Document of The World Bank · VMDC VIPFE Vice Ministry for the Development of Cultures Vice Ministry of Public Investment and External Financing VMT Vice Ministry of Tourism WBG World

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Document of The World Bank

Report No: ICR00003497

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-43790)

ON A

CREDIT

IN THE AMOUNT OF SDR 12.8 MILLION

(US$20 MILLION EQUIVALENT)

TO THE

PLURINATIONAL STATE OF BOLIVIA

FOR A

LAKE TITICACA LOCAL SUSTAINABLE DEVELOPMENT PROJECT

July 27, 2015

Urban, Rural and Social Development Department Bolivia, Chile, Ecuador, Perú and Venezuela Country Management Unit Latin America and the Caribbean Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective 06/30/2015)

Currency Unit = BOB Boliviano BOB 6.96 = US$1

US$1 = BOB 0.14

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ALT APL

Autoridad Binacional del lago Titicaca – Binational Lake Titicaca Authority Adaptable Program Loan

BSTC Basic Services Technical Committee CAF Corporación Andina de Fomento CDD Community Driven Development CMU CPF

Country Management Unit Country Partnership Framework

EMF Environmental Management Framework ENAPA Entidad de Agua Potable y Alcantarillado Sanitario – Drinking Water and

Sanitary Sewer Agency EPSA Entidad Prestadora de Servicios de Agua Potable y Alcantarillado Sanitario –

Drinking Water and Sanitary Sewer Service Provision Agency FPS Fondo Nacional de Inversión Productiva y Social – National Productive and

Social Investment Fund GIS GOB

Geographic Information System Government of Bolivia

IBRD International Bank for Reconstruction and Development ICB ICSDLT

International Competitive Bidding Inter-institutional Committee for the Sustainable Development of Lake Titicaca

IDA International Development Association ISR Implementation Status& Results Report MDG MEPF

Millennium Development Goals Ministry of Economy and Public Finances

M&E MMAyA MPDPE

Monitoring and Evaluation Ministerio de Medio Ambiente y Agua Ministry of Productive Development and Plural Economy

MPME Ministry of Production and Microenterprises NDP National Development Plan NGO Nongovernmental Organization OTB Organizaciones Territoriales de Base – Grassroots Organizations O&M PAD

Operation and Maintenance Project Appraisal Document

PCN Project Concept Note PCU Project Coordination Unit PDCR Proyecto de Desarrollo de Comunidades Rurales – Rural Development Project

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PDO Project Development Objectives PLP Prefecture of La Paz PPF Project Preparation Facility PPU Project Preparation Unit PROASRED Programa de Agua, Saneamiento, Residuos Sólidos y Drenaje Pluvial) SIL SIC

Sector Investment Loan Specific Investment Credit

TDPS TPT

Titicaca-Desaguadero-Poopó-Salar de Coipasa Hydrologic Basin Technical Project Team

UNESCO VMBS VMBWR

United Nations Education, Scientific and Cultural Organization Vice Ministry of Basic Services Vice Ministry of Basins and Water Resources

VMDC VIPFE

Vice Ministry for the Development of Cultures Vice Ministry of Public Investment and External Financing

VMT Vice Ministry of Tourism WBG World Bank Group WSS Water and Sanitation Services

Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez

Sector Manager: Anna Wellenstein

Project Team Leader: John Morton

ICR Team Leader: John Morton

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BOLIVIA Lake Titicaca Local Sustainable Development Project

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 1 3. Assessment of Outcomes ............................................................................................ 2 4. Assessment of Risk to Development Outcome ........................................................... 3 5. Assessment of Bank and Borrower Performance ....................................................... 3 6. Lessons Learned ......................................................................................................... 3 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ............ 3 Annex 1. Project Costs and Financing ............................................................................ 5 Annex 2. Outputs by Component ................................................................................... 6 Annex 3. Economic and Financial Analysis ................................................................... 7 Annex 4. Bank Lending and Implementation Support/Supervision Processes .............. 8 Annex 5. Beneficiary Survey Results ........................................................................... 10 Annex 6. Stakeholder Workshop Report and Results ................................................... 11 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 12 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 13 Annex 9. List of Supporting Documents ...................................................................... 14

MAP

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BOLIVIA LAKE TITICACA LOCAL SUSTAINABLE DEVELOMENT DATA

SHEET

A. Basic Information

Country: Bolivia Project Name: Lake Titicaca Local Sustainable Development

Project ID: P101426 L/C/TF Number(s): IDA-43790

ICR Date: 07/27/2015 ICR Type: Core ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF BOLIVIA

Original Total Commitment:

XDR 12.80M Disbursed Amount: XDR 6.33M

Revised Amount: XDR 6.33M

Environmental Category: B

Implementing Agencies: Fondo Nacional de Inversion Productiva y Social Viciministerio de Turismo, Ministerio de Culturas y Turismo

Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 01/18/2007 Effectiveness: 03/01/2008 12/01/2008

Appraisal: 10/29/2007 Restructuring(s): 09/20/2010 06/13/2012

Approval: 12/20/2007 Mid-term Review: 05/12/2010 06/05/2011

Closing: 06/30/2013 02/02/2015 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Unsatisfactory

Risk to Development Outcome: Substantial

Bank Performance: Unsatisfactory

Borrower Performance: Moderately Unsatisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Unsatisfactory Government: Moderately Unsatisfactory

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Quality of Supervision: Moderately Unsatisfactory

Implementing Agency/Agencies:

Moderately Unsatisfactory

Overall Bank Performance:

Unsatisfactory Overall Borrower Performance:

Moderately Unsatisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance

Indicators QAG Assessments (if

any) Rating

Potential Problem Project at any time (Yes/No):

Yes Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Unsatisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 15 5

Other industry 35 5

Sanitation 17 30

Solid waste management 30

Wastewater Treatment and Disposal 18

Water supply 15 30

Theme Code (as % of total Bank financing)

Cultural Heritage 17 5

Pollution management and environmental health 17 30

Rural non-farm income generation 33

Rural services and infrastructure 30

Urban services and housing for the poor 33 35 E. Bank Staff

Positions At ICR At Approval

Vice President: Jorge Familiar Calderon Pamela Cox

Country Director: Alberto Rodriguez Carlos Felipe Jaramillo

Practice Manager/Manager: Anna Wellenstein Laura Tuck

Project Team Leader: John Morton Daniel A. Hoornweg

ICR Team Leader: John Morton

ICR Primary Author: Rodrigo Cisneros

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F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project's original development objective was to contribute to local sustainable development in the Recipient's (Bolivian) side of the Lake Titicaca watershed.

By facilitating local activities that support tourism development and cultural protection in the communities surrounding the Lake, the Project sought to support improvements in local tourism services

and cultural heritage protection. The Project also aimed to support the sustainable provision of basic services (water supply; wastewater collection and treatment; and solid waste management).

Revised Project Development Objectives (as approved by original approving authority) The Project Development Objective was not revised. Two PDO indicators were eliminated from the project due to a reduction in scope of the project to focus on works and the elimination of the coordination and information sharing role of the project. (a) PDO Indicator(s)

A. Geo-Tourism Score: The score is based on a percentage; with 100% the highest score.

Target Year Target for each tourism area

Copacab

ana

Islas del

Sol y Luna Sampaya

TSY

(1)

CKT

(2)

TKCHAH

(3)

Pto.

Perez Tiwanaku

TCC

(4) Baseline

12/202007 53% 49% 46% 45% 46% 52% 40% 50% 40%

Target 6/30/2013

65% 65% 60% 60% 60% 65% 55% 65% 55%

(1) TSY: Titicachi-Sicuani-Yampupata Route (2) CKT: Copacabana-Kasani-Tiquina Route (3) TKCHAH: Tiquina-Kompi-Chua-Huatajata-Achacachi-Huarina Route (4) TCC: Taraco-Coacollo-Chiripa Circuit

This indicator was eliminated from the Project as part of a restructuring on June 13, 2012 as the project no longer targeted these tourism outcomes. B. Urban Environmental Sustainability Index: The index score is based upon the coverage and quality of water supply, wastewater, and solid waste services, as well as the financial sustainability of the service provider (The index ranges from 1-4, with 1 being the highest score).

Target Index Score

Target year Copacabana Achacachi Tiquina Tiwanaku Viacha

Baseline 12/20/2007 4 3 4 4 4

Target 6/30/2013 2 2 2 2 2

Target 2/2/2015 2 2 2 2 2

Actual 7/23/2015 4 2 4 4 4

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C. Quality of State of the Lake Report: The annual State of the Lake Report would be evaluated based upon its scope, quality of the data, depth of the analysis, and policy impact.

Target Year

Target for Quality of Report

Baseline 12/20/2007

Poor: Limited scope, partial data, little analysis, and limited policy impact

Target 6/30//2013

High: Covers all key environmental and social issues, in-depth scientific and policy analysis; serves as the key management document for guiding the management of Lake Titicaca in Bolivia.

This indicator was eliminated from the Project as part of a restructuring on June 13, 2012 as this coordination and communication function was eliminated from the project.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Tourism improvement projects completed Value (quantitative or Qualitative)

0 100 31 2

Date achieved 12/20/2007 06/30/2013 02/02/2015 02/02/2015 Comments (incl. % achievement)

Indicator 2 : Cultural heritage sites protected Value (quantitative or Qualitative)

0 20 0 0


Indicator 3 : Small business supported Value (quantitative or Qualitative)

0 100 0 0


Indicator 4 : Rural towns with improved water and sanitation services Value (quantitative or Qualitative)

0 20 20 39

Date achieved 12/20/2007 06/30/2013 02/02/2015 07/23/2015 Comments (incl. %

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Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

achievement) Indicator 5 : Urban communities with adequate wastewater services Value (quantitative or Qualitative)

0 5 5 0


Indicator 6 : Cities with adequate solid waste services Value (quantitative or Qualitative)

0 3 3 4


Indicator 7 : Tourism studies completed Value (quantitative or Qualitative)

0 4 2 2


Indicator 8 : Municipal land-use management plans completed Value (quantitative or Qualitative)

0 12 0 0


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G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual Disbursements

(USD millions) 1 01/29/2008 Satisfactory Satisfactory 0.00 2 09/22/2008 Satisfactory Satisfactory 0.00 3 11/24/2008 Moderately Unsatisfactory Moderately Unsatisfactory 0.00 4 05/03/2009 Moderately Satisfactory Moderately Satisfactory 0.58 5 07/27/2009 Moderately Satisfactory Moderately Satisfactory 0.63 6 11/17/2009 Moderately Satisfactory Moderately Satisfactory 0.73 7 04/15/2010 Moderately Satisfactory Moderately Satisfactory 1.02 8 02/23/2011 Moderately Unsatisfactory Moderately Unsatisfactory 2.13 9 09/14/2011 Moderately Unsatisfactory Moderately Unsatisfactory 2.29

10 04/11/2012 Moderately Unsatisfactory Moderately Unsatisfactory 2.37 11 11/15/2012 Moderately Unsatisfactory Moderately Satisfactory 2.87 12 07/08/2013 Moderately Unsatisfactory Moderately Unsatisfactory 3.34 13 03/17/2014 Unsatisfactory Unsatisfactory 3.51 14 11/07/2014 Unsatisfactory Unsatisfactory 5.25

H. Restructuring (if any)

Restructuring Date(s)

Board Approved PDO

Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made

DO IP

09/20/2010 MS MS 1.78 Institutional changes and additional contracting modalities

06/13/2012 MU MU 2.46 Institutional changes, reallocation of funds and project extension.

