Peru, Guarantee Facility Project

Environmental and Social Management Framework (ESMF) Summary

1 Introduction

1.1 Country and sector background Peru faces strong challenges in al l i t s infrastructure sectors, including (i) insufficient productive infrastructure; (ii) low and inequitable infrastructure coverage; and (iii) inadequate quality o f service. To eliminate identified infrastructure shortages, huge investments are needed in al l sectors: to date, the Government o f Peru (GOP) has identified investment needs o f over $18 bi l l ion in projects in the transport, energy, water and sanitation and telecommunication sectors. However, Peru faces strong challenges to fund these investments, as a result o f insufficient public investment capacity and a worldwide decline in private infrastructure finance. In addition, to improve quality o f service, a significant improvement in management i s required.

Therefore, the GOP plans, whenever possible, to implement and fund future infrastructure investments via Public-Private Partnerships (PPPs) combining the benefits o f private sector management and funding wi th public sector contributions. ProInversih, the Peruvian private investment promotion agency, has identified a first phase o f about 15 projects requiring over $1.5 bi l l ion o f investments in the transport, energy, water and sanitation and telecommunication sectors over the next three years that could be developed under PPP arrangements. However, as most o f these projects are o f a regional, rural or local nature, they are not financially viable on their own and require some direct public contribution - contrarily to the first wave o f infrastructure concessions o f the 1990s.

The Guarantee Faci l i ty project (the Project) aims at maximizing the attractiveness o f Peru’s future infrastructure projects to private investors so as to make them suitable for PPP development, maximize private sector funding and minimize the required public contributions. This w i l l be achieved b y providing IBRD Partial R isk Guarantees (PRGs) to protect private project debt against various r isks, including political r i sks and backstopping government obligations under the projects.

The PRGs w i l l reduce the riskiness o f Peru’s projects for private investors -even when the projects are not financially viable on their own-, which w i l l attract more private investments and increase competition among potential bidders. The lower degree o f risk o f Peru’s projects w i l l also enhance their credit ratings, which w i l l reduce the cost o f project debt. Lower cost of debt w i l l reduce government contributions and ultimately translate into lower tariffs for consumers. Consequently, the guarantees w i l l create welfare gains for the Peruvian population. In addition, the higher ratings o f project debt w i l l allow local capital market participants, such as Peru’s pension funds, to invest in

1

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

better-rated project bond issues on the local capital market. Therefore, the PRGs wil l also help develop Peru’s capital markets.

The Project wi l l therefore combine the economic benefits o f increasing the probability o f success o f infrastructure PPPs and lowering future tariffs, wi th the financial benefits o f developing local capital markets, thus contributing to Peru’s economic development and poverty reduction. The Wor ld Bank’s guarantees w i l l tact as catalyst to attract vital private sector investments in infrastructure and help address Peru’s critical infrastructure sector issues.

1.2 Project description The project contemplates the establishment o f a Partial Risk Guarantee Faci l i ty in support o f Peru’s future infrastructure public-private partnership projects. The Project w i l l establish a $100 mi l l ion guarantee facility (the “Guarantee Facility”) to provide IBRD Partial Risk Guarantees (PRGs) to Peru’s future infrastructure projects. Through the Guarantee Facility, the IBRD (the “Guarantor”) w i l l agree to issue guarantees o f loans f rom private investors for infrastructure PPPs that have been satisfactorily appraised, against defaults caused b y the failure o f the Peruvian government to comply wi th i t s obligations in fo rm o f investment and operating cost contributions in eligible concession projects as we l l as political and breach o f contract r isks. Given the large pipeline o f infrastructure projects and their urgency, a faci l i ty w i l l be established to facilitate the granting o f PRGs to several o f these projects without delay.

