Public Disclosure Authorized The World Bank REPORT NO.: RES31312 Public Disclosure Authorized Public Disclosure Authorized RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MX SUSTAINABLE RURAL DEVELOPMENT APPROVED ON FEBRUARY 24, 2009 TO THE UNITED MEXICAN STATES Public Disclosure Authorized AGRICULTURE LATIN AMERICA AND CARIBBEAN Regional Vice President: Acting Country Director: Senior Global Practice Director: Practice Manager/Manager: Task Team Leader: Jorge Familiar Jutta U. Kern Juergen Voegele Preeti S. Ahuja Katie Kennedy Freeman
ABBREVIATIONS AND ACRONYMS AF FIRCO GEF GEO GHG GoM IBRD ISR M&E PDO PDRS SAGARPA Additional Financing Shared-Risk Trust Fund (Fideicomiso de Riesgo Compartido) Global Environment Facility Global Environmental Objective Greenhouse Gas Government of Mexico International Bank for Reconstruction and Development Implementation Status and Results Report Monitoring and Evaluation Project Development Objective Sustainable Rural Development Project (Proyecto de Desarrollo Rural Sustentable) Ministry of Agriculture (Secretaría de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación)
Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID P106261 Original EA Category Partial Assessment (B) Approval Date 24-Feb-2009 Financing Instrument Investment Project Financing Current EA Category Partial Assessment (B) Current Closing Date 29-Jun-2018 Organizations Borrower Government of Mexico, Secretaria de Hacienda y Credito Publico, Unidad de Asuntos Internacionales Responsible Agency Fideicomiso de Riesgo Compartido (FIRCO) Project Development Objective (PDO) Original PDO The project development objective is to promote the adoption of environmentally sustainable technologies in agribusinesses. Summary Status of Financing Ln/Cr/Tf Approval Signing Effectiveness Closing Net Commitment Disbursed Undisbursed IBRD-82160 20-Nov-2012 30-Nov-2012 27-Feb-2013 29-Jun-2018 50.00 31.09 18.91 IBRD-76520 24-Feb-2009 14-May-2009 29-Jan-2010 31-Dec-2013 46.80 46.80 0 TF-93134 14-May-2009 14-May-2009 08-Feb-2010 29-Jun-2018 10.50 8.71 1.79
Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The purpose of this level-2 restructuring is to process a request from the Government of Mexico (GoM) (received on December 19, 2017) to cancel US$10 million from the International Bank for Reconstruction and Development (IBRD) loan MX-82160. This loan was approved on November 20, 2012 as an additional financing for the Mexico: Sustainable Rural Development Project (PDRS, P106261), and it became effective on February 27, 2013. The closing date for the Project is June 29, 2018. 2. Background. This will be the third restructuring for this Project. The first restructuring, approved on April 1, 2015, included commercial practices as a method of procurement of goods, works and non-consulting services, as well as consultants services, under Section III. B. 2 and Section III. C. 2 of the Loan Agreement for the Additional Financing of the Project. Addition of the commercial practices procurement method was needed to reflect the market context for renewable energy and energy efficient technologies in Mexico and their procurement by a large number of private agribusinesses. The second restructuring, approved on December 1, 2016, extended the closing date of the project, including additional financing IBRD loan MX-82160 (P106261) and Global Environment Facility (GEF) grant TF093134 (P108766), by 18 months - from December 31, 2016 to June 29, 2018 1. 3. Disbursements: As of February 26, 2018, disbursements amounted to US$ 46.8 million (93.6%) of the original loan (IBRD 76520, where US$3.2 million were cancelled), US$31.09 million (62.2%) of the additional financing loan (IBRD 82160) and US$8.7 million (82.96%) of the GEF grant (TF093134). The Project experienced disbursement delays in 2016 and 2017 due to lower-than-expected budget allocations resulting from federal budget restrictions in the Ministry of Agriculture (SAGARPA) and the Shared-Risk Trust Fund (FIRCO). SAGARPA allocated MXN$200 million out of its approved budget for 2018, which will be used to disburse almost 80% of the AF loan funds by the closing date (GEF grant proceeds are expected to be fully disbursed by the closing date). 4. Fiduciary and Safeguards: External audit reports for the loan and the grant have been prepared under terms of reference acceptable to the Bank. They have generally been submitted on time, with only minor delays for the grant (2011 and 2013 audit reports), and presented unmodified (clean) opinions. All audit reports have been considered acceptable to 1 The Sustainable Rural Development Project was approved on February 24, 2009 as a blended operation with an IBRD loan (US$50.0 million) and a GEF grant (US$10.5 million). An Additional Financing (AF) loan (IBRD 82160) of US$50.0 million was approved on November 20, 2012 to scale up the activities under Component 1. The original closing date of the Project was December 31, 2013, which was extended to December 31, 2016 as part of the AF. The extension to the closing date from December 31, 2016 to June 29, 2018, was the first extension of the AF loan but the second extension of the closing date of the GEF grant, resulting in a cumulative extension of 4.5 years, and thus it required Regional Vice-Presidency approval. The 18-month extension of the AF Loan was necessary to allow the Project to achieve its PDO and disburse loan proceeds to finance sub-projects that had already been committed, whereas the additional extension of the Grant was required by project design, as Grant resources were (and still are) used to cover the cost of the project management team, while the investment in infrastructure is funded by Loan proceeds (additional information on GEF-funded activities can be found in footnote 3).
