 country grant tested innovative activities and approaches aimed at helping to foster social inclusion of poor young women. The small TAG-1344, which is directed at helping access by the rural poor to climate finance and carbon markets, has implemented activities as planned to achieve its envisaged outcomes. These two grants have been extended by four and seven months respectively to facilitate wider dissemination and stronger appropriation by stakeholders of project results. Grant TAG-1346 has been extended to take advantage of new financing opportunities that emerged during implementation. As for grant COFIN-SP-16-IICA, which, as noted above, experiences a significant implementation delay, a substantial 33-months extension has been approved to enable alignment of its implementation schedule with investment projects in North-east Brazil that, as noted above, required a longer than expected pre-implementation period following approval. Completion 85. Implementation of six grant projects has been completed during the period under review, three of which were also financially closed before the end of the review period (see Table 23 in the appendix). Amounts undisbursed at the end of the review period for these six projects, amounting to a total of US$200,357, or 3% of their combined grant amount, are expected to be disbursed upon review and approval of final statements of expenditure and audit reports, in conformity with IFAD procedures. Closing and cancellations 86. During the review period, the Division continued to intensify efforts towards closing completed grant projects on time or with minimum delays. A total of 14 grants have been closed since July 2012 (see Table 24 in appendice), compared with four in The average delay in grant closing went down significantly from 11 months last year to four months in this review period. Nevertheless, as only one of the six grants that showed overdue closing dates in June 2012 could be closed, the forthcoming period starts with ten grants with overdue closing dates. Given the status of fulfilment of grant closure requirements in June 2013 (Table 25 in the appendix), all these grants could be closed before the end of 2013, provided that CPM and Finance Officers take a pro-active approach in assisting recipients to comply with IFAD closure requirements, which are not always fully understood by all grant recipients. 23 Grants TAG-1250, TAG 1344, TAG 1346 and COFIN-SP-16-IICA 21

38 B. Grant implementation performance 87. Performance scores of on-going grants, presented in Table 26 in the appendix, indicate Disbursement and Quality and Timeliness of Financial Reports as areas of relatively lower performance. Grant recipients have experienced continued difficulties in providing annual audit reports that fulfil IFAD requirements and / or in complying with IFAD deadlines. This is a persistent issue that has been at the origin of significant closure delays. This problem could be mitigated by undertaking simplified financial management capacity assessments during the design of large grants, and by providing all grant recipients with comprehensive information on IFAD financial reporting requirements and withdrawal and audit procedures. This could be assisted by a simple manual on grant financial management and reporting that the Division believes CFS could prepare within a relatively short time. Disbursement issues confronted by grant projects experiencing disbursement delays have been noted above under this same section. C. Linkages to the investment portfolio and knowledge management 88. The Division will continue to pursue efforts in the knowledge management of its grant portfolio. Grants are an integral part of the regional and country programme strategies and the Division intends to focus on the use of innovations, lessons learned and knowledge products generated by the grant portfolio for feeding the investment portfolio. This could be done by making grant design documents more explicit about knowledge management-related objectives, targets, progress measurement, and products. Grant design documents could also be more explicit on the envisaged methodology to facilitate uptake of lessons learned and experience by IFAD staff, country and regional programmes stakeholders, and policy makers. Conceiving grants as catalysts of broader, innovative and scalable processes, could contribute to greater impact on poverty reduction of the portfolio as whole. However, the Division recognises that process of transition is not automatic and needs to be conceptualized, planned, managed and supported on its own. In view of this, the Division has been organising seminars and workshops to share results and knowledge gained from the grant programme among IFAD staff and partners in the region. Three new workshops are scheduled for the second semester of 2013 on different grant initiatives and themes: on the new profile of young rural women in the 21 st century (mainly related to TAG-1250-IEP); on policy processes to share the experience of two successful regional policy dialogue grants (TAG-1326-CLAEH and TAG-1203-RIMISP); and on youth to share experience gained in the region under grants TAG 1305-PROCASUR and 1250-IEP. D. Lessons learned 89. At a general level, one of the main lessons learned from IFAD s grant portfolio in LAC is that, although they generate concrete actions in the short term e.g. first year of operations, knowledge, systematization and potential uses in the lending portfolio must be understood as a medium term process. Hence the importance of maintaining a regular process of grant origination as a way to create a more regular flow of knowledge to feed the Division with sound analytical and operational inputs on strategic issues for rural development. 90. Some of the lessons that are beginning to distil from the on-going grant programme include the following: i. Grant TAG 1250-IEP and 1305-PROCASUR: from the findings of both grants it is possible to conclude that there is a clear need to incorporate from early design phases of lending operations an updated diagnostic of specific population subgroups such as rural women and rural youth. This should help in the identification of relevant components and activities such as increased access to information technology, financial services beyond credit, capacity building for the development of rural non-farm enterprises, strategies for greater and better participation in rural labour markets with higher value added, among others. The experience of TAG IEP has revealed the importance of having a good communication strategy built in from the outset. 22

39 ii. iii. Grant TAG-1373 UNIANDES: this large regional grant, although in its early stages of implementation, has revealed a lot of interest from different stakeholders (government officials, academia, international organizations, and rural population). The intersection between the target groups of public spending in productive activities as well as in social safety nets are one of the main topics of discussion in the region. It has revealed the need and possibility of sharing targeting tools and strategies for both types of spending as in the case of records of beneficiaries (registros de beneficiarios) or in measurement through household surveys. Finally, at the household level, this grant project has the potential to generate proposals to increase the usefulness and efficiency that may have public spending for productive purposes versus those more liquid transfers coming from social protection schemes. Grant TAG-1203 has helped to expand IFAD dialogue and outreach to decision-makers, civil society and private sector agents in Mexico, Colombia and Ecuador, by testing and developing a new policy dialogue model. Experience showed that it is possible to see how the impact of IFAD-like operations can be far greater if development projects are supported and complemented by pro-active and systematic policy dialogue processes. This policy dialogue can seek to make specific direct contributions to policy and institutional changes that can foster a more enabling environment for the rural poor and for rural development. Another lesson learned from this grant is that credibility and effectiveness of policy processes rest on the broadness and legitimacy of their participants, on the quality of the evidence they use to diagnose problems and develop alternatives, and on keeping a skilful balance between independence from government and engagement with decision and policy makers. This grant has shown that, in order to contribute to policy change, a long time is needed just to ensure commitment and build confidence between different actors with different interests and expectations. 23

40 A. V. Management performance of on-going portfolio Project management 91. Average scores for Quality of Project Management remained virtually unchanged from last year (Table 27 in the Appendix). It is noteworthy the considerable higher number of projects included in this year s review, 41 compared with 35 last year, 33 in 2010 and 2011 and 29 in This is an illustration of the expansion of the regional portfolio over the last few years 92. Overall, the increase from 27 to 32 in the number of projects rated 4 or more was partly offset by one project more than last scored 3 or less; and the proportion of projects rated moderately satisfactory or better has increased marginally from 77% to 78%. Quality of project management is a determinant factor of project performance and it is worth to review briefly the eight projects 24 rated 3 and the ninth 25 rated 2 in this indicator. 93. Management performance of project AR 1610 has assessed as unsatisfactory by the latest supervision mission carried out in May 2013 due to delays in the process of incorporation of participating provinces, only three about 18 months after entry into force. 94. BO 1490 which has a short implementation period of only four years experienced a protracted recruitment process of key personnel that was only completed in the second semester of 2012, more than one year after entry into force. The first supervision mission carried out in April 2013 reported that although some progress had been made in the establishment of regional offices most of the other recommendations agreed at the start-up workshop held in November 2012 had not been implemented. 95. DO 1479 and DO 1533 are jointly managed by a project executing unit established in the Ministry of Agriculture. Project DO 1479, effective since May 2010, still shows limited results on the ground; this was initially due to delayed fulfilment of disbursement conditions but little progress has been made since the first disbursement was effected in January DO 1533 is effective since September 2012 but besides a small US$50,000 advance no other pre-implementation activities have been undertaken to date. Both projects are classed as actual-problem-project. The major apparent bottleneck is the lack of minimum budgetary allocations required. The Division has provided intensive implementation support, including four missions since October 2012, without visible results. There seems to be a low level of ownership of IFAD financed operations within the Ministry of Agriculture. The MTR for project DO 1479 that is scheduled for Q III 2013 will assess the prospects of country portfolio and recommend measures that may include its restructuring. 96. Project ES 1568 is effective since June 2012 and is classified as actual-problem-project. No activity could be undertaken in 2012 due to the lack of budgetary allocation for the project. The recruitment process of six key staff started in February 2013 but three of the selected candidates including the Director declined the job offers. Implementation can only start upon selection of an agent responsible for the procurement and the financial administration of the project. In April 2013, the Government decided to undertake a competitive selection process that was yet to be launched at the end of the current review period. There is a risk that progress towards completing the preimplementation activities may be jeopardised since 2013 is a pre-electoral year in view of presidential elections to be held in February The CPM, based in the Guatemala country office, is closely following up of developments, including by holding meetings twice a month, to facilitate acceleration of the pre-implementation processes. 97. Implementation of project GD 1569 continued to experience problems and slowed down considerably during the review period. The PMU is undergoing a renewal process following the resignation of key staff and the decision of the government to not renew the contract of the 24 AR 1610, BO 1490, DO 1479, DO 1533, ES 1568, GD 1569, GT 1274 and PA VE

41 Expected disbursement Latin America and the Caribbean Division inadequate project manager. A recent supervision mission agreed on a number of recommendations for action to be undertaken by the borrower, including to address the chronic management deficiencies and to fill the vacant positions with qualified staff. Progress will be monitored during the next mission, scheduled for November In the three years since becoming effective, project PA 1389 disbursed less than US$1 million, a negligible amount even considering the small size (US$4.2 million) of the IFAD loan in support of the project. Although the last supervision mission (May 2013) observed some progress in the implementation of production sub-projects, it reported constraints in market access surpluses and a high sustainability risk. This project has been downgraded to actual-problem status, from potentialproblem last year. The MTR review for this project, scheduled for the last quarter of 2013, will revisit the project implementation plan to take into account the better understanding of the project context and the problems experienced since the beginning of implementation. 99. The status of projects GT 1274, which left the portfolio on the original completion date last December, and of VE 1404, both classed as actual-problem-project last year, are quite particular and will be discussed further down in the subsequent sections of this report. B. Disbursement performance 100. Disbursements to the region during the period under review have declined to US$68 million from US$77.8 million, a reduction of US$11.5 million, or 15%. This fall is partly explained by a significantly decrease in disbursements for three projects (AR 1098, AR 1610 and BR 1335), which, combined, amount to US$15.3 million. Project AR 1098, which was completed in December 2011, disbursed US$6.2 million in and only a residual amount of less than US$100,000 in the current period. Project BR 1335, completed in December 2012, which had disbursed US$6.7 million in , disbursed only US$1 million in because most of the expenditures submitted were applied to recover the large special account advance of US$5 million. Whereas project AR 1610 did not require to replenish its special account during the current review period as it had received a large US$3.5 million advance in June The above highlights the high dependence of overall disbursement levels on few projects in the LAC region. Chart V - Disbursement by sub-region Notwithstanding the above decrease in 140% Southern Cone the amounts disbursed, 138% 137% 135% Mesoamerica & Caribbean 136% the overall regional 133% disbursement lag % 129% Andean countries 127% 125% remained unchanged LAC overall from last period at -8% (see Chart V beside 120% 115% and Table 28 in the 110% 109% appendix). The Andean 110% 108% and the Southern Cone 105% 106% 100% 102% sub-regions maintained 100% actual disbursement 95% 93% levels well above 90% 92% 92% 90% expected disbursement, 89% 86% 87% 88% albeit by a smaller 85% margin: 37% compared 80% 82% 83% 83% to 38% for the Andean 75% region, and 127% Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 compared with 129% for the Southern Cone. The MCAC sub-region continued to lag behind expected disbursement and showed a disbursement lag of 10% in June 2013, slightly above the 8% in June The disbursement lag is the ratio actual disbursement / expected disbursement calculated from the IFAD disbursement model 25

42 102. Actual disbursement is below expected disbursement in seven countries 27 (out of 19), of which six are located in the MCAC sub-region. While disbursement lags reached significant levels in the Dominican Republic, Guatemala and Panama (62%, 55% and 26%, respectively), Paraguay and Peru display excellent disbursement ratios, showing actual disbursements in excess of expected disbursements by 85% and 52% respectively. Other countries with relatively large portfolios and positive ratios include Argentina, Brazil, El Salvador and Haiti Project-by-project analysis (see Table 28 in the appendix) reveals that 16 projects, out of 40 that had been effective for more than six months in June 2013, show a disbursement lag in June Three are located in the Andean sub region, one in the Southern Cone and 12 in the MCA sub region; i.e., in this sub-region, about half (52%), of the 23 on-going projects that had been effective for more than six months show a disbursement lag in June The same proportion in the Andean and Southern Cone sub regions is 28% and 15% respectively The overall disbursement prospects look favourable as the large majority (10 out of 16 or 63%) of projects showing a disbursement lag have been effective for less than three years, and only one project effective for more than five years - MX experiences a disbursement lag, at a relatively low level of 5%. This project is not a matter for concern as it has been displaying an impressive disbursement performance since June 2009 when its disbursement was at a very high 72%. In effect, its annual disbursements have jumped from US$1.8 million in to US$6.9 million in , and is expected to disburse its loan June 2014 when the closing date expires Table XVI below shows five projects that have contributed to depress overall levels of disbursement to the region. Combined, they disbursed slightly more than US$5 million in , compared with about US$15 million originally planned annual disbursement amounts. Increased disbursement performance of these projects could make a significant contribution to increase the flow of financial resources to the region, MCAC in particular where four of them are located. Table XVI - Disbursement performance of slow disbursing projects Project ID DO 1479 EC 1354 GT 1317 HN 1535 NI 1380 Age (years from entry into force) at 30 June Disbursement performance rating Disbursement performance rating disbursement lag 100% 100% -9% 30% 2012 disbursement lag 57% -5% 31% -25% 2013 disbursement lag 55% 46% 36% 13% -37% IFAD financing (SDR m) Undisbursed June 2013 (SDR m) Undisbursed percentage Planned aver. annual disburs. (SDR m) Historic aver. annual disburs. to June 2013 (SDR m) disbursement (SDR m) disbursement (SDR m) Future aver. annual disburs. required to disburse fully (SDR m) Future required / historic disbursement ratio Loan effectiveness date May-10 Mar-11 Dec-08 Feb-11 Aug-08 Current loan closing date Dec-16 Sep-17 Jun-15 Sep-17 Mar Belize, Dominican Republic, Ecuador, Guatemala, Honduras, Mexico and Panama 26

43 Table XVII - Current IFAD financed portfolio: approved not disbursing projects 106. Ten other projects IFAD financing (USD'000) Project Approval Effectiness that are yet to start Project ID acronym date date AND MCAC SC Total disbursing (see Table XVII beside), and have a BR 1486 Piaui 17 Dec Oct combined value of BO 1598 Accesos 13 Dec US$192.6 million, PY 1611 P. inclusivo 02 Apr Feb equivalent to almost 30% of the regional current CO 1491 TOP 03 Apr Dec portfolio value, are MX 1597 Mixtecas 03 Apr Nov expected to make a BR 1619 Ceará 21 Sep Jun significant contribution to BR 1563 Sergipe 21 Sep increase the level of PE 1498 S.&S. alta 21 Sep Feb disbursements to the HT 1532 PPI III 08 Sep Oct region, seven of them during the second VE 1609 Prosanesu 10 Dec semester of 2012 as they Total were already effective last June. The effect in the MCAC would be relatively less significant because only two of the projects, with a relatively small combined amount of US$31.9 million, are located in this sub-region. This raises the importance of efforts to improve the disbursement of already disbursing projects in the MCAC subregion. C. Counterpart funding 107. Insufficient allocation of fiscal space either to access available external financing or to release government funds, or both, represented a major constraint to implementation progress and to disbursement levels during the period under review. The overall rating for this indicator as at June 2013 is 4.1, down from 4.6 last year. This problem is heavily concentrated in the MCAC sub-region where 12 of the 13 projects rated unsatisfactory are located. The country programmes most affected by this problem are those in the Dominican Republic, Grenada, Guatemala (although not a factor of underperformance as the paralysis of the projects has other reasons), Honduras and Panama. The only project outside MCAC that confronted a significant shortage of counterpart funding is project PY 1333 that did not receive, during the review period, US$1 million necessary to finance beneficiary subprojects approved in 2012 that should have received funding in early 2013 to enable completion by September D. Financial management 108. This year, PSR ratings for the quality of financial management and timeliness and quality of audit have been assigned by finance officers. This was done in agreement with the CPM and benefitted from increased interaction between finance officers and CPM throughout the review period, including the review of audit reports and project financial management capacity assessments and during the preparation and/or review of findings of supervision and implementation support missions. The changes in the scores of some projects from last year could reflect possible differences in the application of the assessment criteria and better ability of finance officers to ensure consistent rating across regional portfolios The overall average rating of quality of financial management remained unchanged at 4.1; as did the proportion of projects rated satisfactory at 75% of the projects scored (see Table 35 in appendix). However, this year three projects were rated 2 or less. In the case of GT 1274 the score 2 resulted from significant delays in the process that should have enabled closure of the project and IFAD loan account by end-of June 2013; the deadline was not respected and an informal extension up to 15 August granted by CFS is unlikely to be sufficient to complete the process despite heavy support from the IFAD country team. Project HT 1275 continues to confront persistent financial management 27

