IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-7683) ON A IBRD LOAN IN THE AMOUNT OF USD 85 MILLION TO THE REPUBLIC OF GUATEMALA FOR A

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR2500 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-7683) ON A IBRD LOAN IN THE AMOUNT OF USD 85 MILLION TO THE REPUBLIC OF GUATEMALA FOR A DISASTER RISK MANAGEMENT DEVELOPMENT POLICY LOAN WITH A CATASTROPHE DEFERRED DRAWDOWN OPTION (CAT DDO) Sustainable Development Department Central America Country Management Unit Latin America and the Caribbean Region February 24, 2013

2 CURRENCY EQUIVALENTS (Exchange Rate Effective February 11, 2013) Currency Unit = Quetzal 1.00 QTZ = US$ US Dollar (US$) US$ 1.00 = 7.87 QTZ FISCAL YEAR ABBREVIATIONS AND ACRONYMS APL Adaptable Program Lending AGIES Guatemalan Association of Seismic and Structural Engineering (Asociación Guatemalteca de Ingeniería Estructural y Sísmica) CABEI Central American Bank for Economic Integration CAFTA Central America Free Trade Agreement CAPRA Central America Probabilistic Risk Assessment CAT DDO Catastrophe Deferred Drawdown Option CCRIF Caribbean Catastrophe Risk Insurance Facility CCT Conditional Cash Transfer CEA Country Environmental Analysis CEPREDENAC Coordination Center for the Prevention of Natural Disasters in Central America (Centro de Coordinación para la Prevención de los Desastres Naturales en América Central) CFAA Country Financial Accountability Assessment CODRED Departmental Coordinator for Disaster Reduction (Coordinadora Departamental para la Reducción de Desastres) COLRED Local Coordinator for Disaster Reduction (Coordinadora Local para la Reducción de Desastres) COMRED Municipal Coordinator for Disaster Reduction (Coordinadora Municipal para la Reducción de Desastres) CONE National Committee for Emergencies (Comité Nacional de Emergencias) CONRED National Coordinator for Disaster Reduction (Coordinadora Nacional para la Reducción de Desastres) COVIAL Road Conservation Unit (Unidad Ejecutora de Conservación Vial) CPS Country Partnership Strategy DDI Disaster Deficit Risk DPL Development Policy Loan DPL DDO Deferred Drawdown Option for Development Policy Loans DRM Disaster Risk Management DRMP Disaster Risk Management Program DVRP Disaster Vulnerability Reduction Program FDI Foreign Direct Investment FOCEGIR Central American Fund for Disaster Risk Management (Fondo Centroamericano de Fomento de la Gestión Integral de Riesgo de Desastres) GDP Gross Domestic Product GFDRR Global Facility for Disaster Reduction and Recovery GoG Government of Guatemala HFA Hyogo Framework for ActionIADB Inter-American Development Bank IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results Report

3 IDEA IEG IFC IFMIS IMF INFOM INSIVUMEH ISR JICA LAC MAGA MARN MCE MDGs MINFIN NFDA NFPS OECS OFDA PCGIR PCN PDO PFM PML PND NPDPM SAA SE-CONRED SEGEPLAN SIAM SINIT SNIP UNDP UN/ISDR WHO WMO Institute of Environmental Studies, National University of Colombia (Instituto de Estudios Ambientales, Universidad Nacional de Colombia) Independent Evaluation Group International Finance Corporation Financial Management Information System International Monetary Fund Instituto de Fomento Municipal Institute for Seismology, Volcanology, Meteorology and Hydrology Implementation and Status Report Japan International Cooperation Agency Latin America and the Caribbean Region Ministry of Agriculture (Ministerio de Agricultura, Ganadería y Alimentación) Ministry of Environment (Ministerio deambiente y Recursos Naturales) Maximum Considered Event Millennium Development Goals Ministry of Finance (Ministerio de Finanzas Publicas) National Fund for Disaster Attention Non-financial Public Sector Organization of Eastern Caribbean States Office of Foreign Disaster Assistance Central American Policy for a Comprehensive Disaster Risk Management (Política Centroamericana para la Gestión Integral del Riesgo) Project Concept Note Project Development Objectives Public Financial Management Probable Maximum Loss National Development Plan (Plan Nacional de Desarrollo) National Program for Disaster Prevention and Mitigation (Programa Nacional de Prevención y Mitigación ante Desastres) (Secretaría de Asuntos Agrarios) Executive Secretariat of the National Coordinator for Disaster Reduction (Secretaría Ejecutiva de la Coordinadora Nacional para la Reducción de Desastres) Ministry of Planning (Secretaría de Planificación y Programación de la Presidencia) Mesoamerican Environmental Information System (Sistema de Información Ambiental Mesoamericano) National System for Territorial Information (Sistema Nacional de Información Territorial) National System for Public Investment (Sistema Nacional de Inversión Pública) United Nations Development Program United Nations International Strategy for Disaster Reduction World Health Organization World Meteorological Organization Vice President: Hasan A. Tuluy Country Director: Carlos Felipe Jaramillo Sector Manager: Anna Wellenstein Task Team Leader: Ana Campos Garcia ICR Team Leader: Ana Campos Garcia

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5 REPUBLIC OF GUATEMALA Disaster Risk Management Development Loan with a Catastrophe Deferred Drawdown Option (CAT DDO) CONTENTS Data Sheet A. Basic Information... i B. Key Dates... i C. Ratings Summary... i D. Sector and Theme Codes... ii E. Bank Staff... ii F. Results Framework Analysis... iii G. Ratings of Program Performance in ISRs... vii H. Restructuring (if any)... vii 1. Program Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1 Bank Lending and Implementation Support/Supervision Processes Annex 2. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 3. List of Supporting Documents Annex 4. The Impact of Pacaya Eruption and Agatha Tropical Storm Annex 5. Map IBRD 33413R

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7 A. Basic Information Country: Guatemala Program Name: Disaster Risk Management DPL w/catastrophe Deferred Draw Down Option Program ID: P L/C/TF Number(s): IBRD ICR Date: 09/07/2012 ICR Type: Core ICR Lending Instrument: DPL Borrower: Original Total Commitment: Revised Amount: Implementing Agencies: THE REPUBLIC OF GUATEMALA US$ 85 MILLION Disbursed Amount: US$ 85 MILLION US$ 0.00 MILLION Ministry of Finance (Ministerio de Finanzas Públicas) Co-financiers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 11/06/2008 Effectiveness: 06/30/ /03/2010 Appraisal: 02/23/2009 Restructuring(s): Approval: 04/14/2009 Mid-term Review: Signing Date: 06/01/2010 Disbursed Disbursement 1 (US$ 50M) Disbursed Disbursement 2 (US$ M, including US$ 212,500 front-endfee 0.25%) 06/15/ /29/2010 C. Ratings Summary C.1 Performance Rating by ICR Closing: 08/31/ /31/2012 Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Moderately Satisfactory Low or Negligible Moderately Satisfactory Moderately Satisfactory

8 C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Not Applicable Quality of Supervision: Moderately Unsatisfactory Implementing Agency/Agencies: Not Applicable Overall Bank Performance: Moderately Satisfactory Overall Borrower Performance: Moderately Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Performance any) Potential Problem Program at any time (Yes/No): Problem Program at any time (Yes/No): DO rating before Closing/Inactive status: Yes No Satisfactory Quality at Entry (QEA): None Quality of Supervision (QSA): None Rating: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General water, sanitation General flood protection sector Theme Code (as % of total Bank financing) Disaster Risk Management E. Bank Staff Positions At ICR At Approval Vice President: Hasan A. Tuluy Pamela Cox Country Director: Carlos Felipe Jaramillo Laura Frigenti Sector Manager: Anna Wellenstein Guang Zhe Chen Program Team Leader: Ana Campos García Joaquin Toro ICR Team Leader: ICR Primary Author: F. Results Framework Analysis Ana Campos García Jeannette Fernandez Program Development Objectives (from Project Appraisal Document) The overall development objective of the operation was to enhance the Government of Guatemala s capacity to implement its disaster risk management program for adverse natural events. 2

9 Revised Program Development Objectives (if any, as approved by original approving authority) (a) PDO Indicator(s) Indicator Indicator 1 : Value (quantitative or qualitative) Value (quantitative or qualitative) Value (quantitative or qualitative) Comments (incl. % achievement) Baseline Value** *There were no formally revised target Values *Formally Original Target Revised Values (from approval Target documents) Values Actual Value Achieved at Completion or Target Years Data from INSIVUMEH and the vulnerability analysis are being used to prioritize public investments and produce more accurate alerts. Baseline: meteorological (55), hydrometric (54) and seismic (29) Baseline: 0 No public buildings with vulnerability analysis Baseline: 0 No municipalities in Guatemala count on risk mapping Expansion of meteorological, hydrometric and seismic monitoring networks from the February 2009 level of monitoring stations by 56% in meteorological, 56% in hydrometric and 29% in seismic networks. 20 public buildings with vulnerability analysis. Risk mapping in 10 municipalities. The target was exceeded. Monitoring networks brought to new standards. 31 new units of meteorological equipment became operational, 1 meteorological radar currently in bidding process (increase of 56%). 30 new units of hydrological equipment were installed (increase of 56%). The updated Seismological Network is composed of 17 new stations, of which 5 are wide band and 12 are short period seismographs (an overall increase of 59%). The target was exceeded. 43 schools and 4 hospitals evaluated using the Safety Index. The target was exceeded. 12 municipalities have flooding and landslide hazard maps useful for land use planning 1. SEGEGPLAN (Ministry of Planning) and the Executive Secretariat of the National Coordinator for Disaster Reduction SE-CONRED developed perception maps 2 of flooding and landslides for all municipalities in the country (total of 333). Date achieved 23-Feb Feb Aug-2012 All municipalities have flood and landslide perception maps developed by SEGEPLAN and SE- CONRED. 12 municipalities have produced their own land use plans (Planes de Ordenamiento Territorial, POTs) based on flood and landslide hazard maps; and only one, the municipality of Sta. Lucia Cotzumalguapa, has issued municipal ordinances to enforce the POT. The Ministry of Education with the support of the Bank s TA funded by the GFDRR produced a Safety Index for education centers based on a similar index developed by PAHO for hospitals. The use of this tool has been officially reported in 43 schools and 4 hospitals 3. 1 The purpose of incorporating DRM in territorial planning is to regulate safe land use based on its risk profile. 2 Perception maps are designed through consultation with local communities based on the historical common knowledge of past disasters. 3 SE-CONRED Draft Closing report of the DPL with CAT DDO 3