the Bank. In the latest Implementation Status and Results Report (ISR) dated December 2017, financial management and procurement ratings were maintained as Moderately Satisfactory 2. Overall safeguard compliance continues to be Satisfactory. 5. Monitoring and Evaluation (M&E): M&E was downgraded from Satisfactory (S) to Moderately Satisfactory (MS) in 2010 since budgetary restrictions resulted in the cancellation of a consultancy to carry out the base line survey of the Project (funded by the GEF grant). Since then, the project faced continuous delays in budgetary allocation for GEF-funded activities, and although most of them have been either completed or scheduled, the budgetary restrictions have also impacted the consultancy for completing the projects final evaluation. In early 2018, FIRCO confirmed budget availability for this consultancy, and it is expected that the procurement process will be completed in the next few weeks. 6. PDO and GEO: Progress towards achievement of PDO (i.e., to promote the adoption of environmentally sustainable technologies in agri-businesses) is rated Moderately Satisfactory. By December 2017, a total of 1,927 agribusinesses 3 had adopted environmentally sustainable technologies (89% of the target). The Project has already overachieved its Global Environmental Objective (GEO), i.e., to contribute to the goals of the National Strategy on Climate Change (NSCC) by reducing Greenhouse Gas (GHG) emissions in the agricultural sector through the adoption of emission reduction technologies and the support to the implementation of the President s Special Program for Climate Change (PECC), with emphasis on the improved environmental sustainability of small and medium-sized agri-businesses. Also by December 2017, GHG emissions had been reduced by 5,538,337 tons of CO 2 equivalent, or 279% of the goal of 1,987,500 tons of CO 2 equivalent. 7. Implementation Progress: The Project s implementation progress (loan) is currently rated Moderately Satisfactory. During the past 2 years, implementation has been slower-than-expected (in terms of disbursements), mostly due to limited budget allocations from the Ministry of Agriculture (SAGARPA). SAGARPA allocated MXN$200 million to the Project for 2018, which FIRCO is planning to devote almost entirely to solar-photovoltaic and solar-thermal sub-projects, with the objective of achieving a disbursement rate of 80% by the Project s closing date (June 29, 2018). The expected remaining balance of 20% of loan resources, or US$10 million, will be cancelled following the approval of this restructuring paper. The implementation of the GEF grant has been progressing effectively over the past 3 years, and the GoM expects to achieve 100% disbursement of grant proceeds by the closing date 4. 8. The proposed restructuring would cancel US$10 million (20%) of the additional finance loan (signed in the amount of US$50 million) and would adjust the disbursement estimates and component costs accordingly. This partial cancellation is needed due to the significant depreciation of the Mexican peso against the US dollar (from MXN$14 per US dollar in late 2014 to MXN$19 per US dollar in late 2017), which resulted in additional available resources from loan 82160 that 2 The FM rating is currently being assessed as a result of a field visit in November 2017. The results of this assessment will be included in the Project s final ISR. 3 Progress reported in this RP are based on an update to the results framework reported by FIRCO in early January 2018, which will be included in the project s final ISR. Latest ISR reported 2,204 agribusinesses adopting environmentally sustainable technologies by June 2017. However, the 2,204 figure corresponds to the number of actual projects implemented in 1,885 agribusinesses (a given agribusiness can have 1,2 or more technologies). The team will clarify this discrepancy between agribusinesses and technologies in the project s Implementation Completion Report. 4 In early February 2018, FIRCO reported that all activities financed by the GEF Grant under Component 1 of the project (category 2 of eligible expenditures under the Grant Agreement) had been successfully completed: (i) 60 initial capital investment projects, (ii) 200 energy efficiency subprojects, and (iii) 3 technology development studies. Also, FIRCO reported that three pilot projects financed by the GEF Grant under Component 2 of the project (Investment and Production Support Services) had been completed, with the decision of not implementing a fourth pilot project due to its low cost-effectiveness. Institutional strengthening and project management activities, also financed by the GEF, are either completed, scheduled, or ongoing. The only pending activity financed by the GEF Grant as of February 2018 is the Project Evaluation consultancy, of which the procurement process has faced some delays due to budgetary restrictions (budget is now available and FIRCO is trying to complete the procurement process so that the consultancy can be completed before the project s closing date).
