FOR OFFICIAL USE ONLY

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1 Document of The World Bank FOR OFFICIAL USE ONLY Report No: GT PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$62.3 MILLION TO THE REPUBLIC OF GUATEMALA FOR A LAND ADMINISTRATION I1 PROJECT IN SUPPORT OF THE SECOND PHASE OF THE LAND ADMINISTRATION PROGRAM (APL) November 15,2006 Environmentally and Socially Sustainable Development Latin America and the Caribbean Region Central America Country Management Unit This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective July 2006) Currency Unit = Guatemalan Quetzal (GTQ) 7.5 GTQ = US$1 0.13US$ = 1GTQ FISCAL YEAR January 1 - December 31 APL BANGUAT CAS CNP-Tierra COCODES CONAP CONGCOOP CONIC CONTIERRA DICABI DPL EA ECUT EMP FM FMA FMR FONTIERRAS GoG GTZ IBRD ICB IDAEH IGN ILO INAB INTA IPDP IPSAS IRR ISA ISR ABBREVIATIONS AND ACRONYMS Adaptable Program Loan Bank of Guatemala (Banco de Guatemala) Country Assistance Strategy Permanent National Coordination on Indigenous Land Rights (Coordinacidn Nacional Permanente sobre Derechos Relativos a la Tierra de 10s Pueblos Zndigenas) Community Development Council (Consejos de Comunidades para el Desarrollo) National Council for Protected Areas (Consejo Nacional de Areas Protegidas) NGOs and Cooperative Coordination (Coordinacidn de ONGs y Cooperativas) National Peasant and Indigenous Coordination (Coordinadora Nacional Zndigena y Campesina) Special Commission of Land Conflict Resolution (Dependencia Presidencial de Asistencia Legal y Resolucidn de Conjlictos sobre la Tierra) National Cadastre and Valuation Agency (Direcidn Nacional de Catastro y Avaluo de Bienes Znmuebles) Development Policy Loan Environmental Assessment Land Use Potential Study (Estudio de Capacidad de Us0 de Tierra) Environmental Management Plan Financial management Financial Management Capacity Assessment Financial monitoring reports Land Fund (Fondo de Tierras) Government of Guatemala German Technical Cooperation (Deutsche Gesellschaft fur Technische Zusammenarbeit) International Bank for Reconstruction and Development International Competitive Bidding Guatemalan Institute of Anthropology and History (Znstituto de Antropologia e Historia de Guatemala) National Geographic Institute (Znstituo Geogrufico Nacional) International Labor Organization National Forests Institute (Znstituto Nacional de Bosques) National Agrarian Reform Institute (Instituto Nacional de Transformacidn Agraria) Indigenous Peoples Development Plan Cash Basis International Public Sector Accounting Standard Internal Rate of Return International Standards on Auditing Implementation Supervision Report

3 IUS1 km' LAP I LOP M&E MAGA MARCs MINFIN MIS NCB NGO NPV OCRET OD OM OP PDO PFU POA PROTIERR4 RGP RIC SAA SBD SEGEPLAN SIAF SICOIN SIGAP SISERIC SNIC SNIP SNIR TORS UACI UCP UDAF UNDP UTJ WB Real Property Tax (Impuesto Unico Sobre Inmuebles) Square kilometers Land Administration Project, Phase I Organic Budget Law (Ley Organica de Presupuesto) Monitoring and evaluation (monitoreo y evaluacidn) Ministry of Agriculture (Ministerio de Agricultura, Ganaderia y Alimentacidn) Alternative Conflict Resolution Mechanisms (Mktodo Alternativo de Resolucidn de Conjlictos) Ministry of Finance (Ministerio de Finanzas) Management Information System National Competitive Bidding Nongovernmental organization Net present value Office of Territorial Reserves (Oficina de Control de Areas de Reserva del Estado) Operation Directive Operational Manual Operation Policy Project Development Objective Projects Financial Unit Annual Work and Procurement Plan (Plan Operativo Anual) Inter-institutional Commission for the Strengthening and Development of Land Property Rights (Comisidn Institucional para el Desarrollo y Fortalecimiento de la Tierra) General Property Registry (Registro General de la Propiedad) Registry of Cadastral Information (Registro de Informacidn Catastral) Secretariat of Agrarian Affairs (Secretaria de Asuntos Agrarios) Standard Bidding Document Secretariat of Planning and Programming (Secretaria de Planificacion y Programacidn de la Presidencia) Integrated Financial and Administrative System (Sistema Integrado de Informacidn Financiera) National Integrated Accounting System (Sistema de Comtabilidad Integrado Nacional) Guatemalan System of Protected Areas (Sistema Guatemalteco de Areas Protegidas) Sistema de Seguimiento y Evaluacidn del RIC National System of Cadastral Information (Sistema Nacional de Informacidn Catustral) National Public Investment System (Sistema Nacional de Inversidn Publica) National System of Registry Information (Sistema Nacional de Informacidn Registral) Terms of reference Procurement and Institutional Purchase Unit (Unidad de Adquisciones y de Compra Institucional} Project Coordination Unit (Unidad de Coordinacidit del Proyecto) Financial Management Unit (Unidad de Administracidn Financiera) United Nations Development Programme Technical and Legal Unit (Unidad Te'cnico y Juridica) World Bank Vice President: Country Director: Sector Manager: Task Team Leader: Pamela Cox Jane Armitage Mark Cackler Frederic de Dinechin