10 Indicator 2 : SE-CONRED and SEGEPLAN are mainstreaming disaster risk management considerations in key plans with respect to capacity building, training, and investments. Value (quantitative or qualitative) Value (quantitative or qualitative) Baseline: 0 No reports on the progress of the National Program for Disaster Prevention and Mitigation (NPDPM) Baseline: 0 There is no methodology available to incorporate DRM into public investment projects. SEGEPLAN has a methodology for inclusion of risk evaluations in territorial (land use) planning. SEGEPLAN and SE- CONRED have produced 3 annual progress reports on the implementation of NPDPM. SEGEPLAN will have developed the instruments and applied the methodology, for inclusion of disaster risk management in investments. 10 municipalities are screening public and private investments for more effective disaster risk management. The target was met. SE-CONRED submitted 4 progress reports on the implementation of NPDPM to the National Platform for DRR (Mesa Nacional de Diálogo para la RRD). Two detailed reports were also submitted to the International Strategy for DRR. The target was met. SEGEPLAN developed a methodology and completed the instruments to incorporate DRM considerations into public investment projects and municipal development planning 4. The target was met. In the period of 2009 to 2012, the number of the 333 municipalities in Guatemala having mainstreamed DRM into Development Plans based on SEGEPLAN s guidelines increased from 81% to 96%. Value (quantitative or qualitative) Baseline: 5% Five percent of urban areas incorporate disaster risk management in their territorial planning. 15% of urban areas 5 have incorporated disaster risk management in their territorial planning. The target was met. Guatemala City, Quetzaltenango and Antigua, comprising 17.6% of the country s urban population, have incorporated DRM in territorial planning and other minor cities are following the same process. Date achieved 23-Feb Feb Aug-2012 SEGEPLAN enforces a number of guidelines that incorporate risk analysis into key development Comments (incl. % processes: a) Risk Analysis in Public Investment; b) Linking DRM with Sectoral and Institutional Planning; c) Guidelines for Territorial Planning; and d) Guidelines to formulate achievement) Municipal Development Plans. This is complemented with training and capacity building for institutions. Indicator 3 : Value (quantitative or qualitative) New public buildings meet the terms of improved building standards. Baseline: 3 A pilot project included 3 schools evaluated using the seismic norm. 60 schools rebuilt to meet seismic standards based on risk assessments validated by SE- CONRED. The target was partially achieved. 73 schools (15% of 484 schools evaluated) were repaired, and some of them with structural retrofitting. There was no data to validate the 4 DRM in Public investment is implemented by the inclusion of: (i) DRM assessments and projects in the Development Plans; and (ii) DRM cost/benefit analysis in the project cycle 5 It is not clear in the PD how to measure % of urban areas and how the baseline was established. The ICR team considered that measuring the % of population in urban areas was more convenient. 4

11 Baseline: 0 No National Building Code available. Construction plans for new public buildings meet seismic standards. actual numbers. The target was met. CONRED recommends the use of seismic standards for designing and construction (NRD-1) (Governmental Agreement published on March 29, 2011). Guatemala City and Mixco have independently adopted these standards. Value (quantitative or qualitative) Baseline: 1 The existing DRM investment tracking mechanism should be updated and improved. Minister of Finance has developed an indicator to track budget appropriation for disaster risk management. 5 SEGEPLAN requires that all public investment projects incorporate risk analysis in the SNIP, which contributes to the enforcement of the seismic standards. The target was met. A DRM tagging system is available and institutional training for its use was conducted. Date achieved 23-Feb Feb Aug-2012 Prior to the approval of the seismic standards (NRD-1) international standards were used for Comments (incl. % building design and construction. The role of the municipalities and CONRED is critical to enforce the NRD-1. Currently the structural designers and contractors hold the responsibility to achievement) ensure adherence to the norms, without government oversight. Ministry of Finance has improved its response capacity to mobilize resources in case of Indicator 4 : disasters. Value (quantitative or qualitative) Baseline: 0 No comprehensive analysis of fiscal exposure, contingent liability and a risk financing strategy for adverse natural events available. In accordance with the NPDPM, the Ministry of Finance has completed the analysis of fiscal exposure to adverse natural events. In accordance with the NPDPM, the Ministry of Finance has completed the assessment of contingent liability. The target was partially achieved. The Ministry of Finance through COVIAL (Road Conservation Unit) has identified that major fiscal impact associated to natural hazards related to the transport sector. The target was partially achieved. Increased understanding of the Governments contingent liability by developing vulnerability assessments for selected groups of government buildings and bridge infrastructure. A preliminary Comprehensive Probabilistic Risk Assessment (CAPRA) application was used at the national level to estimate maximum probable losses due to hurricanes and earthquakes. Studies are under way to identify the State s contingent liabilities to natural hazards.

12 In accordance with the NPDPM, the Ministry of Finance has completed the design of a risk financing strategy. The target was partially achieved. As part of the National DRR Strategy ( ) a disaster risk financing strategic framework was drafted by a consultant but it has not become an official document. Executive Decree of July 14, 2010, updates the Insurance Sector Legislation and promotes its use to cover the impact of adverse natural hazards to meet increasing demand. A National Fund for Disaster Attention (NFDA) for up to US$100 m is currently being considered. Date achieved 23-Feb Feb Aug-2012 Through a consultative process, with the support of the IADB, the GoG drafted a disaster risk financing strategic framework. Although this is a preliminary document, it will help decide on Comments specific instruments tailored to Guatemala s needs and practices, and includes a revision (incl. % proposal for CONRED s Law and NFDA s structure. Developing and implementing a achievement) sustainable national DRFI strategy is a long-term process that requires extensive expert advice and capacity building. **Baseline values were taken from Table VI.1 Selected Government Targets for Ongoing- Country-Bank Dialogue from the CAT DDO Project Document of March 10, 2009 (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Indicator 1: No Intermediate Outcome Indicators Value (Quantitative or Qualitative) Date achieved Comments (incl. % achievement) Formally Revised Target Values Actual Value Achieved at Completion or Target Years G. Ratings of Program Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (US$ millions) 1 05/12/2009 Satisfactory Satisfactory /01/2009 Satisfactory Satisfactory /11/2010 Satisfactory Satisfactory /09/2012 Satisfactory Satisfactory H. Restructuring (if any) Not Applicable 6

13 1. Program Context, Development Objectives and Design 1.1 Context at Appraisal Macroeconomic policy framework at appraisal 1. From 2002 to 2007 Guatemala experienced strong economic growth from 3.2 percent to 6.3 percent. High oil and commodity prices in the first half of 2008 and the global financial crisis in the second half of the year slowed down the growth rate to 3.3 percent. At the same time, additional exogenous factors, including the rise in food prices, exerted substantial inflationary pressures on the Guatemalan economy in Inflation reached a peak of 11.4 percent in 2008, the highest rate in fifteen years. 2. In 2009 the Guatemalan economy contracted sharply in the aftermath of the global financial crisis. The economy only grew around 0.5 percent, but growth prospects have moderately improved since then. Inflation slowed down significantly, reaching 2 percent, due to the drop in economic activity and reduced oil and food prices. The credit tightening in global financial markets affected the country by making credit lines more expensive and difficult to renew. Remittance flows from expatriates, which accounted for 12.4 percent of the GDP in 2007, fell to 10.7 percent in 2009 and severely affected the real economy, yet kept the balance-ofpayments current account deficit at 2.2 percent of GDP. 3. At appraisal, Guatemala s macroeconomic policy framework was relatively unfavorable for the immediate short run, while cautiously favorable for the medium run. Although exports of goods continued to fall and growth projections were revised downwards due to the global economic turmoil, the Guatemalan authorities adopted sound fiscal and monetary policies. In 2008 and prior to appraisal, the Central Bank responded to complex monetary issues by adjusting the monetary policy interest rate twice (raising it from 6.5 to 7.25 percent). The increased interest rate caused an inflow of short-term capital leading to a real appreciation of the Quetzal and a decrease in exports of goods by 8.5 percent, an effect which was mitigated by monetary sterilization operations. On the fiscal front, Guatemala was able to apply countercyclical fiscal policy given its pre-crisis low debt and deficit levels. Disaster Risk Management in Guatemala 4. Over the past decades, Guatemala s economic and social development has been regularly disrupted by disasters caused by natural phenomena. The recovery and reconstruction responsibilities have diverted government resources away from strategically planned development activities in education, health and infrastructure. In addition, disasters in Guatemala disproportionately affect the poor by disrupting their livelihoods and the delivery of basic services 6. For example, the 1976 earthquake resulted in more than 23,000 deaths and damages estimated at 17.9 percent of GDP. More recently, Hurricane Mitch (1998) caused estimated damages of 4.7 percent of GDP, while the toll of Hurricane Stan (2005) on the economy was calculated to be 2.8 percent of GDP. 5. The National Coordinator for Disaster Reduction (CONRED) is the leading agency for DRM in Guatemala. CONRED works as a coordinating mechanism providing a platform and the legal framework for inter-ministerial coordination in cases of emergency and disaster 6 World Bank 2009 Poverty Assessment for Guatemala (PA) 7