1.3 Safeguard issues Whi le al l the infrastructure projects participating to the Guarantee Faci l i ty are not known yet, i t i s anticipated, based on the current pipeline o f projects, that four Bank safeguard policies are l ike ly to be triggered: those on (i) environmental assessment, (ii) natural habitats, (iii) involuntary resettlements and (iv) indigenous people. The first project l ikely to participate to the Guarantee Faci l i ty involves the rehabilitation o f nine regional airports across Peru. This project, if i t participates to the Guarantee Facility, w i l l trigger the Environmental Assessment and the Involuntary Resettlement safeguards.

ProInversi6n has defined wi th the Bank an Environmental and Social Management Framework (ESMF) wi th detailed procedures to ensure compliance wi th the four Bank safeguards listed above, as wel l as with any other Bank safeguard that might be triggered b y new infrastructure projects applying to the Guarantee Facility. T o complement the ESMF, ProInversi6n has prepared a Resettlement Framework and an Indigenous Peoples Framework in l ine wi th the Bank’s safeguards.

The E S M F defines the process for the evaluation, mitigation, implementation, disclosure and monitoring o f the environmental and social impacts o f infrastructure projects participating in the Guarantee Facility. The ESMF, the Resettlement and Indigenous Peoples frameworks have been designed and agreed wi th ProInversi6n’ s staff and management, and have been presented to al l other sector agencies in charge o f monitoring the social impact o f projects. Designated staff o f the future Project Implementation Unit within ProInversi6n w i l l be in charge o f implementing the ESMF.

2

The unit currently consists o f dedicated members f rom ProInversidn but i t wi l l draw on the help o f outside consultants as necessary. The next section o f this document summarizes the main aspects o f the ESMF.

2 The Environmental and Social Management Framework

2.1 Objectives The Environmental and Social Management Framework (ESMF) provides (i) socio- environmental management procedures; (ii) necessary tools to assure the inclusion o f socio-environmental variables in the projects promoted b y ProInversidn; and (iii) methods to ensure compliance with the Wor ld Bank’s Safeguard Policies throughout the l i fe o f projects.

2.2 Legal and Institutional Background The E S M F was developed on the basis o f a diagnosis o f the prevailing legal and institutional framework in Peru.

2.2.1 Concession model used The concession contract model used i s the Build, Operate and Transfer (BOT) model, which consists o f private sector participation in the construction and operation o f public infrastructure, and private sector operation during a period o f time, to guarantee investment recuperation and debt payment. At the end o f the concession, the ownership and operation o f the works revert to the State.

2.2.2 Legal framework B o x 1 below shows the applicable laws and regulations.

3

National Environmental Agency (OSITRAN), which supervises road concession contracts Defines the roles o f the National Environment Council (CONAM) and the

Management L a w Framework Law

Law 27 117 Law 27628

MTC-16 Legislative Resolution 26253

I involuntary resettlement plans in transport projects I Ratifies Convention No. 169 o f the International Labor Organization on

sectoral, regional and local entities in terms o f their environmental responsibilities, to guarantee compliance and avoid overlap, omissions and duplication Expropriations regulation Facilitates the implementation o f road works and establishes procedures

w I indigenous and tribal peoples, and incorporates i t in the political system I Declares the identification, protection, conservation and diffusion of the Law28296

Law 27806 Director Resolution 006-2004- MTC- 16 Director Resolution 007-2004-

I cultural patrimony to be of national interest

for property appraisal Promotes government transparency and regulates access to information Establishes citizen participation and consultation in the socio- environmental evaluation o f transport projects Establishes rules for development and application o f compensation and

2.2.3 Institutional Aspects

ProInversi6n does not have any environmental unit, as responsibilities for the evaluation and mitigation o f the environmental and social impacts o f projects falls on the environmental units o f each sector ministry. However, ProInversi6n plays a support role vis-a-vis these institutions for projects being concessioned under i t s responsibility. I t i s under that role that i t proposes to implement the proposed ESMF.