4 GUATEMALA LAND ADMINISTRATION I1 PROJECT IN SUPPORT OF THE SECOND PHASE OF THE LAND ADMINISTRATION PROGRAM CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE Country and Sector Issues Rationale for Bank Involvement Higher-level Objectives to which the Project Contributes... 2 B. PROJECT DESCRIPTION Lending Instrument Program Objective and Phases Project Development Objective and Key Indicators Project Components (see Annex 4 for more details) Lessons Learned and Reflected in the Project Design Alternatives Considered and Reasons for Rejection... 8 C. IMPLEMENTATION... 8 D Partnership Arrangements (if applicable)... 8 Institutional and Implementation Arrangements Sustainability Critical Risks and Possible Controversial Aspects Loan Conditions and Covenants APPRAISAL SUMMARY Economic and Financial Analyses Monitoring and Evaluation of Outcomes/Results Technical Fiduciary Social Environment Safeguard Policies... 17

5 7. Policy Exceptions and Readiness Annex 1: Country and Sector or Program Background Annex 2: Major Related Projects Financed by the Bank and/or other Agencies Annex 3: Results Framework and Monitoring Annex 4: Detailed Project Description Annex 5: Project Costs Annex 6: Implementation Arrangements Annex 8: Procurement Arrangements Annex 9: Economic and Financial Analysis Annex 10: Safeguard Policy Issues Annex 11: Legal and Institutional Background Annex 12: Indigenous Peoples Development Plan Annex 13: Project Preparation and Supervision Annex 14: Documents in the Project File Annex 15: Statement of Loans and Credits Annex 16: Country-at-a-Glance Annex 17: Map IBRD No

6 GUATEMALA LAND ADMINISTRATION I1 PROJECT IN SUPPORT OF THE SECOND PHASE OF THE LAND ADMINISTRATION PROGRAM PROJECT APPRAISAL DOCUMENT LATIN AMERICA AND CARIBBEAN Date: November 10, 2006 Country Director: Jane Armitage Sector Director: Laura Tuck Sector Manager: Mark Cackler Project ID: PO87106 Lending Instrument: Adaptable Program Loan Team Leader: Frederic de Dinechin Sectors: General agriculture, fishing and forestry sector (100%) Themes: Land administration and management (P);Other rural development (P);Personal and property rights (P);Municipal governance and institution building (S);Legal institutions for a market economy (S) Environmental screening category: Partial Assessment Safeguard screening category: Limited impact [XI Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 62.3 ProDosed terms: FSL RECONSTRUCTION AND DEVELOPMENT Total: FY 4nnual Cumulative