44 problems. These stem from the qualification of project FM staff and the weakness of in-country internal control systems. At the end of the review period the installation of the accounting system software was yet to be made and the audit report was overdue by more than 90 days. The situation is expected to improve during the forthcoming review period following two missions by the CFS finance officer to the country, the replacement of the project financial manager and the decision to contract additional consultants to intensify the implementation support to this project. Project VE 1404 scored 1 because of the extreme weakness of its FM recording and management system that led to the inability to deliver the audit reports to IFAD. This project is under suspension since 1 February This year s quality of Financial Management scores of projects rated 4 or better show a considerable improvement reflected in the increase of the proportion of projects rated 5 from 18% to 33%. The number of projects rated 5 increased to 12 from five last year, including seven projects upgraded from rating 4 last year. Three other projects have been upgraded from moderately unsatisfactory to moderately satisfactory. Audit ratings also show considerable improvement, evidenced by the increase from 80% to 88% of the proportion of projects rated 4 or better The application of the new risk-based disbursement framework introduced by CFS last year has been improved during the review period through an increasing number of project capacity assessments and interaction between the finance officers on the one side and CPM and LAC implementation support consultants on the other. As shown in Table XVIII below, it is noticeable that the number of low risk projects in the region rose to 24, or 55% of the 44 rated projects, from 17 (43%) last year. Four projects 28 have been upgraded from medium to low risk. The proportion of high risk projects has increased from 8% to 11% due to the chronic financial management risk situation in Panama and across the country programme in Haiti, where the number of projects increased to three, and the problems confronted by project VE 1404 reported above. Table XVIII - Financial management risk ratings FM risk rating June 2012 June 2013 No. of projects % No. of projects Low Risk 17 43% 24 55% Medium Risk 20 50% 15 34% High Risk 3 8% 5 11% Sub-total % % Not rated 4 1 Total current portfolio % % E. Loan administration 112. Significant improvements have been made during the review period also on the loan administration front. The new workflow for the review and approval of withdrawal applications has been consolidated and operated smoothly, mainly thanks to close communication across divisions; raised SOE thresholds (see below); efficient work of the LAC implementation support consultants on hands-on training of project staff and answering to queries and following up on outstanding issues; and the diligence of LAC, CFS and Treasury professional and support staff. Two other easing factors were the slightly higher average amount of withdrawal applications and the reduced number and amount of withdrawal applications processed contributed to the lower level of disbursements to the region this year. The above resulted in a further decrease in the average number of days required to process a WA from 13 to Projects BZ 1456, GY 1415, PY 1333, and VE

45 Table XIX - Withdrawal application processing data by review period Amount WA processed (USD '000) No. of WA processed WA average amount (USD '000) Average processing time (days ) There is scope to continue to improve the efficiency of WA processing. As shown in Table 30 in the Appendix, the minimum number of days required was 6 (in one country only); it could be reduced by at least two means: faster notification of CPM approval when the implementation support consultant who assists the CPM in the review under his responsibility receives an e-copy of the WA forwarded to Rome; and faster turn round time from Registry to Treasury through CFS Another key factor to reduce processing times is the SOE threshold defined for the project. There has been improvement also on this front as evidenced in Table 31 in the Appendix that shows an increase from 17 to 27 of the number of projects that are not required to attach supporting documentation for expenditures up to US$100,000, including 13 projects, up from eight last year, that are exempted from submitting supporting documents. SOE thresholds should be revised on a continuing basis taking into account supervision findings, assessment of the quality of WA, unaudited project financial statements and audit reports, and project financial management capacity assessments that should be updated at least once a year. As the proportion of projects assessed for financial management capacity in the region increases, it is expected that the simplification of disbursement procedures will be deepened while ensuring all required safeguards It should be possible to reduce the average processing time for the LAC region also by addressing the causes of delayed processing in countries that show an above average processing time, such as the Dominican Republic (14 days), Guyana (15 days), Haiti (20 days) and Panama (29 days) The extraordinary long delay in Panama was due to inadequate documentation provided for the only WA submitted during the reporting period. Although there is currently one and small sized project in Panama, the Division should find ways of intensifying implementation support to the country programme Processing time for Haiti WA remained high due to deficiencies in supporting documentation, ineligible expenditures and high-risk ratings that entail low SOE thresholds and in-depth review of documentation submitted, and frequent need for follow up with a slow response from projects. Haiti is the country with the largest number of WA in the region, averaging 30 per year, and suffers from weak governance and institutional bottlenecks. During the review the Division took a number of initiatives to strengthen its capacity to address the problems confronted by the country programme, including the out-posting of the CPM to Port-au-Prince In close coordination with the Division, the Finance Officer carried out two missions to Haiti to refine and update the financial management capacity assessment, identify problems and risks and discuss them with relevant authorities, and provide guidance to project personnel and the IFAD country team. During her second mission, the Finance Officer assisted the CPM in the selection of qualified consultants to provide implementation support to IFAD financed projects in Haiti CFS involvement will continue to be required in the forthcoming period to provide continuing support to project staff and the IFAD country team, including the recently selected consultants, and to help in the coordination with the IDB and the World Bank that have engaged the Ministry of Agriculture in an initiative to establish a dedicated unit responsible for the financial management and the procurement of externally financed investment projects under its responsibility During the period under review, the Division and CFS joined efforts also to attempt to resolve some long-outstanding issues. This included the long delay in refunding IFAD of the unjustified 29

46 balance of the authorised allocation for projects BO 1145, PA 1199 and UY 1161, which were overdue since March 2011 for the project in Bolivia and since March 2012 for the projects in Panama and Uruguay. The loan accounts for the projects in Panama and Uruguay have been closed during the review period. However, for project BO 1145 it is yet to be closed despite continued action by the Finance Officer and the LAC country team, because the overdue refund is pending the conclusion of a protracted internal audit conducted by the Ministry of Agriculture Another priority within the collaboration with CFS concerned the problems confronted by the country programme in Guatemala. The Finance Officer has participated in a mission carried out in October 2012 to assess the situation of project GT 1274 and make recommendations for action by IFAD, and has since been closely involved in and supporting the process that should enable IFAD to close the loan account, which, despite the complexity of the problems, is now expected for Q III of 2013, within 90 days of its closing date The Finance Officer responsible for the coordination of the CFS team in charge of the LAC portfolio has also participated in the annual divisional retreat held in Colombia in April This granted a unique opportunity to meet all LAC staff, including the large proportion of out posted personnel and the key divisional implementation support consultants, and gain first-hand knowledge of the strengths and weaknesses of IFAD country programmes in the region. One full day of the retreat has been devoted to a seminar where the Finance Officer led the presentation and the discussion of IFAD financial management strategy, guidelines and procedures. A number of agreements were made during this seminar with a view to strengthen inter-divisional coordination, especially with regard to capacity assessments, supervision and implementation support, project financial management and audit performance ratings and audit related procedures During the forthcoming period, the Division and CFS should place emphasis on a number of areas, which include earlier and fuller involvement of Finance Officers in project design processes, expansion of the coverage and depth of FM capacity assessments, increased CFS contribution to the project supervision and implementation support processes, and the promotion of accounting and audit standards compatible with international best practice and the improvement of private auditor selection processes Most of the activities required to fulfil the above aims are related to in-country processes that LAC has been supporting through out-posted staff and specialised local consultants that can be easily found in the region. This is being done with a double advantage. First, it allows tapping the in-depth local knowledge of experts based in the region. Second, the cost-benefit ratio is high, since local consultant fees are often below international levels and travel costs can be contained as travel is done within the region The Division recognises that, given the relatively healthy status of IFAD portfolio in LAC on fiduciary terms and the progress already made since the Division took up the responsibility for direct supervision in 2009, additional gains would be relatively limited, but could be maximised if continues action takes place in the field, in the proximity of the institutions and the people. This would also reduce the cost to IFAD since overseas travelling for CFS staff to visit countries in Latin America would be avoided The comparatively more developed institutional frameworks and sounder country systems found in Latin America could also constitute a learning ground for CFS, resulting in better knowledge and experience exchanges that could be disseminated elsewhere. F. Procurement 127. Since the introduction of direct supervision, CPM and implementation support consultants became increasingly familiar with IFAD procurement procedures and therefore better able to provide higher quality guidance to project staff on the planning and implementation of procurement activities. This was facilitated by increased awareness of the importance of timely and quality procurement of goods and especially of consulting services for successful project implementation, which also led to improved oversight of procurement plan review and prior and ex-post reviews of procurement 30

47 documentation. As a result, a large proportion of projects (85%, or 35 over 41 projects reviewed) scored moderately satisfactory or better on this indicator, including four that upgraded from moderately unsatisfactory last year. Six projects 29 rated moderately satisfactory or less, all, with exception of project PA 1389, due to inefficiency and delays in procurement activities that might delay project implementation but do not violate IFAD requirements. G. Compliance with financing covenants 128. The number of projects rated 3 or less increased to eight from three last year, including two rated 1: Project GT 1274 because of the unilateral decision to replace the lead project agency and project VE 1404 for the non-compliance with audit requirements that led to the suspension of the project. The two projects (HT 1275 and HT 1532) under the Ministry of Agriculture in Haiti were rated 3 because of the persistent delay in installing an adequate accounting software for the IFAD financed projects; whereas project PA 1389 has scored consistently low on this indicator because of the above mentioned persistent obliviousness of IFAD procurement regulations; project GT 1317 due to the lasting lack of reversal of the mistaken deliberation to transfer the project to another lead agency. The two other projects rated 3 are project ES 1568 and ME 1597, both due to the lack of fiscal space (in 2012 for the project in El Salvador and in 2013 for the Mexico project), which resulted in in both cases in significant delays to start up implementation. H. Audit 129. As shown in Table 32 in the Appendix, 22 audit reports (out of 33 due by June 2013, or 67%) had been received by end-july 2013, of which 11 (50%) were received before 30 June; one of these, for project HT 1171, was received late but within 90 days of due date. The rate of timely delivery of audit reports this year is marginally below 2012 when, out of 31 reports due, 16 (or 52%) were received by 30 June and 22 (71%) by end-july. The 12 audit reports overdue as at 30 July concern projects CO 1294, DO 1479, EC 1354, GT 1274, GT 1317, GT 1473, HT 1275, ME 1349, ME 1412, NI 1380 and VE Receipt of nine of these is expected before the end of September i.e. within 90 days from due date. Dates for the delivery of audit reports for projects GT 1317, GT 1473 and VE 1404 are less certain given the problems afflicting these projects as mentioned above CFS plays the leading role in the audit process by tracking the timeliness of auditor s selection, reviewing auditor TOR and audit reports, providing advice on the quality of financial reporting and auditor s performance, as well as following up on auditor and CFS recommendations and action plans. This year s scores on the audit indicator have been assigned by the CFS Finance Officer in agreement with the CPM finalization of the PSR The use of International Standards on Auditing (ISA) or International Standards of Supreme Audit Institutions (ISSAI) has continued to grow during this period, reaching 86% of the projects for which the audit report has been received compared with 75% and 72% in 2011 and 2010, respectively. National standards were used in the other cases. The Division will continue to pursue efforts, in collaboration with CFS, towards ensuring that the TOR for the selection of private audit firms include the use of international standards as a requirement The proportion of unqualified audit reports remained unchanged from the two previous review periods at 80%. As in previous years, there was no adverse opinion or disclaimer of opinion CFS found that the majority of projects in the LAC region prepare financial statements on the basis of national standards, modified versions of national or international standards, or on a cash basis. CFS intends to promote the use of best practice in financial reporting by proposing to projects that they start using templates designed in IFAD that are compliant with International Public Sector Accounting Standards and International Financing Reporting Standards. 29 Projects ES 1568, GT 1274, GT 1317, HT 1532, PA 1389 and VE

48 134. During the forthcoming period, the Division should continue to collaborate with CFS throughout the audit process to improve the effectiveness of financial management and reporting systems at project level as well as the timeliness and the quality of audit reports. I. Monitoring and evaluation 135. The regional average score for monitoring and evaluation dropped further to 3.7 from 3.9 last year. Although the number of projects rated 4 or more rose from 25 to 27, the increased number of ongoing projects results in a reduction of the proportion of projects rated moderately satisfactory or better from 71% last year to 66% in June 2013 when 14 projects showed M&E scores of 3 or less. These 14 projects are spread through all classes of age: four projects in each of the age groups 30 until five years, two in the 5-7 year group and none of the projects than have been effective for seven years or more. This means that in almost half of the projects that have been effective for three years or less, the M&E system reports on progress only at the level of physical targets and managers make little use of M&E information for planning and / or decision-making; and that, even though the problem seems less serious after PY 3, in June this year 33% and 25% respectively of projects aged 3-5 years and projects aged 5-7 years have no satisfactory M&E system. Actually, ten 31 projects show lower ratings in June 2013 compared with last year, while only three 32 increased their performance on this score during the period under review Problems with M&E at project level are partly linked to underperformance of project management units, as illustrated by the relatively high proportion of projects (27%) that scored moderately unsatisfactory or less on both indicators, but result also from a dearth of qualified M&E officers partly due to the lack of a results-based culture in the region. Another factor of low M&E rating may be the increasing demands of CPM for projects M&E systems to generate higher quality data for results and impact assessment and for knowledge management purposes. Nevertheless, given the fast growth of the divisional investment portfolio and the entry of a relatively large number of newly effective projects during the last two years, the Division should increase its attention to the M&E area. As noted in last year s report, this should focus on early support to recently effective projects to set up their management information and M&E systems, engaging project units in defining the methods and the distribution of tasks for 2nd level reporting well before the project reaches its MTR stage, providing implementation support for projects to improve activity-output-outcome reporting in periodical implementation progress reports and for supervision and completion reporting purposes; it should also include specific attention to timely conduction and quality of baseline surveys as well as of studies and surveys at mid-term and on completion Notwithstanding the above, the Division received acceptable 1st level RIMS reports for 26 of the 30 projects that were required to submit 1st level reporting, and 19 reports for 2nd level out of 20 required (see Table 33 in the appendix). Project compliance with RIMS reporting at results level has been improving markedly since 2010 when only 13 projects, out of 20 required, reported at 2nd level. This is due to the persistent efforts of divisional country teams, especially CPM and M&E consultants that assist with project supervision and implementation support As noted also in last year s report, the Division continued to develop its capacity to document and report on the impact of IFAD financed operations in the region. Some of these initiatives undertaken were in response to corporate priorities stemming from IFAD s last replenishment (IFAD- 9), that include a commitment on the number of people reached by IFAD projects and the number of people out of poverty, 90 and 80 million respectively To contribute to this discussion, the Division has carried out a series of activities that included a diagnostic of the state - quantity and quality - of the information collected under the RIMS system. Table 34 in the appendix presents the extent of availability of RIMS survey information on a project- 30 For the purpose of analysing project maturity, the Division groups on-going projects under five classes of age according the length of time the project has been effective: less than 18 months; 18 months to less than three years; three to less than five years; five to less than five years; and seven years or more 31 Projects DO 1479, ES 1416, GT 1274, HN 1407, HN 1535, MX 1349 and ME 1412 scored 4 in June 2012 and 3 this year; the score of project VE decreased further from 3 to 2; and the score of projects ES 1321 and NI 1380 decreased from satisfactory (5) to moderately satisfactory (4). 32 Project GT 1317 from 3 to 4 and projects HT 1171 and NI 1120 from 4 to 5 32

49 by-project basis, as well as the availability in each country of some other secondary source of information (e.g. LSMS, census, etc.), and of some variable of welfare that could be used to make some estimate of poverty by the poverty line method. The system in place to collect RIMS data does not guarantee a regular flow of information. In other words, there is a need to revise incentive mechanisms to collect and report systematic and quality data The Division has also been participating actively in an inter-divisional group for discussion of methods and concepts on poverty and inequality which will provide input to build a methodology of calculation to meet both corporate indicators referred to above (outreach and poverty reduction). These activities have been undertaken under the coordination of the SSD team in SKM In parallel to the corporate agenda, the Division has undertaken an internal process of reflection on the quality, relevance and use of the information generated by project monitoring and evaluation systems; on cost-effective ways to conduct impact evaluations of IFAD-financed projects; on methods to measure impacts of other types of interventions different from regular investment projects, such as policy dialogue and/or evaluation of programmes and policies where IFAD-financed projects are inserted; and, finally, a reflection on how to analyse and absorb the lessons that emerge from the information contained in the monitoring and evaluation systems into operations both current and future The Division is currently working on developing a method of evaluation for processes, outcomes, outputs and impact of development projects targeting vulnerable groups with the characteristics of those of IFAD, making use of the information collected by the projects, but also allowing in as much as possible the use of secondary sources, and exploring the use of national systems. In this regard, the Division organized a two-day workshop in Lima (Peru), in May The workshop was attended by CPMs and other staff from the Division concerned with the M&E and results and impact areas, representatives of government evaluation offices of Mexico, Colombia, Peru and Brazil, a representative of ECLAC, representatives of SSD / SKM and the team of specialists hired to develop the evaluation method noted above A noteworthy conclusion of the workshop was the confirmation of the possibility of IFAD working in coordination with different government evaluation and census offices that already exist in the countries of the region and build alliances depending on the particular characteristics of each of these offices. For example, in the case of Colombia the evaluation office can carry out impact assessments at the request of the Ministry of Agriculture. In Mexico, CONEVAL (National Evaluation Committee) is available to provide technical advice for the design and for the selection of service providers to implement such assessments in the field With the inputs from the Lima workshop and the methodological proposal under preparation, the Division intends to work in collaboration with SKM and within PMD on a proposal for a customization of RIMS, basically to enrich the system with additional information modules that allow to capture variables of particular relevance to the Latin American context 33