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I. Disbursement Profile

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1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Country Context. The project was prepared and appraised in October 2007 in the backdrop of the beginning of a period of relative political stability and significant reforms in the Country. In the five years before President Morales came to power in January 2006, four different presidents ruled the country. In May 2006 the National Development Plan was initiated to: increase state participation in strategic sectors; channel resources to labor-intensive sectors; develop specific geographic areas; introduce new social programs while scaling up existing ones; ensure greater country ownership of Bolivia’s development process and self-sufficiency in food and energy production; and undertake a profound social and political reform through a new Constitution. Subsequently the Morales administration implemented an array of economic and social policies to empower indigenous peoples and reduce poverty and inequality. A new Constitution was enacted in February 2009 and President Morales was sworn in for a second term in January 2010.

2. Sector Background. Lake Titicaca is a water body shared between Peru and Bolivia. It is part of a hydrologic basin with an extension of 140,000 km2 on the Altiplano1. The Lake, with an altitude of 3,800 m and a drainage area of approximately 58,000 km2, plays an important role in the large bi-national watershed. The Bolivian portion the Lake supports a population of approximately 324,000 people, 93% of which have unmet basic needs. The population is mainly indigenous Aymara, dedicated to agriculture, livestock, tourism, trading, fishing, and mining , activities that rely on the natural resources of the Lake and its surrounding area.

3. Lake Titicaca is an important ecosystem and a world-class attraction2. At the time of Appraisal, tourism was the fourth most important component of Bolivia’s GDP, with a share of 4.6%, generated by national and international tourists3. In spite of its unique natural history and preserved cultural integrity, pollution had started threatening the health of the Lake and the sustainability of the communities that depend on the Lake for their livelihoods and economic activities. Wastewater discharges from urban areas and mining activities in the basin were the two main causes of contamination to the Lake, which due to the altitude experiences a significant level of solar radiation and a high rate of evaporation, making the system very vulnerable. In 2007 there were already some eutrophication problems encountered close to the coastal villages.

4. Despite numerous studies on the Lake, there were no accepted or consistent baseline data, nor community consensus on priorities for local economic development or ecosystem protection. International donor assistance in the Lake-area was often fragmented and complicated by joint Peru-Bolivia jurisdiction.

1 Lake Titicaca is part of the hydrologic basin that includes the Desaguadero River, Lake Poopó, and Salar de Coipasa. 2 Parts of Lake Titicaca are designated as a UNESCO World Heritage site, or national reserves under IUCN Category VI, and the entire Lake is a designated Ramsar site of vulnerable ecosystems and ancient cultures. The entire basin contains six Ramsar sites of global importance. Lake Titicaca has over 25 endemic species. 3Almost half of the international tourists came from Latin-America (49%), followed by European countries (32%) and American (11%). Prior to Appraisal, in the first half of 2006, tourism had increased by 21% compared to the same period in 2005.

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5. Rationale for Bank Assistance. Prior to Appraisal, the Government of Bolivia had requested assistance from the Bank to support a strategy that would improve the quality of life of the basin’s residents through protection of the Lake’s water quality and ecology as well as through local economic and social development opportunities for the communities surrounding the Lake. Bolivia, at the time of Appraisal, was an IDA borrower with limited borrowing capacity and access to international finance, therefore the Government expected that with the Bank’s relatively modest support through the proposed Project, additional donor funds could be leveraged to complement and expand the overall scope of work.

6. The Bank’s 2006 Interim Strategy Note for Bolivia supported the Government’s 2006-2010 National Development Plan and included the following strategic objectives: (i) fostering jobs through inclusive growth; (ii) providing better services to the poor and greater social inclusion through improved public service provision; and (iii) enhancing good governance and transparency. The Bank was positioned to bring specific knowledge in social development, waste water management, infrastructure provision, cultural heritage, sanitation, and housing, considering its worldwide experience in these topics and ongoing involvement in other sustainable tourism projects in the Latin America Region4.

7. Higher Level Objectives to which the Project contributes. The Project aimed to contribute to sustainable development in the region and as part of this integrated strategy was to contribute to the following higher level objectives: Poverty alleviation through the provision of increased opportunities for economic and social development through tourism expansion and local business development. Social Development by building upon existing social and cultural capital. Achievement of MDG coverage goals for water supply and sanitation. Environmental Improvement through investments in sanitation and wastewater treatment, that would directly improve the environment, and through the provision of a credible baseline for monitoring trends in Lake water quality.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 8. The Project’s development objective was to contribute to local sustainable development in the Recipient’s (Bolivian) side of the Lake Titicaca watershed.

9. This would be done through facilitating local activities to develop tourism and cultural protection and improving water and sanitation services. The tourism investments would focus on investments in tourism improvement projects throughout the region (including tourist circuit development, docks, bathrooms, bike paths and visitor centers); upgrading cultural sites; and support to small businesses related to tourism. The basic services investments would support water and sanitation in priority communities and improving basic services (solid waste, water and wastewater) in five of the major urban centers.

4 Vilcanota Valley Rehabilitation and Management Project in Perú (P082625) and the Regional Development in the Copan Valley Project in Honduras (P081172).

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10. Other broader objectives including contributing to the protection of the Lake’s long-term water quality and ecological integrity; greater social inclusion and participation; improved quality of life; increased tourist arrivals; and agreement on a ‘shared vision’ for the Lake development, were to be supported and monitored but were not expected to be fully attributed to the Project. The Project’s contribution to local sustainable development was expected to be modest but provide an important starting point.

11. Key Indicators linked to the PDO were: - Improvement of the Geo-Tourism Score over the 2007 baseline geo-tourism survey5. - Improvement of the Urban Environmental Sustainability Index6. - Quality improvement and updating of the State of the Lake Report7.

1.3 Revised PDO 12. The PDO was not revised during the Project. After the restructuring of June 2012, two of the PDO indicators, those referring to the Geo Tourism Score and the State of the Lake Report, were eliminated to be consistent with the reduced scope of the project and the removal of the information sharing and coordination role of the Project.

1.4 Main Beneficiaries 13. As stated in the PAD, those that would benefit directly were: (i) municipal governments through the establishment of tourism units; (ii) indigenous and peasant communities through basic services improvements; (iii) productive agriculture and livestock organizations by linking the local economic production chain with tourism activities;(iv) artisanal organizations through the production of authentic indigenous art; (v) organizations in the road transportation sector through capacity building to improve the quality of their services; (vi) organizations in the Lake transportation sector through expansion of itineraries to new tourist destinations; (vii) organizations of traders and vendors as important allies for the Project; (viii) organizations of hotelkeepers and lodging services through the improvement of their services; (ix) restaurants and food service industry through the introduction and consumption of nutritional products and the improvement of their services; and (x) tourist guides through the expansion of tourist activities.

14. The indirect beneficiaries were the institutions to be strengthened: (i) the Vice Ministry of Tourism (VMT) as the implementing agency; (ii) the Vice-Ministry of Cultures would benefit from the cultural protection activities; (iii) the Prefecture of La Paz would improve its expertise in the tourism sector; (iv) the Lake Mancomunidad (association of municipalities) would be oriented towards a common goal; (v) the National Tourist Police and tourist operators would benefit from

5 Geo-Tourism Score: This score is based upon a methodology developed by National Geographic which considers a number of different factors in determining the attractiveness of a tourist destination. The methodology is based on a percentage; with 100% the highest score. During Project preparation the Bank supported the first baseline survey. 6 Index is based upon the coverage and quality of water supply, wastewater, and solid waste services, as well as the financial sustainability of the services provider (The index ranges from 1-4, with 1 being the highest score). 7 Before Appraisal, through a World Bank Netherlands Water Partnership Program Trust Fund, the Bank supported the development of a framework for Lake Titicaca’s first State of the Lake Report which summarized existing information on the Lake, including sources of contamination, habitat degradation and an additional water modeling exercise that shows impacts of current pollution trends. A second one was produced during implementation.

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the adoption of land-use plans, regulations and tourism norms; and, (vi) foundations, universities, NGOs, consulting firms, professionals, social and productive organizations would able to better coordinate their activities with the Municipal Governments.

1.5 Revised Beneficiaries 15. The Project Beneficiaries changed after the restructuring due to the reduction in scope of the project and the removal of the coordinative and information sharing role of the project. In particular:

16. The direct beneficiaries became the local government and the communities benefitting from the basic service improvements and the beneficiaries of the dock works and the visitor centers (transportation operators and communities where the docks would be located and tourism operators that use the two border crossings where the visitor centers would be constructed).

17. The indirect beneficiaries became the two sector Vice-ministries (Vice-ministry of Tourism and Vice-ministry of Basic Sanitation).

1.6 Original Components

18. The Project had three main components:

19. Component 1. Support to Tourism Development and Cultural Protection - USD 8.91 million (USD 8.25 million Bank financing; USD 0.66 million counterpart)

Tourism Development Support. Community demand driven small-scale investments for tourism.

Cultural Heritage Program. Restoration of pre-hispanic agricultural landscapes and trails, and artistic and historic assets in colonial churches.

Support to Productive Activities for Tourism. Small scale grant financing for handicrafts, textiles, and cultural events linked to tourism.

Administrative Cost for FPS.

20. Component 2. Basic Services - USD 11.09 million (USD 8.74 million Bank financing; USD 2.35 million counterpart)

Community Water and Sanitation. Small-scale water and sanitation infrastructure for rural communities.

Sewerage and Waste Water Treatment. Sanitation facilities for rural communities and improvement of sewerage systems in five cities, including appropriate wastewater treatment.

Solid Waste. Solid waste investments and management in three cities.


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21. Component 3. Institutional Strengthening and Project Management - USD 3.01 million (USD 3.01 million Bank financing; USD 0.00 million counterpart)

Institutional Strengthening for national government agencies, municipalities, communities, and the prefecture.

Monitoring and Evaluation. Annual updating of the State of the Lake Report, development of a communication strategy, project management, PCU fees and third party auditing.

1.7 Revised Components 22. The institutional arrangements changed in January 1, 2012 as part of a formal restructuring. FPS became the sole agency implementing Project investments and technical assistance. As a consequence, all those Components and activities that were previously under VMT responsibility but had not yet been initiated by said date, were either dropped or reduced in scope, resulting in the following revised components:

23. Revised Component 1, Support to Tourism Development and Cultural Protection- USD 4.52 million (USD 3.86 million Bank financing; USD 0.66 million counterpart)

Tourism Development Support. Completed activities and infrastructure to be carried out through FPS (works related to border visitor centers and small docks).

Cultural Heritage Program. Design for the protection of cultural heritage monuments in Isla Del Sol and Isla de la Luna.


24. Revised Component 2. Basic Services- USD 15.97 million (USD 13.62 million Bank financing; USD 2.35 million counterpart)

Community Water and Sanitation, was revised to be consistent with updated target communities.

Sewerage and Waste Water Treatment, was not revised.

Solid Waste, was not revised.

Administrative Cost for FPS, was revised to include all audits for the Project.

25. Revised Component 3. Institutional Strengthening and Project Management – USD 2.51 million (USD 2.51 million Bank financing; USD 0.00 million counterpart)

Institutional Strengthening. Reduced focus and added support to the VMT to participate in tourism fairs.

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1.7 Other Significant Changes 26. First Restructuring: On September 20, 2010 a first amendment was signed. The amendment: (i) reflected the reorganization of the Ministries, most significantly the VMT being transferred from the Ministry of Production, Development and Plural Economy (MPDPE)8 to the Ministry of Culture and Tourism9; (ii) replaced the inter-institutional committee (Inter-institutional Committee for the Sustainable Development of Lake Titicaca-ICSDLT), proposed for sharing information and coordination, with bi-yearly inter-institutional workshops; and (iii) renamed the PCU the Technical Project Team (TPT).