could not be used due to the lack of budget allocation to implement additional activities. This cancellation will not have a material effect on the achievements of the project, as most indicators have been either met or exceeded. II. DESCRIPTION OF PROPOSED CHANGES 9. Since late 2016, the team has been reporting implementation delays, due mostly to fiscal austerity measures undertaken by the GoM which resulted in reduced budget for line ministries (including SAGARPA). Although physical implementation continued (as evidenced by the achievement of the PDO and GEO targets), federal budget allocations have remained as a constraint, and consequently FIRCO could not expand the benefits of the Project to more agribusinesses from the resulting savings observed in the loan (a significant depreciation of the Mexican currency against the US dollar since effectiveness in 2013 meant that each subproject disbursed fewer US dollars for the same amount of disbursements in Mexican currency). 10. In November 2017, the team carried out a fiduciary mission with the objective (among others) of evaluating available federal budget for the last months of project implementation. During this mission, FIRCO confirmed that SAGARPA had allocated MXN$200 million (approximately US$10 million) for 2018, with the stipulation that the money should be used to benefit a final wave of mostly solar thermal and solar photovoltaic projects (due to their short period of execution). In addition to these MXN$200 million, FIRCO also estimated that under the most optimistic scenario, approximately US$4 million from the loan could be disbursed to cover eligible expenses incurred during the implementation of SAGARPA programs during 2015 and 2016, whose objectives and guidelines were similar to those of PDRS. Under this highlyoptimistic scenario, the disbursement rate would have ended at 88%. However, given recent experiences with reduced budget allocation from SAGARPA to FIRCO, and taking into account also the time required to decide whether subprojects dating from 2015 and 2016 could be deemed as eligible for Bank financing, on December 19, 2017 the GoM decided to request the cancellation of US$10 million from IBRD loan MX-82160. 11. The GoM expects this cancellation to result in a reduction of the achievement against the target set for one PDO indicator (number of agribusinesses that have adopted environmentally sustainable technologies) and one intermediate indicator (MWh produced by biomass subprojects), both by 10%. All other targets have been either met or surpassed. Given this and the imminent closing of the project, the proposed restructuring will not adjust the results framework. Instead, the project will be assessed based on the results framework in place. 12. While there will be no reallocations between disbursement categories, the following section reflects the reduced allocation to disbursement Category 2: Agribusiness Grants-other than GEF, from the original US$49.875 million to US$39.875 million, as well as updated disbursement estimation based on actual disbursements from 2009 to 2017 and the expected disbursement for 2018 (US$10.141 million). Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. III. SUMMARY OF CHANGES Changed Cancellations Proposed Not Changed
OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE The World Bank Reallocation between Disbursement Categories Change in Disbursement Estimates Change in Implementing Agency Change in DDO Status Change in Project's Development Objectives Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Change in Disbursements Arrangements Change in Overall Risk Rating Change in Safeguard Policies Triggered Change of EA category Change in Legal Covenants Change in Institutional Arrangements Change in Financial Management Change in Procurement Change in Implementation Schedule Other Change(s) Change in Economic and Financial Analysis Change in Technical Analysis Change in Social Analysis Change in Environmental Analysis IV. DETAILED CHANGE(S)
CANCELLATIONS Ln/Cr/Tf Status Currency IBRD- 76520-001 IBRD- 82160-001 TF-93134-001 Fully Disburs ed Disburs ing Disburs ing Current Amount Cancellation Amount Value Date of Cancellation New Amount USD 46,800,513.19 0.00 46,800,513.19 USD 50,000,000.00 10,000,000.00 19-Dec-2017 40,000,000.00 USD 10,500,000.00 0.00 10,500,000.00 Reason for Cancellation BORROWER' S REQUEST FOR COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Allocation Actuals + Committed Proposed Allocation Financing % (Type Total) Current Proposed IBRD-82160-001 Currency: USD ilap Category Sequence No: 1 Current Expenditure Category: GO, CS, TR - other than GEF 0.00 0.00 0.00 100.00 100.00 ilap Category Sequence No: 2 Current Expenditure Category: Agri-Busines Grants-other than GEF 49,875,000.00 30,640,437.61 39,875,000.00 100.00 100.00 ilap Category Sequence No: 4 Current Expenditure Category: PREMIUM FOR CAPS/COLLARS 0.00 0.00 0.00 Total 49,875,000.00 30,640,437.61 39,875,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes
Year Current Proposed 2009 3,000,000.00 0.00 2010 10,000,000.00 125,000.00 2011 10,000,000.00 12,156,203.00 2012 12,000,000.00 17,882,111.00 2013 15,000,000.00 7,034,236.00 2014 10,000,000.00 15,280,124.00 2015 5,000,000.00 11,749,724.00 2016 15,000,000.00 9,345,637.00 2017 5,000,000.00 3,086,250.00 2018 15,000,000.00 10,141,229.00 Note to Task Teams: End of system generated content, document is editable from here.