14 prevention. The National Council for Disaster Reduction (Consejo Nacional para la Reducción de Desastres 7 ) led by the Vice-President of the Republic is the highest body that oversees CONRED. An Executive Secretariat, SE-CONRED, supports the National Coordinator through seven areas of expertise: (a) coordination, (b) financial management, (c) comprehensive disaster risk management, (d) response, (e) preparedness, (f) mitigation, and (g) logistics. This structure is replicated at the regional, municipal, and local levels. The coordinators are cross-sector committees that include public, private, and civil society organizations and providers of emergency services, and are convened by the most senior government representative in the relevant locality. 6. Acknowledging its high vulnerability to disasters, Guatemala has made significant steps towards vulnerability reduction. The policy program of Government ( ) Plan de la Esperanza focused on increasing growth and reducing poverty and inequality. Linkages to DRM were emphasized as means to assure productivity and growth. Relevant actions taken included: (a) the development of risk evaluations; (b) disaster risk-informed territorial planning; and (c) the adoption of an earthquake-resistant code. 7. Moreover, Guatemala has sought comprehensive disaster risk reduction and longterm DRM strategies, culminating with the adoption of the National Program for Disaster Prevention and Mitigation (NPDPM). Following Hurricane Stan (2005), a consultative process led to the adoption of the NPDPM which aims to: (i) improve risk identification and monitoring, (ii) invest to reduce risk, (iii) strengthen institutional and planning capacity for risk management, and (iv) develop risk financing strategies. The Program sets out in detail the four lines of action, responsible agencies, and budget allocations. The Program has been adopted by CONRED and funded by national budget appropriations since Rationale for Bank s assistance 8. The Bank acknowledged the country s commitment to disaster risk reduction and was already supporting its efforts. In the aftermath of Hurricane Stan (2005), the GoG began to work on a National Program for Disaster Prevention and Mitigation that required enhancing national capabilities for a gradual implementation. Since then, DRM has been incorporated in the national agenda by the Country s Administrations showing a proactive approach towards the investment in ex-ante risk reduction activities. The Country Partnership Strategy (CPS) reflected this engagement placing DRM as a self-standing policy issue in the context of securing sustainable growth and productivity. A DPL with CAT DDO was explicitly requested by the GoG for the CPS period. 9. In April 2009, the Bank s Board of Executive Directors approved the Disaster Risk Management Development Policy Operation with a Catastrophe Deferred Drawdown Option. The DPL with a CAT DDO for the Government of Guatemala was declared effective in June 3, In line with Guatemala s gradual development of a DRM agenda, the CAT DDO was aimed to provide immediate liquidity in the event of a disaster triggered by an adverse natural event, thus enabling a quicker response to address emergency needs and helping to avoid redirecting budgetary resources allocated to social and investment programs. 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) 7 National Policy for Disaster Risk Reduction in Guatemala, CONRED,

15 10. The development objective of this operation was to enhance the Government s capacity to implement its disaster risk management program for adverse natural events. The DRM program aimed to: (i) improve risk identification and monitoring, (ii) invest to reduce risk, (iii) strengthen institutional and planning capacity for risk management, and (iv) develop risk financing strategies. Consistent with NPDPM, four key outcome indicators were agreed for monitoring and evaluation of the CAT DDO: 1) Data from INSIVUMEH and the vulnerability analysis are being used to prioritize public investments and produce more accurate alerts. 2) SE-CONRED and SEGEPLAN are mainstreaming disaster risk management considerations in key plans with respect to capacity building, training, and investments. 3) New public buildings meet the terms of improved building standards. 4) Ministry of Finance has improved its response capacity to mobilize resources in case of disasters. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification 11. The Program Development Objective (PDO) and key indicators were not revised. 1.4 Original Policy Areas Supported by the Program (as approved) 12. The program supports the following four strategic areas of action for the implementation of the Government s National Program for Disaster Prevention and Mitigation: a) Improving risk identification, assessment, and monitoring; b) Strengthening institutions and planning capacity for risk management; c) Investing to reduce risk; and d) Developing risk financing strategies. 1.5 Revised Policy Areas (if applicable) 13. Policy areas were not revised. 1.6 Other significant changes 14. No other changes were made. 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance 15. The DPL with a CAT DDO was a single tranche operation. The single Prior Action was fully implemented (Table 1). The agreed drawdown trigger to access the funds was a declaration of national and/or regional-level state of emergency by Executive Decree, in accordance with Public Order Law 7, Article 14 of On May 27 and 30, 2010, a national state of emergency was issued by Executive Decree No. 14 and , ratified by the Congress on June 1 st 2010 through Decree No As a result of the eruption of the Pacaya volcano debris and ash rained down in several Guatemalan cities and villages to the northwest of the volcano, including Guatemala City, Antigua and Escuintla. Houses, social and transport infrastructure were blanketed by volcanic ash and over 2,000 people were forced to evacuate. To make things worse, Tropical Storm Agatha hit Guatemala on May 29, 2010, and caused mudslides, destruction to multiple bridges, damages to at least 3,500 houses, an estimated 20,000 homeless people, and the evacuation of over 110,000 9

16 people. The two events together resulted in economic damages and losses of US$1,552.6 million equivalent to 2.6 percent of the 2009 GDP. 17. To respond to the impact caused the eruption of the Pacaya volcano and almost concurrent tropical storm Agatha; the Government of Guatemala withdrew, in June 2010, the whole amount of the DPL with CAT DDO. Initially, the Government requested a first disbursement in the amount of US$50,000,000 on June 15, As the Guatemalan authorities realized the full magnitude of the disaster, the Government requested, on June 29, 2010, the remaining undisbursed amount of US$34,787,500. Disbursement # Amount Expected Actual Release Release US$ Release Date Date Disbursement 1 50,000,000 June 15, 2010 June 15, 2010 (1) Regular Disbursement 2 34,787,500* June 29, 2010 June 29, 2010 (1) Regular * (US$212,500 corresponding to the loan s front-end-fee, 0.25% of the loan amount of US$85,000,000, which was paid to the Bank on June 3, 2010, out of the loan proceeds) 18. There were four key outcome indicators linked to four areas of actions. These four indicators form the basis for assessing the performance of this operation. First Area of Action: Improving Risk Identification, Assessment and Monitoring Indicator 1: Data from INSIVUMEH and the vulnerability analysis are being used to prioritize public investments. 19. In the three-year period ( ) implementation of the National Program for Disaster Prevention and Mitigation (NPDPM), the GoG significantly supported hazard s monitoring and risk identification efforts. Seismological, meteorological and hydrological monitoring networks, under the control of INSIVUMEH, were upgraded and brought to new standards. The improved data has been used to update hazard maps, particularly at the municipal level, where DRM is being incorporated into development and land use plans. In a similar account, seismic zoning has been integrated in the new building standards (NRD-1) proposed by the Guatemalan Association of Seismic and Structural Engineering (AGIES) with a resolution that includes municipal administrative divisions. Moreover, an agreement of more than 15 technical institutions and agencies will facilitate data exchange and the repository of information through the Spatial Data Infrastructure Project hosted by the National System for Territorial Information (SINIT in Spanish). 20. Hazard and vulnerability analysis became part of project assessments for public investment. All municipalities have flood and landslide perception maps developed by SEGEPLAN and CONRED which have been used in the formulation of municipal development plans. Twelve municipalities have produced their own land use plans (Planes de Ordenamiento Territorial, POTs) based on floods and landslides hazard maps; and only one, the municipality of Sta. Lucia Cotzumalguapa, has issued municipal ordinances to enforce the POT. 21. The expected target to complete a vulnerability analysis of 20 public buildings was exceeded. SE-CONRED and the Ministry of Education with the support of Bank technical assistance (TA), funded by the GFDRR, produced a Safety Index for Education Centers based on a similar index developed by PAHO for hospitals. The use of this tool has been officially reported in 43 schools and 4 hospitals. Second Area of Action: Strengthening Institutions and planning capacity for risk management. 10

17 Indicator 2: SE-CONRED and SEGEPLAN are mainstreaming disaster risk management considerations in key plans with respect to capacity building, training and investments. 22. The design and enforcement of a number of guidelines has opened the road to incorporating DRM into relevant development processes. SEGEPLAN enforces a number of instruments to incorporate risk analysis into key processes, among them: a) Linking DRM with sectoral and institutional planning; b) Guidelines to include DRM in Territorial Planning; and c) Guidelines to formulate Municipal Development Plans. At appraisal, 81 percent of the municipalities (270) had completed their Development Plans, which incorporated DRM as a key element for the Territorial Analysis. By 2012, this figure raised to 96 percent (321 municipalities). This process is complemented with training and capacity building to end-users. 23. Introducing DRM into municipal development plans and into territorial planning shows mixed results. While 96 percent of the municipalities have incorporated natural hazards maps to its development plans, only 4 percent have produced land use plans based on flooding and landslides, two of the most frequent hazards in the country. A combination of factors, including the lack of a culture of prevention and the need for municipal ordinances on the subject tend to delay this practice. Guatemala City (the major urban area in the country), Quetzaltenango, and Antigua Guatemala, comprising almost 17.6 percent of the country s urban population, have incorporated DRM into land use and territorial planning. High turnover of municipal staff makes it necessary for SE-CONRED and SEGEPLAN to design a system to follow up the development of DRM territorial plans at the municipal level and secure the sustainability of the practice. 24. In addition, the National System for Public Investment (SNIP) incorporates DRM in investment projects from national institutions and municipalities. Guatemala has adopted a project cycle management approach in the SNIP to improve the quality of projects by ensuring that all relevant issues and conditions are taken into account during design and implementation. Risk analysis is being incorporated in public investments beginning at the earliest possible stage in the project cycle and continues throughout the planning process, generating progressively more detailed information. Seismic designs are verified during the project revision. Third Area of Action: Investing to reduce risk. Indicator 3: New public buildings meet the terms of improved building standards. 25. The CONRED recommendation for using the seismic standards National Norm for Risk Reduction One (NRD-1) contributes to the reduction of structural vulnerability to earthquakes and other natural hazards. CONRED approved the NRD-1 in 2010 (Decree 03, published in the Official Diary March 29th 2011). The identification of mechanisms to assure its implementation will help to progressively reduce risk in new construction stock. The adoption and enforcement of the standards by the municipalities of Guatemala City and Mixco in the Metropolitan Area for new construction is an important achievement, and will motivate other smaller urban centers to follow similar procedures contributing to the positive impact of this regulation. Schools and hospitals have specific mechanisms for both existing and new construction, which are also promoted by SE-CONRED. 26. The enforcement of current seismic standards for design and construction of public and private buildings needs to be improved in order to significantly contribute to risk reduction. Although, SEGEPLAN requires that all public investment projects incorporate risk analysis in the SNIP, only with Congress approval as a law, the implementation of these seismic standards will be mandatory in the country. Special attention should be given to the establishment of roles and responsibilities for implementation and supervision during design and building 11