27. In addition, turn-key contracting and contracting of public academic institutions were introduced in reaction to difficulties detected in the market environment to recruit qualified contractors. Some of the targets for intermediate results were revised to allow for more realistic monitoring of results.

28. Second Restructuring: On June 13, 2012 a second restructuring paper was signed to rectify deficiencies in the Project’s implementation arrangements and to focus on executing works. As of January 1, 2012, FPS became the sole agency implementing Project investments and technical assistance activities and the Project closing date was extended to February 2, 2015. This combined with the updating the estimated costs of works to reflect the increasing costs of construction in the country, led to the change in components, allocations, and corresponding changes in indicators as outlined earlier (see Sections 1.3 to 1.6).

29. Substitution of subprojects: In January 2014, a decision was made that the project could consider adding new projects that were outside the original scope of the targeted investments but supported the PDO. After a screening of potential new projects, a list of additional subprojects was added to the Project. The chosen works focused on water and sanitation investments including a sewerage system; rural water supply systems and rural sanitation systems. No restructuring was needed to make these changes.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry 30. At the time of Project design there were many issues that needed to be addressed to foster sustainable development of the Lake Titicaca Region: (i) communities felt excluded from national economic growth and the political decision making process; (ii) the National Tourism Plan was predicated on broad stakeholder participation; (iii) long-term strategic planning was absent in the involved municipalities; (iv) there was a considerable backlog in infrastructure and basic services and solid waste management was sporadic and unsustainable; (v) there was a lack of tourism infrastructure; (vi) few economic activities existed to provide incentives to retain the population;

8 On February 2009, after the new Constitution was approved, the Ministry of Production and Microenterprises (MPME) had been renamed as Ministry of Production Development and Plural Economy (MPDPE) retaining the Viceministry of Tourism within its organizational structure. In February 2010, the VMT was transferred to the Ministry of Culture and Tourism. 9 The Republic of Bolivia was renamed as the Pluri-National State of Bolivia; the Ministry of Water was replaced by the Ministry of Environment and Water; the Vice Ministry of Basic Services was renamed as Vice Ministry of Basic Sanitation; the Prefectures changed to Departmental Autonomous Governments; and the Municipalities became Municipal Autonomous Governments.

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(vii) the watershed was environmentally sensitive; (viii) there were multiple threats to the Lake10; and, (ix) the Lake was shared between Peru and Bolivia with a bi-national lake-management agency (ALT) with limited impact.

31. Taking into account the Government interest in an integrated approach that touched on all the above listed issues, a larger investment focusing on water and sanitation was not considered and instead, a comprehensive development approach was decided for the Project thereby including multiple types of activities and multiple stakeholders as well. The Project was originally conceived as an APL, but it was agreed that the most appropriate instrument for the Project was a SIL that would provide sufficient targeting to implement a set of important investments which could be expanded and continued as government priorities evolve. The project preparation thus focused on strategic targeting of investments, building community consensus, identifying activities that could fill gaps in planning and coordination in the regions’ tourism and basic services and arriving at implementing arrangements that could respond to the diverse needs of sustainable development in the region in the short and medium term in the context of executing the project.

32. Overall, the elements of the project design that affected implementation and outcomes included a comprehensive and participatory planning exercise that communicated, socialized and identified priority interventions; the complex institutional arrangements; the lessons considered from other projects and the limited subproject preparation undertaken. During appraisal some but not all of the risks associated with these elements were identified.

33. Community Socialization and Communication: A participatory planning process was initiated with communities and in parallel the Government undertook a comprehensive socio-cultural and organizational assessment as part of the development of a long-term strategic vision for the Lake Titicaca watershed. These consultations that convened numerous stakeholders from local and national levels, revealed a pressing need to initiate a process of revaluing the cultural patrimony assets found in the area.

34. The social analysis reviewed the existing historical and cultural studies and current tourism activities and worked toward developing a consensus on the role of tourism to generate additional economic and social benefits. Primary information was gathered with the help of young Aymara professionals living in the region, who assisted in interviews with community leaders, municipal authorities and representatives of producer associations and social organizations in the area. In a first phase, 25 workshops took place with approximately 851 participants followed by community consultations in several workshops that were conducted in a second phase. A third phase of community consultations was developed with the objective to identify and estimate the value of the proposed cultural and tourist investments in the Lake region. The consulting firms, assisted by the Aymara-speaking facilitators, visited more than 300 communities, where meetings were held with more than 500 indigenous authorities and participation of more than two thousand local residents.

35. The process successfully built awareness of the project and helped identify priorities, building local ownership of the project. At that same time it raised expectations which, combined with the small size and limited scale of the impacts of the proposed interventions, was considered to be a high risk at appraisal. Preparation activities and the inclusion of a communication strategy were intended to be mitigation measures. The process built significant ownership of the strategic

10 Climate variability and climate change; inadequate water resources regulations; organic and industrial pollution; sediment loading; invasive species; habitat destruction; heavy metal contamination from mining; nitrates from fertilizer run-off; land-use changes; over-fishing.

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focus of the targeted interventions that was sustained through the project but the expectations raised affected project implementation. In particular, because of the potential negative reaction of the communities to project cancellation or other changes, it limited the options for adjustments in the Project that could be undertaken.

36. Investment Prioritization and Targeting: Substantial work during Project preparation and just after approval was undertaken to identify needs and target investments. The social assessment study and a participatory planning process that involved communities developed an inventory of tourist products, assessed demand, designed itineraries and identified projects. Tourism studies for each of the four Lake zones were carried out during preparation and priorities defined consensually for the Region. In addition, a strategic prioritization process was able to identify the cities where the sewerage and wastewater treatment plants and solid waste landfills would be implemented and a process was undertaken to prioritize rural communities in the region based on the need for “emergency” sanitation investments. Overall the needs were much larger than the investment amount and therefore a systematic targeting was an important exercise. The targeting of the investments was thoroughly done and as a result, their relevance to local governments and communities was high and maintained throughout the project lifetime.

37. Subproject Preparation: While the preparation completed substantial work in targeting investments, no upfront work was undertaken to prepare the subprojects. Only one study to consider the feasibility of multi-municipal landfills in Copacabana and Tiwanaku was under execution. In addition, the technical designs for the prioritized ̈ emergency¨ services had been recently contracted by the respective municipal governments. The Project was appraised without any feasibility studies, designs, locations and associated land availability and acquisition completed. Land acquisition was not anticipated to be a significant issue and technical capacity was identified as a moderate risk. The Project intended to prepare the investments through consultancies contracted by the PCU in VMT. The lack of readiness of projects at appraisal combined with the poor quality (both technically and safeguards) and slow rate of subproject preparation resulted in the execution delays. Additionally, the combination of targeted investments that were promised to communities and the lack of pre-feasibility work created expectations many of which could not be met because the projects did not have available land or had poor or incomplete designs.

38. Institutional Arrangements: The Project´s conceptualization considered a comprehensive view of sustainable development in the Lake Titicaca region, including multiple activities of different types and scopes, as well as a relatively large number of different stakeholders, thereby making the implementation and monitoring a complex challenge that was considered during preparation. The issue that confronted the project was that there was not a clear umbrella agency that had the capacity and mandate to manage such diverse activities in multiple sectors. What was included in the design was the implementation of many key components overseen by a variety of relevant agencies and municipalities but with overall responsibility under VMT. This was complemented by coordination mechanisms among various stakeholders.

39. In particular, as stated in the PAD, the Project would be implemented by Ministry of Production and Microenterprises (MPME), through VMT which would operate the Project under the supervision of MPME. An inter-institutional committee (ICSDLT) would be created to gather all Project stakeholders and to provide advice to the Project and assist in coordination. All oversight of contracting and execution of major infrastructure would be administered by FPS 11. The VMT

11 With the exception of very specific investments in productive and tourism infrastructure which would be managed by the PCU.

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through a PCU, would be in charge of the overall Project coordination; the implementation of the institutional strengthening program; the development and execution of Bolivia’s tourism strategy for the Lake; the preparation of an annual update of the “the State of the Lake Report”; and the procurement of VMT components. VMT and the Prefecture of La Paz would sign an agreement that established the conditions for coordinated interventions in the area.

40. FPS would rely on the municipalities for the execution of sub-projects, i.e. the municipalities would carry out all procurement activities and would be in charge of signing the contracts for investments in infrastructure. In order to secure the technical quality of infrastructure designs in basic sanitation; FPS, VMBS and the PCU would form a quality review committee. Once reviewed, the PCU would send the subprojects to FPS for their implementation and would thereafter, monitor FPS work.

41. Several risks were identified at appraisal including the limited technical capacity of the VMT to implement the Project and ensure successful coordination across sectors (rated moderate) and the potential overlapping roles between and among national authorities, the Prefecture and municipalities (rated high). The risks related to VMT were realized and significantly affected implementation. VMT institutional weaknesses affected the technical implementation and pace of the project. The fact that VMT was implementing activities for which they did not have clear competency and mandate was not able to be overcome through a clear description of roles, and the formation of the PCU. The coordination mechanisms including signing of MoUs and forming of coordination committees had very limited operational impact, and the inter-institutional committee (ICSDLT) never met.

42. Another risk that was identified (as high) was “Discrepancies between the Vice Ministry of Tourism and the Vice Ministry of Basic Sanitation for overseeing Project components”. VMBS was not included significantly in the implementation arrangements with the exception of a joint technical review due to the fact that the Ministry was new and had limited capacity. While this conflict never affected the project, the limited involvement of VMBS in the original institutional arrangements combined with the fact that the technical review committee never became functional manifested itself in scarce support coming from the VMBS up until the final two years of implementation (through what at that time was Ministry of Environment and Water). The lack of direct responsibility in the project and involvement in review and technical support for the investments by VMBS may have affected the quality and progress of the technical designs for the integrated urban water projects which were never implemented due to contracting delays and quality issues.

43. Lessons from other projects. The Project design reflected the lessons learned from Peru’s Vilcanota Valley Rehabilitation and Management Project and the Copan Tourism Project in Honduras, where Bank financing was used for strategic and catalytic investments to leverage further investment by other donors and the private sector. The Project design relied heavily on the Peruvian Project with similar institutional arrangements; an integrated development approach including a variety of stakeholders and numerous types of small activities. At the time of Appraisal, the Vilcanota Project had already undertaken a Mid Term review (in June 2007) which showed the delays and difficulties due its complexity. These issues were not incorporated as lessons or risks in the Lake Titicaca Project.

44. The Honduras Project was already successfully closed by the time of Appraisal. Being a similar tourism project, it had less ambitious scope and a simpler institutional set-up (apart from the involved municipalities, no other government stakeholders but the tourism authorities were involved). In addition, the implementing unit that had been established in Honduras for project

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implementation, remained unchanged over the life of the project. In general, most design concepts were retrieved from the Peruvian Project, but not the lessons learned during implementation.

2.2 Implementation 45. The implementation of the project lasted a period of just over seven years from December 2007 until February 2015. The project implementation strategy changed significantly from the original plan after the second restructuring in June 2012 and again in the last year of implementation beginning in 2014. The factors that affected implementation can thus be best described in the corresponding three project phases.

46. Phase 1: Integrated Regional Development Program (December 2007 - January 2012): This phase focused on implementing the project as an integrated regional project as designed including the targeted tourism and basic services activities; and using the proposed implementing, information sharing and coordination arrangements with VMT as the focal point.

47. During these four years of implementation, cumulative disbursements amounted to USD 2.2 million or 11% of the total loan amount. The project implementation was affected by institutional uncertainty and arrangements that did not function as designed. The major activities that were undertaken were the development of feasibility and design studies for a portion of the works; the implementation of a small portion of the tourism activities (most significantly, studies, the improvement of two tourist sites and completion of signage on the tourist circuits), and the production of the State of the Lake report for one year.