50 A. VI. Results of the on-going portfolio Overall implementation progress 145. As shown in Table 35 in the appendix, the regional average score for overall implementation progress this year is 3.83, two decimal points below last year average of 4.03 and also lower than the 3.97 in June This year s moderately unsatisfactory average originates primarily in the increased number of projects rated 3 or less, which rose to nine from seven last year despite the retirement of project PA 1199 and the upgrade of three of the projects rated 3 in Other contributing factors were the assignment of scores of 2 to three of the nine projects scoring 3 or less and the reduction from eight to five of projects scoring 5 or better Projects GT 1274, GT 1317 and VE 1404 confronted the harshest problems, already described above, which actually worsened from last year when they scored 3 on overall implementation progresses; this year the projects in Guatemala scored 2 and project VE 1404 scored 1. The two Dominican Republic projects (DO 1479 and DO 1553), the single projects in Grenada and Panama (GD 1569 and PA 1389) and one project each in Ecuador (EC 1588) and El Salvador (ES 1568), all rated 3, complete the list of projects with unsatisfactory project implementation progress in June The above reflects the critical situation in Guatemala and in the Dominican Republic described above and confirms the difficulties of sustaining satisfactory quality of project implementation in Panama The Grenada project (GD 1569) received the last supervision mission in July 2013 and progress in the implementation of important recommendations agreed with government will be closely monitored by the CPM. The situation will be reassessed in November 2013 during the forthcoming supervision mission. In the meantime, implementation support should be provided, in coordination with CDB that co-finances the project, to help concerned country authorities to overcome the problems experienced by the only IFAD-financed operation in this debt stressed small island state As mentioned above, project EC 1588 is managed by the recently established project unit responsible also for the implementation of project EC Both projects are part of a larger programme of national priority and are expected to receive all necessary support from the government. The last supervision mission took place in May 2013 and confirmed an effective start-up of project activities Prospects for an effective start-up of Project ES 1568 early in the forthcoming review period are somewhat less favourable. This project was approved in December 2010, signed in March 2012 and entered into force in June 2012 with an effectiveness lag of 18 months. In 2012 no fiscal space was assigned to the project in the government s budget and the project remained in standstill until the beginning of Although at the time the project was yet to receive an initial counterpart funding contribution, could disburse US$150,000 from the IFAD loan in March 2013 to finance start-up costs. This facilitated the initiation of the selection process for key project staff, incidentally complicated by the need to re-advertise three positions, including the project director 33. The most intricate problem confronted during the first semester of 2013, which regarded the appointment of an external entity responsible for the administration of the project financial resources, was finally resolved with the decision to contract UNOPS in July The contract is expected to be signed in August-September Therefore, the progress that this project could make before the end of 2013 in the actual implementation of planned activities is at this point uncertain and should be closely followed up by the Guatemala-based CPM in charge of El Salvador The scores of two projects rated 5 in were downgraded to 4 this year due to slowdown of the implementation pace. For project NI 1380 this is attributed to hindrance caused by the process of adjustment to the project institutional framework changes resulting from the extinction of its former lead agency, the Rural Development Institute, that was replaced with a newly created Ministry. Project ME 1412 experienced a delay in the advertisement of its annual call for sub-project application, which was yet to be made at the time of the May 2013 supervision mission, due to the 33 Due to the protracted length of the selection process some applicants had found other jobs when they received notification of their selection for the position in the IFAD-financed project. 34

51 process of restructuring its lead agency initiated after the installation of a new Federal government in December The best performing projects in the portfolio include, besides projects BR 1335, CO 1294 and PY 1333 that have consistently shown above average performance, project ES 1321, which is exceeding most of its targets, and project NI 1120, that has made a significant contribution to raise the food security and the income of its over 8,000 beneficiaries, the large majority of whom (82%) are women. A sixth project, PE 1240, also made good implementation progress during the review period but its pace has slowed down due to uncertainty regarding its expenditure ceiling for It is interesting to note that all six best performing projects in the current review period are more than five years old, with the marginal exception of project ES 1321 (effective for slightly more than 4.5 years). Likelihood of achieving the development objective 152. The critical situation in the Dominican Republic and in Guatemala and the operational demise of project VE 1404, combined with the aggravation of the problems experienced by project GD 1569, resulted in an increase to five from three of last year of the number of projects assessed as having slimmer prospects of meeting development objectives by their respective completion dates. The increase in the number of projects rated 5 from six to eight offset the decline of the average rating only partially, because, unlike last year when the lowest score assigned was 3, one project (VE 1404) scored 1 and another (project GT 1274) scored 2 on this indicator. It is consoling to notice that project GT 1274 left the portfolio last December and project VE 1404 is due for cancellation this year All seven projects that scored 5 or more last year and were on-going in the whole or part of the current period maintained their consistent high likelihood of achievement of development objectives. These are projects BR 1335, CO 1294, NI 1380, PE 1240 and PY The two other projects (ES 1215 and GT 1085) left the portfolio in December and September 2011 respectively. Four new projects (AR 1279, ES 1321, HT 1171 and NI 1120) joined the higher grade group. All this projects except ES 1321 have been effective for more than five years and, in the case of the projects in Haiti and Nicaragua, over ten years, evidencing the long time required for LAC projects to realise outcomes commensurate to design targets. B. Outputs and outcomes Contribution to IFAD s Results Management Framework 154. The average regional score on country programme performance against the RMF increased incomes indicator remained unchanged from last year at 4.05 (see Table 36 in the Appendix). There were however a few changes in individual country ratings. The very low rating of 1 assigned to Grenada has been adjusted upwards to a still unsatisfactory score of 2. In Brazil, completion of project BR 1335 in December coincided with the start-up of project BR The lower country score of 4 assigned this year reflects the lower level of investment activities during the year ending in June The score of the contribution to increased incomes in Guatemala dropped to 3 in recognition of the implications of the problems afflicting the investment portfolio in this country The programme in Mexico performed well during the year with an increasing orientation towards economic empowerment and income generation and is now rated 5. The scores for other countries remained unchanged. While they continue to be unsatisfactory and moderately unsatisfactory in the Dominican Republic and in Guyana respectively, they are 4 or more in all the other countries, with Colombia, El Salvador, Honduras, Nicaragua, Paraguay and Peru at par with Mexico with a score of 5. Movement of ratings for improved food security and for empowerment of the rural poor follow the same pattern. The regional average for increased incomes declined slightly due to an adjustment made to the score in Argentina. The marginally lower average score for empowerment is due to a decrease in scores in four countries, namely Haiti (from 6 to 5), Brazil and Panama (both from 5 to 4) and Guatemala (to 3); not offset by one point increase in Bolivia and Honduras. Overall, the programmes in El Salvador, Nicaragua and Paraguay ranked highest in the impact quadrant with scores of 5 or more in all single indicators. The programmes in the Dominican Republic, Grenada, Guatemala and Guyana continued to show unsatisfactory performance. 35

52 156. The assessment of the extent to which the country programme adheres to the aid effectiveness agenda continued to be favourable overall, with a regional average score of 4.42 unchanged from last year, and modified ratings in only four countries. The scores of Guatemala and Guyana were upgraded as a reflection of the improved coordination with governments and co-financiers. The less favourable aid effectiveness assessment in the Dominican Republic stems from the low level of commitment evidenced by the unavailability of fiscal space. The score on aide effectiveness in Nicaragua also decreased, from 5 to 4, and in this regard it is interesting to note the significantly higher opinion expressed by respondents to this year s client survey This year, the results of the annual client feedback survey became available earlier than in 2012 and on time for including an analysis in this report. This is a global survey conducted in each IFAD member country with an active programme in alternate years. The respondents to this survey are partners belonging to one of the following categories: (i) public sector institutions; (ii) development organisations; (iii) and private sector and civil society organisations. Thirty different people on average are selected and invited by the CPM to respond to the survey. For the survey to be valid the response rate should be 40% or more It is important to note that the results of the survey are not to be interpreted as a judgement of good or bad. They are rather an instrument to gauge the perceptions of people with whom we work and are important actors in the rural poverty reduction and social and economic development arena. The client survey is also one of the reporting tools for the IX Replenishment Corporate Results Management Framework in respect of country programme and project management indicators. The survey is therefore relevant for portfolio performance assessment purposes This year the survey has been conducted in seven countries from the region with valid results in six of them, namely Colombia, Dominican Republic, Ecuador, El Salvador, Nicaragua and Venezuela. The results from this year s survey for the six countries concerned show relatively high overall average ratings for the categories of aid effectiveness (although harmonisation was considered an area for improvement in the Dominican Republic and in Ecuador, and marginally satisfactory in Colombia) and of impact on poverty It is interesting to note that, in all countries except Ecuador, survey respondent rates on income and food security are higher than CPM scores. This may be a reflection of high recognition of IFAD s single role and comparative advantage over other development partners in the economic empowerment of poor people in rural areas. The relatively low Ecuador respondent scores are probably related to the issues that have limited the effectiveness of the investment projects in the country for the reasons explained elsewhere in this report. In the case of the Dominican Republic, the relatively high respondent scores on the impact category contrast with the low ratings assigned in the CPIS for this country. This is possibly explained by the high level of appreciation for the alignment of the IFAD programme with national policies and procedures of survey respondents (average of 5.06) and of expectations regarding the potential impact of the investment programmes in the country notwithstanding the problems that they have been confronting Results from the responses received indicate the need for the Division to make additional efforts in the Dominican Republic, Ecuador and Venezuela, with regard to the level of IFAD engagement in national policy dialogue and to how it plays a facilitating role for meaningful participation and contribution to policy discussion of local stakeholder in these three countries. This should be made easier by the rotation of CPM for these countries that took place early this year and, in the case of the Andean sub-region the closer proximity of the CPM who was out posted to the Lima country office Responses to the question introduced this year assesses to what extent IFAD is considered as an effective partner. There is high regard for IFAD on this score especially in Colombia and Nicaragua. Opinions expressed have been quite favourable overall, except in Ecuador that averaged 3.07, and to a lesser extent but still moderately satisfactory in the Dominican Republic On this year s survey results it is worth to noting the highly satisfactory views expressed by respondents from Nicaragua, where the overall average score for all indicators combined reached 36

53 5.65, ranking very high among the 32 countries where the survey was conducted in The average was equally above five for each of the four categories that comprise the questionnaire. The extent to which the IFAD country programme adheres to the aid development agenda as defined in the Paris Declaration on the three areas of fostering country ownership, aligning the country programme with national policies and procedures, and coordination and harmonisation with other development partners was especially appreciated. Contribution to policy dialogue was also highly rated, as was the effectiveness of IFAD as a development partner. This can be attributed principally to the IFAD country team that has operated in close communication with government and other partners over the last few years, including periodic joint project supervision and the provision of implementation support as and when required. The approach and the methods applied in Nicaragua could certainly be replicated in other countries in the region, including those under a Rome-based CPM as is the case of Nicaragua Overall, if this year s results can be taken as an indication of relative strengths and weaknesses of the Division in the areas covered by the survey, the conclusion is that it should intensify its efforts towards better coordinating and harmonising its strategies and procedures with in-country development partners, both bilateral and multilateral; and boosting its involvement and contribution to national agriculture and rural development policy dialogue processes, including the facilitation of local stakeholders participation, especially of farmer organisations, and contribution to policy discussions As to the policy agenda, the Division has an outstanding record of achievements in this area, especially in the Southern Cone sub-region, and has been implementing several initiatives aimed at promoting the development of increasingly pro-poor public policies. These have been taking place primarily under the regional grant programme, as noted above under the section on the divisional grant portfolio and operations, but application of results and lessons learnt has been slow. The issue to be resolved might be connected to an as yet insufficient degree of dissemination of information and coordination with the CPM group. Only the CPM is in a position to plan, organise and lead the policy dialogue processes that warrant to be nurtured at the country level and which should be integrated with the policy objectives embedded in the COSOP. Project outputs and outcomes 166. As regards individual project component performance analysis, the cohort of projects is made of all projects that include component ratings in the PSR, 33 in both 2012 and Two projects in 2012 and eight projects in 2013, all effective for less than three years, did not include ratings for component performance, the difference being explained by the higher number this year of young projects effective for more than six months at the end of the review period. Coincidently, the cohorts for both periods include the same total number of components The number of projects with average component scores of 4 or more has decreased slightly to 20 from 22 last year. While last year six of the 22 projects had been effective for less than years, only three of the twenty projects with average component scores of 4 or more belong to the same age group. This is an indication of the lesser readiness for implementation of new projects entering the ongoing portfolio. While four projects experienced a noteworthy decline in component scores (BE 1456, GD 1569, DO 1479 and VE 1404), six other projects improved their performance significantly (projects EC 1297, PA 1389, ES 1321, HN 1407, HN 1535 and ES 1416). Among the projects above that showed declining performance, only BE 1456 is not-at-risk this year. Project ES 1416 is one of the three last year actual-problem-projects that were upgraded to not-at-risk during the current period. 37

54 Table XX - Ratings of outputs and outcomes No. % No. % average rating rating 1 2 2% rating 2 7 7% 3 3% rating % 21 21% rating % 47 48% rating % 23 23% rating 6 2 2% 4 4% No. of components rated % % rating 3 or less 28 29% 24 24% rating 4 or more 70 71% 74 76% No. of projects reviewed The on-going portfolio includes 12 projects 34 that have been performing particularly well in terms of outputs achieved, showing average component scores of 4.5 or more. Seven of these stand out by showing average component ratings of 5 or more and moderately satisfactory or better performance in all their components. All 12 projects were more than four years old in June 2013, with the exception of projects HN 1535 (2.4 years) and PE 1352 (3.8 years). This confirms that projects in the region take a long time before starting to produce results and more effort needs to be made for earlier, i.e. from project approval rather than from effectiveness, and more effective preparation for start-up and during the early implementation period through implementation support In accordance with PSR component scores, projects have been performing well in the Markets impact domain in Brazil, Ecuador, El Salvador, Honduras and Peru, more markedly in Honduras and in Peru. This is a domain where interventions in the region have been generally successful, with the exception of countries with systemic problems viz. the Dominican Republic, Grenada and Guatemala Performance is also strong in the Natural Resources and the Environment domain, where all seven projects effective for more than one year performed more than satisfactorily or better with particularly good results in El Salvador and in Peru. This augurs well for the increasing number of environment and climate change related interventions arising from the expansion of the GEF portfolio in the region. C. Targeting, poverty and gender 171. The regional portfolio continued to perform well on targeting, focus on poverty and gender. The problems experienced on gender focus by the projects in Bolivia and El Salvador have been resolved. The new projects that joined the on-going portfolio generally have developed or are finalising their gender strategies. The proportion of projects rated moderately satisfactory or better increased to 83% from 77% last year. New projects generally also started well in terms of poverty focus and the number of projects rated 5 or 6 remained at 23 despite the departure of highly ranked projects on this indicator. The proportion of projects moderately satisfactory or better regarding the effectiveness of targeting approaches remained unchanged at a considerable 91% of the portfolio The most successful country programmes in these remain Brazil, Nicaragua and Paraguay. The group of highly ranked projects was joined this year by projects in El Salvador (ES 1321), Haiti (HT 1171) and Honduras (HN 1407 and HN 1535). 34 Projects CO 1294, PE 1240, BR 1335, NI 1120, ES 1321, HN 1407, HN 1535, NI 1380, PY 1333, HT 1171, PE 1352 and EC

55 D. Innovation, learning, knowledge management, replication and scaling-up 173. Overall, projects in the region continued to perform well in the areas of innovation and learning and of replication and scaling-up, notwithstanding a decrease of the regional average score caused by low ratings of some projects, in the Dominican Republic, Guatemala and Venezuela in particular IFAD s programme in Peru has been epitomised as rich of innovation and as a fertile ground for developing, learning from and scaling-up successful rural development methodologies. Two good examples are the concurso (contest) methodology for competitive allocation of public funding and the development of rural local markets for technical assistance through peer-to-peer paid provision of technical services by talentos locales to other campesino smallholder farmers and microentrepreneurs. These methodologies have now spread not only across Peru but also to other countries and continents A representative example of the up-scaling of both methodologies is Colombia where today more than 50% of the national budget for agriculture is allocated through a competitive procedure; and where project CO 1491 has, as one of its main objectives, the promotion of learning processes based on local best practices using emerging local talents to disseminate technical expertise. Another example of scaling up of methodologies originally developed in Peru is Bolivia, where project BO 1598 will promote demand-driven peer-to-peer technical assistance to support rural business development and natural resources management; and will use the contest methodology for the allocation of seed capital for promoting the improvement of natural resource management practices, especially in soil restoration and water management. Projects EC 1297 and EC 1354 in Ecuador have also adopted competitive based fund transfers to finance beneficiary investment sub-projects In some countries where institutional and cultural environment are not conducive to critical analysis and learning, a regional or sub-regional approach to learning and knowledge management can help to make the difference. In the Southern Cone, the REAF MERCOSUR bi-annual meetings have continued to offer an excellent opportunity for project staff and other government and farmer representative stakeholders of IFAD country programmes in Argentina, Brazil, Uruguay and Paraguay, to exchange innovations and knowledge. To further enhance knowledge exchanges, the new MERCOSUR sub-regional grant programme (TAG-1326) includes a specific component on knowledge management directed at facilitating the capture and the dissemination of successful experiences within the Southern Cone and to other regions in and beyond Latina America. The new supervision modality adopted in Argentina has also proved to be a strong medium for knowledge sharing among staff of provincial management units that implement their parts of the IFAD supported country programme in relative isolation and now meet regularly at the time of each bi-annual country programme joint supervision mission In working with the most marginalised population groups in Latin America and the Caribbean, the Division has been placing strong emphasis on the capture, systematisation, documentation and dissemination of knowledge owned by Indigenous and Afro-descendant populations. For example, in Bolivia systematisation of traditional Indigenous knowledge is a basis for efforts to foster adoption and adaptation of modern technologies in the agricultural, environment and financial services sectors. In Ecuador, IFAD-financed projects have, for several years now, been focusing on Indigenous knowledge in crafts and visual art, oral history and literature, music, drama, dance, traditional celebrations, etc.. This has enabled to include in the country programme an innovation that consists of testing the incorporation of these subjects in the educational system in particular locations with a predominance of Afro-descendant or Indigenous populations In Brazil, the GEF-financed Sertao programme (grant GEF-FSP-2), coinciding with the design of the second phase of Dom Helder Camara project (project BR 1620 planned for submission to the EB in December 2013), the Agricultural Innovation Marketplace (grant TAG-1334) and the North-East semi-arid region knowledge management programme (grant COFIN-SP-16), together provide a solid platform for innovation, knowledge management and scaling-up, especially regarding productive development and natural resources management. The Sertao project, which has a special focus on intertwining sustainable natural resources management with productive development and improved 39