18 construction processes. New chapters in the construction code need to address low-rise structures for dwellings. Fourth Area of Action: Developing risk financing strategies. Indicator 4: Ministry of Finance has improved response capacity to mobilize resources in case of disasters. 27. The GOG drafted a disaster risk financing strategy in 2012 to develop tailored instruments to address Guatemala s needs and practices. The purpose of the financial strategy, as referred in the technical report produced with the assistance of the IADB 8, is to improve financial management of disasters associated to natural hazards. The proposal recommends that some instruments be designed to promote prevention and mitigation, and others to stimulate risk transfer mechanisms and/or bring in resources to cover funding gaps in public expenditure that generally occur during emergencies for both, humanitarian assistance and reconstruction. 28. Important steps are being taken towards the initiation of a disaster risk financing and insurance (DRFI) strategy to face the negative impact of natural hazards. Some examples of the progress achieved in this area are the assessment of the economic impact of natural disasters like hurricanes and earthquakes through CAPRA, the draft law to modify Congress Decree , that regulates CONRED, aiming to modify the availability of resources for the National Fund for Disaster Attention (NFDA), the enactment of Decree that requires the insurance sector to create reserves to address adverse natural events, the initiative to develop agricultural insurance within a regional scheme, and the use of contingent loans such as the DPL with CAT DDO. 29. The consolidation of a DRFI strategy requires further definition of contingent liabilities, financial instruments and institutional arrangements for its implementation. Although progress has been achieved in understanding possible losses generated by disasters and different financial instruments available, a final DRFI strategy requires that the GoG assess possible fiscal losses for frequent and occasional events and establishes different financial instruments for each case. Currently, MINFIN is undertaking basic studies to understand possible contingent liabilities associated to natural hazards that the country could be facing. 8 Villagrán García Oscar, Lineamientos de la Estrategia de Gestión Financiera de Estado para la Gestión del Riesgo de Desastres en Guatemala, Agosto de

19 Table 1: Prior and Action Areas, Expected and Actual Outcomes* Prior Action and Action Areas Proposed Outputs by 2012 Proposed outcomes by 2012 Achievements Prior Action: Developing and validating in a participatory process the National Program for Disaster Reduction and Prevention and including budgetary appropriations in support of the Program in the 2009 National Budget. Area 1: Improving risk identification and monitoring Expansion of meteorological, hydrometric and seismic monitoring networks from the February 2009 level of monitoring stations to 56% in meteorological, 56% in hydrometric and 29% in seismic networks. Baseline: meteorological (55), hydrometric INSIVUMEH is using the expanded monitoring networks and strengthening its capacity for more accurate alerts. (54) and seismic (29) 20 public buildings with vulnerability analysis. Baseline: 0 No public buildings with vulnerability analysis. Data from INSIVUMEH and the vulnerability analysis is being used to prioritize public investments. Data from INSIVUMEH and the vulnerability analysis is being used to prioritize public investments. The target was exceeded. Monitoring networks brought to new standards. 31 new units of meteorological equipment became operational, 1 meteorological radar currently in bidding process (increase of 56%). 30 new units of hydrological equipment were installed (increase of 56%). The updated Seismological Network is composed of 17 new stations, of which 5 are wide band and 12 are short period seismographs (an overall increase of 59%). The target was exceeded. 43 schools and 4 hospitals evaluated using the Safety Index. Indicator 1: Data from INSIVUMEH and the vulnerability analysis are being used to prioritize public investments Risk mapping in 10 municipalities. Baseline: 0 Municipalities in Guatemala do not count on risk mapping. The target was exceeded. 12 municipalities have flooding and landslide hazard maps useful for land use planning 9. SEGEGPLAN and CONRED developed perception maps 10 of flooding and landslides for all municipalities in the country (total of 333). 9 The purpose of incorporating DRM in territorial planning is to regulate safe land use based on its risk profile. 10 Perception maps are designed through consultation with local communities based on the historical common knowledge of past disasters. 13

20 Area 2: Strengthening institutions and planning capacity for risk management. Indicator 2: SE- CONRED and SEGEPLAN are mainstreaming disaster risk management considerations in key plans with respect to capacity building, training and investments. SEGEPLAN and SE-CONRED have produced 3 annual progress reports on the implementation of the National Program for Disaster Reduction and Prevention. Baseline: 0 No reports on the progress of the National Program for Disaster Reduction and Prevention. SEGEPLAN will have developed the instruments and applied the methodology for inclusion of disaster risk management in investments. Baseline: 0 There is no methodology available to incorporate DRM into public investment projects. SEGEPLAN has a methodology for inclusion of risk evaluations in territorial (land use) planning. 15% of urban areas 12 have incorporated disaster risk management in their territorial planning. Baseline: 5% Five percent of urban areas incorporate disaster risk management in their territorial planning. SE-CONRED and SEGEPLAN are mainstreaming disaster risk management considerations in key sectoral plans with respect to capacity building, training, and investments. 10 municipalities are screening public and private investments for more effective disaster risk management. The target was met. SE-CONRED submitted 4 progress reports on the implementation of the National Program for Disaster Prevention and Mitigation (NPDPM) to the National Platform for DRR (Mesa Nacional de Diálogo para la RRD). Two detailed reports were also submitted to the International Strategy for DRR. The target was met. SEGEPLAN developed a methodology and completed the instruments to incorporate DRM considerations into public investment projects and municipal development planning 11. The target was met. In the period of 2009 to 2012, the number of the 333 municipalities in Guatemala having mainstreamed DRM into Development Plans based on SEGEPLAN s guidelines increased from 81% to 96%. The target was met. Guatemala City, Quetzaltenango and Antigua Guatemala, comprising 17.6% of the country s urban population, have incorporated DRM in territorial planning and other minor cities are following the same process. 11 DRM in Public investment is implemented by the inclusion of: (i) DRM assessments and projects in the Development Plans; and (ii) DRM cost/benefit analysis in the project cycle 12 It is not clear in the PD how to measure % of urban areas and how the baseline was established. The ICR team considered that measuring the % of population in urban areas was more convenient 14

21 Area 3: Investing to reduce risk New public buildings meet the terms of improved building standards. 60 schools rebuilt to meet seismic standards based on risk assessments validated by SE- CONRED. Baseline: 3 A pilot project included 3 schools evaluated using the seismic standard. Construction plans for new public buildings meet seismic standards. Baseline: 0 No building code available. SE-CONRED has inspected all new school construction to ensure conformity with seismic standards. New public buildings meet the terms of improved building standards. The target was partially achieved. 73 schools (15% of 484 schools evaluated) were repaired, and some of them with structural retrofitting. There was no data to validate the actual numbers. The target was met. CONRED recommends the use of seismic standards for designing and construction (NRD-1) (Governmental Agreement published on March 29, 2011). Guatemala City and Mixco have independently adopted these standards. Minister of Finance has developed an indicator to track budget appropriation for disaster risk management. Baseline: 1 The existing DRM investment tracking mechanism should be updated and improved Ministry of Finance has increased capacity to monitor public sector investment in disaster risk reduction. SEGEPLAN requires that all public investment projects incorporate risk analysis, which contributes to the enforcement of the seismic standards. The target was met. A DRM tagging system is available and institutional training for its use was conducted. Area 4: Developing risk financing strategies In accordance with the NPDPM, the Ministry of Finance has completed: (1) Analysis of fiscal exposure to adverse natural events; Ministry of Finance has improved response capacity to mobilize resources in case of disasters. The target was partially achieved. The Ministry of Finance through COVIAL (Road Conservation Unit) has identified that major fiscal impact associated to natural hazards related to the transport sector. 15

22 (2) Assessed the contingent liability; and The target was partially achieved. Increased understanding of the Governments contingent liability by developing vulnerability assessments for selected groups of government buildings and bridge infrastructure. A preliminary CAPRA application was used at the national level to estimate maximum probable losses due to hurricanes and earthquakes. Indicator 4: Ministry of Finance has improved response capacity to mobilize resources in case of disasters. (3) Drafted the risk financing strategy. Baseline: 0 No comprehensive analysis of fiscal exposure, contingent liability and a risk financing strategy for adverse natural events available. * This table was prepared based on the PD Annex 1: Guatemala CAT DDO Policy Matrix. Studies are under way to identify the State s contingent liabilities to natural hazards. The target was partially achieved. As part of the National DRR Strategy ( ) a disaster risk financing strategic framework was drafted by a consultant but it has not become an official document. Executive Decree of July 14, 2010, updates the Insurance Sector Legislation and promotes its use to cover the impact of adverse natural hazards to meet increasing demand. A National Fund for Disaster Attention (NFDA) for up to US$100 m is currently being considered. 16

23 2.2 Major Factors Affecting Implementation: External Factors 30. In 2008, Guatemala entered into a period of slow economic growth triggered by the global financial crisis, and accentuated by a food price spike and an oil crisis. The economy of Guatemala was hit by a combination of declining exports, remittances and private capital inflows. Due to falling import taxes, by mid-2009, the government tax revenue especially related with exports had dropped by 7.8 percent. As a result, the GoG issued a decree to contain public expenditure; main social programs were exempted but other agendas suffered delays, among them the implementation of the National Program for Disaster Reduction and Prevention. The crisis prevented the GoG (CONRED, SEGEPLAN and MINFIN) to offer technical assistance to municipalities to include DRM in land use planning and monitoring budget appropriation. In addition, the lack of resources for retrofitting public buildings limited the interest for carrying out vulnerability studies. 31. A 14-month delay of the Congress of Guatemala to approve the operation reduced the loan implementation period. The Board approval was furnished on April 2009 and the loan signature by the GoG in June, In addition, once approved, the loan was disbursed in full within the first month, with no clear Bank guidelines to monitor the implementation of the DRM Program upon full disbursement. 32. During the implementation period of the CAT DDO, several disasters impacted the country s economy forcing realignment of resources to emergency response and slowing down prevention and mitigation initiatives. The almost concurrent volcanic eruption of Pacaya (May 2010) and Tropical Storm Agatha produced damages and losses for US$1.5 billion equivalent to 2.6 percent of the GDP an activated the CAT DDO. In October 2011, heavy rains associated to Tropical Depression 12 E caused losses estimated at 0.81 percent of GDP (see Annex 4). Factors under Government Control 33. Recovery processes associated with above-mentioned disasters provided an opportunity to promote concepts related to reducing vulnerability. Incorporating a risk reduction approach during and after the emergency requires political will and capacities, which can positively impact by helping to break the vicious cycle of development-disasterdevelopment. The GoG has seized the opportunity to go beyond the replacement or reparation of affected infrastructure, and begun to work on the intervention of vulnerability factors contributing to sustainability and risk reduction. 34. The new Government administration took office in January 2012, with limited information regarding the requirements for renewing the CAT DDO. The financial cost and legal aspects of using the revolving feature of the CATDDO were not clearly assessed by GoG and the Bank during appraisal and implementation. Legal uncertainties regarding the need for a Congress approval demotivated a newly established government to further explore this option. On the other hand, the new Administration acknowledged and incorporated previous efforts in the design of a National Strategy for Disaster Risk Reduction ( ), which still is under validation by national stakeholders. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 17