ProInversi6n has an Off ice o f Social and Community Affairs (DASC), o f which the key function i s to lead the institution’s consultation and information processes during project development. The D A S C maintains direct contact wi th regional and municipal governments and c iv i l society representatives through local, institutional, social and sector authorities.

Before starting to develop a project, ProInversi6n seeks the formal consent of local and regional authorities, as wel l as the favorable opinion o f c i v i l society and, according to the type o f project, acceptance b y local communities. T o that end, i t establishes direct

4

contacts with local authorities, publishes on the Web all relevant information for a project and distributes information through mass communications media. In many cases ProInversi6n enters into dialogue with the local population of the directly or indirectly affected area to learn about their perception o f the project and reach agreements with community representatives interested in the projects.

2.3 Socio-Environmental Evaluation of Projects The ESMF i s based on an evaluation of the socio-environmental r isks of projects, on the basis o f which the socio-environmental studies that w i l l be required to comply with the Peruvian environmental legislation and the World Bank’s safeguard policies w i l l be defined. ProInversih’s projects can have different levels o f socio-environmental risk, according to the nature o f the projects and o f the environment around them.

2.3.1 A categorization of projects based on different risk levels has been established. The proposed process to determine risk levels consists in classifying projects in terms of (i) their nature and magnitude, and (ii) the sensitivity of the environment in which they are located.

Categorizing Projects by Socio-Environmental Risk

Classification by nature and magnitude of projects

Two aspects should be taken into account to classify projects depending on their nature and magnitude: (i) the overall size of the projects and the resulting l ikely magnitude of their impact, and (ii) the nature of the proposed works. The following table was prepared with ProInversih, to classify the various projects they are l ikely to promote in three socio-environmental impact categories: (A) High impact projects; (B) Moderate impact projects; and (C) Low impact projects.

5

Table 2: Categorization of projc

A

Large road projects on principal or primary network

Large scale energy and related projects (electrical lines that are part o f the national inter- connected network and generation plants o f more than 100 MW)

Large scale oil, gas and pipelines projects

Large scale irrigation and drainage projects

Large scale o i l or gas exploration

Potable water and sanitation projects for large population centers wi th more than 1 mi l l ion inhabitants

Manufacture, transport, use o f dangerous or toxic materials

:s depending on their nature and

B

Road projects on secondary road system

Medium scale energy and related projects (electrical lines that are part of the secondary network and generation plants between 10 and 99 MW)

Medium scale oil, gas and pipelines projects

Medium scale irrigation and drainage projects

Medium scale o i l and gas exploration

Potable water and sanitation projects for population centers with between 100,000 and 1,000,000 inhabitants

iagnitude n

Road projects on tertiary road system

Small scale energy and related projects (electrical lines that form part o f a rural network and generation plants smaller than 10MW)

Rural and tertiary level oil, gas and pipelines projects

Small scale irrigation and drainage projects

Small scale o i l and gas exploration

Potable water and sanitation projects for population centers wi th less than 100,000 inhabitants

Regional airports

Note: This l i s t serves as a reference and can be extended as the need arises.

In terms o f type of works, the most common classification differentiate new construction, expansion, rehabilitation and maintenance.

New Construction: New projects with new geographic boundaries. New construction requires the acquisition o f land. Note that ProInversi6n’s pipeline projects are all centered around existing facilities and premises, so that the pipeline should not include any new construction project (unless some existing facilities need substantial expansion).

Expansion: Expansion o f current projects, such as, for example, the expansion o f generation capacity, increases in reservoirs, road expansion or realignment. This may require the acquisition of land.

Rehabilitation: Works aimed at returning a deteriorated project to i t s original condition. Works are conducted on the existing structure, roadway or land. Rehabilitation occurs on- site. In road rehabilitation projects, the work includes improvement o f drainage, containing walls and ramparts, among others.

Maintenance: The project i s in good condition and no additional investments are planned. This requires only routine and periodic work to maintain the project in good condition. All work occurs in the structure or on-site.