48. The major factors affecting implementation included:

49. Delay in Reaching Effectiveness: After the Project was approved in December 2007, it took 12 months until it became effective in December 2008, a time period which is common for many projects in Bolivia. The reasons were because the Congress did not approve the credit until June 2008 and institutional changes in MPME. The institutional changes included changes in the PCU staff which ultimately delayed the production of the operations manual and the signing of the subsidiary agreements.

50. Coordination Mechanisms: The envisioned coordination mechanisms, with VMT as the focal point did not become operational due to the lack of ownership of the project by VMT and their lack of authority over the diverse issues and stakeholders addressed under the project. In particular, the inter-institutional committee (ICSDLT) was never convened. As part of the project restructuring in September 2010 this committee was substituted with bi-yearly inter-institutional workshops, which equally never were undertaken. Coordination between VMT and FPS was not strong which also impeded the transition of the studies into viable and executable works.

51. Institutional Uncertainty and Changes in VMT: The first years after approval saw constant changes within the MPME and in VMT including frequent changes of Ministers, threats to the mandate of VMT through the formation of another institution with similar functions, and wavering views of the relevance of the project within the MPME and VMT. In addition, 14 months after the Project had become effective, in February 2010, the VMT was transferred to the Ministry of Culture and Tourism. The changes reduced continuity of staffing and contributed to the fluctuating activity of the PCU and eventually led to a standstill in the contracting of consultants during 2011.

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52. Phase 2: Focus on realizing previously targeted works under the responsibility of FPS. (January 2012 – Febuary 2014): With the lack of progress in the project and the difficult institutional environment, in June 2011, a mission was undertaken with the Sector Leader, current and future task managers, a senior safeguards specialist who was previously not part of the team, and the core team members (financial management, procurement, tourism and water and sanitation specialists). The Country Manager also participated actively in the mission and its outcomes. The major issues discussed included the request of the Ministry of Culture and Tourism that the Project be removed from its responsibility on the premise that Project activities lied outside the VMT’s mandate and the Bank recognition that this project was going through the same issues as the Vilcanota Valley Project in Peru had gone through years earlier and a similar change in institutional arrangements was warranted along with a potential partial cancellation of the credit.

53. Based on concerns of social unrest in light of raised expectations in this Region that has a history of volatility, a cancellation of project resources was not a viable consideration for the Government. The delivery of the promised works in order to meet expectations was the overriding concern in the scope of the restructuring. It was agreed that the project would be executed by FPS as the sole implementing agency and it would focus on executing targeted works that are outside the mandate of VMT. Project investments including subproject pre-investment studies and technical assistance activities were reduced to: activities already completed; activities already initiated by VMT but not completed and to be transferred to FPS; and other works originally assigned to FPS for implementation which had to be completed by the extended Project closing date of February 2, 2015. The social safeguards review also highlighted the need to pay greater attention to compliance with social safeguards as part of subproject preparation and implementation.

54. After two years of implementation under this strategy, cumulative disbursements for the project increased to USD 3.3 million or 17% of the total loan amount. The implementation during this phase focused on delivering the promised works under the revised scope of the project through FPS. Because the majority of the works were not ready for contracting at the time of the restructuring, work focused on ensuring readiness of the works and undertaking bidding and contracting procedures. The major activities that were achieved were developing and rectifying project design and safeguards; bidding and contracting works; and executing the works. Of the 28 sets of previously targeted works, 19 were prepared and underwent bidding and 10 were eventually executed under the Project. (see Annex 2). These included solid waste landfills and equipment in four municipalities, and rural water supply systems in two municipalities. The total beneficiary population was 27,776.


56. Increased focus on bidding and contracting works: The direct engagement of FPS which is a contracting entity, eliminated the impact of political and institutional changes of the Ministry of Culture and Tourism on project execution. It also allowed a more practical focus on how to execute the works under Bank rules and in the Bolivian context, which in the past was impeded by a lack of coordination with FPS under the previous arrangements. This was complemented by a more collaborative, problem solving supervision approach that the project team was able to develop under this new institutional environment.

57. The need to undertake further subproject preparation by FPS was outside their normal mandate but was largely accommodated. One exception was the seven urban water projects which were the most costly works under the credit (water supply for three cities and, sewerage and wastewater treatment works in four cities), the designs of which were partially completed by VMT.

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The launching of the re-bidding the designs was delayed a year, leaving inadequate time for completion of the long bidding process, completing the study and bidding and constructing the works. Therefore these seven works were not executed.

58. Ensuring quality of designs and technical specifications for developed works: Of the projects that were developed by VMT, many had deficiencies in the quality and appropriateness of the designs. Out of 28 subprojects, 19 subprojects needed to improve the technical designs. FPS with in collaboration with technical experts mobilized by the World Bank, improved designs for the majority of these projects and adequate designs were developed for 23 of the 28 subprojects. Two designs were not technically viable for implementation under the project and three (a portion of the integrated water projects) never underwent design.

59. Identifying land and associated acquisition and compensation arrangements: As highlighted at the time of restructuring, it was necessary to identify, confirm and document the land acquisition arrangements and related compensation in compliance with Bank safeguards policies. This delayed subproject finalization and made it impossible to execute some projects as designed. Of the 24 subprojects to which land issues applied12, 15 subprojects confirmed land acquisition arrangements and 9 were not able to confirm viability from this perspective.

60. Procurement: For many of the works undergoing bidding during this period no contractors showed interest in the works due to the saturated market and limited number of contractors that were involved in public works in Bolivia nationally. Contributing to the unattractiveness of the bids were their size, the unusual nature of some of the works, and the rural locations. For most of the works the bidding responsibilities were transferred from the municipalities to FPS. Adjustments were also made in the bidding modality after revising contractor’s eligibility criteria in accordance to what was learned from market demand consultations and reviews. Fourteen subprojects had failed bids and after these adjustments were taken five of those works were able to award contracts. Overall of the 19 subprojects that launched a bid, 10 were able to award contracts. Despite many attempts and effort by the Bank team and FPS were not able to award the bid to a firm that could execute the contract for the nine sets of docks13.

61. Phase 3: Focus on realizing works that were ready or in process (previously targeted and new works) (February 2014 - February 2015): After it became clear that only a portion of the targeted works that were part of the restructuring could be executed, an action plan was outlined in June 2013. The action plan, indicated the status of projects and actions to be taken to improve the status over the next six months. After that time, it would be updated to form a basis to decide on cancellation or extension of the Project. In January 2014, a review of the status was undertaken with MPD and Bank Management and it was decided that the Project would not be extended further and that, in the last year, the Project would implement what was ready to be implemented in the time period and could consider new projects that were outside the original scope of the targeted investments but supported the PDO. A partial cancellation would only be considered just before closing which would allow time for MPD and FPS to communicate this to local governments and

12 Subprojects included at the time of restructuring were docks in 9 municipalities (9); urban water supply in 3 municipalities (3); urban sewerage and wastewater in 4 municipalities (4); landfills in 4 municipalities (4); landfill equipment in 4 municipalities (4); visitor centers in 2 municipalities (2); and rural water supply in 2 municipalities (2). Review of land acquisition and compensation arrangements were needed for all but the landfill equipment.

13 The docks were bidded 3 times by the munciipalities, and 4 separate times as a consolidate package of projects by FPS.

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communities. After a review of potential new projects that were proposed by MMAyA (Ministry of Environment and Water) based on designs and feasibility studies they undertook under other financing and screening them for readiness and eligibility, a list of additional subprojects was added to the Project. The chosen works focused on water and sanitation investments including a sewerage system; rural water supply systems and rural sanitation systems.

62. After one year of implementation under this strategy, cumulative disbursements for the project increased to USD 9.9 million or 49% of the total loan amount. The major activities that were achieved were executing the previous works already contracted; and packaging, bidding, contracting and executing the new works. Communicating the closing date and the associated implications on subprojects execution or cancelation to municipalities was also undertaken. The 10 newly introduced works included rural water supply systems in two municipalities; rural sanitation systems in two municipalities; additional solid waste equipment in four municipalities; and a sewerage system in one municipality benefitting an additional population of 30,041 making the total population benefitted under the project 57,817. (see Annex 3)


64. Selection of new works: A screening process was undertaken on a long list of works ensuring the safeguards were complied with, the land was available and the designs were of adequate quality. The project types chosen were also common in Bolivia. This screening and the common nature of the subprojects significantly improved the success of the subprojects relative to the previously targeted works. Of the 12 works chosen, 10 were eventually contracted and implemented.

65. Re-enforcement of the local Bank team: A senior technical specialist was assigned to the local Bank team that undertook the day to day coordination and technical advice on the project, improving the responsiveness to challenges faced by FPS, and providing an additional level of technical expertise and review for the project bidding and contractual management.

66. Time and budget to execute the works in full: Many of the contracted works could not be completed within the Project’s time period, hence counterpart funding was identified to finance the contracts that would go beyond the closing date and others were reduced in their scope (e.g, number of latrines and solid waste equipment). The effort that went into the agreements between FPS and the municipalities to provide counterpart funds after the closing date required extensive negotiations with the municipal governments, and in some cases, involved significant additional counterpart funding from the municipalities. All works were able to be delivered before July 2015.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 67. Project Results Indicators: The project included a set of indicators to measure the outputs and three indicators to measures progress on outcomes related to tourism, service delivery and coordination and information sharing. After the restructuring in 2012 and the concomitant focus on executing works, the key indicators were adjusted according to the restructured Project scope. Use of this monitoring framework to measure intermediate outcomes and evaluate Project impacts was limited in Bank and FPS monitoring reports until the time of the ICR. This was mainly due to the fact that there were very few results to report until the last year of the Project and the indicators did not reflect the outputs of subproject preparation, contracting and execution which was the focus of the supervision.

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68. Subproject Progress Monitoring: Under the restructured project, FPS used their internal monitoring and evaluation mechanisms to monitor subproject progress during the implementation. The monitoring system was useful in the last three years of the project, identifying bottlenecks and feeding into the major decisions made on allocating effort on different elements of the subproject cycle and eventually in including further subprojects.

69. Other Monitoring Mechanisms: The original project had included in addition to monitoring of project indicators and progress by VMT, the broader communication on the Lake status and the State of the Lake Report. One State of the Lake Report was produced with the assistance of the World Bank team but the process did not have sufficient ownership to have continuity and no more reports were produced. The inter-institutional committee (ICSDLT) and workshops that were intended for monitoring and communication were never put into operation.

2.4 Safeguard and Fiduciary Compliance 70. Safeguards: Over the life of the Project the compliance with safeguards was rated as Moderately Satisfactory.

71. OP 4.01 Environmental Assessment. The Project was categorized as B for environmental assessment at appraisal as the project did not present any large-scale works of an unprecedented or irreversible nature, had a relatively narrow range of impacts with known mitigation and management measures. This continued to be the case during implementation. A framework was created for VMT at appraisal and at the time of the 2012 restructuring, FPS manuals and guidelines were approved by the Bank. The frameworks ensured that the applicable infrastructure project obtains an environmental license in accordance with Bolivian and Bank regulations. The project complied with this framework.

72. OP 4.01 Natural Habitats. The Project did not degrade any critical natural habitat. Screening criteria and management mitigation measures were included in the environmental assessment process for each subproject.

73. OP 4.11 Physical Cultural Resources. The Project did not involve works that affected a national protected site or monument since most of the tourism component, which contained upgrading of these monuments, was not implemented. For subprojects near potentially important sites and monuments, archaeologists were included as part of the design teams to avoid these types of impacts..