24 35. A better definition of outcomes, outputs and indicators would have made it easier to measure progress and evaluate accomplishments of the overall operation. The PD has shortcomings in the definition and selection of indicators, outcomes, outputs and baseline proposed in different sections of the document (Table V.2, Table VI.1 and Annex 1). The design of indicators is focused in a large number of outputs. The use of SMART indicators (specific, measurable, attributable, realistic, timely bound), for example, could have facilitated monitoring through Implementation and Status Reports (ISR) and evaluation through this ICR. In addition, the indicators and baseline data presented in PD Table VI.1 and Annex 1 were inconsistent, which made it difficult to understand what should be monitored and how to measure it Periodic monitoring reports were not requested by the Bank nor issued by the Government during the implementation. According to the Loan Agreement (Article III- Program), the Borrower should have furnished to the Bank for its review and comment a report on the progress achieved in carrying out the Program, in such detail as the Bank shall reasonably request. The Bank neither requested progress reports nor defined the details or periodicity expected for these reports. The Government Final Completion Report was replaced by an Aide Memoire as a result of a workshop (Annex 2). 37. Bank staff assisted the national entities in monitoring the execution of the program during the implementation period. The Bank was responsible for monitoring both the macroeconomic environment and progress of program implementation as measured by the indicators specified in the Loan Agreement. Although the project indicators were monitored in coordination with three entities: SE-CONRED, SEGEPLAN and MINFIN, measurement of the four outcome indicators were not reported on with enough frequency and verified to ensure data quality. 2.4 Expected Next Phase/Follow-up Operation (if any): 38. Focus on disaster risk management will continue through the proposed National Strategy for Disaster Risk Reduction ( ), and could be supported by a potential second CAT DDO. To improve its capacity to manage risk resulting from adverse natural events the Government has been formulating a NSDRR ( ), providing continuity to initial accomplishments and offering the policy framework for a potential second CAT DDO as stated in current CPS. 39. Support the consolidation of a comprehensive DRFI strategy through the design of specific instruments tailored to needs and conditions of the country. Developing and implementing a sustainable DRFI strategy is a long-term process that requires extensive capacity building. This highly specialized endeavor could be supported by a GFDRR trust fund and carried out in coordination with other units from the Bank (Treasury, PREM, GFDRR and LCSDU), the international community and the leadership of the national authorities. 40. At Central American level, Guatemala will continue to benefit from Banksupported initiatives, such as the implementation of the third phase of the CAPRA initiative. 13 For example, PD Table VI.1 established a benchmark of 15 percent of urban areas that have incorporated disaster risk management in the territorial planning, starting from a baseline of 5%.. How the baseline was measured is not explicit in the PD, nor how to quantify urban areas. A different benchmark for the same indicator was established in other section on the PDAnnex 1 (20 percent). 18

25 A recently approved Trust Fund for probabilistic risk assessment will help to evaluate risk at national, municipal and sectoral levels, providing information to define risk reduction strategies. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Consistency with Government Priorities 41. The CAT DDO supported Guatemala on the implementation of its National Program for Disaster Prevention and Mitigation ( ) and made resources readily available when most needed. The project supported the Program implementation through its four major lines of action: 1) Risk Identification and Monitoring, 2) Planning and Institutional Strengthening, 3) Risk Reduction, and 4) Financial Strategies for DRM showing full alignment with the country s priorities. Through a GFDRR trust fund (TF094228) the Bank provided technical assistance in land use planning and the formulation of technical specifications for building standards. At the same time, this CAT DDO assured quick and timely access 14 to funding in the aftermaths of the 2010 joint impact of Pacaya volcanic eruption and Agatha storm. 42. Project objectives, design and implementation remain consistent with Guatemala s current development priorities thus showing a high relevance of the CAT DDO operation. The new Government Administration, which took office in January 2012, has outlined an ambitious development agenda to ensure long-term sustainability of its development programs, systematic attention to environmental issues and the mainstreaming of recurrent impact of adverse natural hazards into specific plans. For example, the rural development plan addresses DRM through: a) a focus on ex-ante vulnerability reduction, b) improvement of early warning systems, c) use of territorial planning for disaster prevention and mitigation, and d) improved emergency response. 43. The National Strategy for Disaster Risk Reduction (NSDRR ) will be the new instrument to put into operation the National Policy for Disaster Risk Reduction. Under the leadership of CONRED, specialized teams for DRM (Mesa Nacional de Diálogo para la Gestión del Riesgo a los Desastres) have prioritized a number of activities that will have a direct impact on the improved capacity for DRM in the country. The NSDRR proposes the continuity to all the activities undertaken under previous PMPMD, among them those supported under CAT DDO implementation phase. Relationship with Bank Strategy 44. The GoG and the Bank have agreed on including DRM into joint strategies. From the outset, the project was aligned with the existing CPS ( ) that included DRM through promotion of sustainable growth and productivity. The relevance of the objective has been confirmed through the current CPS ( ), which incorporates DRM as a means to support competitiveness and growth. Complementarities with other World Bank activities 14 The National State of Emergency was issued on May 27, The first disbursement request was received on June 7 and disbursed on June 15. A second request was made on June 24 and disbursed on June 29,

26 45. The DPL with CAT DDO was complemented with other Bank technical assistance activities in the country. A GFDRR-financed technical assistance in the amount of US$0.73 million aimed at enhancing Technical and Scientific Information for Municipal Planning was prepared and implemented over a 2-year period (ending in January 31, 2011) through a participatory process with several institutions, including INSIVUMEH, MAGA, SE-CONRED, SEGEPLAN, and relevant municipalities. This TA supported the accomplishment of several CAT DDO s matrix outcomes, including the hazard and risk mapping, the methodologies for land use and planning and school safety index, an updated seismic building code and setting up of the Mesa Nacional de Diálogo para la Reducción del Riesgo 15. Guatemala was also part of the first phase of the Central American Probabilistic Risk Assessment (CAPRA) exercise, whose major accomplishment was a compendium of risk maps that provided disaster risk specialists and policy-makers with preliminary national level hurricane and earthquake maximum probable losses. This information was useful to estimate disaster impact for the DRFI strategy. Alignment with Good Practice Principles and Conditionality 46. The DPL with CAT DDO looked for operational consistency with the Bank s Five Good Practice Principles of Conditionality. 1) This operation reinforced national ownership by aligning its development objective, outcomes and outputs to government specific goals; 2) An operational policy matrix was agreed up front with the GoG and coordinated with the IMF; 3) the Bank supported the Government s development of its integrated financial management system (SIAF) and e-procurement system (Guatecompras); and 4) The policy matrix contains outcomes that have been defined by the borrower and are closely linked to the supported policy actions. 3.2 Achievement of Program Development Objectives 47. This DPL with CAT DDO has enhanced the Government s capacity to implement its DRM program. Although it is very difficult to establish a direct causal relation between the CAT DDO and the progress made by the government, it is possible to assert that Guatemala s DRM agenda has moved from emergency-centered actions to a more systemic risk management approach with more participation of development entities as SEGEPLAN and MINFIN. 48. To achieve the PDO, the project was divided into four outcomes, of which the improvement of risk identification and monitoring data and the strengthening of institutional and planning capacity for risk management are the ones with the best results. Through the upgrade in more than 50 percent of meteorological, hydrometric and seismic networks, Guatemala has improved its capacity to produce more accurate alerts. The scientific data produced by INSIVUMEH also supports the GoG to make well-informed decisions to effectively integrate disaster risk considerations into development plans, vulnerability analysis, designing of seismic standards, and the establishment of disaster prevention plans. 49. The instruments produced to guide municipalities and other government levels to include DRM 16 into regular business and operations are significant. This has gone in hand 15 GFDRR, Guatemala Country Program Update 2011 and Guide for DRM incorporation in Land Use Planning (Guía para la inclusión de la Gestión del Riesgo en los Procesos de Ordenamiento Territorial, 2. Guidelines to articulate DRM in sectoral and instituional planning (Lineamientos para vincular la Gestión del Riesgo en planificación sectorial e institucional),3. Guide for risk analysis in public investment (Guía para el análisis de riesgo en proyectos de inversión pública, 4. Guide for the fomulation of development plans (Guía para la formulación de Planes Municipales de Desarrollo) 20

27 with training and capacity building which have generated that disaster risk management considerations are being slowly incorporated in key plans (municipal development and land use). 50. The number of public buildings that meet building standards and the improvement to mobilize resource in case of disasters were more limited. The formulation of the seismic standards (NRD-1) represent an important milestone, although supplementary work is required to ensure its mandatory enforcement, though its approval as a law by Congress and the establishment of adequate institutional arrangements to supervise designs and works in each municipality. In the other hand, despite the fact that several initial steps have taken place in the country towards the definition of a DRFI strategy is only on its initial conceptual stage and the limited information obtained regarding the fiscal exposure and contingent liabilities do not allow to identify the adequate instruments to transfer or retain the risk. 51. The four outcomes and action areas included in the project were aligned to the four proposed objectives of the NPDPM. The Program focused on the following four objectives: (i) improve risk identification and monitoring, (ii) invest to reduce risk, (iii) strengthen institutional and planning capacity for risk management, and (iv) develop risk financing strategies. The proposed new National Strategy for Disaster Risk Reduction ( ) could provide continuity to the NPDPM, identifies strategic lines of action, assigns specific roles and responsibilities to public and private organizations, clarifies the role of local governments, and provides a guideline for resources assignment. 52. The achievements made by the DPL with CAT DDO have been part GoG coordinated efforts with other international organizations. The IADB, the UN System, UNISDR, CEPREDENAC, CABEI, and the European Commission through different projects contributed to the NPDPM, therefore to several of the outcomes proposed in the project. The upgrade of the monitoring networks was possible due to an investment credit provided by CABEI to the GoG to complement national funding. Likewise, IADB assisted GoG in the design of the risk financing strategic framework which will need to develop specific instruments and procedures to make it operational. UNDP has supported institutional strengthening for DRM and contributed to the development of different guidelines promoted by SEGEPLAN. 3.3 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 53. The CAT DDO exhibited high relevance to the needs of the country. The project s design and implementation strategies have contributed to the Government s Development Plan and the National Program for Disaster Prevention and Mitigation ( ), and continue to be relevant as shown in the new National DRR Strategy ( ) and the new CPS ( ). 54. In accordance with the purpose of the DPL with CAT DDO, this project provided a quick source of liquidity injection after catastrophic events. The project was very efficient in providing quick liquidity in response to the eruption of the Pacaya Volcano and the Tropical Storm Agatha. The instrument also was an important innovation and advance in the Bank s line of products and the country s risk financing tools. 55. During project implementation, important policies and tools contributed to the improvement of disaster risk management in Guatemala. Significant advances in disaster risk monitoring, alerts and risk evaluation as well as different instruments for incorporating DRM in 21