6

After classifying projects based on their nature and magnitude and on the type o f work required, a first categorization of projects by type of projects i s reached, for which four categories o f projects have been defined: Type I, Type 11, Type I11 and Type I V . This first-cut categorization o f projects allows to obtain a first approximation o f the l ikely environmental and social impact o f a project, wi th Type I projects l ikely to have the largest negative environmental and social impacts and Type I V projects the smallest impact.

I t i s worth noting that when a concession includes various sub-projects, the exercise should be done wi th each sub-project and the overall risk category should be that o f the project with the highest negative socio-environmental impact.

Classification by the sensitivity of the environment

Once the project has been classified b y nature and type o f work, the level o f sensitivity of the natural and social environment in which the project i s developed should be more precisely described. T o that end, a checklist has been designed so that, based on secondary information (reports, maps, etc.), the degree o f sensitivity o f the environment can be evaluated.

7

Table 4: Degrees

Sensitivity of the environment

HIGH

MODERATE

,OW

’ Sensitivity of the environment

Description

Protected areas (National Parks, others) Areas with high biodiversity (L. Holdrige, 1978) Areas with a high degree o f threat (accessibility, CIAT) Areas with a high degree o f endemism Areas with a grave danger o f environmental degradation (deforestation, hunting, etc.) Mountainous areas with hi l ly relief (>35% slope) Areas with high risk o f earthquake Areas subject to natural disasters (e.g. floods) Areas subject to erosion Permanently flooded areas (marshes, wetlands) Old growth forests Rare ecosystems and habitats wi th endangered species Water springs Regions recognized as indigenous territory or with vulnerable populations Sites o f high anthropological or archeological interest Regions occupied b y indigenous communities Areas occupied by populations that reside, work or obtain subsistence from i t Areas at risk o f social conflict because o f environmental agreements not fulf i l led Buffer zones for protected regions Areas with moderate to high biodiversity Areas with moderate to high degree o f threat (accessibility, CIAT) Areas with moderate to high endemism Areas with moderate danger o f environmental degradation (deforestation, hunting) Areas with moderate earthquake risk (15 to 35%) Areas with moderate potential for erosion Sporadically flooded areas Areas with presence o f populations with established legal rights and good management capacity Areas with moderate archeological or anthropological interest Regions under risk of human occupation or recent invasions Areas leading to significant loss o f labor Occupied areas outside o f National Parks Areas with low to moderate level o f biodiversity Areas with low to moderate degree o f threat Areas with low to moderate endemism Areas with low danger o f environmental degradation (deforestation, hunting) Areas with affected vegetation Regions without threat o f flooding Regions with absence o f historic or national interest Unprotected areas Regions with low levels o f social conflict Partially built up land or structures Regions with alternative or harmonized uses

After both the nature o f the project and the sensitivity of the environment have been evaluated, the socio-environmental risk o f the project can be determined. These risk

8

levels are divided into High (level l), Moderate (level 2), and L o w (level 3), as shown in the matrix below.

Table 5: Matrix to define the Environmental Risk Category of Projects I I Sensitivity of the Environment

Level 1 Projects: Projects wi th high socio-environmental r i sks due to the high sensitivity o f the environment and that the planned works are o f such magnitude that they can alter the natural environment, i t s biodiversity, the social fabric, economic organization and cultural richness. The impacts could be irreversible.

Level 2 Projects: Projects wi th moderate socio-environmental risks due to moderate levels o f socio-environmental sensitivity and the fact that the planned works are not o f a large magnitude. The impacts o f this type o f project are easily identifiable.

Level 3 Projects: Projects that have a l o w socio-environmental risk. The natural environment, biodiversity, social fabric, economic organization and cultural richness are not at risk.

2.3.2 Required social and environmental studies

As mentioned earlier, once the socio-environmental risk category o f a project has been determined, the E S M F determines the environmental and social studies that w i l l be required during the appraisal o f the project to ensure i t s environmental sustainability and compliance wi th the W o r l d Bank safeguards.