7 loes the project require any exceptions from Bank policies? Pef. PAD 0.7 3ave these been approved by Bank management? :s approval for any policy exception sought from the Board? 3oes the project include any critical risks rated substantial or high? Ref. PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Ref. PAD ]Yes [XINO [XIYes [ ]No [XIYes [ ]No Project development objective Ref. PAD B.3, Technical Annex 3 The Land Administration I1 Project Development Objective is to foster the process of achieving land tenure security in seven new departments (Alta Verapaz, Baja Verapaz, Chiquimula, Escuintla, Izabal, Sacatepequez, and Zacapa) and the municipality of Palachum in the Department of Quiche, through the provision of efficient and accessible cadastral and land administration services. Project description [one-sentence summary of each component] Ref. PAD B.4, Technical 4nnex 4 The project will have four components: (a) cadastral and land regularization; (b) maintenance of cadastral information and municipal services; (c) legal reforms and institutional strengthening; and (d) project management and monitoring and evaluation. Which safeguard policies are triggered, if any? Ref. PAD 0.6, Technical Annex 10 The project triggers Environmental Assessment (OP/BP/GP 4.01), Natural Habitats (OP/BP 4.04), Forest (OP/BP 4.36), Cultural Property (OPN 11.03), and Indigenous Peoples (OD 4.20) Significant, non-standard conditions, if any, for: Ref. PAD C.6 Disbursement condition: Approval and publication of the specific regulations to the RIC Law for the cadastre of communal lands for disbursements under technical services (cadastral fieldwork) Board presentation: The project does not require any exceptions from Bank policies. Loadcredit effectiveness: - - Signing of a subsidiary agreement between the Borrower and RIC; Operations Manual adopted by RIC Board (OM was approved by Bank before negotiations and has now to be vetted by RIC Board). Covenants applicable to project implementation: - Six months after signing of the loan, approval and publication of RIC general regulations and signing of participating agreements with RGP, Land Fund, IGN, IDAEH, OCRET, SAA and the municipalities; - Twelve months after signing of the loan, adopt a consultative system with indigenous participation; - Three years after effectiveness, furnish draft Land Regularization Law.

8 A. STRATEGIC CONTEXT AND RATIONALE 1. Country and Sector Issues Guatemala is the largest economy in Central America, with a population of 12.2 million and a per capita income of about US$2,000. An area of 108,900 square kilometers, the country is divided into 22 departments and 332 municipalities. The majority of the population (61 percent) still lives in rural areas, where poverty is concentrated. Extreme poverty afflicts 93 percent of the indigenous population. Land is one of the most important resources in Guatemala, but land tenure is often insecure due to unreliable cadastral (exact geographic description of a parcel) and legal (certainty of legitimate owner) information, lack of coordination among land administration institutions, and weak conflict resolution mechanisms. This problem is particularly acute in rural areas, where it is estimated that 40 percent of rural parcels are not registered. Land issues figure prominently in the Peace Accords. Specifically, the Social and Agrarian Accord of 1996 called for the establishment of a legal and institutional framework to ensure land tenure security and a decentralized, multiuser, efficient, and financially sustainable cadastral-based land registry. In addition, increased land tenure security, particularly in rural areas, is fundamental for Guatemala s growth, given that lack of secure property rights hinders investments and fuels conflicts. 2. Rationale for Bank Involvement In the context of supporting the Peace Accords, in December 1998, the Bank approved the first phase of an Adaptable Program Loan (APL, Loan 4415-GU) for Land Administration, concentrating on the Department of El PetCn (33 percent of the country s territory). Based on the successful experience of the first phase of the program and the approval of the Cadastre Law in June 2005, the Government of Guatemala has requested the Bank to prepare the second phase of the program, focusing on stronger links between the cadastre and registry, and expanding the geographic area to seven additional departments (Phase I and Phase I1 cover roughly 50 percent of the country s territory). The Government has highlighted the importance of the Land Administration I1 project in the recently approved Country Assistance Strategy for Guatemala. Because of the Bank s involvement in the initial design phase of this APL, it is seen as a longterm strategic partner in land administration reform in Guatemala, and therefore has a comparative advantage in continuing its support for this endeavor. The Bank can capitalize on the lessons learned from Phase I of the program, and those from similar Bank-supported projects in other countries in Latin America and elsewhere. The Bank has considerable experience in the design and implementation of land administration projects in Central America, and in other countries in the region. There is a discrepancy about the project area of Phase I of the program between the Project Appraisal Document (November 10, 1998) and the Loan Agreement signed on April 27, At appraisal, it was agreed that Phase I would cover El Peten plus five other departments, but by April 2000, it was decided that only El Pettn would be included in Phase I, since it was the only department in Guatemala at the time with a comprehensive land law. The Loan Agreement explicitly restricted the project area to the Department of El Pettn. Thus, for the purposes of evaluating the results of Phase I, indicators and triggers apply only to that department. In April 2005, due to successful results in El PetCn, reflected in some project savings, a limited project area expansion to selected municipalities in the Departments of Alta Verapaz and Baja Verapaz was approved by the Bank. 1