56 market access, provides important lessons that were taken into consideration in the design of the new IFAD-financed state level investment projects and could also be applied in the implementation of the newer generation of GEF-financed projects. In Ecuador, underlying risks related to climate change are being addressed by adopting in the country programme as a whole an approach for the transition to sustainable agriculture that aims to mitigate negative environmental impacts and foster greater resilience of agricultural production to climate change by combining support for the intensification of productive agro ecological systems with the strengthening of ecosystem protection services. Project EC 1354, under its GEF-financed component, will also introduce a further innovation through the testing of implementation of payment for environmental services Also with regard to the use of knowledge gained for policy development and for scaling-up, in Nicaragua government recognised that the results and the knowledge gained from the IFAD-financed portfolio had generated worthwhile inputs for the development of new sectorial policy instruments, especially with regard to agro-industrialisation and to market access by smallholders and by Indigenous and Afro-descendant communities. In 2012, government asked for IFAD support to strengthen the coffee and cocoa sectors in particular. Joint work since mid-last year during the identification and design of a new project that is planned for the submission at the December 2013 EB sessions (project NI 1683) has started to facilitate the development of a national vision and strategy for enhancing coffee and cocoa production across the country A handicap that makes knowledge management tasks harder is the weakness of M&E systems at project level and the absence of a learning culture within institutional frameworks where IFAD country programmes operate. Greater emphasis on M&E and the increasing country presence in the region should help to improve the quality of M&E and impact monitoring systems at project level which, in turn, are expected to strengthen learning and knowledge management processes. E. Sustainability 181. Sustainability prospects of the on-going regional portfolio overall show a minor reduction compared with last year when regional average ratings in the PSR sustainability quadrant as a whole were moderately satisfactory or better for two thirds of the portfolio. This year, despite an increase in absolute terms to 25 projects averaging 4 or more (from 23 in 2012), the proportion of projects with acceptable sustainability prospects fell slightly to 61%. This was caused by low scores of projects especially in the Dominican Republic, Guatemala and Venezuela Four projects aged three years or more would warrant special attention: projects HT 1275, GT 1317, DO 1479 and PA All these projects operate under difficult institutional and policy environments and, with the possible exception of Guatemala, also a dearth of qualified service providers in the rural sector. As noted above, the Division is pursuing a very active engagement with the government in Guatemala, the CPM for Haiti is based in the country, and the MTR mission for the project in the Dominican Republic is expected to make a fuller assessment of the problems confronted by the country programme that will inform on decisions to be taken before the end of However, project sustainability is hard to build under any circumstances since development processes at rural community level take time to mature and projects have a short duration of five to six years. It is particularly challenging for the most marginalised and vulnerable population groups: Afro-descendants, Indigenous people, women-headed households, youth and internally displaced people. They are a significant proportion of the IFAD target group in the region, and require additional, broader and longer technical and capacity building support The Division has continued efforts to enhance the sustainability of project interventions as illustrated by the following examples of concurrent work on two dimensions of in-country ownership: by government and by beneficiary groups Government ownership is essential for IFAD supported interventions to receive political priority that is critical for sustaining continued public sector support during and after the project implementation period at both central and local government levels. Project ownership by beneficiaries 40

57 facilitates empowerment and makes project activities more demand-driven and better tailored to the specific needs of different groups In Haiti, where projects have always had a strong focus on strengthening the capacities of grass-roots organisations, the recently effective project HT 1532 includes a strategy and resources to reinforce the capacities of the Ministry of Agriculture at both central and departmental levels. In El Salvador, projects have started to provide direct support to strengthen territorial planning capabilities of municipalities and to foster and facilitate public-private alliances at local, municipal and departmental levels. In Peru, one of the key elements of the most recently approved project (PE 1498) is the establishment of public-private partnerships promoted by local governments that receive project support Another means to promote sustainability through enhanced government ownership, especially in countries with more developed institutional frameworks, is to shift away from the traditional model of stand-alone PMU. Under the new project in Peru, rural municipalities are the main project implementing agencies and they will, in practice, participate in public concursos for fund allocation that will include ranking criteria to foster partnerships with the private sector At the beneficiary level, the Division recognises also the importance of measures to empower women for project sustainability. A new grant programme (TAG-1385-UNWOMEN) will develop and disseminate innovative strategies for enhancing women s voice and power to influence local development priorities, operations and processes and for informing policy-making. In Haiti, the country team has started to promote the inclusion of gender indicators in the management bodies of community organisations in order to facilitate a deeper analysis and understanding, also by communities themselves, of gender differentiated access to project services and project benefits Private sector is also relevant for project sustainability, especially in value chain development and market access improvement projects. On this front, the Division has been promoting the development of strategic alliances between small holder organisations and larger private sector players. In El Salvador this has helped to open new, or facilitate the expansion of existing, commercial opportunities for small rural entrepreneurs, leading to increasingly profitable linkages with markets A weakness on the sustainability front that the Division should address more forcefully relates to individual project exit strategies as regards the timeliness of their preparation, their quality and the degree of stakeholder buy-in during implementation. In effect, there has been a reduction in the proportion of projects rated 4 or more in this indicator 79% last year to 68% in June In accordance with the PSR, only two of the 17 pre-mtr projects that had been effective for more than six months and less than three years, or 41% of all 41 projects that are effective for more than six months, were yet to start developing its exit strategy. Early preparation and agreement of exit strategies before projects reach the point of mid-term review should be made a priority for the regional investment portfolio in general. Priority should be given in particular to projects that operate under weak policy and institutional contexts that are less favourable to building sustainability during implementation, or where there is greater scarcity of service providers 41

58 VII. Evaluation and self-assessment 191. During the period under review, the Division has conducted MTR for four projects, two each in the MCAC and Andean sub-regions The MTR for project BO 1298 was carried out in October-November After three years of implementation, this project still showed incipient effects, especially due to the lack of a coherent implementation strategy articulating how to integrate the various levels of intervention along the camelid value chain. While the project has made good progress in the physical and financial implementation, this has taken place though in fragmented local initiatives with no complementarities or synergies between them. As the MTR noted that implementation would be completed in 2014 ahead of the original schedule, it is of particular importance to ensure follow up and implementation support at a technical level and to an extent that facilitates correction of the deficiencies and an adequate exit strategy during the next 18 months The MTR for project BZ 1456, undertaken in September-October 2012, confirmed that project remains highly relevant to Belize s rural financial sector and the needs of poor and vulnerable households in the rural area, as well as efficiency in terms of cost / timing and quality of delivery and favourable sustainability prospects. While significant impacts could be observed in terms of enhanced capacity of some of the participating credit unions and of increased membership, the mission also pointed out significant delays in the realisation of outputs, particularly for the rural Credit Fund component that was yet to be operational In the case of project HN 1407, the MTR evidenced the slow implementation progress since November 2008, namely in relation to outreach targets, which had been met for the Tolupan Indigenous group but overall was at a low 36% of the 4,177 households project target. After four years of implementation, notwithstanding a significant improvement since 2011, the project had utilised only 25% of financing available, showing a particularly low level in the use of BCIE co-financing (5%). The mission highlighted the low complementarity and quality of the processes for capacity strengthening of beneficiary organisations. This was partly due to low intensity of technical assistance and training that project management attributed to budgetary limitations. While successful in the incorporation of women and Indigenous population, the lack of a specific strategy was hindering the participation of youth in project activities. A major problem yet unresolved was the absence of an M&E system, partly because of high rotation of PMU staff, five different M&E officers since Overall, sustainability prospects remained low and work on the definition and implementation of a strategy for the consolidation of investment sub-projects and the strengthening of organisational and managerial capacities of beneficiary organisations would be the main challenge for the last two years of project implementation The October-November 2012 MTR for project PE 1352 assessed project implementation overall has successful. Two years before completion date, the project was reaching 90% of its outreach target of 20,000 households, and was 13% above target on the area under improved natural resource management practices that had reached 7,742 ha, one the main project objectives. The single most important issue highlighted by the MTR was the uncertainty of available budgetary resources in the past two years that was putting at risk the sustainability of the project by restricting the extent of the activities directed at fostering inclusion and participation in project activities of the poorer segments of the beneficiary population. The need for enough resources is particularly important for this project, which operates in 115 municipalities dispersed over a large remote area of the country that has historically been devoid of public support and where municipalities have very limited financial and human capacities During this period, IOE carried out a country evaluation in Ecuador that culminated with a round table in the country in June However, by the time of writing this report, the evaluation report was not yet finalised. The Division will include key lessons from this evaluation exercise in the 2014 portfolio performance report. In the meantime, they will be taken into account in the preparation of the RB-COSOP for this country. 42

59 197. As regards completion report validation, IOE prepared four new PCRV during the review period. Overall, there was a high level of consistency between PSR scores and both PMD and IOE ratings for all PCR reviewed. An exception were the Gender Quality and Women s empowerment ratings that in the case of projects ES 1215 and GT 1085 were lowered by IOE from 6 in the last published PSR to 4 and 5, respectively. For project ES 1215, this seems to have been due to PCR quality deficiencies rather than actual project achievements in the gender and women s empowerment area. In the case of project GT 1085 there is no explanation for the deviation in the PCRV. Perhaps PMD and IOE scoring criteria, or how it is applied, do not fully match 43

60 A. VIII. Portfolio management Supervision and implementation support 198. Table 38 in the appendix shows the supervision and implementation support missions carried out during the review period as recorded in PPMS. Divisional PPMS figures should be interpreted with a degree of caution in assessing the intensity of implementation support for individual projects. This is mainly because during supervision missions for specific projects, missions may also provide substantial implementation support to other projects, and, with the expansion of decentralisation, an increasing proportion of implementation support is carried out without need for travel of country office staff. It has also been noticed that some degree of late or under-reporting takes place in the Division, namely when there were delays in forwarding mission documentation to programme assistants. Notwithstanding the above, the information provided in the table is useful for a broad analysis of the coverage and focus of supervision and implementation support in the region In accordance with the figures recorded in PPMS, a total of 106 implementation support (IS) or direct supervision (DS) missions covering 42 different investment projects were carried out between July 2012 and June In the previous review period, the number of missions totalled 101 for 45 different projects (85 for 36 projects in ). The average number of missions (all types combined) per project shows a slow but continuing increase to 2.5 from 2.4 and 2.2 in the previous periods The number of projects that received three or more missions raised to 18 from 14 last year, reflecting the increased need for in-loco work to address the problems confronted by the country programme in the Dominican Republic and by project VE 1404, to prepare and formalise the documentation for the extension of projects in Ecuador and Venezuela, and, more significantly, to support the planning and implementation of start-up activities for new projects, namely in Bolivia, Brazil, Ecuador and Honduras. In effect, the LAC portfolio includes 15 projects recently effective or that will soon become effective, spread over 12 countries that will require intense support in the startup phase. This is even more important since the above projects include the ten projects noted in the disbursement performance section that are yet to start to disburse and have a combined value equivalent to almost 30% of the total current portfolio value. While the above will require principally implementation support, through somewhat light and short missions, the rapid rejuvenation of the regional portfolio brought about a significant increase of the number of on-going projects that require normal supervision. This will require careful planning of supervision and implementation support activities and tuning their intensity to well identified project requirement priorities, while respecting corporate standards with regard to frequency of supervision There is a risk of CPM overload, compounded by the increased number of on-going projects in their portfolios and their high dispersion across several countries. This risk can be illustrated by the number of projects that at the end of the review period have been effective for more than six months and will continue onto the next review period without having received supervision or a MTR mission during the review period. For the LAC region this number has increased from six in June 2012 to ten this year. Some projects may be experiencing a slow start-up and do not show sufficient progress to warrant a heavy supervision mission, but it is good practice to field the first supervision mission and produce the first full supervision report before the end of project year 1. Adequate start-up of the numerous new projects, extra implementation support to projects experiencing problems, increasing attention to project M&E systems and to the factors of sustainability (including early planning and implementation of exit strategies), and adequate coverage of formal supervision processes will be a continuing challenge for the Division Last year s report noted the intention of the Division to explore new avenues for reducing unit supervision costs without compromising the quality and the value of the support provided to project units. The pilot in Argentina proved to have significant potential for broader dissemination, especially in countries where there is more than one project under the umbrella of the same lead project agency, as is the case in several countries in the region. The Argentina model was experimented within a 44

61 multifaceted context comprised of three projects spanning over all regions of a large country with a multitude of sub-national entities with a great diversity of political, legal, institutional and skill situations responsible for implementation in their respective territories. The three projects combined have a value of almost US$190 million, evenly distributed between IFAD and the borrower. During the review period they were at different stages of implementation, from start-up (project AR 1610), almost midterm (AR 1364) to approaching completion (AR 1279), thus each requiring a specific type of approach in the supervision process The combination of circumstances found in the pilot should make lessons extracted from its assessment valuable in a wide variety of conditions elsewhere. The IFAD country team carried out two supervision missions during this reporting, in October 2012 and May Each mission lasted for about 12 days and comprised five consultants besides the IFAD CPM. The May supervision report includes a number of suggestions to continue to improve the methodology. Some of the ingredients that contributed to the success of this methodology are, from the country s side, a central unit well organised, skilfully managed and equipped with qualified and committed personnel, that plays a coordinating role and pro-actively oversees and provides timely support where and when required to the sub-national implementing entities On the IFAD side, a competent group of professionals with a profound knowledge of the country and its rural sector, maintained stable over time and that gained the trust and the respect of its national counterparts. The two sides have jointly arrived at the identification of the need to think out the box in the search for ways and means to reduce the transaction costs, both financial and time and opportunity costs, of the supervision process and to make it a joint activity with a potential to generate processes and products that could benefit all parties concerned, build ownership and develop methods, tools and skills useful to improve performance during implementation and facilitate sustainability after the completion of the project. This facilitated the close cooperation and the continued reflexion and exchange of ideas that expedited the fast perfection of the model. The above elements may not be found in the same combination throughout the region, but it would be worth to look for ways to adapt the model to local conditions in other countries Another approach has been followed in Nicaragua, where it became customary to undertake two missions per project each year. In this case, the direction taken was to experiment with alternating full, comprehensive and in-depth supervision missions and lighter, shorter and with more focus on addressing known problems and identifying new ones. Each mission would cover and report on the whole portfolio of in-country projects, also three in Nicaragua albeit of a lower size compared with the Argentina country programme. This arrangement would be combined with short and focused implementation support missions to assist with resolving specific issues. One difference between the IFAD set up in these two countries is the existence in Nicaragua of a liaison officer that facilitates continuous communication and follow up. This approach is also worth exploring for its potential 206. In the pursuit of smarter ways of organising supervision and implementation support, it may be useful to search for new approaches specific for conducting activities from country offices where they exist. In the context of decentralisation, LAC started two sub-regional offices that serve as base for more than one CPM. This creates a potential for combining different skill profiles and job grades and new ways of distributing programme management tasks. In this regard the adoption of the proposal to base a Finance Officer in the region would add another potentially rewarding element by exploring synergies between the operational and the fiduciary dimensions of project implementation and supervision. B. Risks 207. The PSR risk section is often a narrative of events or problems that have emerged and are relevant in terms of impact on project implementation and / or sustainability, followed by statements on action taken or recommended. It often overlaps with the follow-up action section. The analysis of information presented in this section points to an insufficient understanding of the concept of risk. This may due in part to the lack of clear guidance in the Guidance Note for Supervision Aide-memoire. In addition to more clarity in the concept of risk and how to identify, assess and describe risks, it would 45

62 be useful to adopt for this section a format similar to the PSR proposed follow-up section to enable explicit presentation of risks and of specific mitigation measures for each risk. As CFS has developed and is mainstreaming a financial management risk assessment methodology, it could be useful to consider the preparation of a simple guidance note on this specific area and include a dedicated row for FM risk in the PSR risk section Table 39 In the appendix shows a listing of the more prevalent risk areas as recorded in end-ofperiod PSR. The most prevalent risk, reported for 19 projects, or almost of the investment portfolio, arises from weak planning and / or M&E capabilities at project level. This risk has always featured high in the ranking of risks impacting project implementation progress and confirms the need for proactive measures This year, a similar number of PSR make reference to three other risk types with impact on fiduciary performance or implementation progress: lacking capacity in the PMU and/or the Lead Project Agency, lacking or weak project implementation and/or exit strategy, and insufficient or untimely availability of fiscal space. All these, in the same way as for the M&E area, relate to issues that have emerged as problems that actually constrained project performance during the review period, rather than to probable negative occurrences caused by certain vulnerabilities and that may be avoided through pre-emptive (rather than remedial) action. C. Portfolio at risk 210. The number of projects rated as actual-problem project (APP) at the end of the review period increased to nine, from seven last year when the proportion of projects in the on-going portfolio in actual-problem status (19%) broke the 20% threshold for the first time. The same proportion this year is 21%, still the second best and at par with the period. This is the result of the growth of the on-going portfolio, that counts a record of 42 projects today, compared with only 26 projects in June Projects in Guatemala (GT 1274 and GT 1317) and project VE 1404 were already rated APP last year. The two projects in Guatemala also rated APP in The problems confronted by these projects were noted above in this report. While implementation of project GT 1317 is expected to resume upon correction of the law approved last year, time and significant efforts will be required before it will start to pick-up. This is mainly because most of the personnel have left and new selection processes will have to be engaged, financial records need to be reconciled and updated, outstanding audit reports submitted, many activities were abruptly interrupted letting down beneficiaries, service providers and other stakeholders; and the Ministry of Agriculture has capacity shortcomings that have historically slowed down project implementation pace. Project GT 1274 is no longer on-going as it left the portfolio last December upon reaching completion date. As noted above, the Division expects to close project VE 1404 in anticipation due to the impossibility of removing the obstacles that prevented the start-up of implementation Project PA 1389 was rated potential-problem-project (PPP) last year and was downgraded because of a continuing degradation of the project environment and unresolved project-specific problems. The Division will be in a better position to assess the prospects for this project upon the MTR that will be carried out before the end of The two projects in the Dominican Republic were also rated as APP, project DO 1479 for the second time as in it has been rated as actual-problem due to delays in the fulfilment of disbursement conditions. Implementation of this project started late and still shows limited results on the ground, as not much progress was made since the first disbursement was effected in January Project DO 1533 is effective since September 2012 and pre-implementation activities are yet to start. The continued unavailability of budgetary resources is the major stumbling block to deliver results in this country, despite intensive efforts deployed by the Division, including a mission headed by the Director. The MTR for project DO 1479 that is scheduled for Q III 2013 is expected to provide additional insights on decisions on how to proceed with investment operations in the Dominican Republic. 46