Environmental Studies Requirements

Level 1 projects, of high socio-environmental risk, require a detailed Environmental Impact Assessment (EIA), which discusses alternatives and justifies the selected alternative as having the lowest socio-environmental impact. An Environment Management Plan (EMP) w i l l have to be produce for the selected alternative.

Level 2 projects, of medium socio-environmental risk, require an Environmental Assessment (EA), which identifies the potential impacts and proposes, in the Environmental Management Plan, measures to prevent, mitigate and/or compensate these impacts . Level 3 projects, o f limited socio-environmental risk, require an Environmental Report (ER) which identifies social and environmental technical specifications needed to ensure the environmental sustainability o f the project.

9

Social Studies Requirements

Level 1 Projects: High risk projects should include, in addition to the EIA: i) a Resettlement Framework, an Indigenous Peoples Development Plan, and/or a Plan for Preservation of Historical and Cultural Property depending on the r i sks identified; ii) an identification o f the needs to strengthen regulatory and institutional capacity; iii) a strategy for public consultation and community participation; iv ) a clear, comprehensible and accessible publication strategy to disclose the social and environmental aspects o f project . Level 2 Projects: Medium risk projects should examine the possible negative and positive effects o f the project and recommend methods to prevent, minimize and compensate for the negative impacts and improve the positive effects. The EA may include: i) a specific Resettlement Plan, an action plan for Indigenous Peoples, and/or an evaluation o f other social r i sks depending on the r isks identified; ii) the programming o f a public consultation with the objective to understand the expectations o f interested parties and disclose the results o f the EA.

Level 3 Projects: The low risk level implies that the impacts can be managed by adequate specifications in the technical designs prepared b y the environment sector agency.

In al l cases, these studies should be included in the technical feasibility or design studies, so that the project specifications take them into account and minimize socio- environmental r isks. T o facilitate the execution o f these studies and ensure compliance wi th the Bank’s standards, a Resettlement Framework and an Indigenous People Framework have been developed by ProInversi6n wi th the help o f the Bank to complement this ESMF. They have been disclosed at the Infoshop wi th the ESMF.

Poverty assessment study requirements

The E S M F requires also that for al l projects, a poverty impact study needs to be carried out to (i) ensure their el igibi l i ty (only project that are socially desirable are eligible to the Guarantee Facility), (ii) evaluate negative and positive impacts on poverty, and (iii) measure the results during implementation. The E S M F specifies that, during the pre- appraisal phase, a Preliminary Poverty Impact Evaluation w i l l be conducted wi th qualitative estimate o f the project’s expected impacts on poverty. During the appraisal phase, a Poverty Impact Evaluation w i l l estimate the expected impacts on poverty. The impacts w i l l be measured in terms o f prices, employment, access to services and assets b y the affected population group. The evaluation wi l l also propose some indicators on the basis o f which the impact of the project on poverty w i l l be monitored during implementation.

Complementary socio-environmental studies

The E S M F highlights that several complementary studies may be required depending on the nature of r isks. The box below summarizes the required instruments when a Safeguard Policy i s activated.

Among them, an Environmental Audit might be needed to establish environmental liabilities. Also, in the case o f projects such as roads, gas lines, electrical networks, etc.

10

which go through protected areas (national parks, protected forests, etc.) or environmentally sensitive areas (wetlands, o ld growth forests, etc), a Protected (or Sensitive) Areas Management Plan should be developed or updated before any other environmental study i s conducted.

Table 6: Nature of socio-environmental studies ri

World Bank Policies

OP 4.01 Environmental Assessment

Infrastructure projects with direct or indirect impacts

OP 4.04 Natural Habitats

If a project crosses a fragile area in terms o f biodiversity, whether or not i t i s a legally declared area.

OP 4.12 Involuntary Resettlement

When project implementation may result in displacement or involuntary resettlement o f a population.