74. OP 4.12 Involuntary Resettlement. At appraisal it was anticipated that the activities under the tourism and basic services components would not have an impact on people and property in terms of acquisition of land, houses and/or access to property. However, a resettlement policy framework was prepared for use in case any of these impacts were found. In reaction to the recognition at the time of the 2012 restructuring that the majority of the of the works would involve these impacts, FPS guidelines and manuals on resettlement were revised and updated in compliance with Bank policies. As of the closing date, affected beneficiaries had accepted and signed agreements with their municipal governments, which in some cases had offered additional benefits above those that were required under the Bank policy.

75. OP 4.10 Indigenous Peoples. Since 93% of the population identified themselves as Aymara and the remainder non-indigenous, the project triggered OP/BP 4.10 with the principles and elements of an Indigenous Peoples Development Plan incorporated in the project design. This was

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complied with through the project’s social assessment and the process of consultations during the subproject development.

76. OP 7.50 Projects on International Waterways. The procedures outlined in the policy including prior notification to the Peruvian Government (via a letter from the Bank Country director) were undertaken.

77. Financial and Procurement Management. No major financial or procurement issues were faced during the Project’s life. As recommended at Appraisal, semi-annual supervision missions visited the field to carry out review of procurement and financial management. External audits were all carried out as expected with no major issues raised.

2.5 Post-completion Operation/Next Phase 78. Integrated Regional Development: There are no plans to continue with multi-sector integrated regional development approach in Lake Titicaca Region. However, an environmental strategy for improvement of Lake Titicaca has been developed by MMAyA and presented June 20, 2015, that supports a parallel high level dialogue with Peru. The strategy focuses on sewerage, treatment and solid waste works to reduce contamination in the Lake.

79. Completion of Works: For those subprojects that remained under implementation at the closing date, counterpart funds had been secured by FPS through financial agreements that were signed with each corresponding municipal government, hence all subproject contracts had delivered their works by July 2015.

80. Operational and Financial Sustainability: All works, because of the limited capacity of the municipalities and service utilities, have a substantial sustainability risk. To help mitigate this risk, as part of all the infrastructure projects, a complementary contract for “community development and institutional strengthening” was undertaken. In addition to communication and consultation activities, the activities developed with the municipalities or water utilities the institutional and organizational framework and the capacity needs and operational procedures to administer and operate the facilities. In addition, a tariff structure was established in consultation with the communities. For the solid waste landfills, support was provided during construction and the beginning of operation through a South-South Exchange with a municipality in Colombia of a similar size. The exchange included visits to Colombia and two visits of the Colombians to Bolivia and was supported by regional experts in the operation of landfills.

81. Completion of the Viacha Wastewater Treatment Plant: The construction of the wastewater treatment plant that would receive and treat the wastewater from the sewerage investment financed under the Project has an estimated cost of USD 3.3 million. It is being financed through the USD 109 million PROASRED (Programa de Agua, Saneamiento, Residuos Sólidos y Drenaje Pluvial) Project financed by Corporación Andina de Fomento (CAF). The design is in the final stages of approval with bidding expected to begin in August 2015 with completion of works in 2016, at which time the sewerage connections will become operational.

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3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation 82. Rating: Modest.

83. The Relevance was rated modest as the objectives remained relevant but the design and implementation approach, which involved a small, regional and integrated development project covering two sectors, did not maintain substantial relevance in light of World Bank and Government strategies and priorities. The restructuring in 2012 and related changes did not overcome these deficiencies in the relevance of the design and implementation.

84. Objectives: The Project Development Objective, ¨contribution to local sustainable development in the Borrowers (Bolivian) part of the Lake Titicaca watershed¨, was and has remained relevant for the communities and municipalities in the region as the needs remain.

85. In terms of the national relevance of the objectives, the objective to improve tourism as an engine for development maintained its overall relevance as evidenced in the National Tourism Plan which considers tourism as the overarching and cross-cutting theme that can support development in the country. In terms of the provision of water and sanitation services and protecting the environment of Lake Titicaca, this sub-objective was relevant before the start of the Project and increased its relevance during the course of the Project. In particular during the time period of implementation the Government declared access to water and sanitation as a ¨ fundamental human right¨ and recognized of the rights of “Mother Earth” in the new State Political Constitution. Consequently, national budget allocations to improve and expand water and sanitation services have been the largest among the social sectors over the last decade. In addition, MMAyA has recently launched a strategy to reduce contamination in the Lake which been recently presented to Perú at a Presidential-level bilateral meetings.

86. The relevance of the objectives in light of the Bank’s engagement under the Country Partnership Strategy (2010-2015) also continued. The Strategy included the pillars of sustainable productive development; and human development and access to basic services. It also emphasized the catalytic impact of key areas that included: (a) supporting sustainable employment and production regions, particularly in rural areas; and (b) enhancing institutional capacity in decentralized areas to deliver basic and social services. The project objectives supported these agendas and thus remained relevant in the context of the Bank’s engagement with Bolivia.

87. Design and Implementation: In terms of the design, the needs targeted were and remain relevant for the communities and municipalities, however, the small size of the project and the dual sector approach to integrated regional development were less relevant in the context of the Government’s priorities and the World Bank’s engagement in the country. In particular:

88. Local Relevance of Targeted Interventions: The detailed needs assessment and participatory planning process undertaken at appraisal was able to identify a set of targeted interventions that were important and remained relevant throughout implementation. This was evidenced by the continued community and municipal pressures for executing the project and

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individual subprojects during supervision and the unfulfilled need for improved tourism infrastructure and improved basic services in this region.

89. Integrated, Regional, Multi-Sector Approach: The project was designed to be a small project that responded to important needs in regional tourism and basic services. The relevance of taking this dual sector strategic approach in a given region was not maintained in national planning or in the and among the relevant line ministries, as evidenced in the dialogue on the project and the nature of its restructuring. In the context of the Banks Country Partnership Strategy, the approach of using a small project to work in two sectors in a sub-region in the country was not consistent with the growing focus on engagement beyond the traditional sector approach, working at the national level and through larger projects. This was evidenced in the Country Partnership Strategy as well as in the discussions on proposed extensions of the Project which highlighted the need to focus on larger operations at a more national level in the portfolio.

90. Effect of restructuring on Relevance: The restructuring in June 2012 caused the project to become more concentrated on basic services and eliminated the activities related to coordination and information sharing. On balance though it maintained the regional approach and included tourism investments. Implementation did not align itself with ongoing strategies enough to significantly change the relevance rating. The introduction of the additional investments in the last year of the project did not reduce the relevance of the interventions at the local level as they were responding to needs for which there was a large unmet demand.

3.2 Achievement of Project Development Objectives

Rating against original indicators: Negligible Rating against revised indicators: Modest 91. The Project did contribute to the local sustainable development in the Bolivian part of the Lake Titicaca watershed. This was done to a significantly lesser degree than anticipated. When compared against the original indicators before the restructuring in June 2012, the achievement of the objectives was negligible and when compared against the revised objectives the achievement of the objectives was modest.

92. Against original indicators: When compared against the indicators originally approved, the PDO indicators were not achieved and only a portion of the results indicators were achieved. In particular, the tourism portion of the project had achieved almost nothing while the basic services component underperformed.

93. PDO indicators: Of the three PDO indicators, the Geo-tourism indicator was not achieved; the targets of the Urban Environmental Sustainability Index were only able to be achieved for one city and the production of the State of the Lake report was not done annually as anticipated, rather was produced once with good quality.

94. Activities that support tourism development and cultural protection. Was not achieved to any significant degree.

95. Improvement of basic water and sanitation services. Was partially achieved in comparison to what was originally planned. More water supply projects and solid waste projects were achieved,

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however, the integrated urban water projects which were the largest investments and the focus of the project PDO indicators were not undertaken with the exception of one sewerage project.

Intermediate Outcomes and Project Targets

Component Indicator Target Target revised

Final Result

Component 1: Tourism and Productive Development

Tourism improvement projects 100 31 2 Cultural sites protected 20 Eliminated 0 Small businesses supported 100 Eliminated 0

Component 2: Basic Services

Rural towns with improved water and sanitation services

20 20 39

Urban communities with adequate wastewater services

5 5 1

Cities with adequate solid waste services 3 3 4

Component 3: Institutional Strengthening

Tourism studies completed 4 Eliminated 1

Municipal land-use management plans completed 12 Eliminated 0

Activities aimed at promoting the region’s international tourism potential

0 3 (added) 3

96. Against revised indicators: When compared against the indicators that were revised as part of the June 2012 restructuring, the remaining PDO indicator (the Urban Environmental Sustainability Index) was not achieved. The intermediate outcome indicators were, however, achieved with the exception of the large urban water and wastewater projects and the tourism works.

97. PDO indicators: The PDO indicator, the Urban Environmental Sustainability Index was a composite indicator made of up target improvements in services and financial performance for five cities. Of the five cities, only one city was able reach its targets.

98. Activities that support tourism development and cultural protection. The revised indicators focused on the construction of the docks and the visitor centers. None of these were achieved although the modest support to promoting international tourism potential was undertaken.

99. Improvement of basic water and sanitation services. Was partially achieved with some indicators exceeding expectations. More water supply projects and solid waste projects were achieved than originally targeted. The integrated urban water projects, which were the focus of the project PDO indicators, were not undertaken with the exception of one sewerage project.

3.3 Efficiency

Rating: Modest

100. The efficiency was considered modest based on the combination of the economic analysis of the works undertaken and the time for the Project to undertake these small works. The economic analysis of the investments undertaken indicated the investments met the standard based on economic efficiency or cost-benefit analysis. The subprojects took seven years to develop and implement and the costs of preparing and supervision under that project amounted to 23% of the total costs of the investments. While the project began implementing investments at a more rapid

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rate after restructuring, the dependence of the works on the studies undertaken as part of the original project does not allow an improved efficiency rating to be credited after restructuring.

101. Economic Analysis: At appraisal, an economic analysis was undertaken on the tourism component using projected increases in tourist visits based on historical trends; the average length of stay; and the average expenditure per tourist in the Region. For the basic services component an economic analysis was also undertaken on a set of water supply projects to arrive at a level of cost efficiency that could be used in the development of these types of subprojects.

102. For the ICR, an economic analysis was undertaken covering the subproject investments under the basic services component. A cost efficiency analysis was undertaken on the water supply projects using actual costs and updated reference values. Cost effectiveness was also done for the landfills and a cost-benefit analysis was undertaken for the sewerage project.

103. Water Supply Projects: As the reference values for cost effectiveness were no longer applicable considering the economic changes in the country and increased construction costs, the cost effectiveness analysis was based on the cost per beneficiary when compared to 35 recent rural water supply projects undertaken separately in Bolivia. The results indicate the costs per beneficiary for the water supply systems under the project (USD 322 per beneficiary) are the same as those reference values (USD 316 per beneficiary).

104. Solid Waste Management Systems: The cost-effectiveness analysis was based on a comparison of the costs of the established services of sweeping, collection and disposal when compared to reference values for these types of services established for Colombia, taking into account the dimension of the service in each locality, the nature of the investment activities under the project and differences in labor costs14. The results indicate that the costs of the services established are comparable to what is considered economically efficient15.

105. Viacha Sewerage Project: The Viacha sewerage subproject financed the sewerage system in a district of the city of Viacha. The sewerage system benefits are tied to a large investment in wastewater treatment in the City which has confirmed financing and ongoing. It is scheduled to finish in the second half of 2016. As the benefits are dependent on the project as a whole, the cost-benefit analysis of the sewerage investment was considered as with the wastewater treatment plant project. A net present value (NPV) of USD 2.1 million and an internal rate of return (IRR) of 15.8% were obtained. 3.4 Justification of Overall Outcome Rating Rating: Unsatisfactory

14 Reference prices were established based the “Comisión de Regulación de Agua Potable y Saneamiento Básico” formulas for the services of sweeping; collection and final disposal that, calculate the level of costs that is considered economically efficient for individual service providers.