63 214. The other three projects rated as APP are projects EC 1588, ES 1568 and GD Project EC 1588 has been effective since May 2012 and until the end of the year pre-implementation activities focused on the establishment and formalisation of the Buen Vivir joint management unit, selection of and induction of key personnel, finalisation of other operational arrangements, and first disbursement that was effected in December The APP rating for this project reflects the delayed start-up of implementation that has effectively started only in the first semester of As noted above, the Division is confident of a gradual improvement of the implementation status of his project, as pre-implementation activities were adequately implemented, the management unit has a sufficient degree of autonomy and government ownership of the national Buen Vivir programme is very strong Project ES 1568 has been effective since June 2012 but no activity could be undertaken in 2012 due to the lack of budgetary allocation. Other pre-implementation requirement that dragged during 2012 was the appointment of an agent responsible for the procurement and the financial administration of the project. By the end of the review period both questions had been resolved (although the administration covenant was not yet finalised) and the first disbursement effected (in March 2013). Implementation is expected to start during Q III of 2013 but there are risks arising from 2013 being a pre-electoral year. The CPM, based in the Guatemala country office, is closely following up developments, including by holding meetings twice a month, to accelerate the implementation start-up process Implementation of Grenada project GD 1569 slowed down considerably during the review period. The last supervision mission in July 2013 left important recommendations whose implementation, assessed through implementation support missions and agreed with the government, will be closely monitored by the CPM. The situation will be reassessed during the forthcoming supervision mission in November In addition to the nine APP described above the portfolio includes three other projects-at-risk, rated as potential-problem-projects (PPP) this year, namely two projects in Haiti (HT 1275 and HT 1532) and one in Honduras (HN 1595). These three projects were assessed as moderately satisfactory overall but scored 3 or less in a number of critical performance indicators, those that are also used to calculate country PBAS allocations Project HT 1275 had been rated APP in June 2011 due to very slow and problematic implementation since effectiveness in November Progress started to accelerate from the second half of 2011 but not enough for the project to achieve results commensurate to its targets, also due to a number of problems, some project-specific but others systemic. The persistent under delivery of counterpart funding and weak financial management and internal controls, poses a risk of suspension unless the long overdue installation and operationalization of accounting software is completed soon and audit reports of adequate quality are provided on time. These factors also lowered the score on compliance with loan covenants. While the project is doing well at targeting poverty, there is need for improving on gender, particularly with regard to the role of women in beneficiary organisations. Compliance with procurement requirements has improved but procurement activities take very long and have delayed progress in tendering for feasibility studies and for civil works, a major element of project investment given the focus of the project on the rehabilitation and construction of irrigation schemes. Other areas for improvement include M&E and the selection of service providers, which are also linked to the shortage of qualified manpower in the country. However, the project made progress in the implementation of key activities, including a partnership agreement between the Ministry of Agriculture and IICA, the preparation of a framework for supporting marketing activities, adopting the PAIP (project HT 1171) approach for boosting microfinance, and a new agreement with AAA for the development of another watershed area. Nevertheless the project will continue to carry an important delay and the scares of the lasting problems that affected progress to date The younger project HT 1532 was approved in September last year and signed and declared effective less than two months later. The design of this project embraces two main lessons learned over time in Haiti, being the need for strong government sense of ownership, not always easy to develop in a situation of high external dependence, and the importance of strategic partnerships to 47

64 compensate for public sector weaknesses. This placed the Irrigation Department in a leading role in the definition of the strategic direction of project financed investments and in the planning and oversight of irrigation investments. The negotiation process for this project also concluded by an agreement to involve IICA as an implementing party directly in charge of the execution of a number of critical project activities Regrettably, although the planning phase has been successfully completed, implementation of project HT 1532 has not yet started. The single factor now causing delays is the absence of reliable functional accounting software, the same that would be used by sister-project HT 1275 and constitutes a general condition for starting to disburse IFAD financing. The Ministry of Agriculture has demonstrated a strong sense of ownership by devoting tremendous efforts to accelerate the implementation preparation phase, including by using its own funds to hire consultants to assist with preparation of project manuals and other activities, and by requesting IFAD to suspend the disbursement conditions to allow for payments to IICA, which is ready to start the activities under its responsibility. However, as no IFAD funds could be withdrawn for payments to the Ministry of Agriculture even if IFAD approves the request from government to disburse to IICA, normality of implementation remains dependent on the progress that will be made in installing the accounting software. The Division is confident that the Ministry of Agriculture will do all in its capacity to accelerate this process. But in any event implementation will be limping until normality of disbursements is established The country programme in Honduras has a record of systemic problems in the implementation pace and in the mobilisation and disbursement of both external financing and domestic counterpart funding. Weaknesses in accounting and financial management and in M&E have also been a consistent obstacle to effective implementation. All projects in Honduras have gone through periods of hardship that caused their classification as actual-problem-project. The most recently effective project in Honduras (HN 1595), also rated as PPP this year, became effective in February 2012 after a relatively short lag from approval of less than five months. However no fiscal space was assigned to the project throughout the year and the first disbursement could only take place in May This project experienced delays also in the approval of co-financing. The project is co-financed by a relatively small US$3 million GEF grant, the design of which had been completed by June 2012 but was only approved in May Approval of this co-financing was a prior requirement for processing a larger loan (US$8 million) financed by BCIE, which is now expected to be concluded near the end of Although the current status of this project is not dramatic, it will require close follow up during the forthcoming period in order to cut to minimum further delays that jeopardise implementation The total number of projects at risk at the end of this review period adds up to 12, four more than last year. They make up a relatively large (29%) proportion of the number of on-going projects at the end of the period (42) but one (GT 1274, rated APP) left the portfolio last December. Hence, the region starts the period with 11 projects-at-risk, of which eight in APP status. Nine of the 11 projects-at-risk are located in the MCAC sub-region, the other two in the Andean sub-region. As the MCAC sub-region had 22 projects on-going in June 2013, the above means that this sub-region holds 82% of the portfolio-at-risk in LAC (compared with 52% of the regional on-going portfolio) and starts the forthcoming review period with 41% of its portfolio in at-risk status. Problems are mostly concentrated in the Dominican Republic and in Haiti, with two projects-at-risk each The Division has accorded strong priority to Haiti during the review period. The principal decision was to out-post the CPM who is now full-time devoted to this country programme and initial results are already emerging. In the case of the Dominican Republic, as noticed above, a determinant MTR review of project DO 1479, that will also look into project DO 1533, will take place in September Prospects in Guatemala are also uncertain but the CPM has been showing high pro-activity in anticipating events and search for solutions in close collaboration with high-level authorities that are showing increased commitment and action to resuscitate the IFAD programme in the country Government commitment in Grenada was reinforced during the recent supervision mission and the Division will provide implementation support and follow developments closely for an update of progress next November. In Honduras, there will also be need for close follow up and adroit action to 48

65 establish the firm foothold required for project HN 1595 during the electoral period until the installation of new Government and Congress in January D. Problem Patterns 225. This year, coherence between AWPB & implementation ranks as the lowest performing area of the portfolio. The regional average rate dropped from 4.1 to 3.7 last year and the proportion of projects rated moderately satisfactory or better from 79% to only 60%. As all, except one, ten projects effective for 18 months or less either were not (six project) or scored 4 on this indicator (likely an indication of satisfactory progress in planning and implementing start-up activities), the problem lies with the more mature part of the portfolio In effect, none of the seven projects in the 1.5 to 3-year age group scored more than 3 in this indicator. This group includes two projects placed this year in the actual-problem-project category (GD 1569 and VE 1404) that had very limited or no activity this year. The problems experienced in the Dominican Republic and in Guatemala, the continued difficulties of project PA 1389, the delay in making operational the PMU for project BO 1490 and the slow start-up of project AR 1610 provide the remaining explanation As noted above, six younger projects aged one year or less were not rated this year. This is an indication of absent or rather incipient progress in the implementation start-up of these projects, explained, with the exception of projects BR 1487 and CO 1491, by the lack of fiscal space allocated to IFAD-financed projects in government budgets The low scores on this indicator therefore implies both institutional or policy issues of the kind that virtually stopped project implementation in the Dominican Republic and in Guatemala; and weaknesses in budgetary planning and/or allocation mechanisms that are not activated in the relative much shorter time between project approval and effectiveness since the entry into force of the new General Conditions. Chart VI - Areas of relative low performance ( ) 229. Monitoring and evaluation remains one of the areas with highest incidence across the portfolio as it scores moderately unsatisfactory or less in almost one third of the projects. As noted in last year s report, weaknesses in M&E systems impact on the ability to adequately plan and monitor results and impacts, M&E is also a key tool for activity and budgetary planning. Projects without an appropriate management and information system are less able to make realistic financial and operational projections, to detect deviations from established time schedules for the execution of procurement and field activities on time, and, crucial considering the fiscal space problems confronted 49

66 in the region, to explain to high level civil servants and to politicians why they should receive priority in budgetary allocation or re-allocation process Despite being for some years one area of focus of direct supervision, project performance on M&E in the region overall shows a continuous albeit slow deterioration. The Division recognises a relative technical complexity of the tasks involved in project M&E and the challenge of finding and retaining good M&E officers. However, since , the Division has invested considerably in implementation support to projects, especially through short-term consultancies during supervision missions or stand-alone missions. This phase had been preceded by a long period during which support to projects was provided under the grant programme through organisations perceived as having a comparative advantage in terms of project M&E skills. Today, with the increased focus on impact and on the achievement of tangible and documented results, it is about time to start reflecting on how to best reorganise divisional work on this area. One element of reflection regards the presence of a perhaps counter-productive outsourcing element in both approaches. The reflection on the next phase could consider broadening the sense of ownership and of accountability of M&E and impact management related tasks among staff Regional average scores of the Responsiveness of Service Providers indicator have consistently been below 4 in the past four years since the Division started its direct supervision programme. The 3.83 average of this period reflects a declining trend, as it compares with 3.94 last year and 3.97 in Information from supervision reports and PSR are not vey elucidating of the causes, or of action taken to address problems deriving from scarcity or quality of service providers. Nevertheless improvement is required at it affects the pace of delivery and the quality of project results, while undermining empowerment of the poor rural and the prospects of post-project sustainability Consistently relatively higher scores in this indicator in Brazil, Colombia, Paraguay and Peru, may provide clues to support the search for innovative modalities for the mobilisation, organisation and management of services required by project beneficiaries. Assignment of higher importance to procurement activities could also help through better preparation of terms of reference and other elements of requests for proposals including evaluation criteria. Divisional focus to date on compliance with IFAD regulations should be balanced with increased emphasis on the technical and operational quality of procurement processes, including strengthened management and supervision of contract implementation at project level The two other areas of relative low performance this year, namely disbursement and exit strategies, have been discussed elsewhere in this report. E. Proactivity and reduced risk 234. The pro-activity index for the LAC region this year is 57% since four of the seven projects rated as APP last year have been upgraded or suspended. The performance of projects BO 1490, EC 1354 and ES 1416, has improved overall, as evidenced by higher average PSR scores; especially in the case of project ES 1416, as expected in last year s review. Problems experienced by project VE 1404 have been extensively noted above and, the division expects that it will be closed in anticipation before the end of 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. 50

67 235. The reduced risk index 36 is 33% as only one (project GT 1317) of the three projects that were classed as actual-problem-projects last year and remained in the actual-problem group (projects GT 1274, GT 1317 and VE 1404) featured improved performance during the review periods. Table XXI - Reduced risk index Country Project ID Effectiven ess date Completio n date IP Average score all flags Guatemala Oct Dec Guatemala Dec Dec Venezuela Oct-10 31/2/ DO Change 36 The reduced risk index is the share of projects rated as actual-problem-projects in the previous year that, despite remaining in the actualproblem 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 IX. Conclusions and the way forward 236. The region as a whole will continue to show moderate rates of economic growth in 2013 and 2014 largely due to a global economic slowdown both in developed and emerging economies. However, it is expected that overall macroeconomic stability will be preserved and on-going reform process will continue in order to ensure the sustainability of the social and economic progress so far achieved. On-going reforms include, among others, fiscal consolidation and counter-cyclical policies. In the fiscal realm, counter-cyclical policy has played a critical role in mitigating the adverse effects of the financial crisis. However, today we are being alerted on 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. As noted elsewhere in this report, IFAD operations have suffered the impact of fiscal restrictions that confined budgetary allocations to levels insufficient to maintain operational normality in a relatively large number of projects In terms of fight against poverty and reducing inequality, the region has shown a positive trend. During the past two decades, the poverty headcount ratio decreased from 48.4% in 1990 to 31.4% in 2010 and for extreme poverty from 22.6% to 12.3%. These results are attributed, to a great extent, to redistribution efforts, among which conditional transfers under social protection programmes have played a predominant role. However, due to the high levels of inequality that persist in the region, above 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 Unequal access to technology has also widened the productivity gap between a dynamic modern agricultural sector and family farming. 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. Challenges remain also with regard to income-generating strategies in rural areas outside the agricultural sector, which are particularly important for IFAD s target groups, mainly youth and women, for whom the promotion of alternative sources of income is critical in order to ensure the sustainability of the rural environment where they live Regional trends represented by regional averages hide significant disparities among LAC countries, which differ significantly from one another. 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 is a fundamental tool, but 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 economic and social inclusion of the rural population The English Caribbean sub-region continues to pose several challenges for IFAD. The insularity and the small size of Caribbean countries, their high debt burden, limited human capital and low absorptive capacities, necessitate that IFAD adopt an innovative approach. While recognising the pressing need to revitalize the agricultural sector in the Caribbean and to address issues of rural poverty, youth unemployment and climate change, the current IFAD business model implies high cost of design, delivery and administration of a plethora of small loans to individual member states. The Division has started to explore a multi-country programme approach to reduce administrative costs, build synergies across the countries and bring common solutions to similar problems across small island states With regard to the investment portfolio in particular, the number of on-going projects showed a dramatic increase to 42 projects from 36 last year, 33 in June 2011 and 26 in June 2008 when the Division started to organize the uptake of direct supervision. In terms of value, the on-going IFAD financed portfolio increased by 21% from last year and, more impressively, jumped by 44% since 2006 following a continued upward trend. 52

69 242. The significant growth of the on-going portfolio is the fruit of continued efforts to fulfil the lending programme and to accelerate effectiveness of approved projects. Nine new projects became effective during the current review period for a combined value of US$185.6 million in IFAD financing, more than the double of the US$million 85.3 million value of the seven projects that became effective in Consequently, the end-of-period stock of IFAD financing pending effectiveness has been halved from US$166.6 million to US$86 million. Another effect was further rejuvenation of the ongoing regional portfolio that now comprises 81% of projects effective for less than five years, compared with 64% in The rapid increase in the number of on-going projects has implications for the divisional supervision programme. CPM need to attend to additional projects, and this has significant budgetary implications, especially in terms of additional consultant time and travelling, with a peak in 2014 when recently effective projects will require above average support as they are in the start-up phase. The Division has continued its best efforts to contain expenditure on supervision and implementation support, but its margin to efficiency improve further is limited by the relative small average amount of IFAD financing per project, which, as noted above in this report, is a consequence of the PBAS system introduced in The PBAS system restrained the overall value of IFAD financing available for poverty reduction in the regionfrom 2000 to 2012, the region s share of IFAD financing has been cut from 18% to 12%. While over the period, the value of IFAD s overall current portfolio increased by 73%, from US$3.2 to US$5.5 million, LAC current portfolio increased by only 19%, from US$0.58 million to US$0.69 million. The PBAS system has caused a structural change in the regional distribution of investment projects in the region. The MCAC sub-region has been particularly affected, its share of IFAD financing dropping from 55% in June 2011 to 43% in Stability of the amount of resources available to the region to finance IFAD s unique kind of poverty reduction interventions is the exclusive result of a remarkable increase in external cofinancing, which has almost doubled since In others words, in terms of project financing, at the closing of the PBAS cycle, the Division has a different business model. This new business model has implications in the way of approaching and managing the administrative budget of the Division, as the cost of project design and project supervision is made up of several sources of funding adding complexity to the traditional way budgets used to be managed Efforts, for accelerating effectiveness of approved grants, similar to those made for investment operations, has placed the Division for the first time in the position of having no approved grants pending effectiveness at the end of the review period this year. This helped a further increase in the value of the IFAD financed portion of the grant portfolio that jumped from US$12.3 million in June 2010 to US$21.1 million at the end of this review period. It is however bound to decline in the future because allocation of IFAD grant resources to the region have been drastically reduced: despite full use by the Division of the US$7.2 million 2012 grant allocation, the 2013 grant budget approved for the region amounts to only US$4 million As noted in previous reports, the Division had decided to have fewer but larger grants in order to concentrate the grant portfolio in less but more focused areas and to reduce the management and administration costs of the grant programme. Further progress has been made on this front, as illustrated by the US$1 million average grant size reached in June 2013, significantly higher than the already respectable US$615,000 in June Disbursements to the region during the period under review have declined to US$66.4 million from US$77.8 million, a reduction of US$11.5 million, or 15%. This fall is mostly explained by the high dependence of overall disbursement flows to the region on a few projects, as evidenced by the weight in overall disbursements of the five best disbursing projects, which, for the past five review periods has averaged 38% of total disbursements to the region. This was exacerbated in the review period, as the two projects that showed the highest disbursements in , of US$12.8 million combined, only disbursed US$1.1 million in