28 planning process, among progress in other activities, contributed to position DRM in the development agenda. 56. Nonetheless, this ICR rates the project as Moderately Satisfactory, as the project did not succeed in four of the thirteen outputs. Shortages in developing the analysis of fiscal exposure, the assessment of contingent liabilities, the development of a comprehensive risk financing strategy and difficulties in validating the number of retrofitted and repaired schools contributed to this rating. 57. In addition, the need of improvements in policy dialogue, monitoring and reporting procedures, and clarity about renewal options were identified through this ICR. A sustained policy dialogue between the Bank and the Government and an appropriate M&E structure during the implementation could have helped to improve the results. 3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 58. The vulnerability of Guatemala to natural hazards, economic external shocks, and violence impinges on both economic growth and the achievement of more equitable social outcomes. The two events that occurred in 2010 (the volcano Pacaya and the Agatha storm) had severe consequences in terms of loss of life and economic impact. The CAT DDO provided financial resources to quickly respond to the disaster, likely reducing the burden of the shock on the poorest, which are normally the more affected. 59. Sustainability of social programs is usually threatened by the negative impact of natural hazards. Poverty reduction programs in Guatemala are constrained by low tax revenue and poorly funded social spending, reflecting historically weak fiscal capacity. Funding of these programs tends to be diverted to cope with the humanitarian phase of a disaster and the later recovery process. These funds are difficult to be paid back contributing to an even worst scenario for the underprivileged. Having in place the CAT DDO contributed to fill partially the budgetary gap helping handling these complex situations. (b) Institutional Change/Strengthening 60. Institutional strengthening and capacity building was one of the most important accomplishments during the program implementation period. CONRED significantly improved its catalytic role to convene and coordinate different national and local entities engaged in the DRM process, including scientific, sector ministries, the municipalities and belonging not only to the public but also the private sector, the international community and the NGOs. Particularly relevant for the purpose of DRM policy is the engagement of SEGEPLAN and MINFIN through territorial planning, tracking for public investments and better understanding DRFI needs for the country. (c) Other Unintended Outcomes and Impacts (positive or negative, if any) 61. The progressive development of instruments for the incorporation of the DRM agenda led to formulate an additional guideline for sectoral development planning. SEGEPLAN developed guidelines to incorporate DRM within the planning processes at the sectoral and institutional levels (Lineamientos para vincular la gestión del riesgo en el proceso de 22

29 planificación sectorial e institucional) that go beyond the targets of the CAT DDO. SEGEPLAN and MINFIN have acquired a prominent role in the implementation of the DRM agenda in Guatemala by joining traditional stakeholders such as SECONRED. In addition, the permanent inter-institutional dialogue and coordination allow DRM mainstreaming into regular development business and a better use of resources. 62. The DRM technical assistance provided during the Project implementation was a vehicle for several innovations that have become common practice in DRM efforts. Notably (a) a methodology for risk and vulnerability analysis and preventive planning that dynamically integrates complex technical and scientific expertise with community knowledge through an educational and awareness raising process for all participants; (b) the development of a School Safety Index applied to more than forty schools in urban areas, along with a work in progress methodology to be applied in rural areas where structural typologies differ substantially; and (c) the establishment of a dialogue, exchange and DRM coordination mechanism integrated by delegates from relevant national organizations know as Mesa Nacional de Dialogo para la Gestion del Riesgo. 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not Applicable 4. Assessment of Risk to Development Outcome Rating: Negligible to low 63. The DPL with CAT DDO has contributed to institutionalizing GoG s capabilities and methods to implement its DRM Program thus assuring its sustainability over time. The sustainability of the intervention is high given the Government s full ownership of the program. The Government has contributed with important human and financial resources to the program development objective which can be seen through at least three key accounts: 1) Legal and institutional frameworks provide a comprehensive DRM system, boosting CONRED s role as coordinator and promoting the participation of other key institutions (SEGEPLAN, Ministry of Finance and the municipalities); 2) The National DRR Strategy ( ) acknowledges the new administration s interest to incorporate these issues into the new development agenda, therefore, assuring continuity of processes after a short delay associated to the administrative transition period; and 3) A reform of the National Fund for Disaster Attention (NFDA) assigned to CONRED is considered to add financial resource for emergency management and risk reduction in general. 64. DRR program implementation can be delayed due to recurrent impact of severe natural events in Guatemala. Recurrent emergencies force re-allocation of resources to handle the humanitarian response and recovery process reassigning funds from on-going programs. The GoG is working to progressively reduce possible impact in terms of loss of lives and investments. For the later, a comprehensive DRFI strategy for Guatemala will support national and local authorities to reduce the impact of an unexpected severe natural hazard. For the former, efforts to reduce vulnerability through, for example, more hazard-sensitive land use planning and development, and enhanced disaster response capacity will help reduce losses. The CAT DDO in particular contributed to enhance risk mapping, land use planning, building design and construction standards, and a preliminary risk financing strategy. 23

30 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 65. The Bank promptly addressed a formal request from the GoG for a DPL with CAT DDO, through an interdisciplinary team comprised of staff from PREM, Treasury and Disaster Risk Management - LCSDU. The team correctly identified country needs. Within 60 days the Bank completed the appraisal and approval phases. The relevance of the project to both the GoG and the Bank contributed to a dynamic dialogue and exchange in the project formulation and Board approval. While policy issues were fully assessed in preparation, the monitoring framework was weak in terms of definition of outcomes and specific indicators. 66. The CAT DDO was a new financial product considered by the Bank as pioneering given its flexibility and promptness in formulation and disbursement. The team achieved two important outcomes in preparing the project. Firstly, it was able to take advantage of a newly created instrument, which was first approved for the Government of Costa Rica in September and Colombia in December Secondly, it managed to include action areas focused in key issues relating disaster risk management with development, moving the Government to look beyond the traditional emergency management vision. 67. The newness of the product may have contributed to a lack of clarity and explanation to the client on how the renewal option of the CAT DDO was to function. It also, may have contributed for the underestimation of the big challenge that a high number of outputs and ambitious targets represented for the supervision. (b) Quality of Supervision Rating: Moderately Unsatisfactory 68. The team undertook regular supervision missions and managed technical assistance to provide support in the implementation. Through a GFDRR trust fund the team contributed to the promotion of the municipal preventive planning to risk reduction and incorporate the risk management into the development planning process. The major impact relates to the enhancement of local DRM capacity by supporting the preventive municipal planning through the development of municipal land use plans (including risk maps) for 12 municipalities, and updating of the National building code. 69. The opportunity to support the policies and outputs related with the disaster risk financing strategy was not fully managed. Although the team did realize some activities, like a regional workshop to exchange experiences among Central American countries related with disaster risk financing, the insufficient technical assistance and coordination with IDB in this area where the Bank has been a lead entity, resulted in shortages in the output related with developing the analysis of fiscal exposure, the assessment of contingent liabilities, and the development of the DRFI strategy. 70. There was fragile monitoring of the program supervision. During project implementation the appropriate documentation was not filed after every supervision mission. The information provided and frequency of the ISR were not enough to document the progress. There 24

31 are in total four ISR: the first two, submitted before the loan effectiveness (05/12/2009 and 12/01/2009), the third a week after the loan effectiveness date (06/11/2010), and the last in 07/09/2012. None of the ISRs make a complete reference to the four outcome indicators established. 71. Further contributing to the Moderately Unsatisfactory rating was the failure of the Bank to request from the GoG the presentation of periodic reports as established in the loan agreement and to provide timely information about the instrument renewal options and cost. As a result of not requiring the support from the Government, the Project did not benefit from complete and supported information regarding the progress of indicators, and the possibility of the GoG to take in a timely manner the decision of activating the revolving mechanism of the CAT DDO. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 72. Overall Bank performance is rated moderately satisfactory: The Bank designed a project that was well adapted to the needs of the country, and provided adequate financial support to the emergency. However, the efforts and resources dedicated to support key policy and institutional reforms during supervision of the CAT DDO were insufficient. The Bank underestimated the challenges of supporting the dialogue and the achievement of ambitious outcomes, and did not put in place an appropriate M&E framework at project design and implementation, consequently the overall rating proposed is Moderately Satisfactory Borrower Performance (a) Government Performance Rating: Moderately Satisfactory (b) Implementing Agency or Agencies Performance Rating: not applicable (The Government and the implementing agency were the same) (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 73. Overall Borrower s performance was rated as moderately satisfactory. During the project execution, the GoG implemented the National Program for Disaster Prevention and Mitigation (Programa Nacional de Prevención y Mitigación ante Desastres ), strengthened DRM national capacities, and progressively integrated other development agencies (such as SEGEPLAN, Ministry of Environment, MINFIN and the Academia) in the DRM process. The following aspects are worth highlighting: The Government s implementation arrangements were aligned with the project s needs. The Government was overall committed to the development of the disaster risk management agenda that was affected by the reduction of budgetary ceilings. 17 The overall MS rating for Bank performance combines the MS rating for quality at entree and the MU rating for supervision, and considers the overall project outcome ratings of MS. Based on the ICR preparation guidelines, when the rating is in the satisfactory range while the rating for the other dimension is in the unsatisfactory range, the rating for the overall Bank Performance normally depends on the Outcome rating. 18 Política Nacional para la Reducción del Riesgo a los Desastres de Guatemala, CONRED,