15 Achacachi: USD348/day vs a reference value of USD485/day; Copacabana: USD367/day vs USD437/day; Tiwanaku: USD 156/day vs USD 169/day. See annex 2 for details.

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106. As described above, the Project Development Objective and related tourism and basic services needs remained relevant along with the targeted interventions. The design and implementation, specifically the regional approach along two sectors lines, did not maintain its relevance for the Government or the World Bank strategy. The PDO indicators were not substantially achieved as many activities were not fully implemented. Those that were implemented had important economic benefits locally which were achieved in a long time period with significant transaction costs. The restructuring and subsequent changes in the indicators and scope of the project did increase the efficacy of the project but overall did not change the rating.

Overall outcome rating analyzed before and after 2012 restructuring Against original project Against restructured project

(June 2012) Relevance Modest Modest Efficacy Negligible Modest Efficiency Modest Modest Overall Rating Unsatisfactory Unsatisfactory

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 107. While the impact did not have the anticipated outcome, the participatory decision making process in the targeting of investments was an excellent example of inclusive, participatory planning. The implementation of basic services projects contributed to the achievement of MDG goals for water supply and sanitation.

(b) Institutional Change/Strengthening 108. The project as originally envisioned, expected to build institutional capacity in VMT and other agencies and stakeholders through a coordinative mechanism. With the lack of coordination, and the eventual dissolution of the PCU in VMT capacity was not able to be built in this way. Capacity was built in relation to the works that were executed. In particular, FPS was strengthened in various areas related to project implementation, such as safeguard policies and instruments and, technical design. In addition, local communities benefited from the institutional strengthening program related to the works implementation and operation provided under the project. As the solid waste landfills were among the first for cities of this size in Bolivia, the implementation with the support of a Global South- South Trust Fund was able to build capacity in MMAyA, FPS and the local governments.

(c) Other Unintended Outcomes and Impacts (positive or negative)

109. Recently the Lake´s pollution has become high profile issue. Some of the Project studies and designs have been used as inputs into a new strategy of MMAyA to reduce contamination in Lake Titicaca. In addition, the studies that were undertaken are being used as inputs to investments being considered by some of the local governments.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable.

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4. Assessment of Risk to Development Outcome Rating: Substantial 110. For the infrastructure projects that were implemented, the main risk is future sustainability. The institutional strengthening programs were thorough, developing the institutional arrangements, tariffs and undertaking capacity building. This combined with the continued involvement of MMAyA in the subprojects and their sustainability will help mitigate this risk. While the risk is important, it should be noted that there is more experience in managing water supply projects in the Country. The risk is higher for the solid waste services as facilities such as those constructed under the project are largely new to the Country. The completion of the other components (wastewater treatment plant) of the Viacha subproject is also a risk. The steady progress on these works including the availability of funding, designs and political support mitigate this risk substantially.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Unsatisfactory 111. The project underwent a thorough participatory planning process and targeting of investments that responded to a set of local priorities and the gap in integrated planning that existed in the Region and that leveraged Bank knowledge and convening power. However, the design was lacking key fundamental elements. In particular:

- No pre-investment studies were carried out, leaving the project with targeted projects without any guarantee of their viability or timely implementation.

- The project design and the multiple sectors it covered did not adequately match the mandates and priorities and capabilities of the national institutions that would implement them.

- Another Bank Project used in the design, the Vilcanota Project from Perú, was experiencing serious difficulties. The corresponding lessons learned were not well reflected in the design.

- The overall risk ratings as stated in the PAD were underestimated.

(b) Quality of Supervision Rating: Moderately Unsatisfactory 112. Supervision was hindered by institutional changes at the beginning of the project, however, the effectiveness of supervision improved steadily over the course of the project. During the seven years of Project implementation and in the six months after closing (to supervise ongoing works) at least bi-yearly missions were organized with dedicated project team leaders and members. In addition, all fiduciary controls were monitored and complied with and external audits were undertaken. The team mobilized additional targeted supervision support in particular in response

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to safeguards, design deficiencies and contracting difficulties, and exercised flexibility in the implementation in procurement processes and subproject eligibility. In addition, the team developed a strong collaborative relationship with FPS in confronting project difficulties on the ground. Some of the shortcomings were:

- The project was restructured only after four years of implementation, despite constant warnings that the implementation arrangements were not functioning. Similarly the decision to pursue alternative projects was made late in project implementation.

- Safeguards supervision was limited in the first four years of the project when VMT was preparing projects. While it did not result in non-compliance, the lack of planning for these issues did delay implementation and limited the outcomes that could be achieved.

- A dedicated Bolivia-based focal point in the Bank who could resolve technical and project issues on a day to day basis was only appointed in the last year. This limited the rate of progress on subprojects, considering the technical capacity shortcomings and consistent problems with contracting.

- The monitoring of results indicators was not systematically carried out.

(c) Justification of Rating for Overall Bank Performance Rating: Unsatisfactory 113. Both the preparation and supervision of the Bank was diligent and with specific efforts that in many ways went beyond what was expected including the strategic planning work done at preparation and the effort and flexibility made during supervision to resolve what were constant and ongoing issues. At the same time, several strategic issues related to institutional and subproject readiness and the timing of the institutional changes made in the 2012 restructuring and the introduction of alternative subprojects, if more proactively addressed with the Government at an earlier stage, could have improved project performance.

5.2 Borrower Performance (a) Government Performance Rating: Moderately Unsatisfactory 114. The institutional setup in the design did not maintain the anticipated political support in VMT or in other levels of Government resulting in poor project performance and coordination between the different government entities. This was not resolved until the institutional changes were undertaken four years into the project. The strategic decision of allowing implementation of alternative projects was similarly made very late in the Project implementation. During the period after this 2012 restructuring MPD was actively involved in pressuring FPS to implement the targeted interventions and in the last year in promoting alternative projects for implementation and facilitating counterpart funding.

(b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory

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115. VMT: The lack of political commitment to the project, the lack of experience in project implementation and its scarce coordination capacity severely affected the project implementation, leading to an eventual standstill in contracting and subsequent elimination of the PCU in VMT. Rating: Unsatisfactory.

116. FPS: After the 2012 Project restructuring the FPS became the sole implementing agency for the Project. FPS was experienced and diligent in pursuing the contracting of works and worked collaboratively with the Bank in resolving issues for those projects at the contracting stage and executing those works. Because of the circumstances of the project, in many ways they made unusual efforts including: taking responsibility for contracting from the municipalities; improving subproject designs; directly intervening on safeguards issues; negotiating additional counterpart funding after the closing date and supervising those contracts. Limitations included, competing priorities with other investment programs and the lack of institutional focus and experience in preparing subprojects which contributed to delays; most significantly the delay in contracting and lack of focus on executing the urban water supply, sewerage and wastewater treatment project studies. Rating: Moderately Unsatisfactory.

(c) Justification of Rating for Overall Borrower Performance Rating: Moderately Unsatisfactory 117. The borrower’s overall performance is rated as Moderately Unsatisfactory based on the combination of the above ratings.

6. Lessons Learned 118. Respecting existing institutional mandates and avoiding project-specific institutional roles and coordination mechanisms. The project’s regional, multi sector focus had no supporting institutions with the mandate and interest to undertake such an approach. In particular, the project had an implementing agency that had a sector mandate over only a portion of the types of investments and did not have sufficient ability to convene and coordinate with groups with these mandates. Limiting the involvement of MMAyA to coordination and having FPS implement the pre-investment studies was also contrary to normal mandates and may have affected implementation. The project may have had more success if it was more practical in the scope interventions and worked with institutions with corresponding mandates such as a provincial government or by implementing two or more separate projects through separate line ministries.

119. Taking early action on fundamental restructurings: The project removed itself from what was a non-functional institutional arrangement only after four years of implementation, the timing of which ultimately reduced the degree to which the project development objective could be reached and provided little time contingency for unforeseen delays and adjustments. The need for a major project restructuring should be promptly identified as project issues would need to be rapidly resolved if a project is to be put back on track. 120. Implementation Support in Low Capacity Environments: The project experienced bottlenecks due to limited capacity throughout implementation. Although undertaken late in implementation, solutions were found for many of these bottlenecks, providing lessons that can be used in Bolivia and other low capacity environments. In particular, challenges in the quality of technical designs for works that are relatively uncommon in a country should be expected and thus project supervision should consider direct technical support using practical international experience. In addition, general capacity constraints were able to be overcome in the last few years by moving beyond the typical World Bank implementation support model to a more direct, hands-

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on relationship with the client and providing personnel that can work in collaboration with clients to confront particular challenges (safeguards, technical designs) as well as respond to day to day issues.

121. Adopting appraisal stage readiness criteria for subprojects: The project relied on works, none of which were ready at the time of appraisal. This, combined with the underestimation of the complexity of preparing such projects, delayed implementation and in many cases created commitments to projects that could not be undertaken. Appraisal readiness criteria applied to a least a portion of the subprojects along with a rigorous analysis of timelines would have mitigated this risk.

122. Incorporating contingency planning to manage investment uncertainty: The project targeted important investments that were committed to early-on but because of their level of preparedness had uncertainty as to their viability. Many of the sub-projects as designed were not viable in the time period of the project, and in the last year contingency projects that met readiness criteria were introduced with many of them successfully implemented. Considering at appraisal it was known that the investment needs were much larger than the project lending envelope, preparing additional subprojects and allowing for the substitution of these subprojects as needed as part of project design could have managed this uncertainty at an earlier stage and allowed the development objective to be more substantially achieved within the time period of the project.

123. Taking into account contracting risks in design: One of the major delays and impediments for realizing some of the works was the experience of consultants, contractors and the demand for such contracts in the Bolivia context especially when the procurement was done through municipal governments. The market of contractors and suppliers and their preferred packaging and terms of contracts should be analysed at the preparation stage and considered as much as possible in project risks and planning.

124. Following up participatory planning with continued communication: The planning process responded to a clear need at the beginning of the project, allowing for regional planning to be done in a participatory manner, which was never done before. It provided a well-organized means to get feedback and input from the communities in this Region. This did not continue with the same organization and effort during implementation, which, when combined with the slow implementation, led to real and perceived local discontent. The associated concerns of community reaction to cancelation or changes ultimately limited practical adjustments that could be made in the project execution. A strong communications strategy throughout implementation would have provided a forum to better manage expectations and make more timely adjustments with the involvement and broad consent of the community.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Comments received are summarized in Annex 5. The points made by FPS on their efforts as part of the project were incorporated in the document and considered in their individual rating. In response to MPD comments, the ICR included material on the need to look at timelines at preparation as part of the lessons learned. (b) Cofinanciers Not applicable. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate

(USD millions)

Actual/Latest Estimate (USD

millions)

Percentage of Appraisal

Component 1 8.91 0.28 3% Component 2 11.09 10.39 94% Component 3 3.01 2.01 67%

Total Financing Required 23.01 12.68 55%

(b) Financing

Source of Funds Type of

Cofinancing

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)

Percentage of Appraisal

Borrower Counterpart 3.01 2.79 93%

International Development Association (IDA)

20.00 9.89 49%

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Annex 2. Outputs by Component PDO indicator: Environmental Sustainability Index

(1): High, 100% of O&M costs covered by users’ fees. Medium, more than 75%. Low, all others. (2): High, 16 hours of service & 75% coverage. Medium, 8 hours of service & 50% coverage. Low, all others. (3): High, functional waste water treatment plant (WWTP) and 75% coverage. Medium, functional WWTP and 50% coverage. Low, all others. (4): High, 75% collection coverage & disposal in a sanitary field. Medium, 50% collection coverage & disposal in a sanitary field. Low, all others. (5): Level 1: All indicators are High. Level 2: Financial Indicator is Medium and all others High or Medium. Level 3: Financial Indicator is Medium and one other indicator is Low. Level 4: All others.