OD 4.20 Indigenous Peoples

When a project benefits or affects indigenous people or vulnerable groups

3PN 11.03 Management o f Cultural Property in Bank-Financed Projects

When the project area includes sites that are o f ircheological or religious imDortance

'ublic Information

:n al l cases when a population w i l l be negatively iffected by or w i l l benefit from the project.

uired to satisfy World Bank safeguards

Instruments

Level 1 projects require an EIA; Level 2 projects require an EA; Level 3 projects require an ER. When works have a regional impact, a Strategic Environmental Evaluation should include a long- term view o f potential indirect and cumulative effects.

Construction design should be adapted to established conditions in the Area Management Plan. If the area i s not legally declared, the project should evaluate whether i s should be.

An Involuntary Resettlement Plan and a Simplified Resettlement Plan are required, depending on the size o f the displaced population. When the project includes a number of concessions or subprojects, in which the location i s not known precisely, it w i l l be necessary to develop a resettlement framework for each o f the sectors. As a condition o f approval to the concessionaire, projects should include specific resettlement plans within the Framework.

An Indigenous Peoples Development Plan should propose sustainable development programs that are culturally sensitive and approved b y the authorities or their representatives.

A Cultural Properties Protection Plan should comply with the requirements o f the Cultural Properties Protection Law

The Management Plans should include a :ommunications strategy for affected populations

I 1

Socio-environmental dialogue requirements

The ESMF requires that, during appraisal, projects include dialogue wi th local players, including the community. This dialogue should include information on the project and i t s potential impacts. The number and purpose o f these dialogues vary depending on the level of socio-environmental risk o f projects.

Level 1 projects require two meetings wi th local representatives and the community. The first meeting should discuss the proposed project and receive input on potential impacts. The second meeting should present the results o f the environmental studies.

I f appropriate, the dialogue procedures should guarantee participation o f indigenous populations. I t should further assure adequate participation o f Indigenous people in the preparation o f the Indigenous Peoples Development Plan based on local indigenous cultural characteristics . Level 2 projects require one meeting wi th local players and the community to discuss: i) the project objectives; ii) results o f the environmental evaluation; iii) the simplified resettlement plan, i f required.

Level 3 projects require an informational meeting with the community on the project objectives.

Information disclosure requirements

All projects should include a public information strategy to i n fo rm citizens in general and direct beneficiaries o f objectives and impacts. The ESMF specifies that information w i l l be published on ProInversi6n’s website and w i l l use adequate local media to reach the affected population.

ProInversi6n’s web page wi l l include: i) basic project information; ii) a chronology of activities for bidding processes (tenders); iii) the project’s level o f socio-environmental risk; iv) the terms o f reference for the required environmental studies; v) the l i s t o f businesses participating in the bidding process; vi) a summary o f community meetings; vi i) the final environmental impact assessment or report; vi i i ) where relevant, the resettlement plan or the simplified resettlement plan; ix ) where relevant, the indigenous peoples development plan and the cultural properties protection plan; x) any other important study o f the project; xi) the announcement o f the selected company; x i i ) the signed contractual social and environmental commitments made by the concessionaire; and during implementation x i i i ) an annual progress report.

The fol lowing w i l l also be placed in local media: i) the place, date and invitees to the meetings; ii) draft environmental impact studies; and iii) draft resettlement plan (so that local stakeholders have enough information in advance to engage in an informed dialogue).

The bid due date, l i s t o f participating bidders and the announcement o f the selected bid should also be published in the local media. In addition, a summary o f the results o f the community dialogue and the contract wi th the selected bidder should be published. This should include social and environmental commitments.

12

2.3.3 Each project should count with all required authorizations or permissions from the corresponding environment sector agency. Once concluded, the environmental and social studies conducted as requested in the ESMF should be submitted to the respective environment sector agencies so that each agency has enough information to give the respective license or environmental permit. The license or permit becomes official upon publication o f a Supreme Resolution.