32 The Government coordinated with different donors and partners to accomplish the outputs. Although the Government managed to accomplish positive results and to put DRM in the public agenda, four out of thirteen established outputs were partially achieved, particularly those related to risk financing strategy, public facilities vulnerability analysis and construction codes for public buildings. The Government did not provide periodical reports as established in the loan agreement. The Government did not furnish a completion report. Hence the Government and the Bank carried out a consultation workshop with the implementation agencies to assess the projects outcomes (See Annex 2). 6. Lessons Learned CAT DDOs as instruments that offer different opportunities: 74. The CAT DDO is designed to not only provide liquidity. As a DPL, the CAT DDO entails a combination of financial transfer to the country s budget to provide liquidity after an emergency, with an equally important component of DRM policy advice and dialogue. Therefore, adequate resources and technical assistance to support achievement of project outcomes should be provided accordingly. 75. DPL with CAT DDO operations could be an opportunity to introduce broader concepts of Disaster Risk Financing and Insurance (DRFI) for countries developing comprehensive strategies. These types of projects are a conductive venue to inform national stakeholders of the importance of having in place a comprehensive DRFI strategy tailored to specific country needs and capabilities. Governments should be encouraged to structure complementary financing mechanisms for emergency situations to offset the CAT DDO with national reserve funds or resources from other sources, especially to address small-scale events, since the instrument is better suited for fiscal unbalances caused by less frequent and more severe disasters. CAT DDOs as instruments as part of a broader engagement: 76. Matching the CAT DDO with parallel technical assistance can enhance the DRM policy dialogue. Having the DPL with a CAT DDO as part of a larger level of engagement with the country through TAs or other lending operations can facilitate continued engagement and a fluid exchange with the government. 77. The process of designing a CAT DDO can provide a platform to bring other sectors and institutions. A wide range of stakeholders coming from the public sector, academia, and other organized groups of the civil society, can be part of a comprehensive initiative to support the National DRM Plan and to introduce the risk perspective in the sectoral and territorial planning. 78. DPLs with CAT DDO require coordination with development partners in order to achieve more sustained and broader impacts. Sustained changes at the policy level will require a partnership approach with other bilateral and multilateral partners to exchange ideas, receive feedback, but more importantly to avoid resource duplication and find synergies to scale up impact. The Bank should support the local government to become a catalyst of this process, where its leadership can align all DRM effort towards the same goal. 26

33 79. Given the multidisciplinary nature of DRM, the implementation of a DPL with CAT DDO requires partnerships with other sectors within the World Bank Group. This type of operation is perfectly suited to strengthen inter-sector collaboration with different teams in the Sustainable Development network as part of the mainstreaming process, as well as PREM, FPD, and Treasury. Although this approach was not implemented during supervision, it could improve the fiscal evaluation, DRFI analysis, and financial management. CAT DDOs should evolve: 80. It is necessary to learn how to manage early disbursements of CAT DDOs. A Declaration of Emergency caused by a catastrophic event triggers the disbursement of the instrument and not the outputs/outcomes. Since regular DPL s usually close after full disbursement, this situation becomes a negative incentive for the completion of CAT DDO s output/outcomes when early full disbursement occurs. Moreover, Bank systems reported the operation as closed and systematically did not required the ISR s, therefore, they need to be adapted to better reflect the Bank supervision for CAT DDO s, especially when the disbursement of the loan is made in early stages of the project implementation. 81. DPLs with CAT DDO have a revolving and renewal features that need to be further analyzed by the Bank and explained to governments during Project preparation. There are three aspects that should be considered: 1) Financial: All the parties related to the instruments should be familiarized with financial costs. The Bank should emphasize different options available for repayment, renewal, and interest rate allocation; 2) Legal: It is strongly recommended that the Bank reviews with the client during Project Preparation, national regulations and legal implications for activating the revolving or renewal feature; 3) Technical: Bank guidelines indicates that CAT DDO renewals will require that the original program (hazard risk management and macroeconomic frameworks) remains largely in place. Therefore, it is necessary to clarify the period of implementation of outcomes and outputs to better establish and evaluate them, and facilitate the process of updating the Policy Matrix when repayments and renewals are made, considering as an option the possibility to become a programmatic DPL. The programmatic approach offers flexibility to manage risks and captures the medium-to long-term nature of most significant reforms. 82. An operational manual can be helpful to address emergencies and should be considered for future DPLs with CAT DDO. Planning can contribute to a quick allocation of resources in case of emergency situations. Identifying key roles and responsibilities of different institutions and stakeholders in the DRM process, particularly for emergency response and management, prioritization of funds, sequencing of activities, and funding decisions will allow strategic decision making. Governments should be encouraged to have procedures and mechanisms in place to address these aspects, especially inter-institutional coordination. 83. Reporting mechanisms should be more specific in the loan agreements, and agreed up front with the government including the designation of the responsible party. The most important sources of information for an appropriate and timely monitoring and evaluation of program implementation are the government s reports, which should properly record progress made through key outcome indicators. This would facilitate adjusting support in real time and providing international experience from the Bank when most needed. In addition, the compilation of these reports will smooth the write-up process of ICRs and the dialogue with counterparts. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 27

34 84. An Aide Memoire with Borrowers comments are presented at Annex 2. 28

35 Annex 1 Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Lending Names Title Unit Joaquin Toro TTL - Sr Disaster Risk Management Specialist LCSUW Francis Ghesquiere Lead Urban Specialist LCSUW Niels B. Holm-Nielsen Hazard Risk Management Specialist LCSUW Armando Guzman Hazard Risk Management Specialist LCSUW Marcela Tarazona Hazard Risk Management STC LCSUW Ana Maria Torres Hazard Risk Management STC LCSUW Emma Philips Hazard Risk Management STC LCSUW Maricarmen Esquivel Hazard Risk Management STC LCSUW Osmar Velasco Hazard Risk Management STC Violeta Wagner Sr Program Assistant LCSUW Supervision Ana Campos Garcia ICR TTL - Sr Disaster Risk Management Specialist LCSDU Armando Guzman = TTL- Sr Disaster Risk Management Specialist LCSDU Joaquin Toro TTL- Sr Disaster Risk Management Specialist LCSDU Osmar Velasco Sr Disaster Risk Management STC LCSDU Jeannette Fernandez Sr Disaster Risk Management ETC LCSDU Andre Carletto Disaster Risk Management STC LCSDU Luis Corrales Disaster Risk Management STC LCSDU Stamatis Kotouzas Junior Professional Associate LCSAR (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage USD (including travel and No. of staff weeks consultant costs) Lending FY , FY Total: , Supervision/ICR FY , FY , FY , FY , FY , Total: ,

36 Annex 2. Summary of Borrower's ICR and/or Comments on Draft ICR Aide-Memoire Validation Workshop on Implementation Completion and Results Report (ICR) for the Disaster Risk Management Development Policy Loan with a Catastrophe Deferred Drawdown Option (DPL with CAT DDO BIRF 7683) Guatemala City, February 7 th 2013 Background In April 2009, the Bank s Board of Executive Directors approved the Disaster Risk Management Development Policy Loan (DPL) with a Catastrophe Deferred Drawdown Option (CAT DDO), requested by the Government of Guatemala (GoG) for US 85 million dollars, which was declared effective in June 3 rd To respond to the impact caused by eruption of the Pacaya volcano and tropical storm Agatha, the Government of Guatemala withdrew a first disbursement in the amount of US$ 50,000,000 on June 15 th 2010 and the remaining undisbursed amount on June 29 th The agreed drawdown trigger to access the funds was a declaration of national state of emergency by Executive Decree N issued by the Congress of the Republic on June 1 st CAT DDO development objective was to strengthen the GoG national capacities to implement the National Program for Disaster Prevention and Mitigation to face adverse natural events. Validation Workshop Purpose The Validation Workshop aimed to review jointly the Implementation Completion and Results Report (ICR) and collect inputs from GdG agency representatives in light of the assessment of outcomes achieved, measured in terms of the accomplishment towards the General Objective and indicators, Bank performance, GoG performance, assessment of key factors affecting performance and lessons learned. This validation workshop was attended by representatives of the Directorate of Public Credit under the Ministry of Finance (DCP/MINFIN), Ministry of Planning (SEGEPLAN), Ministry of Education (MINEDUC), Institute for Seismology, Volcanology, Meteorology and Hydrology (INSIVUMEH) and representatives of the World Bank. Validation Workshop Development Initially, DCP/MINFIN officials welcomed workshop participants and explained the context under which the GoG requested the contingency loan to the WB. They also synopsized the DPL with CAT DDO as instrument to ensure financial liquidity to cope with times of crisis. The four key outcome indicators contained in the CAT DDO policy matrix and the thirteen output indicators were individually assessed against their respective baseline and goals initially proposed. They reviewed also internal and external factors that might have affected the project implementation. Then, the ratings given to the accomplishment of project objectives and outcomes, the proposed bank performance and the proposed Borrower performance were assessed by the representatives of attending agencies. The Bank s delegates explained rating criteria and scale. 30

37 They held discussions about the operation timetable, from the date of approval of CAT DDO on April 14 th 2009 through its congress approval on June 1 st 2010 and total disbursement on June 29 th They clarified that during the 14-month period elapsed between the approval date and the execution date, the Bank accompanied the dialogue and the implementation of concrete DRM actions through a technical assistance financed by the Global Facility for Disaster Reduction and Recovery (GFDRR). Finally, validation workshop participants formulated the lessons learned resulting from the implementation of this operation. Comments from government agencies 1. About DPL with CAT DDO The representatives of government agencies concluded the DPL with CAT DDO accomplished successfully its main goal to support Guatemala on the implementation of its NPDPM and made resources readily available when most needed following the declaration of the national state of emergency as a result of the eruption of Pacaya volcano and tropical storm Agatha. Furthermore, the validation workshop participants stated the declaration of the national state of emergency as a result of a disaster is a sound trigger that activates the CAT DDO because it provides said mechanism with flexibility and swiftness to disburse credit funds and said trigger must be the primary precondition sufficient to release funds. They recommend establishing an Operational Manual to guide the use and implementation of credit funds for similar operations. It is advisable to have in place instruments complementing CAT DDO to diversify disaster financing options in case of disasters, e.g. inter alia, implementing and strengthening a prevention and response emergency fund. Importantly, have the best information about the CAT DDO revolving facility and maintain dialogue during the project implementation. The representatives of government agencies believe the DPL with CAT DDO was part of national efforts undertaken to improve the country DRM capacity, timely supported by other development partners. 2. About Outcome Indicators Outcome Indicator 1: Data from INSIVUMEH and the vulnerability analysis are being used to prioritize public investments 1.1 INSIVUMEH agreed with the outcome indicator values and stated the meteorological radar procurement is in progress. 1.2 MINEDUC reported the school safety index (SSI) was applied throughout 43 urban schools and the methodology is being revised for implementation in rural zones. SEGEPLAN confirmed the hospital safety index was applied in 4 national hospitals (Cobán, San Juan de Dios in Guatemala City, Salamá and Mazatenango). 1.3 They clarified the development of perception maps of flooding and landslides and historic records for all municipalities in the country (total of 333) was supported jointly by 31