9 3. Higher-level Objectives to which the Project Contributes The project is an integral part of Guatemala s Vamos Guatemala (Let s Go Guatemala) program, which includes three pillars: (i) Guate Soliduria (Social); (ii) Guate CrecelCompite (Economic); and (iii) Guate Verde (Environmental). Phase I1 of the Land Administration Program contributes to the economic pillar. Within this pillar, the project is the Government s main instrument for enhancing property rights. The project is also included in the Country Assistance Strategy (CAS), dated April 11, 2005, which was prepared based on the Government s program. Key priorities include technical integration of the cadastre and registry, the consolidation of the institutional framework of the cadastral (that is, geographic description of parcels) and registry (that is, legal title to parcels) functions of the land administration system, and a broad participatory framework at the local level for field activities. With the approval of the Cadastral Information Registry Law in June 2005, itself the result of Phase I efforts, the legal foundation for a consolidated national cadastre has been established. Thus, the proposed project will finance implementation of many of the law s provisions at the national level, and area-specific cadastral surveying and land regularization activities in selected departments of the country. As noted in the CAS Results Framework , between Phases I and 11, it is expected that the Program will achieve cadastral surveying of approximately 50 percent of the country s territory. B. PROJECT DESCRIPTION 1. Lending Instrument The Land Administration I1 Project (the Project) is the Second Phase of the Land Administration Program (the Program) and will therefore be financed using an Adaptable Program Loan (APL). The Project is expected to have a total cost of US$62.3 million and to be implemented over a sixyear period. The Government of Guatemala (GoG) has requested that the Project be financed 100 percent from loan proceeds. The country financial parameters, approved for Guatemala in October 2004, allow 100 percent of project costs to be financed by the Bank. 2. Program Objective and Phases The Program s overarching objective continues to be to: (a) increase legal security of land tenure, and (b) strengthen the legal and institutional framework for land registry and cadastre services in the country. This is to be achieved through a participatory process for conflict mitigation and resolution that includes indigenous and non-indigenous communities. Since the Program required a long-term vision and commitment, the GoG requested that the Program be financed using an Adaptable Program Loan (APL), with three phases to be implemented over at least 12 years: Phase I was to cover one department, Phase I1 was to cover an additional seven departments, and Phase I11 was to cover the rest of the country. Each phase has, besides its geographic coverage, national institutional and legal developments goals. Phase I, which has been in the process of implementation since July 2000 and is expected to close in March 2007, has covered the Department of El PetCn, at a cost of US$38 million (out of which the Bank contributed US$31 million). Thus far, Phase I has been successfully 2