Once the concession i s adjudicated, ProInversi6n’s Board o f Directors w i l l send the project’s socio-environmental report to the corresponding ministry. The report should include the agreements made by ProInversi6n during the process of acquiring environmental authorizations, agreements with communities and other interested parties, and other inter-institutional agreements.

The concession contract should include clauses ensuring compliance with sector agency requirements.

Compliance with Environmental Agencies Requirements

2.4 2.4.1 A Socio-Environmental Management Unit (SEMU) wi l l be created within ProInversi6n. The unit w i l l be led by a manager with a broad understanding o f socio-environmental issues, supported by an assistant to ensure adequate management.

The unit manager’s functions w i l l include:

Responsibilities for the Environmental and Social Management of projects

Creation of a Socio-environmental unit

e

e

a

e

e

e

a

e

e

a

Participate in the project evaluation work teams Propose a socio-environmental category for the projects using the Environmental Project Categorization method described in the ESMF and submit to the World Bank for approval Prepare the Preliminary Environmental Evaluation Reports after the evaluation process has begun Follow up on studies during the pre-appraisal stage Coordinate with environmental authorities and ensure compliance with environmental legislation Prepare an Environmental Appraisal Report Ensure the inclusion of environmental clauses in the concession contracts Update the ESMF as needed Develop training activities on social and environmental themes to internalize the topic within the institution Develop promotional activities and publications for the ESMF for project coordinators

13

2.4.2 Project Cycle Procedures and Positions

Identification stage

During the identification stage, the SEMU wi l l be responsible for filling in a pre-defined Eligibility Form that w i l l enable the Bank to assess whether a project soliciting participation to the Guarantee Facility i s eligible or not. The Eligibil i ty Form includes a proposal for the Environmental Category of the projects, based on the categorization method described earlier. Projects that wi l l solicit a World Bank guarantee should receive a no objection to the proposed category.

Pre-appraisal stage SEMU’s manager w i l l coordinate with the World Bank Project Coordinator in Washington D C the activities to be developed during the pre-appraisal phase. These activates should include a site visit, after which SEMU wi l l be responsible to fill in a pre- determined Preliminary Environmental Evaluation Report. For projects soliciting a World Bank guarantee, this report should be forwarded to the World Bank for review and no objection. This form should include an Action Plan, agreed with the Bank, defining all the environmental and social studies that w i l l need to be carried out during appraisal and specific dates for their contracting, and implementation.

SEMU should then prepare the Terms of Reference for all studies that w i l l be required during the appraisal stage. Terms of Reference for Level 1 projects require the Bank’s no objection. SEMU wi l l be responsible to monitor that the studies are executed properly. As much as possible, SEMU wi l l coordinate with the sector environmental authorities in order to ensure that they are involved in the preparation o f the studies and ensure compliance with the appropriate legislation.

Appraisal stage

After the required studies have been finalized, SEMU wi l l review the results and indicate i t s agreement with the results. During this review process, S E W wi l l maintain a close coordination with the sector environmental authority, in order to agree on the results.

SEMU wi l l then prepare a pre-determined Environmental Appraisal Report which summarizes the results o f the environmental and social studies and confirms the social and environmental viability o f the project. A no-objection f rom the Wor ld Bank i s required for World Bank-supported Level 1 and Level 2 projects.

Finally, SEMU should make sure to include the Environmental Appraisal Report in the concession promotion plan, to ensure the recommendations made in the report are included in the bidding documents and concession contract.

Monitoring stage

ProInversidn i s developing a number o f follow-up and monitoring activities for projects already concessioned in order to ensure that the studies and plans developed and agreed upon during the investment preparation phase are executed and implemented. In addition to these initiatives, the ESMF imposes that ProInversi6n prepares annual Project Monitoring Reports (PMRs) to be send to the Bank with a detailed evaluation o f the

14

projects’ progresses. The detailed content of the PMRs w i l l be defined in the project’s operational manual.

15