Eliminated PDO Indicators: Geo-tourism Score---no measurable results Quality of the State of the Lake Report: Not completed. One report produced of high quality but not done annually. Intermediate Results Indicators

Component Indicator Target Target revised

Final Result

Component 1: Tourism and Productive Development

Tourism improvement projects 100 31 2 Cultural sites protected 20 Eliminated 0 Small businesses supported 100 Eliminated 0

Component 2: Basic Services

Rural towns with improved water and sanitation services

20 20 39

Urban communities with adequate wastewater services

5 5 1

Cities with adequate solid waste services 3 3 4

Component 3: Institutional Strengthening

Tourism studies completed 4 Eliminated 1

Municipal land-use management plans completed 12 Eliminated 0

Activities aimed at promoting the region’s international tourism potential

0 3 (adtaded) 3

Baseline

2007

Result

2015

Baseline

2007

Result

2015

Baseline

2007

Result

2015

Baseline

2007

Result

2015

Baseline

2007

Target

2013

Result

2015

Copacabana Low Low Low Low Low Low Low High 4 2 4

Achacachi Medium Medium High High Medium Medium Low High 3 2 2

Tiquina Low Low Low Low Low Low Low High 4 2 4

Tiawanacu Low Low High High Low Low Low High 4 2 4

Viacha Low Low High High Low Low Low Low 4 2 4

City

Financial Indicator

(1)

Water Supply

Indicator (2)

Waste Water

Indicator (3)

Solid Waste

Indicator (4)Index Score (5)

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World Bank Core Indicators

Indicator Number Direct Project Beneficiaries (number) of which female (%) 57,817,

54% female People in urban areas provided with access to regular solid waste collection under the project (number).

19,362

People provided with access to “improved sanitation facilities” under the project (#) 2,536 Improved latrines constructed under the project (#) 634 Sub-projects or investments for which arrangements for community engagement in post-project sustainability and/or operations and maintenance are established (percentage)

100%

Industrial and municipal waste disposal capacity created under the project (tons) 16,617 Contaminated land managed or dump sites closed under the project (ha) 0.75 People provided with access to “Improved Water Sources” under the project (number) 8,414

New piped household water connections that are resulting from the project intervention (number)

1,974

Water utilities that the project is supporting (number) 31

Summary of Subprojects and Designs Completed Solid Waste Management Systems: The solid waste management projects were based on planning and pre-investment studies that analyzed the current system that undertook a participatory process to identify sites for the landfills and designed the investments including the environmental and social plans. These subprojects upgraded and introduced services of urban cleansing (sweeping); waste collection; and waste disposal. It included equipment and works to help modernize these services including vehicles for collection, sweeping equipment, and the construction of disposal sites. It also included technical assistance for communication and institutional strengthening to establish the organizational structure and financing for that would allow the system to operate. The projects were implemented in four municipalities, Copacabana, Achacachi, Tiquina and Tiwanacu with a total beneficiary population of 19,362. Rural Water Supply Systems: These systems provided water supply systems for rural households. They included the works to provide the source, storage and delivery through household connections of the water supply. It also included the community outreach and institutional strengthening to support the operation, establishment of tariffs and to strengthen the community based water utilities. The project established systems in 34 communities in 4 municipalities (Puerto Perez, Laja, Achacachi y Huatajata) benefiting 8,414 people and 31 water utilities. Rural Sanitation Systems: These systems provided basic sanitation for rural households through the construction of ecological sanitation systems. It also included the community outreach and institutional strengthening to support the operation of the system. The project established 634 systems in 5 communities located in 3 municipalities (Acacachi, Huatajata, and Santiago de Huata) benefitting a population of 2,536. Sewerage Project in Viacha: The Project financed a sewerage system in a two districts of the city of Viacha which is part of a larger investment in sewerage in the other districts in the city and a wastewater treatment which is ongoing with confirmed financing through CAF, designs and will be bidded out in August 2015. The works financed by the Project include the collection systems for two districts with a population of 27,505 and the community communication and institutional

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strengthening program. Once the wastewater treatment plant is completed, the connections will become functional. This is expected in 2016.

Tourist Site Upgrading: The project completed upgrading two small tourist sites and placed signage in several tourist circuits in the Lake Titicaca region. The signs provide directions, and maps of the main tourist areas in the region and can be found in the city centers and in key locations around the tourist attractions.

Design Studies Completed: In several cases the project finished technical design studies that could not be executed under the project but may be used in future investments. In particular the project completed designs for: (i) urban water supply in Copacabana; (ii) urban wastewater treatment in Copacabana; (iii) 26 docks in 9 municipalities; (iv) two tourist centers on the border with Peru; (v) upgrading of ruins on Isla Del Sol and Isla de la Luna and (vi) tourism circuits and attractions for the lake.

Subproject development process for works under the 2012 Restructuring

Project category

# locations (municipalities)

Adequate designs

Safeguards completed

Bidding launched

Contracted Completed

Landfills 4 4 4 4 4 4 Solid waste equipment

4 4 NA 4 4 4

Rural Water supply

2 2 2 2 2 2

Integrated urban water projects

-Water supply 3 1 0 0 0 0 -Sewerage- wastewater

4 1 0 0 0 0

Docks 9 9 9 9 0 0 Tourist centers

2 2 0 0 0 0

Total 28 23 15 19 10 10

Subproject Development Progress for works introduced in 2014

Project category

# locations (municipalities)

Adequate designs

Safeguards completed

Bidding launched

Contracted Completed

Rural Water Supply

3 2 2 2 2 2

Ecological sanitation

4 4 4 3 3 3

Additional solid waste equipment

4 4 4 4 4 4

Sewerage system

1 1 1 1 1 1

Total 12 11 11 10 10 10

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Annex 3. Economic and Financial Analysis

At appraisal the project economic analysis considered both tourism and basic services benefits. The tourism benefits were calculated using projected increases in tourist visits based on historical trends, the average length of stay and the average expenditure per tourist in the Region. The economic analysis involved an assessment of the Project costs and benefits as compared to a realistic “without-Project scenario”.

The basic services investments were considered as a positive externality with expected additional economic benefits for the direct users: resource services (time savings and savings that result from the elimination of individual water treatment –e.g. the cost for boiling water; benefits from increased water consumption estimated by the willingness to pay for increased consumption for users who without the Project would use less effective and more costly alternatives such as river, bottled water, etc). At appraisal an economic cost benefit analysis was conducted from a sample of 21 water supply subprojects to establish a reference value for cost effectiveness. These results indicated that US$240 per beneficiary cost was a reference value below which a project could be considered cost-effective.

For the ICR, given the Project restructuring during implementation removed the tourism outcome indicators, no analysis was undertaken for the tourism component whereas for the basic services component a cost efficiency analysis was carried out on the investments on water supply, latrines and landfills using actual costs and updated reference values, and a cost-benefit analysis was undertaken for the sewerage project.

Cost-effectiveness of Water Supply Projects: As the reference values for cost effectiveness defined at Appraisal were no longer applicable considering the economic changes in the country and construction costs increases16 , the cost effectiveness analysis was based on the cost per beneficiary of water supply subprojects when compared to a separate set of 35 rural water supply projects undertaken recently in Bolivia17. To allow direct comparison, the costs of the Project-related subprojects did not consider the costs for communication and capacity building activities. The results indicate the costs per beneficiary for the water supply systems under the Project (USD 322 per beneficiary with a standard deviation of 171) are statistically the same as the reference values (USD 316 per beneficiary with a standard deviation of 208).

16 INE (National Statistics Institute) construction cost index increased 62% between 2006-2014

17 From FPS project database.

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Cost per beneficiary for project water supply investments

Cost-effectiveness of Solid Waste Investments: The project invested in modernized systems solid waste management including collection, sweeping and disposal services. The project provided equipment, works and technical assistance in order to setup the new services in four municipalities.

Location Cost (USD) Beneficiaries Cost per

beneficiary (USD)

AYATA AJLLATA (ACHACACHI) 1,290,369.68 405 411

CORPAPUTO BAJA (ACHACACHI) 1,611,320.99 306 724

CORPAPUTO CENTRO, JANCO AMAYA Y KHOANI (ACHACACHI) 3,803,950.19 1,284 405

KENAMARINI - KELAHUARANCA (ACHACACHI) 1,781,478.46 491 492

ANTAJAHUA (LAJA) 504,148.66 140 383

PUCHUNI (LAJA) 379,365.01 162 245

WICHI WICHI (LAJA) 262,403.73 134 202

CHIRI (LAJA) 497,073.26 140 360

COLLPAJAHUA (LAJA) 403,937.27 166 262

AVICAYA (LAJA) 373,980.71 171 224

MACHACAMARCA ALTA (LAJA) 489,276.98 268 205

MACHACAMARCA BAJA (LAJA) 748,184.73 224 391

TAMBILLO (LAJA) 1,776,339.96 761 290

KALLUTACA (LAJA) 521,139.60 263 195

PUCHUCOLLO ALTO (LAJA) 326,044.79 191 188

PUCHUCOLLO BAJO (LAJA) 269,152.10 185 159

PUCHUCOLLO BAJO SUR (LAJA) 358,150.16 140 280

QUELLANI (LAJA) 1,077,260.81 138 868

SULLCATACA ALTO (LAJA) 968,908.80 331 352

SULLCATACA BAJA (LAJA) 913,579.52 289 337

KARAPATA ALTA (PUERTO PEREZ) 698,133.89 380 225

KARAPATA BAJA (PUERTO PEREZ) 510,605.92 232 282

KHANAPATA (PUERTO PEREZ) 361,991.45 363 128

QUEHUAYA (PUERTO PEREZ) 830,224.69 565 159

TOKE AJLLATA (STGO DE HUATA) 1,487,441.04 685 280

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An analysis was undertaken for three of the four municipalities to understand if the basic services established were cost-efficient18.

Cost Efficiency Reference Values: These cities are among the first locations of this country of this size to have modernized their solid waste services and therefore no reference solid waste management systems upon which one could base cost-efficiency exist for Bolivia. The analysis took advantage of the reference prices established as part of the Colombian Tariff System for these services. On the basis of cost data collected from municipalities and economic models the “Comisión de Regulación de Agua Potable y Saneamiento Básico”19 (CRA) in Colombia has established formulas for the services of sweeping; collection and final disposal that, calculate the level of costs that is considered economically efficient for individual service providers.

The costs include the necessary investment and operational costs for a given municipality based on the size of the municipality, and dimension of each of the services (tons collected and disposed; km swept). The formulas were adjusted to include the labor costs based on the 2015 Government salaries of Bolivia.

Dimension of services established under the project

City Sweeping (Km/day) Collection (tons/day) Disposal (tons/day)

Achacachi 23.4 4.2 4.2

Copacabana 30 3.0 3.0

Tiwanaku 7.5 1.5 1.5

Reference costs per day based on CRA formulas.

Calculated Reference costs

City Collection (USD/day)

Disposal (USD/day)

Sweeping (USD/day)

Total Costs (USD/day)

Achacachi 154.44 143.93 186.68 485.04 Copacabana 198.00 103.98 134.87 436.86 Tiwanaku 49.50 51.65 66.99 168.14

Cost-effectiveness: The costs for the services introduced under the project included the investment costs, reinvestment costs over 20 year project lifetime and operational costs (personnel, fuel and other costs). As the administration and personnel for the services is consolidated, the costs were

18 No analysis was undertaken for the case of Tiquina because of the unusual nature of the service established which involves collection in two urban areas separated by a waterway with transport of the garbage by boat. No reference costs for this type of systems were available to understand its cost efficiency.