70 249. The response from the Division is to pay increased importance to improve the implementation performance of slow-disbursing projects and to speed up implementation readiness of projects entering the on-going portfolio. A significant part of these efforts would need to be devoted to ensuring sufficient fiscal space for both external financing and government funds, which was a constraint to implementation progress and to disbursement levels during the period under review. Particular efforts should be devoted to the MCAC sub-region that counts most of the under-disbursing projects and only two of the ten not-yet-disbursing projects, and where 12 of the 13 projects that suffered from insufficient budgetary allocations are located Significant progress has been made during the review period also on the financial management and the loan administration fronts. The continued application of the new risk-based disbursement framework, supported by an increasing number of project capacity assessments and better interaction between finance officers on the one side and CPM and LAC implementation support consultants on the other, enabled a noticeable increase in the number of low financial management risk projects in the region that raised to 24, or more than half of the portfolio, a 50% increase over last year. It also helped in further revision of project SOE thresholds. The number of projects that are not required to submit supporting documentation for expenditures up to US$75,000 has increased from 17 to 27, including 13 projects, up from eight last year, that are altogether exempted from submitting supporting documents. The effective work carried out by LAC implementation support consultants, closer communication across divisions, and the diligence of LAC, CFS and Treasury professional and support staff, also contributed to further decreasing the average number of days required to process a WA, from 13 to 10 days A key success factor of the above noted improvements is the operating model adopted by the Division of combining decentralisation and staff out-posting with a network of specialised local consultants. This comes with a double advantage. First, it allows tapping the in-depth local knowledge of experts based in the region. Second, the cost-benefit ratio is high, since local consultant fees are often below international levels and travel costs can be contained as travel is done within the region The Division recognises that, given the relatively healthy status of IFAD portfolio in LAC on fiduciary terms and the progress made since the Division took up the responsibility for direct supervision in 2009, additional gains could be maximised with greater physical proximity to the institutions and the people with whom we work in the region. In this sense, the Division has put forward a proposal to CFS for out posting a Finance Officer to the region. This would reduce IFAD costs since overseas travelling for CFS staff to visit countries in Latin America could be minimised The comparatively more developed institutional frameworks and sounder country systems found in Latin America could also constitute a learning ground for CFS that could use knowledge and experience gained from more direct and close interaction with the region for dissemination in, and easier exchanges with, countries in other parts of the world. The ideal location, but not the only option, would be Guatemala since it is the location of IFAD s main sub regional office in LAC where two CPM are based, including the coordinator for the MCAC sub region. As repeatedly noted in this report, the large majority of projects experiencing problems, especially in the financial management and audit areas, are located in the MCAC sub-region One area requiring improvement is project M&E. Project scores on M&E have historically been moderately unsatisfactory and this year M&E ranks lowest amongst all PSR indicators with a regional average score of 3.7. Given the demand for higher quality data for results and impact assessment and for knowledge management purposes, it is important to inform about replication and up-scaling initiatives, and the fast growth of the on-going portfolio that now includes a large number of newly effective projects, the Division will continue to improve further on its work in the M&E area As noted in last year s report, on the one hand, this should focus on early support to recently effective projects to set up their management information and M&E systems, engaging project units in defining the methods and the distribution of tasks for 2nd level reporting well before the project reaches its MTR stage, providing implementation support for projects to improve activity-outputoutcome reporting in periodical implementation progress reports and for supervision and completion 54

71 reporting purposes; it should also include specific attention to timely conduction and quality of baseline surveys as well as of studies and surveys at mid-term and completion On the other hand, the Division should continue both to develop its own capacity to document and report on the impact of IFAD-financed operations in the region. Some new initiatives have been initiated during the review period, also in response to corporate priorities stemming from IFAD IX Replenishment. These have included a diagnostic of the information collected through the RIMS system that pointed to the need for putting in place incentive mechanisms to collect and report systematic and quality results and impact data. The Division has also been participating actively in an inter-divisional group for discussion of methods and concepts on poverty and inequality activities under the coordination of SKM s SSD team Improved emphasis on M&E related issues is also expected to help divisional continuing efforts to enhance the sustainability of project interventions, a particularly challenging task in the region as a significant proportion of the IFAD target group is comprised of the most marginalised and vulnerable population groups: Afro-descendants, Indigenous people, women-headed households, youth and internally displaced people Notwithstanding a significant rotation of staff within the CPM group, the Division implemented its supervision and implementation support programme successfully. The total number of missions has increased over last year, as did the average number of missions per project. This is a reflection of the intensification of efforts to address unexpected problems in certain country programmes, and to support the planning and implementation of start-up activities for newly effective projects. In the next few years, fulfilment of supervision responsibilities will require substantial efforts and imagination, both operationally and financially, as a result of the significant increase in the number of on-going projects, which in LAC are highly dispersed geographically The Division has continued to explore new avenues for reducing unit supervision costs without compromising the quality and the value of the support provided to project units. The on-going pilot in Argentina proved to have significant potential for broader dissemination, and the lessons learned are valuable in a wide variety of conditions elsewhere. Another pilot approach was adopted in Nicaragua, by experimenting with alternating full, comprehensive and in-depth supervision missions and lighter, shorter and with more focus on addressing known problems and identifying new ones. Out-posted CPM are also assessing the cost and the effectiveness benefits from physical proximity. Next year, the Division will continue to report on further progress made in the pursuit of smarter ways of organising supervision and implementation support The overall average performance of the regional portfolio this year has been affected by problems experienced in the Dominican Republic and Guatemala country programmes as a whole, and by project-specific problems experienced by individual projects in the country programmes of Ecuador, El Salvador, Grenada and Panama and, to a smaller extent, in Haiti and Honduras. This is reflected in the increased number of projects rated as actual-problem project, although, as a proportion of the on-going portfolio, at 21%, is only one percentage point above the last fiver-year average. In all cases, the Division has responded by stepping up implementation support and dialogue with in-country counterparts and will continue to intensify efforts as may be required to adjust, restructure or cancel non- or under-performing projects. 55

72

73

74 APPENDICES

75

76

77 1 Country RB-COSOP approval date Last review undertaken Table 1 : RB-COSOP programme: June 2013 Next review planned New RB-COSOP planned Bolivia Dec 07 Nov Brazil Sep 08 Nov 11 Q IV Colombia 2015 Dominican Republic Apr 10 Q IV 2013 Ecuador 2014 El Salvador 2015 Guatemala Dec 08 Dec Haiti Apr 09 Nov Remarks RB-COSOP has been extended to 2015 to align with election cycles RB-COSOP Implementation not reviewed to date due to delays in the start-up and implementation of investment projects RB-COSOP to be prepared after completion of ongoing Country Evaluation Initial consultations held in Q IV Presentation to EB of new RB-COSOP to be defined In Q III 2013 Presentation to EB planned for September 2013 Honduras Dec 12 Q I 2014 Replaced former RB-COSOP approved in April 2007 Mexico Dec 07 Feb Nicaragua Dec 12 Q I 2014 Panama Sep 07 Feb 11 Q IV 2013 Peru Sep 09 Mar Consultations with government on new RB-COSP started in March 2013 Latin America and the Caribbean Division

78 Status Ongoing Country Table 2: Current investment Portfolio: June 2013 Project ID Project Approval date Signing date Effectiveness date Current completion date Current closing date Argentina 1279 PRODERPA 02 Dec Nov Sep Mar Sep 14 Argentina 1364 PRODEAR 14 Dec Oct Dec Dec Jun 16 Argentina 1610 PRODERI 15 Sep Nov Dec Dec Jun 18 Belize 1456 RFP 17 Dec May Sep Sep Mar 17 Bolivia 1298 VALE 14 Dec Nov Nov Dec Jun 16 Bolivia 1490 PLAN VIDA 17 Dec Mar Aug Sep Mar 16 Brazil 1486 VIVA O SEMI-ÁRIDO (Piauí) 15 Sep Apr Apr Jun Dec 20 Brazil 1487 PROCASE (Paraíba) 17 Dec Oct Oct Dec Jun 19 Brazil 1619 PAULO FREIRE (Ceará) 21 Sep Jun Jun Jun Dec 19 Colombia 1294 OPORTUNIDADES 14 Sep Feb Jun Dec Jun 14 Colombia 1491 TOP 03 Apr Sep Dec Dec Jun 18 Dominican Republic 1479 PRORURAL OESTE 30 Apr Jun May Jun Dec 16 Dominican Republic 1533 PRORURAL CENTRO Y ESTE 02 Apr May Sep Sep Mar 19 Ecuador 1297 CORREDRO CENTRAL 02 Dec Mar Sep Jun Dec 14 Ecuador 1354 IBARRA-SAN LORENZO 15 Sep Mar Mar Mar Sep 17 Ecuador 1588 BUEN VIVIR 15 Sep May May Jun Dec 18 El Salvador 1321 PRODEMORO 19 Apr Jan Dec Dec Jun 17 El Salvador 1416 PRODEMOR CENTRAL 12 Sep Apr Dec Dec Jun 16 El Salvador 1568 AMANECER RURAL 15 Dec Mar Jun Jun Dec 17 Grenada 1569 MAREP 05 Dec Mar Mar Mar Sep 17 Guatemala 1317 ORIENTE 02 Dec Jun Dec Dec Jun 15 Guatemala 1473 PRODERNORTE 17 Dec Dec Jan Mar Sep 18 Guyana 1415 READ 13 Dec Jul Jan Mar Sep 15 Haiti 1171 PAIP 23 Apr Jun Dec Dec Jun 15 Haiti 1275 PPI 2 14 Dec May Nov Dec Jun 16 Haiti 1532 PPI 3 08 Sep Oct Oct Dec Jun 18 Honduras 1407 PROMECOM 13 Dec Mar Nov Dec Jun 16 Honduras 1535 EMPRENDE SUR 16 Sep Nov Feb Mar Sep 17 Honduras 1595 HORIZONTES DEL NORTE 29 Aug Sep Feb Mar Sep 18 Mexico 1349 PRODESNOS 08 Sep Mar Sep Dec Mar 14 Mexico 1412 DECOFOS 15 Sep Mar Mar Mar Sep 16 Mexico 1597 LAS MIXTECAS 03 Apr Nov Nov Dec Jun 19 Nicaragua 1380 PROCAVAL 12 Sep Jan Aug Sep Mar 16 Nicaragua 1505 NICARIBA 15 Dec Sep Jan Mar Sep 17 Panama 1389 PARTICIPA 24 Apr Jul Mar Mar Sep 16 Paraguay 1333 PARAGUAY RURAL 19 Apr Jun Aug Sep Mar 14 Paraguay 1611 PARAGUAY INCLUSIVO 02 Apr Aug Feb Mar Sep 18 Peru 1240 SIERRA SUR 11 Dec Oct Apr Dec Jun 14 Peru 1352 SIERRA NORTE 13 Dec Feb Sep Sep Mar 15 Peru 1498 SIERRA Y SELVA ALTA 21 Sep Feb Feb Mar Sep 18 Venezuela 1252 PROSALAFA II 18 Dec Dec Jul Sep Mar 14 Venezuela 1404 WARAO 17 Dec Dec Oct Dec Jun 18 No. of projects - 42 Not Signed Brazil 1563 DOM TAVORA (Sergipe) 21 Sep 12 Venezuela 1609 PROSANESU 10 Dec 12 No. of projects - 2 Not Effective Bolivia 1598 ACCESOS 26 Mar 13 No. of projects - 1 Total no. of projects

79 3 Sub-region Table 3: Current investment portfolio - IFAD financing by sub-region: (USD'000) % June 2011 June 2012 June 2013 No. of projects (USD'000) % No. of projects (USD'000) % No. of projects MCAC Andean Southern Cone Total Impact domain Table 4: Current investment portfolio - IFAD financing by impact domain and sub-region: June 2009 Andean MCAC Southern Cone Total Andean June 2013 MCAC Southern Cone Total USD M % USD M % USD M % USD M % USD M % USD M % USD M % USD M % % change Social Development Market and Rural Enterprises Dev Management, M&E Agriculture, Livestock & Fisheries Dev Enviroment & Common RR Financial Assets Physical Assets Institutional development Human Development Others Total Latin America and the Caribbean Division

80 4 Sub-region / country Project Lending terms IFAD financing (USD '000) Table 5: Current investment portfolio: No. of projects Project average size (USD '000) Share in total IFAD financing (%) Project Lending terms IFAD financing (USD '000) No. of projects Project average size (USD '000) SOUTHERN CONE % % Argentina PRODERNEA O PRODERI O PRODERNOA O PRODERPA O PRODEAR O Brazil Low-income Family Support O Paulo Freire Project O Community Dev. Rio Gaviao O Viva o Semi Árido O Dom Helder Camara O PROCASE O Dom Tavora O Chile IV Region Project O Paraguay Peasant Develop. Fund NE O Paraguay Rural HT/I Peasant Development Fund O Paraguay Inclusivo (PPI) O Uruguay Nat. Smallholder Support O June 2000 June 2013 ANDEAN % % Bolivia Camelid Producers Dev. HC VALE PROJECT HC Beni Indigenous People HC Plan vida PEEP HC Small Farmers Tech. Asst. HC ACCESOS I Colombia Rural Micro-enterprise O OPORTUNIDADES I TOP O Ecuador Upper Basin Cañar Project I Central Corridor HC Saraguro-Yacuambi I Ibarra-San Lorenzo O Indigeneous Peoples Dev. I BUEN VIVIR RURAL O Peru Mgmnt of Natural Resource I Sierra Sur O Puno Cusco Corridor Dev. O Sierra Norte O Highlands Local Dvplmt O Venezuela Falcon & Lara Project O PROSALAFA II O PRODECOP O Warao Support Prog. O PROSANESU O Share in total IFAD financing (%) Latin America and the Caribbean Division

81 June 2000 June Sub-region/ country Project Lending terms IFAD financing (USD '000) No. of projects Project average size (USD '000) Sub-regional share of total IFAD financing (%) Project Lending terms IFAD financing (USD '000) No. of projects Project average size (USD '000) MCAC % % Belize Community-initiated Agric O RFP O Costa Rica Agricultural Dev. Nicoya O Dominica Rural Enterprise Project I Dominican Republic Ag. Dev. San Juan Maguana I PRORURAL OESTE O PROPESUR I Prorural Centro y Este O El Salvador Paracentral Project I PRODEMORO O Chalantenango Rehab & Dev I PRODEMOR-CENTRAL O PRODERNOR I Amanecer Rural O PRODAP-II I Grenada MAREP O Guatemala Cuchumatanes Highlands I Central & Eastern Regions I PRODERQUI I PRODENORTE O PRODEVER I Guyana Poor Rural Communities HC READ DHC Haiti Small-Scale Irrigation HC PAIP HC Food Crops Intensif. II HC PPI-2 HC/D PPI 3 D Honduras PLANDERO (Western Reg.) HC PROMECOM HC PRODERCO HC Emprende Sur HC PROSOC HC Horizontes del Norte HC FONADERS HC Mexico Ixtlera Project O PRODESNOS O Rural Development Project O Community-based Forestry O Rural Dev. Mayan Comm. O Las Mixtecas O Rural Dev. Rubber O Nicaragua Tropisec Area (Segovias) HC PROCAVAL DHC Rural Dev. S. Pacific Dry HC NICARIBE DHC Technical Assistance Fund HC Panama Rural Dev Ngobe Comm.ties O PARTICIPA O Darien Project O Cocle, Colon & Panama W. O Saint Lucia Rural Enterprise Project I St Vincent - Grenadines Smallholder Crop Improv. I Total % % Sub-regional share of total IFAD financing (%) Latin America and the Caribbean Division

82 6 Grant title GEF financing USD '000 Table 6: GEF financing: June 2013 Effectiveness date Current completion date Cumulative disbursement USD '000 Sustainable land management in the semi-arid sertão Aug Sep Project implemented satisfactorily. Started to plan for project completion (Sep 2013) and GEF Terminal Evaluation (by March 2014) Sustainable management of biodiversity and water resources in the Ibarra-San Lorenzo Corridor Competitiveness and Sustainable Rural Development Project in the Northern Zone Mitigating climate change through sustainable forest management and capacity building in in the Southern states of Mexico (Campeche, Chiapas and Oaxaca) Nov Mar Activities started in April Together with associated IFAD project, GEF grant needs frequent implementation support and continuous dialogue with concerned government institutions. Status Endorsed by GEF CEO in April 2013 and approved by IFAD in May Financing agreement negotiation ongoing. Start up expected Q III Mar Mar 16 Start-up of activities expected for Q III 2013 (delayed due to lengthy finalisation of subsidiary agreement between NAFIN and CONAFOR and transition to new government). Sustainable and climate-friendly development in Veraguas province May Jun 16 Financing agreement has been signed in May 2013 and project start up is foreseen for Q III 2013 Sustainable management of protected areas and forests of the Northern highlands of Peru Conservation and Sustainable Use of High-Andean Ecosystems of Peru through Compensation of Environmental Services for Rural Poverty Alleviation and Social Inclusion Promotion of Sustainable and Climate-compatible Rural Development in Lara and Falcon States Sep Sep Activities started at the beginning of 2012 and implementation is porceeding smoothly. First supervision mission carried out in November/December Next supervision mission planned for Q III Endorsed by GEF CEO in July Finalisation of financing agreement expected for Q III Jun Dec 17 Effective in June Started to plan for start up of activities, expected for Q IV Latin America and the Caribbean Division

83 7 Table 7: Current investment portfolio by type of co-financier and sub-region (US$'000): June 2013 Type of co-financier Andean MCAC Southern Cone Total % Regional financial institutions BCIE CAF CDB Multilateral organizations OPEC Fund GEF IICA Bilateral organizations/funds STF Other Domestic financial institutions NGOs Private sector Total Latin America and the Caribbean Division

84 8 Country Table 8: Current investment portfolio - co-financing ratio by country: June 2013 IFAD Government External cofinanciers (USD'000) % (USD'000) % (USD'000) % Gov.+Ext./IF AD ratio Andean Bolivia Colombia Ecuador Peru Venezuela MCAC Belize Dominican Republic El Salvador Grenada Guatemala Guyana Haiti Honduras Mexico Nicaragua Panama Southern Cone Argentina Brazil Paraguay Total Total Gov/IFAD ratio Ext./IFAD ratio Latin America and the Caribbean Division

85 9 Country Table 9: Approved IFAD and STF financing: PBAS period (US$'000) Initial allocation 1) IFAD STF IFAD STF IFAD STF IFAD STF Total Argentina Bolivia Brazil Colombia Dominica 200 Dominican Republic Ecuador 2) El Salvador Grenada Guatemala 3) Guyana Haiti Honduras Jamaica Mexico Nicaragua Panama Paraguay Peru Suriname Venezuela 4) Total ) cf. doc. EB 2009/98/R.56/Add.1 2) The three-year Ecuador PBAS allocation was reduced to US$ M in ) Cancelled in ) The three-year Venezuela PBAS allocation was reduced to US$ M in 2010 Latin America and the Caribbean Division