38 SEGEPLAN and SE-CONRED. Likewise, the 12 municipalities selected are within the four watersheds identified, not additional ones. Outcome Indicator 2: SE-CONRED and SEGEPLAN are mainstreaming disaster risk management considerations in key plans with respect to capacity building, training, and investments 2.1 Participants agreed with the outcome indicator matrix on the number of reports developed. 2.2 SEGEPLAN clarifies the methodological guide employed to mainstream risk variables in key development plans and territorial planning is included in a single document that complements the public investment guide and strategic planning. 2.3 Representatives of governmentagencies agreed on the percentage of urban beneficiaries benefitted from the inclusion of DRM into urban planning processes as variable to measure this outcome indicator. Outcome Indicator 3: New public buildings meet the terms of improved building standards 3.1 MINEDUC clarified the schools affected by the eruption of Pacaya volcano and tropical storm Agatha, were assessed and most of them had minor repairs as a result of volcanic ash fall events, heavy rains and floods. Though some cases saw structural repairs, an updated record is not available. Considering the foregoing, the validation workshop participants agreed to rate it as target partially achieved. 3.2 SEGEPLAN clarified the NRD1 is a technical standard approved by a Government Order instead of a Decree as mistakenly seen in the outcome indicator matrix. Additionally, the disaster risk assessment was included into public investment projects, which promotes the enforcement of the seismic standard. Bottom line: the representatives of government agencies recommend upgrading the rating as target accomplished. 3.3 DCP/MINFIN reported it had designed a budget expenditure classifier to track budget appropriation for disaster risk management. Its implementation at central level has advanced. Furthermore, validation workshop participants observed the budget appropriation classifier tracking the municipal public investment should be classified under Outcome Indicator 2. Outcome Indicator 4: The Ministry of Finance has improved its response capacity to mobilize resources in case of disasters 4.1 DCP/MINFIN stated its agreement on this outcome indicator rating 4.2 DCP/MINFIN requested to incorporate into the CAT DDO policy matrix, the progress seen in identifying contingent liabilities resulting from natural threats (geological, hydrological and meteorological ones) that may affect state finances. These are preliminary assessments. Upon completion, they expectedly would contribute to measure risks and inform the design of risk financing instruments. 4.3 Validation workshop participants believe the GoG has undertaken initial efforts to identify the potential constituents of a DRM financing strategy. In the future, they expect to consider the assessment and design of specific risk financing instruments such as equity funds, contingency loans, insurances, etc. 32

39 Bottom line: upon the assessment of outcome indicators as whole, the validation workshop participants recommended to modify their current ratings, as follows: Upgrade rating of Outcome Indicator 1.2 from Target partially accomplished to Target overachieved Downgrade rating of Outcome Indicator 3.1 from Target overachieved to Target partially accomplished Upgrade rating of Outcome Indicator 3.2 from Target partially accomplished to Target Met Correspondingly, the number of Outcome Indicators partially accomplished account for 4 out of About Factors that Affected the Credit Implementation: Representatives of state agencies agreed on key factors identified in the ICR 4. About Ratings: 4.1. Scope of Project Objectives Representatives of government agencies believe the Project Objectives were accomplished as much as GoG s capacities to implement its National Program for Disaster Prevention and Mitigation increased. Likewise, they stated said Project Objectives remain relevant beyond the operation end because their continuity will be ensured by the proposed National Strategy for Disaster Risk Reduction ( ), thus keeping the government priorities in this topic. On the other hand, disbursed funds contributed to provide the GoG with a quick source of liquidity in the event of severe crisis following the impacts from the eruption of Pacaya volcano and tropical storm Agatha Loan Assessment Representatives of state agencies deemed appropriate the Moderately Satisfactory rating proposed for the loan assessment. They suggested implementing more adequate mechanisms to ensure sound monitoring and evaluation from the Bank and country agencies Bank Performance Assessment The Bank s performance in managing the credit requested by the GoG is rated Moderately Satisfactory while the quality of supervision is rated Moderately Unsatisfactory, which matches the criteria set forth in the ICR report. Considering the Bank assessment guides, the validation workshop participants proposed the overall bank performance to be reconsidered as Moderately Satisfactory. 33

40 4.4. Government Performance Assessment Validation workshop participants rated the Government Performance as Moderately Satisfactory, which is consistent with the proposed ICR assessment criteria. Lessons Learned Proposed by Representatives of State Agencies 1. The objectivity and quality of the Policy Matrix Outcome Indicators should be enhanced as they are critical to ensure sound monitoring and follow-up, as well as clarity to guide actions leading towards the achievement of outcomes and targets. 2. The role and purpose of CAT DDO instrument played within a country risk financing strategy should be clarified. 3. The CAT DDO met its goal, which was to provide the GoG with liquidity to cope with times of crisis. Here, the advantages of such instrument are acknowledged for its flexibility. 4. The development of a CAT DDO Operational Manual is recommended in order to clarify arrangements and procedures regulating disbursements, frequency and responsibilities falling under reporting, monitoring and evaluation. 5. Improve Bank s technical accompaniment relating to capacity building and follow-up. 6. Encourage regular inter-institutional meetings to discuss monitoring and follow up during the project implementation. Comments on ICR Contents DCP/MINFIN representatives informed comments and observations on ICR would be submitted to the Bank in the coming days. Furthermore, regarding the Bank s proposal to support the Government of Guatemala in granting a second DPL with CAT DDO operation, due note has been taken and MINFIN top management will be briefed appropriately so they state their interest in this potential credit operation. Raúl Rolando Enríquez Director de Crédito Público Ministerio de Finanzas Públicas Ana Campos García Task Team Leader World Bank Copy of the original Aide-Memoire in Spanish 34

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46 Annex 3. List of Supporting Documents 1. IBRD Program Document for a proposed Disaster Risk Management Development Policy Loan with a Catastrophe Deferred Draw Down Option (CAT DDO) in the amount of US$85 million to the Republic of Guatemala, March 10, Loan Agreement Disaster Risk Management Development Policy Loan between the Republic of Guatemala and the IBRD, June 1, IBRD and IFC, Country Partnership Strategy for the Republic of Guatemala for the periods FY 09-12, and FY Disaster Risk Management in Central America: GFDRR Country Notes, Guatemala 5. Implementation Status and Results Reports of May 12 and December , June 11, 2010 and June 25, Informe de avances en el marco del préstamo para políticas de desarrollo sobre la gestión del riesgo de desastres con una opción de desembolso diferido ante catástrofes (CAT DDO), CONRED, Junio 7 de Programa Nacional de Prevención y Mitigación ante Desastres , Enero Estrategia Nacional para la Reducción del Riesgo a los Desastres , versión 1 (en proceso de validación por la MNGRRD), Abril, Foro Internacional: Entendiendo las inversiones públicas para la reducción del riesgo de desastre, caso de Guatemala, San Cristóbal de las Casas, México, Sept. 27 de Informe Final de la Guía para incorporar la Gestión de Riesgos en la inversión pública, Miguel Ángel Zea, Consultor para SEGEPLAN 11. Guía para la Formulación de Planes Municipales de Desarrollo, Módulos 1-4, SEGEPLAN Manual de Clasificaciones Presupuestarias para el Sector Publico de Guatemala, Ministerio de Finanzas 12. Gestión para la Reducción de Riesgos a Desastre, Presupuesto Público y Seguimiento al Gasto, Ministerio de Finanzas, Junio de Análisis de Riesgo en Proyectos de Inversión Pública, Guía de aplicación para proyectos que forman capital fijo, Guatemala Plan de Gobierno IADB, Lineamientos de la Estrategia de Gestión Financiera del Estado para la Gestión del Riesgo de Desastres en Guatemala, Proyecto GU-T1135: Fortalecimiento de Capacidades para la Gestión Integral del Riesgo de Desastres, Agosto,

47 Annex 4. The Impact of Pacaya Eruption and Agatha Tropical Storm The accumulated effects of all events associated to Volcano Pacaya eruption and the Tropical Storm Agatha, that hit the country immediately after the eruption, including landslides, flooding, and associated loss caused by extraordinary rainfall and storms between May and September 2010, have affected 3.9% of total population of Guatemala. The Post-Disaster Needs Assessment (PDNA) conducted by a team of experts from ECLAC, World Bank and UN has shown that although the total impact is concentrated in the public sector infrastructure, it is also vital to recovery losses affecting population livelihoods and incomes (particularly women who are Guatemala: Affected Population, 2010 Population Total Affected Displaced Sheltered Missing 42 Wounded 223 Death 235 Impact (%) (based on total population 3.9 Source: SE-CONRED, 2010 affected directly by their own losses and the need to spend more time at home attending the family, with less time for paid activities), and the environment (drainage capacity of rivers, flooded soil restoration, water sources cleaning, debris and waste disposal). Aggregate macro-economic effects of the two events did not significantly alter the original estimations, but posed an additional challenge of financing and investment by increasing cumulative risk. Guatemala's macroeconomic performance through September 2010 has been robust due to rapid increase in exports and imports, as well as the recovery of almost all productive sectors, except agriculture, which experienced a significant slowdown because of the disasters effects. Damage and losses, due to the eruption of Pacaya and heavy rains after the passage of Tropical Storm Agatha in 2010, were US$ 1,552.6 million equivalent to the 2.6 percent of 2009 In the overall evaluation of the eruption of Pacaya and Tropical Storm Agatha highlights some important conclusions regarding: 1. The urgency of including disaster risk management as a strategic part in the estimation of the profitability, viability and sustainability of investments, infrastructure and human settlements. 2. It is paramount to foster risk understanding for developing risk reduction and transfer tools customized to local needs, so the country may have a Disaster Risk Financing and Insurance strategy to cope with future events. 3. The cumulative effect of events, which do not have a full recovery and reconstruction, gets worse with each new disaster increasing damages and losses, and reconstruction and recovery costs. 4. The cumulative effects of environmental degradation (reduction of absorption capacity and resistance to natural events) result in substantial damage and loss, even when the event is not extreme (for its strength and intensity). 41