10 implemented, the triggers for Phase I1 have been met (or will be met by March 2007), and the Program has achieved most of its performance indicators. It has also established the institutional and legal foundations for program expansion to seven other departments in the country under Phase I1 (described in detail in sections B.3 and B.4). The plan for Phase I11 remains the same as envisioned in 1998, namely, to complete the geographic coverage of the country, establish national standards for the integrated cadastre and registry system (developed during Phases I and II), and strengthen the institutional capacities at the municipal level. However, the GoG has asked the Bank to finance a larger share of Phase I1 in the amount of US$62.9 million, about 50 percent higher than envisioned in 1998, to compensate for a smaller present commitment from other donors, which currently amounts to about US$13.4 million under parallel financing arrangements. Phase I1 would be implemented over a six-year period. With the approval in 2005 of the Cadastral Registry Law (the RIC Law), the GoG expects an increased commitment from other donors for Phase I11 of the Program. In line with the Program s original financing plan, the expected Bank s contribution for Phase I11 of the program would be about US$41 million (in 2006 price^).^ Status of Triggers for Phase 11 1) Geographic coverage: Fully met 100 percent of inter-municipal boundaries in the Department of El PetCn mapped. 100 percent of urban parcels in El PetCn surveyed. 90 percent of rural parcels in El PetCn already surveyed, 100 percent expected by end of Phase I. Titling activities in rural lands are somewhat lagging behind given that these lands are regulated by the Land Fund Law, which requires a number of additional steps for issuing a titling resolution. However, titling activities are not part of the trigger. Registry office in El PetCn fully operational since first year. 2) Achievement of national program: Fully met The project s implementing agency, the Technical and Legal Unit (Unidad Te cnico Juridica, UTJ), transformed into the Cadastral Information Registry (Registro de Informacion Catastral, RIC) in August 2005, has become a solid basis for an enhanced institutional framework for land administration in the country, and through the second phase of the project will be consolidated in a technically strong and well-respected entity with national recognition. A communication strategy has been successfully tested and is ready for launching of Phase Ley del Registro de Inforrnacion Catastral (Decree Number ) of June 15, In , it was estimated that the three-phase program would cost about US$208 million (or about US$264 million at 2006 prices), of which the Bank would finance US$113 million (US$143 million at 2006 prices), other donors US$63 million, and GoG US$32 million. In 1998, the Bank s expected contribution for Phase I1 of the program was US$32 million (US$40.5 million at 2006 prices) and for Phase 111 US$50 million (US$63.3 million at 2006 prices). Thus, in real terms, the Bank s contribution to Phase I1 (US$62.3 million) is about 50 percent higher than anticipated in 1998, while the Bank s expected contribution to Phase 111 has been reduced by about 35 percent to US$41.4 million (in 2006 prices). 3

11 Regulatory changes to PetCn Law: No longer relevant, since the Land Fund Law (June 1999) replaced Peten Law. Trigger waived. 3) Social monitoring: Will be met by the end of Phase I in March 2007 Update of Social Assessment, and compliance with applicable safeguards: Social assessment updated for Phase I1 and safeguards complied with so far. Evaluation of beneficiaries, in progress, as part of preparation of Phase 11. Eighty-five percent of public in urban areas and 89 percent in rural areas rank the project as good or very good. Follow-up to the original Social Assessment shows improvement in social conditions and community perceptions. Social assessment for Phase I1 indicates improvement in social conditions. 4) Institutional, technical, and social strengthening at Department of El PetCn level: Fully met 80 percent of UTJ technical staff internationally certified. To date, 88 percent of technical staff has been trained and internationally certified. 100 percent of UTJ/RIC technical staff evaluated as competent by the public. Survey shows that 97 percent of public evaluates UTJ/RIC staff as competent. Although quantitatively short of target, trigger can be considered met. Participatory and conflict resolution methodology is accepted. Social monitoring assesses that the majority of the public evaluates the project as good or very good. Although the project s conflict resolution mechanisms continue being improved, this trigger can be considered met. 3. Project Development Objective and Key Indicators The passage by the Guatemalan Congress of the RIC Law in June 2005 allows for the definition of Phase 11 s development objective more precisely than originally envisioned at the concept stage. The law creates the Registry of Cadastral Information (Registro de Informacibn Catastral, RIC) to establish and maintain the national cadastre and to coordinate its activities with key agencies dealing with land, including the General Registry Property (RGP), the Land Fund4, and the municipalities. The new law provides for a detailed process for the establishment of the cadastre. The Land Administration I1 Project Development Objective is to foster the process of achieving land tenure security in seven new departments (Alta Verapaz, Baja Verapaz, Chiquimula, Escuintla, Izabal, Sacatepequez, and Zacapa) and the municipality of Palachum in the Department of Quiche, through the provision of efficient and accessible cadastral and land administration services. In the context of the Project, cadastral and land administration services 4 The World Bank financed Phase I of the Land Fund APL, which closed in June The development objective of the program was to assist GoG to: (a) establish a program to facilitate beneficiaries access to land; (b) support beneficiaries access to technical assistance and productive subproject financing; and (c) improve the legal and institutional framework so that land markets could work more efficiently. Ratings in the Implementation Completion Report of Phase I convey a satisfactory project outcome, likely sustainability, and modest institutional development impacts. 4