86 10 Country Project ID Table 10: New investment projects that became effective: Project Lending terms No. of projects IFAD current financing (USD '000) Approval date Effectiveness date Current completion date Effectiveness lag (months) Argentina 1610 PRODERI O Sep Dec Dec 17 3 Bolivia 1490 PLAN VIDA HC Dec Aug Sep Ecuador 1588 BUEN VIVIR 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 Grenada 1569 MAREP O Dec Mar Mar 17 4 Mexico 1412 DECOFOS O Sep Mar Mar Ecuador 1354 IBARRA-SAN LORENZO O Sep Mar Mar Honduras 1535 EMPRENDE SUR HC Sep Feb Mar 17 5 Venezuela 1404 WARAO O Dec Oct Dec Dominican Republic 1479 PRORURAL OESTE O Apr May Jun Panama 1389 PARTICIPA O Apr Mar Mar El Salvador 1416 PRODEMOR-CENTRAL O Sep Dec Dec Argentina 1364 PRODEAR O Dec Dec Dec Bolivia 1298 VALE HC Dec Nov Dec Peru 1352 SIERRA NORTE O Dec Sep Sep Belize 1456 RFP O Dec Sep Sep Guyana 1415 READ DHC Dec Jan Mar El Salvador 1321 PRODEMORO O Apr Dec Dec Guatemala 1317 ORIENTE I Dec Dec Dec Honduras 1407 PROMECOM HC Dec Nov Dec Haiti 1275 PPI 2 HC Dec Nov Dec Nicaragua 1380 PROCAVAL DHC Sep Aug Sep Latin America and the Caribbean Division

87 Table 11: IFAD financing agreements signed for new investment projects: Country Project ID Project Lending terms No. of projects IFAD current financing (USD '000) Approval date Signing date Signing lag (months) Argentina 1610 PRODERI O Sep Nov 11 2 Ecuador 1588 BUEN VIVIR O Sep May 12 8 El Salvador 1568 AMANACER 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 Grenada 1569 MAREP O Dec Mar 11 4 Bolivia 1490 PLAN VIDA HC Dec Mar Ecuador 1354 IBARRA-SAN LORENZO O Sep Mar Mexico 1412 DECOFOS O Sep Mar Honduras 1535 EMPRENDE SUR HC Sep Nov Dominican Republic 1533 PRORURAL CENTRO Y ESTE O Apr May 10 1 Venezuela 1404 WARAO O Dec Dec Dominican Republic 1479 OESTE RURAL O Apr Jun 09 2 Belize 1456 RFP O Dec May 09 5 El Salvador 1416 PRODEMOR-CENTRAL O Sep Apr Peru 1352 SIERRA NORTE O Dec Feb Argentina 1364 PRODEAR O Dec Oct Guyana 1415 READ DHC Dec Jul 08 7 Panama 1389 PARTICIPA O Apr Jul Review Period Guatemala 1317 Central & Eastern Regions I Dec Jun Honduras 1407 PROMECOM HC Dec Mar Nicaragua 1380 PROCAVAL DHC Sep Jan Bolivia 1298 VALE PROJECT HC Dec Nov

88 Table 12: Delays in signing and effectiveness - IFAD financing agreements: Country 1) Cancelled Project ID Project Lending terms No. of projects IFAD current financing (USD '000) Approval date Signing date Agreements NOT SIGNED more than two months after approval Bolivia 1598 ACCESOS I Dec 11 7 Brazil 1487 PROCASE (Paraiba) O Dec Brazil 1486 VIVA O SEMI ÁRIDO (Piauí) O Sep Colombia 1491 TOP O Apr 12 3 Guatemala 1519 QUICHE 1) O Apr Mexico 1597 LAS MIXTECAS O Apr 12 3 Paraguay 1611 PARAGUAY INCLUSIVO O Apr 12 3 Signing lag (months) Effectiveness lag (months) Projects NOT EFFECTIVE more than four months after signing Dominican Republic 1533 PRORURAL CENTRO Y ESTE O Apr May Agreements NOT SIGNED more than two months after approval El Salvador 1568 AMANECER RURAL O Dec 10 6 Nicaragua 1505 NICARIBE DHC Dec 10 6 Guatemala 1519 QUICHE O Apr Guatemala 1473 PRODENORTE O Dec Brazil 1487 PROCASE O Dec Brazil 1486 VIVA O SEMI ÁRIDO (Piauí) O Sep Projects NOT EFFECTIVE more than four months after signing Dominican Republic 1533 PRORURAL CENTRO Y ESTE O Apr May Agreements NOT SIGNED more than two months after approval Guatemala 1519 QUICHE O Apr 10 2 Bolivia 1490 PLAN VIDA HC Dec 09 6 Brazil 1487 PROCASE O Dec 09 6 Brazil 1486 VIVA O SEMI ÁRIDO (Piauí) O Sep 09 9 Ecuador 1354 IBARRA-SAN LORENZO O Sep 09 9 Mexico 1412 DECOFOS O Sep 09 9 Guatemala 1473 PRODENORTE O Dec Costa Rica 1417 PRONADEM O Sep Projects NOT EFFECTIVE more than four months after signing Venezuela 1404 WARAO O Dec Dec 09 6 Brazil 1194 XINGÓ 1) O Dec Dec

89 13 Table 13: IFAD financing agreements not signed more than two months after approval: June 2013 Country Project ID Project New IFAD financed projects No. of operations Lending terms Current financing (USD '000) Approval date Time since approval (months) Expected signing date Brazil 1563 DOM TAVORA (Sergipe) O Sep 12 9 Sept/Oct 2013 Venezuela 1609 PROSANESU O Dec 12 7 Oct 2013 STF co-financing Venezuela 1609 PROSANESU O Dec 12 7 Oct 2013 GEF co-financing Honduras 1595 HORIZONTES DEL NORTE G Feb 13 4 Sept/Oct 2013 Total average 7 Latin America and the Caribbean Division

90 14 Country Project ID Table 14: Investment projects completed during the review period: Project Effect. data Original completion date Original project duration (years) Disbursed at original completion date (%) Current completion Date Actual project duration (years) Brazil 1335 Gente de Valor 11 Dec Dec % 31 Dec 12 6 Guatemala 1274 OCCIDENTE 20 Oct Dec % 31 Dec 12 6 Nicaragua 1120 FAT 20 Jun Jun % 30 Jun Average Total disbursed at closure Argentina 1098 PRODERNOA 04 Mar Mar % 31 Dec % 3 El Salvador 1215 PREMODER 23 Dec Dec % 31 Dec % 3 Guatemala 1085 PRODEVER 06 Sep Sep % 30 Sep % Panama 1199 Ngöbe-Buglé 16 Sep Sep % 30 Sep % Average Peru 1240 SIERRA SUR 22 Apr Jun % 30 Jun % Uruguay 1161 Uruguay Rural 04 Sep Sep % 31 Mar % 2 Nicaragua 1256 PRODESEC 17 Aug Sep % 31 Dec % 1 Mexico 1268 MICROCUENCAS 18 Jun Jun % 21 Dec % Bolivia 1145 PROMARENA 22 Aug Sep % 30 Sep % 2 Haiti 1070 PICV II 05 Sep Sep % 30 Sep % Average Brazil 1101 Dom Helder Camara 21 Dec Dec % 31 Dec % 2 Mexico 1141 HULE 21 Dec Dec % 31 Dec % Honduras 1128 FONADERS 03 Jul Sep % 30 Nov % 2 Honduras 1198 PRONADEL 05 Oct Dec % 30 Nov % 2 Venezuela 1186 Barlovento 29 Jul Sep % 30 Sep % Average Grenada 1181 Rural Enterprise Project 03 Oct Dec % 30 Jun % 1 No. of extensions Latin America and and the the Caribbean Division Annual Portfolio Performance Report

91 Table 15: Time overrun of investment projects: June 2013 Country Project ID Project Effectivenes s date Original completion date Current completion date Original project duration (years) No. of extensions Time overrun (months) (%) Argentina 1279 PRODERPA 10 Sep Sep Mar % Argentina 1364 PRODEAR 16 Dec Dec Dec 15 6 Argentina 1610 PRODERI 07 Dec Dec Dec 17 6 Belize 1456 RFP 01 Sep Sep Sep 16 7 Bolivia 1298 VALE PROJECT 05 Nov Dec Dec 15 6 Bolivia 1490 PLAN VIDA 10 Aug Sep Sep 15 4 Brazil 1486 VIVA O SEMI ÁRIDO Piauí) 09 Apr Jun Jun 20 7 Brazil 1487 PROCASE (Paraíba) 17 Oct Dec Dec 18 6 Brazil 1619 PAULO FREIRE (Ceará) 27 Jun Jun Jun 19 6 Colombia 1294 OPORTUNIDADES 28 Jun Jun Dec % Colombia 1491 TOP 13 Dec Dec Dec 17 5 Dominican Republic 1479 PRORURAL OESTE 26 May Jun Jun 16 6 Dominican Republic 1533 PRORURAL CENTRO Y EST 04 Sep Sep Sep 18 6 Ecuador 1297 CORREDOR CENTRAL 25 Sep Sep Jun % Ecuador 1354 IBARRA-SAN LORENZO 04 Mar Mar Mar 17 6 Ecuador 1588 BUEN VIVIR RURAL 30 May Jun Jun 18 6 El Salvador 1321 PRODEMORO 24 Dec Dec Dec 16 8 El Salvador 1416 PRODEMOR-CENTRAL 18 Dec Dec Dec 15 6 El Salvador 1568 AMANECER RURAL 01 Jun Jun Jun 17 5 Grenada 1569 MAREP 30 Mar Mar Mar 17 6 Guatemala 1317 ORIENTE 01 Dec Dec Dec 14 6 Guatemala 1473 PRODENORTE 27 Jan Mar Mar 18 6 Guyana 1415 READ 15 Jan Mar Mar 15 6 Haiti 1171 PAIP 20 Dec Dec Dec % Haiti 1275 PPI 2 05 Nov Dec Dec 15 7 Haiti 1532 PPI 3 24 Oct Dec Dec 17 5 Honduras 1407 PROMECOM 17 Nov Dec Dec 15 7 Honduras 1535 EMPRENDE SUR 01 Feb Mar Mar 17 6 Honduras 1595 HORIZONTES DEL NORTE 21 Feb Mar Mar 18 6 Mexico 1349 PRODESNOS 01 Sep Sep Dec % Mexico 1412 DECOFOS 23 Mar Mar Mar 16 5 Mexico 1597 LAS MIXTECAS 29 Nov Dec Dec 18 6 Nicaragua 1380 PROCAVAL 20 Aug Sep Sep 15 7 Nicaragua 1505 NICARIBE 11 Jan Mar Mar 17 5 Panama 1389 PARTICIPA 31 Mar Mar Mar 16 6 Paraguay 1333 PARAGUAY RURAL 30 Aug Sep Sep 13 6 Paraguay 1611 PARAGUAY INCLUSIVO 26 Feb Mar Mar 18 5 Peru 1240 SIERRA SUR 22 Apr Jun Dec % Peru 1352 SIERRA NORTE 23 Sep Sep Sep 14 5 Peru 1498 SIERRA Y SELVA ALTA 20 Feb Mar Mar 18 5 Venezuela 1252 PROSALAFA II 20 Jul Sep Sep % Venezuela 1404 WARAO 19 Oct Dec Dec 17 7 On-going portfolio 3% 15

92 16 Country Project ID Project Table 16: Project extensions: Effectiveness date Original completion date Current completion date (June 2013) Extensions in the review period No. Length (months) Argentina 1279 PRODERPA 10 Sep Sep Mar Colombia 1294 OPORTUNIDADES 28 Jun Jun Dec Ecuador 1297 CORREDOR CENTRAL 25 Sep Sep Jun Mexico 1349 PRODESNOS 01 Sep Sep Dec Venezuela 1252 PROSALAFA II 20 Jul Sep Sep Total no. of extensions Latin America and and the the Caribbean Division Annual Portfolio Performance Report

93 17 SR: small regional; LR: large regional; SC: small country; LC: large country Table 17: Current grant portfolio: June 2013 Project Grant no. Type Approval date Effective date Current completion date Current closing date Amount (USD'000) Know ledge Management in the North eastern Semi-Arid Region of Brazil COFIN-SP-16-IICA LC 27 Apr May Dec Jun Know ledge Sharing on Food Security in Haiti/Dominican Republic COFIN-SEC-825-FAO SR 02 Nov Jan Mar Sep Peru as a Learning Territory COFIN-FN-1336-FUNDA-K LC 17 Apr Apr Dec Sep Sustainable Land Management in the semiarid (project BR 1101) GEF-FSP-2-BR LC 14 Dec Aug Sep Mar Sust. Mgmt. of Biodiversity and Water in Ibarra-San Lorenzo (project EC 1354) GEF-FSP-21-EC LC 04 May Nov Mar Sep Sust. Mgmt of Protected Areas of the Northern Highlands of Peru (project PE 1352) GEF-FSP-22-PER LC 08 Jul Sep Sep Jun Mitigación del Cambio Climático en el Sur de México (project MX 1412) GEF-FSP-28-MX LC 18 Oct Mar Mar Sep Sust. And climate friendly Devpt in Veraguas (project PA 1389) GEF-FSP-024-PA LC 13 Feb Jun Jun Dec Soc. Integral devpt and interrleation w ith CC in w atersheds (project VE 1252) GEF -FSP-23-VE LC 27 Sep Jun Jun Dec PRODEMORO (project SV 1321) LC-784-SV LC 19 Apr Dec Dec Jun PRODERNORTE (project GT 1473) LC-1070-GT SC 17 Dec Jan Mar Sep SIERRA SUR (project PE 1240) LC-1158-PE SC 17 Dec Aug Dec Jun TOP (project CO 1491) LC-1360-CO LC 03 Apr Dec Dec Jun LAS MIXTECAS (project MX 1597) LC-1361-MX LC 03 Apr Nov Dec Jun Young Rural Women in LAC in the 21st Century TAG-1250-IEP LR 05 Dec Apr Oct Apr Market Access Programme for Rural Associative SME's in Central America TAG-1256-AGEXPORT LR 15 Dec Mar Mar Sep Building and Scaling-Up Know ledge on High Andean Livestock TAG-1292-FUNDABIO SR 27 Jun Jul Sep Jun Strengthening community mgmt. in support of REDD+ in Mesoamerica TAG-1303-NAFIN LR 29 Aug Jun Mar Dec Promoting Young People's Entrepreneurship in Poor Rural Areas of LAC TAG-1305-PROCASUR LR 29 Aug Nov Dec Jun Public Policy Dialogue on Family Farming in the Southern Cone of LAC TAG-1326-CLAEH LR 27 Nov Mar Mar Sep Peru as a Learning Territory TAG-1336-FUNDA-K SR 03 Dec Dec Dec Sep LAC-Brazil Agricultural Innovation Marketplace TAG-1334-FUNARBE SC 05 Dec Dec Dec Sep Legal Preparedness for Climate Change and Rural Development in LAC TAG-1344-IDLO SR 20 Dec Dec Sep Mar Cooperativa de Mujeres 4Pinos TAG Pinos SC 20 Dec Dec Dec Sep Regional Programme in Support of Rural Populations of African descent in LAC TAG-1369-ACUA LR 05 May Jul Mar Sep Programme on Conditional Cash Transfers and Rural Development in LAC TAG-1373-UNIANDES LR 05 May May Jun Dec Broadening Economic Opportunities for Rural Women Entrepreneurs in LAC TAG-1385-UNWOMEN LR 12 Aug Apr Jun Dec Rural development and Fiscal policy TAG-1415-ICEFI SR 11 Dec Feb Mar Dec Smallholders Climate-Smart Agricultural Prod. and Marketing in English Caribbean TAG-1422-IICA SR 17 Dec Jan Sep Jun Information mgmt. for policies and projects of rural dvpt. and food security in CAC TAG-1424-CEPAL SR 17 Dec Mar Mar Dec Ongoing 30 grants Approved not effective n.a. n.a. Total current portfolio 30 grants Latin America and the Caribbean Division

94 18 Table 18: Maturity of current grant portfolio: review period Age structure No. of projects % % Cumulative No. of projects IFAD financing % % Not effective 4 17% 17% % % Cumulative < 1 year 9 39% 57% 8 38% 38% < 2 years 4 17% 74% 9 43% 81% < 3 years 3 13% 87% 3 14% 95% >= 3 years 3 13% 100% 1 5% 100% External financing 9 100% 9 100% Not effective 2 22% 22% < 1 year 5 56% 78% 2 22% 22% < 2 years 2 22% 100% 5 56% 78% < 3 years 100% 1 11% 89% >= 3 years 100% 1 11% 100% Total % % Not effective 6 19% 19% < 1 year 14 44% 63% 10 33% 33% < 2 years 6 19% 81% 14 47% 80% < 3 years 3 9% 91% 4 13% 93% >= 3 years 3 9% 100% 2 7% 100% Latin America and and the the Caribbean Division Annual Portfolio Performance Report