19 Derived unit reference costs were: USD6.6/km swept; USD34.4/ton collected; USD 44.7/ton disposed. Formulas used are from the Marco Tarifario de Aseo 2015 available at www.cra.gov.co.

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not disaggregated but rather presented as the total for all three services. The results indicate that for the three cities the services established are cost-effective.

Actual costs for services established under the project.

Investment costs (USD) Operational Costs (USD/Yr) Total Costs (USD/day)

Project investments

costs

Reinvestment over project

lifetime

Personnel Fuel Other

Achacachi

333,798

447,565

47,040

19,489

21,485 348.17

Copacabana

350,345

849,984

32,340

22,312

19,174 366.69

Tiwanaku

242,122

93,432

24,696

7,171

8,236 155.84

Cost-Benefit Analysis of the Viacha Sewerage Project. The Project financed a sewerage system in a district of the city of Viacha which is part of a larger investment in wastewater treatment in the City. The wastewater treatment plant project execution is ongoing with other financing and is expected to be finished in 2016. As the benefits of the Project sewerage system are dependent on the operation of wastewater treatment plant and the completion of this investment, the cost-benefit analysis of the sewerage investment was considered as part of this broader project.

Estimation of Benefits: The benefits were estimated through a contingent evaluation method based on the maximum willingness to pay of the potential project beneficiaries20. Focus group discussions were organized in four different districts including the district that the project investments took place in order to create awareness on the project and to find out about the different perceptions of the overall population regarding the construction of the proposed wastewater treatment plant. Among other variables, the willingness to pay and the corresponding payment ranges were collected. Based on the results of the focus group discussions 401 different households were surveyed to understand their perception of the project, willingness to pay and payment capacity.

Of the 401 households that were surveyed 17 were not be willing to pay and 366 would be willing to pay between Bs.2 and Bs10 depending on their income level. The final calculated value for the monthly willingness to pay was Bs.8.19. The willingness to pay is interpreted as the amount of benefits perceived by the beneficiaries because of the project, hence they constitute the project benefits. From the survey the following main data was obtained, among others: monthly family income Bs.2,848.80, monthly family expenditures Bs.1,376.64, monthly payment for electricity Bs.43.82, monthly payment for water supply services Bs.19.97, monthly payment capacity Bs.1,533.

20 This was based on the socioeconomic study for the Viacha wastewater treatment plant project undertaken by independent consultants hired by MMAyA (Ministry of Environment and Water) in April 2015 with IADB (Inter-American Development Bank) and AECID (Spanish International Development Cooperation Agency) co-financing.

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The benefits were calculated as the willingness to pay added to the current tariffs the beneficiaries pay for the current water supply services multiplied by the projected beneficiary population over 20 years. of the project lifetime. Costs: The total investment costs for the project sewerage investments (Bs 30,663,056; USD 4,292,828) and the wastewater treatment plant infrastructure (Bs 24,049,949; USD 3,366,993) is Bs 54,713,005 (USD 7,659,821). The yearly costs for operation and maintenance of the complete system, including the current services, were estimated and projected for the next 20 years.

Inputs for the economic analysis Beneficiary population 62,688 Annual rate of population growth 4.9% Capital Cost (Bs) Bs 54,713,005 (USD 7,659,821) Average benefits/yr Bs 15,205,532 (USD 2,128,774) Average operational costs/yr Bs 832,006 (USD 116,481) Interest rate 12.67% Project lifetime (yrs) 20 years

Cost-benefit: A net present value (NPV) of Bs. 15,025,067 (USD 2,128,774) and an internal rate of return (IRR) of 15.8% were obtained at market prices.

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Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty Lending

Stefania B. Abakerli B Senior Social Development Spec GSURR Social Development

Roberto Chavez Consultant GSURR Project support Maria Elizabeth Dasso Consultant GTIDR Project support Ana F. Daza Language Program Assistant GSURR Project Assistant Maria Ruth Llanos Vda De Navarro

Consultant GPVDR Indigenous Peoples

Natalie Palugyai Junior Professional Associate LCSUW-

HIS Project Support

Renan Alberto Poveda Senior Environmental Specialis GENDREnvironmental Safeguards

Fernanda Ruiz Nunez Senior Economist GCPDR Economist

Ephim Shluger Consultant UDRUR

- HIS Project support

Dan Hoornweg Sr. Environmental Specialist LCSUR TTL

Alejandro Marcos Tapia Energy Spec. LCSEG -

HIS Project support

David Tuchschneider Senior Rural Development Speci GFADR Rural development

Miguel Vargas-Ramirez Sr Water & Sanitation Spec. GWASL Water and Sanitation and TTL

Supervision/ICR

Juan Arenas Lizana Consultant LCSUW-

HIS Solid waste

Chrystel Cancel Consultant LCSUW-

HIS Project support

Francisco Carranza E T Consultant GWASL Project support Miriam Cespedes Program Assistant GGODR Project support Guang Zhe Chen Country Director AFCE3 Sector Manager Ana F. Daza Language Program Assistant GSURR Project assistant Dilma Elizabeth Flores Gamboa

E T Consultant GWASL Project support

Maria Lucy Giraldo Consultant GGODRProcurement Specialist

Kristine M. Ivarsdotter Senior Social Development Spec LCSSO -

HIS Social development

Alejandro Labbe Fluhmann Consultant TWIWA

- HIS

Menahem Libhaber Consultant GWASL Wastewater Expert

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Lourdes Consuelo Linares Loza

Sr Financial Management Specia GGODRFinancial Management

Maria Ruth Llanos Vda De Navarro

Consultant GPVDR Social Safeguards

Marjolein Ooijevaar Consultant LCCBO Project support

Alvaro M. Orozco Consultant LCSDU -

HIS Wastewater Expert

Diana Ortiz Zuluaga E T Consultant EACVF Project support

Margaret Rose Pajaro Consultant LCSUW-

HIS Project support

Naya Ponce Fortun Consultant GWASL Project support Jorge Quiroga E T Consultant GWASL Project support Joaquin Aguilar E T Consultant LCCBO Technical specialist Navid Rahimi E T Consultant GSURR Project support

Alejandro Marcos Tapia Energy Spec. LCSEG -

HIS Project support

Jorge Trevino Sr Water Resources Spec. GWADR Co-TTL, technical specialist

David Tuchschneider Senior Rural Development Speci GFADR Rural DevelopmentJose Zevallos Sr. Social Development Specialist GSURR Social Safeguards Kimberly Vilar Social Development Specialist GSURR Social Safeguards Rodrigo Munez Consultant GSURR Social Safeguards

Juan Carlos Uria Consultant GENR Environmental Safeguards

John Morton Sr. Urban Development Specialist GSURR TTL Adam Behrendt Country Operations Officer GSURR Social Safeguards

Tatiana Guerra Sr. Financial Management Specialist

LCSFMFinancial Management

Jose Rasumussen Sr. Procurement Specialist LCCBO Procurement Marco Navarro Consultant GSURR Technical expert Shirley Leigue Program Assistant LCCBO Project assistant

Gabriela Guisbert Consultant GSURRSolid waste specialist

Ondina Rocca Consultant GSURRSolid waste specialist

Julio Moscoso Consultant GSURRWastewater specialist

Leandro Sandoval Consultant GSURRSolid waste specialist

Pedro Fernandez Consulant GSURR Docks specialist

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(b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending FY07 71.41 259.17 FY08 50.65 225.78

Total: 122.06 484.95 Supervision/ICR

FY08 20.84 49.78 FY09 42.12 149.82

FY10 20.04 144.75 FY11 17.89 108.46 FY12 16.63 85.53 FY13 11.58 69.36 FY14 17.86 96.83 FY15 43.58 163.24

Total: 190.54 867.77

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Annex 5: Summary of Borrowers ICR and Comments on the Draft ICR Comments on the Draft ICR The draft ICR was shared with FPS, the Ministry of Planning for Development and the Ministry of Culture and Tourism for their comments and the contents of the ICR were also presented in a workshop. The following comments were received: Comments by FPS The significant effort undertaken to obtain the counterpart funding should be highlighted. The effort that went the agreements to provide counterpart funding after the closing date required extensive negotiations with the municipal governments, and in some cases, involved significant additional counterpart fund. Asked to consider the extraordinary effort taken by them on many points in evaluating the rating of their performance. In particular, they:

Took responsibility and executed contracting processes which were originally the responsibility of municipal governments, and were able to award many of them.

Took responsibility to improve subprojects designs, in particular the designs of docks and sanitary landfills.

Were proactive in implementing safeguards. For example, in the Laja water supply subprojects, the FPS’s social team assumed initial responsibilities for the social consultancies until the consulting firm was be hired.

Continued supervision of contracts after the closing date of the Project, with a lower operating cost (less than the normal 5% given to FPS to supervise works).

Leveraged complementary resources of municipal governments to ensure the completion of works subsequent to project closure.

Proactively assumed tasks to consolidate a correct management of Sanitary landfills promoting workshops with the MMAyA and municipal governments.

Comments from Ministry of Planning for Development

Delays in some processes like effectiveness which are common for all projects in Bolivia, should be discussed with the government and other financial agencies, in order to achieve greater efficiency.

Recommended an exhaustive risk analysis of deadlines, as some projects like this suffer time extensions that affect the overall cost of the project.

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Client Final Report FPS developed a final report on the project that included: the background of the program; a summary of the execution of the project components; environmental and social safeguards implementation and compliance; financial execution of program including disbursements and cancellation; internal and external limitations in the execution of the project; and actions taken. FPS developed a summary of the conclusions and lessons learned of the report and these are translated below: Conclusions: The prioritized final portfolio consists of 40 projects, of which 39 are completed. All of them are located in the department of La Paz distributed in 9 municipalities surrounding Lake Titicaca and Viacha.

After the effective date of the contract (February 2, 2015), 15 projects representing 37.5% of the total projects executed were pending completion. The conclusion of these projects was assured through the Financial Transfer Agreement established with the subproject municipalities who increased their municipal contribution with additional financial resources. In some cases, this additional contribution was significant. From the 40 subprojects under execution, 39 (97.5%) were completed with only one (2.5%) is still in the process of execution. The conclusion of this project is planned for July 2015. The type of projects considered responded to the population demands and preferences (e.g., small docks, centers for visitors and landfills). However, in the preparation of studies it was necessary to assess the real possibility of implementation of these subprojects. Studies to identify potential social conflicts related to land acquisition for particular types of project infrastructure (potable water, sanitary landfills, etc.) will help avoid conflicts during execution that might impede the realization of the subproject. Lessons Learned: During the structuring of the loan the initial guidelines for implementation should be well developed. For example, the strategies to be undertaken by the implementing agency in the case of land acquisition and ensuring social and legal staff are part of the program to help minimize these problems. In developing the project pre-investment studies should confirm the existence of valid documentation to support the ownership of the land by the municipality. This will help facilitate the execution of the works. The modality and threshold values for procurement can be different in the credit agreements of the World Bank, a situation which is important to clarify and manage in order to provide different options under the loan for contracting depending on the subproject type and needs.

All actors involved in implementing a program (financier, FPS, sector ministries) should have specialists in the areas of intervention of the subprojects (e.g., landfills and docks). The fluid and regular communication with the project manager improved process of approval of different requirements such as non-objections, queries and other performance.

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BOLIVIA

LAKE TITICACA LOCAL SUSTAINABLE DEVELOPMENT PROJECT

LakeTiticaca

DEC

EMBER 2007

The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

LAKETITICACA

Source: Ministerio de Producción y Microempresa Viceministerio de Turismo.

IBRD 35808

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