95 19 Table 19: On-going grant portfolio by grant policy output: June 2013 Policy Output / Grant Grant no. Approval date Effectiveness date Current completion date Awareness, advocacy and policy dialogue on issues of importance to poor rural people 2 grants Public Policy Dialogue on Family Farming in the Southern Cone of LAC TAG-1326-CLAEH 27 Nov Nov Mar Sep Programme on Conditional Cash Transfers and Rural Development in LAC TAG-1373-UNIANDES 05 May May Jun Dec Capacity of partner institutions strengthened to deliver a range of services in support of poor rural people 1 grant Strengthening community mgmt. in support of REDD+ in Mesoamerica TAG-1303-NAFIN 29 Aug Jun Mar Dec Innovative activities promoted and innovative technologies and approaches developed in support of IFAD s target group 6 grants Market Access Programme for Rural Associative SME's in Central America TAG-1256-AGEXPORT 15 Dec Mar Mar Sep Promoting Young People's Entrepreneurship in Poor Rural Areas of LAC TAG-1305-PROCASUR 29 Aug Nov Dec Jun Cooperativa de Mujeres 4Pinos TAG PINOS 20 Dec Dec Dec Sep Legal Preparedness for Climate Change and Rural Development in LAC TAG-1344-IDLO 20 Dec Dec Sep Mar Regional Programme in Support of Rural Populations of African descent in Latin America TAG-1369-ACUA 05 May Jul Mar Sep Broadening Economic Opportunities for Rural Women Entrepreneurs in LAC TAG-1385-UNWOMEN 12 Aug Apr Jun Dec Lesson learning, knowledge management and dissemination of information on issues related to rural poverty reduction 10 grants Young Rural Women in LAC in the 21st Century TAG-1250-IEP 05 Dec Apr Oct Apr Building and Scaling-Up Know ledge on High Andean Livestock TAG-1292-FUNDABIO 27 Jun Jul Sep Jun 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 Rural development and Fiscal policy TAG-1415-ICEFI 11 Dec Feb Mar Dec Information mgmt. for policies and projects of rural dvpt. and food security in CAC TAG-1424-CEPAL 17 Dec Mar Mar Dec Smallholders Climate-Smart Agricultural Prod. and Marketing in English Caribbean TAG-1422-IICA 17 Dec Jan Sep Jun Peru as a Learning Territory COFIN-FN-1336-FUNDA-K 17 Apr Apr Dec Sep Know ledge Sharing on Food Security in Haiti/Dominican Republic COFIN-SEC-825-FAO 02 Nov Jan Mar Sep Know ledge Management in the North eastern Semi-Arid Region of Brazil COFIN-SP-16-IICA 27 Apr May Dec Jun Current closing date Amount (USD) Total 19 grants Latin America and the Caribbean Division

96 20 Table 20: Grant financing approved: review period INNOV: Innovative activities promoted and innovative technologies and approaches developed in support of IFAD s target group LL&KM: Lesson learning, knowledge management and dissemination of information on issues related to rural poverty reduction promoted among stakeholders Grant Table 21: Grants that became effective: review period Grant no. Approval date Effectiveness date Completion date Closing date Effectiveness lag (months) Amount (USD'000) Disbursed (USD'000) Stand-alone grants (IFAD and external financing) 6 grants average Strengthening community mgmt. in support of REDD+ in Mesoamerica TAG-1303-NAFIN 29 Aug Jun Mar Dec Regional Programme in Support of Rural Populations of African descent in Latin America TAG-1369-ACUA 05 May Jul Mar Sep Broadening Economic Opportunities for Rural Women Entrepreneurs in LAC TAG-1385-UNWOMEN 12 Aug Apr Jun Dec Rural development and Fiscal policy TAG-1415-ICEFI 11 Dec Feb Mar Dec Smallholders Climate-Smart Agricultural Prod. and Marketing in English Caribbean TAG-1422-IICA 17 Dec Jan Sep Jun Information mgmt. for policies and projects of rural dvpt. and food security in CAC TAG-1424-CEPAL 17 Dec Mar Mar Dec GEF 2 grants average 12.5 Sust. And climate friendly Devpt in Veraguas (Project PA 1389) GEF-FSP-024-PA 13 Feb Jun Jun Dec Soc. Integral devpt and interrleation w ith CC in w atersheds in Lara&Falcon (Project VE 1252) GEF -FSP-23-VE 27 Sep Jun Jun Dec IFAD LCG 2 grants average TOP (project CO 1491) LC-1360-CO 03 Apr Dec Dec Jun LAS MIXTECAS (project MX 1597) LC-1361-MX 03 Apr Nov Dec Jun Total 10 grants average Disburs. % 30/06/13 Latin America and and the the Caribbean Division Annual Portfolio Performance Report

97 21 Grant no. Approval date Table 22: Grant disbursement rates: 30 June 2013 Effective date Completion date Planned closing date Amount (USD'000) % of implementation period elapsed Disburs. % Last disbursement date TAG-1250-IEP 05 Dec Apr Oct Apr % 71% 03-May-11 TAG-1256-AGEXPORT 15 Dec Mar Mar Sep % 28% 06-Apr-12 TAG-1303-NAFIN 29 Aug Jun Mar Dec % TAG-1305-PROCASUR 29 Aug Nov Dec Jun % 52% 31-May-13 TAG-1326-CLAEH 27 Nov Mar Mar Sep % 59% 14-Jan-13 TAG-1334-FUNARBE 05 Dec Dec Dec Sep % 62% 30-Mar-12 TAG-1369-ACUA 05 May Jul Mar Sep % 22% 21-Sep-12 TAG-1373-UNIANDES 05 May May Jun Dec % 14% 23-Jul-12 TAG-1385-UNWOMEN 12 Aug Apr Jun Dec % - COFIN-SP-16-IICA 27 Apr May Dec Jun % 29% 05-Aug-11 LC-1070-GT 17 Dec Jan Mar Sep % 22% 15-Mar-12 LC-1158-PE 17 Dec Aug Dec Jun % 52% 31-Aug-12 LC-1360-CO 03 Apr Dec Dec Jun % - LC-1361-MX 03 Apr Nov Dec Jun % - LC-784-SV 19 Apr Dec Dec Jun % 75% 25-Apr-13 GEF-FSP-024-PA 13 Feb Jun Jun Dec % - GEF -FSP-23-VE 27 Sep Jun Jun Dec % - GEF-FSP-21-EC 04 May Nov Mar Sep % 19% 16-May-12 GEF-FSP-22-PER 08 Jul Sep Sep Jun % 67% 19-Jun-13 GEF-FSP-28-MX 18 Oct Mar Mar Sep % - GEF-FSP-2-BR 14 Dec Aug Sep Mar % 100% 24-Apr-12 Latin America and the Caribbean Division

98 22 Table 23: Grant completed: review period Project Grant no. Approval date Effectiveness date Current completion date Closing date Actual closing date Table 24: Grants closed or cancelled: review period Amount (USD'000) Undisbursed Balance (USD'000) Strengthening of Farmer Organisations to Promote Policy Dialogue TAG-1109-COPROFAM 30 Apr Nov Dec Jun % Completed Learning Routes Programme II TAG-1178-PROCASUR 17 Dec Apr Jun Dec Jun n.a. 100% Closed Knowledge for Change: Policy processes for poverty impact TAG-1203-RIMISP 22 Apr May Jun Dec % Completed Enhancing the Gender-sensitive Impact of Remittances for Rural Dev. in LAC COFIN-SP-15-FUNDA-K 20 Aug Dec Dec Jun % Completed NI - Apoyo al IV Censo Agropecuario DSF-8075-NI 23 Dec May Dec Jun May n.a. 100% Closed GENTE DE VALOR (project BR 1335) LC-850-BR 20 Apr Sep Sep Mar Jun n.a. 100% Closed Grant Grant no. Approval date Effectiveness date Disburs. % June 2013 Total 6 grants % Completion date Planned closing date Actual closing date Delay in closing (months) Grant amount (USD'000) IDRC - Scaling up Rural Innovations TAG-1036-IDRC 25 Apr Dec Jun Dec Jan Learning Routes Programme II TAG-1178-PROCASUR 17 Dec Apr Jun Dec Jun Reunión Especializada sobre Agricultura Familiar, REAF TAG-1056-MERCOSUR 11 Sep Feb Mar Sep Mar Policy Dialogue on Family Farming in MICs TAG-1187-UNOPS 21 Dec Mar Mar Sep Mar CIAT - Reg. Prog. In Support of Rural Populations of African Descent in LAC TAG-1169A-CIAT 17 Dec Jul Jun Sep Jan CIAT - Reg. Prog. In Support of Rural Populations of African Descent in LAC TAG-1169-CIAT 17 Dec Jul Jun Sep Jan EC - Support to the Formulation of the Dev. Plan of the Cuenca del Baba TAG-1259-EC 17 Dec Jan Mar Dec Jun Learning Adaptation and Mitigation from Highland Indigenous People TAG-1266-PRAIA 23 Dec Jan Mar Dec Mar Lessons from MesoAm Indigenous Peoples on the Transition to a Green Economy TAG-1348-ACICAFOC 27 Dec Dec Mar Dec Jan Haiti Post-Earthquake Support Programme COFIN-SEC Apr Apr Mar Sep Dec Haiti Post-Earthquake Support Programme DSF-8058-IICA 22 Apr Apr Mar Sep Dec NI - Apoyo al IV Censo Agropecuario DSF-8075-NI 23 Dec May Dec Jun May GENTE DE VALOR (project BR 1335) LC-850-BR 20 Apr Sep Sep Mar Jun QUICHÉ (Project GT 1519) LC-1201-GT 15 Dec Jun 13 Cancelled Status 30/06/13 Amount cancelled (USD'000) Total 14 grants average Latin America and and the the Caribbean Division Annual Portfolio Performance Report

99 23 Grant no. Approval date Effectiveness date Table 25: Grants with overdue closing dates: June 2013 Completion date Closing date Time overrun (months) Amount (USD'000) Undisbursed balance (USD'000) Remarks TAG-966-UY 18 Jul Oct Dec Mar Refund of unspent USD 100,000 expected in September 2013 TAG-1015-INCCA 31 Dec Aug Jun Dec Completion report cleared. Pending receipt of audit report TAG-1129-DO 08 May Jun Dec Sep Audit contracting undergoing in June 2013 TAG-1186-EC 18 Dec Feb Jun Mar Completion report cleared. Pending receipt of audit report TAG-537-CARUTA 26 Apr Oct Oct Apr Refund of unspent USD 5, expected in July 2013 TAG-1144-WINFA 14 Aug Sep Dec Jun Under forced closing procedures TAG-1211-AGRISEM 23 Aug Aug Dec Sep Audit undertaken but pending receipt of SOE and audit letter TAG-1206-FUNARBE 16 May Jun Jun Mar Closed on 18 July 2013 TAG-1109-COPROFAM 30 Apr Nov Dec Jun Audit undertaken but pending receipt of original documents COFIN-SP-15-FUNDA-K 20 Aug Dec Dec Jun Audit report under CFS review for closing Latin America and the Caribbean Division

100 24 SR: small regional; LR: large regional; SC: small country; LC: large country GEF and IFAD LCG are excluded Table 26: GSR ratings of grant projects: June 2013 Latin America and and the the Caribbean Division Annual Portfolio Performance Report

101 25 Country Project ID Current completion date Imp. prog. Overall assessment and risk profile Dev. obj. Phys. & fin. assets Food sec. Table 27: PSR ratings of investment projects: June 2013 Financ. manag. Disburs. rate Fiduciary aspects Count. funds Loan coven. Proc. Audits Proj. manag. M&E Project implementation progress AWPB & implem. Gender focus Pov. focus Target. appr. Innov. & learning Outputs and outcomes (component ratings) C.1 C.2 C.3 C.4 C.5 Argentina Mar Argentina Dec Argentina Dec Belize Sep Bolivia Dec Bolivia Sep Brazil Dec Brazil Dec Colombia Dec Colombia Dec Dominican Rep Jun Dominican Rep Sep Ecuador Jun Ecuador Mar Ecuador Jun El Salvador Dec El Salvador Dec El Salvador Jun Grenada Mar Guatemala Dec Guatemala Dec Guatemala Mar Guyana Mar Haiti Dec Haiti Dec Haiti Dec Honduras Dec Honduras Mar Honduras Mar Mexico Dec Mexico Mar Mexico Dec Nicaragua Jun Nicaragua Sep Nicaragua Mar Panama Mar Paraguay Sep Peru Dec Peru Sep Venezuela Sep Venezuela Dec Regional average Institut. building Emp. Sustainability Benef. partic. Service provid. Exit strat. Scal. up & replic. Latin America and the Caribbean Division

102 26 Country Project ID Table 28: Disbursement performance of investment projects - IFAD financing: June 2013 Project Loan / DSF grant no. Effectiveness date Current completion date Amount (SDR m) Cum. disb. (SDR m) 30/06/13 Expected disb. (SDR m) Disbursed % Expected disb. % ARGENTINA % 43% -33% 1279 PRODERPA Sep Sep % 63% 1364 PRODEAR Dec Dec % 35% -59% 1610 PRODERI Dec Dec % 11% -334% BELIZE % 38% 18% 1456 RFP Sep Sep % 38% 19% BOLIVIA % 58% -17% 1145 PROMARENA Aug Sep % 94% 8% 1298 VALE Nov Dec % 35% -149% 1490 PLAN VIDA Aug Sep % 13% -11% BRAZIL % 43% -24% 1335 GENTE DE VALOR Dec Dec % 73% -25% 1487 PROCASE (Paraíba) Oct Dec % 4% 9% COLOMBIA % 66% -33% 1294 OPORTUNIDADES Jun Jun % 66% -33% DOMINICAN REPUBLIC % 17% 62% 1479 PRORURAL OESTE May Jun % 28% 55% 1533 PRORURAL CENTRO Y ESTE Sep Sep % 94% ECUADOR % 29% -13% 1297 CORREDOR CENTRAL Sep Sep % 63% -25% 1354 IBARRA-SAN LORENZO Mar Mar % 18% 46% 1354 IBARRA-SAN LORENZO Mar Mar % 18% 46% 1354 IBARRA-SAN LORENZO 30 Mar % 18% 46% 1588 BUEN VIVIR May Jun % 7% -25% Disb. lag Latin America and and the the Caribbean Division Annual Portfolio Performance Report

103 27 Country Project ID Project Loan / DSF grant no. Effectiveness date Current completion date Amount (SDR m) Cum. disb. (SDR m) 30/06/13 Expected disb. (SDR m) Disbursed % Expected disb. % EL SALVADOR % 29% -26% 1321 PRODEMORO Dec Dec % 48% -29% 1416 PRODEMOR-CENTRAL Dec Dec % 35% -50% 1568 AMANECER RURAL Jun Jun % 7% 88% GRENADA % 18% -47% 1569 MAREP Mar Mar % 18% -45% GUATEMALA % 49% 55% 1274 OCCIDENTE Oct Dec % 73% 65% 1317 ORIENTE Dec Dec % 48% 36% 1473 PRODERNORTE Jan Mar % 9% 15% GUYANA % 44% -29% 1415 READ Jan Mar % 44% -28% 1415 READ Jan Mar % 44% -28% 1415 READ 31 Mar % 44% -28% HAITI % 52% -15% 1171 PAIP Dec Dec % 95% -6% 1171 PAIP Jan Dec % 9% -530% 1171 PAIP 31 Dec % 76% -19% 1275 PPI Nov Dec % 48% 19% 1275 PPI Jan Dec % 31% -128% 1275 PPI 2 31 Dec % 43% -12% 1532 PPI Oct Dec % 100% Disb. lag Latin America and the Caribbean Division

104 28 Country Project ID Project Loan / DSF grant no. Effectiveness date Current completion date Amount (SDR m) Cum. disb. (SDR m) 30/06/13 Expected disb. (SDR m) Disbursed % Expected disb. % HONDURAS % 25% 12% 1407 PROMECOM Nov Dec % 48% 15% 1535 EMPRENDE SUR Feb Mar % 18% 13% 1595 HORIZONTES DEL NORTE Feb Mar % 9% -9% MEXICO % 43% 4% 1349 PRODESNOS Sep Sep % 75% 5% 1412 DECOFOS Mar Mar % 18% -90% 1597 LAS MIXTECAS Nov Dec % 100% NICARAGUA % 47% -14% 1120 FAT Jun Jun % 95% -2% 1380 PROVACAL Aug Sep % 50% -22% 1380 PROVACAL 8009A 20 Aug Sep % 50% -22% 1380 PROVACAL Dec Sep % 4% -165% 1380 PROVACAL Dec Sep % 4% -181% 1380 PROVACAL 30 Sep % 25% -37% 1505 NICARIBE Jan Mar % 9% -83% 1505 NICARIBE Jan Mar % 9% -83% 1505 NICARIBE 31 Mar % 9% -83% PANAMA % 83% 26% 1199 NGOBE-BUGLE II Sep Sep % 94% 26% 1389 PARTICIPA Mar Mar % 31% 25% PARAGUAY % 41% -88% 1333 PARAGUAY RURAL Aug Sep % 63% -59% 1333 PARAGUAY RURAL Dec Sep % 11% -668% 1333 PARAGUAY RURAL 30 Sep % 52% -85% Disb. lag Latin America and and the the Caribbean Division Annual Portfolio Performance Report

105 29 Country Project ID Project Loan / DSF grant no. Effectiveness date Current completion date Amount (SDR m) Cum. disb. (SDR m) 30/06/13 Expected disb. (SDR m) Disbursed % Expected disb. % PERU % 54% -52% 1240 SIERRA SUR Apr Jun % 85% -17% 1240 SIERRA SUR II Sep Dec % 24% -315% 1240 SIERRA SUR 31 Dec % 63% -42% 1352 SIERRA NORTE Sep Sep % 38% -82% VENEZUELA % 50% -9% 1252 PROSALAFA II Jul Sep % 75% -28% 1404 WARAO Oct Dec % 21% 73% Total 52 loans / DSF grants % 45% -8% Expected disbursement is calculated from the IFAD model, as at 30/6/2013 Percentage disbursement is calculated against the loan amount net of cancellations Projects with closed loans have been excluded LCG are excluded Disb. lag Latin America and the Caribbean Division

106 30 Table 29: Loans and DSF grants with disbursement lag of 40% or more: June 2013 Expected disbursement is calculated from the IFAD model, as at 30/6/2013. Percentage disbursement is calculated against the loan amount net of cancellations. Projects with closed loans have been excluded. Only loans/dsf grants that have been effective for one year or more at 30/6/2013 are included. Loans/DSF grants with zero disbursement are excluded Latin America and and the the Caribbean Division Annual Portfolio Performance Report

107 31 Table 30: Withdrawal application processing by country: Latin America and the Caribbean Division

108 32 Table 31: Project SOE thresholds: June 2013 Note: The predominant ceiling has been selected for projects with different ceilings across categories Latin America and and the the Caribbean Division Annual Portfolio Performance Report