12 ~~ include a systematic diagnostic of beneficiaries, a communication campaign, mapping, verification of rights, delimitation of properties, field conflict resolution, notification of results, and the transfer of information into the cadastral registry, as well as day-to-day integrated cadastral and property registry services (for example, individual title registration, issuance of cadastral certificates). For those cases that fall within certain special titling provisions of the Cadastral Registry Law, the Project will support the titling and regularization of previously unregistered lands. The Project will be implemented in a participatory manner to ensure broad participation of indigenous and non-indigenous beneficiaries. In particular, the Project will support broader efforts to develop methods for improving the land tenure security for indigenous communities, including through the development of appropriate participatory procedures and conflict resolution mechanisms (see annex 12 for more details). These aspects of the Project may therefore have the benefit of supporting the GoG s efforts to improve the legal framework for land regularization, which will otherwise lie outside of the scope of the Project. Under Phase 11, the Program will expand its coverage to selected areas of seven new departments of Guatemala (Alta Verapaz, Baja Verapaz, Chiquimula, Escuintla, Izabal, Sacatepequez, and Zacapa) and one municipality in the department of Quiche6. This geographical coverage represents roughly 22 percent of the country s territory, bringing the total coverage from Phases I and I1 (which includes El PetCn) to about 50 percent. The agreed development indicators are: 80 percent of new transactions in the project area conducted with validated and integrated cadastral and registral information. 80 percent of land conflicts identified during the cadastral survey are in a resolution process, out of which 50 percent are solved (see the Social Assessment for more details on the conflicts typology). Satisfactory rating (third level on a four-scale basis) by at least 50 percent of National System of Cadastral Information (Sistema Nacioaal de Informacidn Catastral, SNIC) users. At least 70 percent of the targeted population in the project area participates in the cadastral survey. A detailed description of the expected key results indicators is included in Annex Project Components (see Annex 4 for more details) The project will have four components: (a) cadastral and land regularization; (b) maintenance of cadastral information and municipal services; (c) legal reforms and institutional strengthening; and (d) project management and monitoring and evaluation. The costs of each component are summarized in Table 1. Chapter I1 of Title VI1 of the Cadastral Registry Law, which is described in greater detail in Annex 11 of this PAD. 6 The municipality of Palachum in the department of Quiche was included in Phase I1 because it forms part of a cluster of municipalities (manconiunidad) with those adjacent municipalities in the department of Alta Verapaz. The socioeconomic and environmental features of this municipality are similar to those found in Alta Verapaz. 5

13 (1) Cadastral and land regularization (US$ million) (2) Maintenance of cadastral information and municipal services I Contingencies I 0.65 I Total Project Costs Front-end fee (IBRD) 0.00 Total Financing Reauired Component 1) Cadastral and land regularization (US$31.95 million approx.). The objective of this component is to carry out the cadastral and limited land regularization processes in the project area. This component will finance pre-fieldwork activities (socioeconomic diagnostic, geodetic and mapping work necessary for field surveys, registries investigations), communication campaigns, surveying of macro boundaries (for example, inter-municipal boundaries, communal lands, and protected areas), and parcel-level surveying and validation in urban and rural areas. As a result of these activities, RIC will issue cadastral notifications to inform the beneficiaries and the RGP about the regular or irregular status of the parcels. Those irregular parcels that meet the specific requirements of the special titling provisions of the Cadastral Registry Law will be regularized through the inscription of title with the RGP. Given the specific requirements for regularizing irregular parcels under the special titling provisions of the Cadastral Registry law, only a percentage of cadastered parcel that are determined to be irregular will be eligible for titling and regularization. Benefits may include the development of mechanisms that may lead to the resolution of certain land conflicts, a more accurate database of information on land tenure than currently exists under the RGP, the physical identification of communal and municipal lands that are largely used and managed by indigenous peoples, and the demarcation of protected areas and sites of cultural value. The activities under this component should produce collateral benefits for the land tenure security of all Guatemalans, including historically disadvantaged groups such as women, indigenous peoples, and afrodescendants, whose land tenure should be identified through the cadastral process and reflected in the databases maintained by the RIC. Free legal services will be provided for certain aspects of the cadastral process with special attention to vulnerable groups. 7 The special titling provisions provide a narrow, specific authorization for the RIC to proceed to regularize parcels through the RGP in situations where the parcel in question has never been registered with the RGP (i.e. these provisions do not apply in cases where the parcel is already registered in the name of the Republic, a municipality or a private party). It should be noted that the procedures for carrying out this inscription process still need to be described in still pending General Regulation of the Cadastral Registry Law. 6

14 Component 2) Maintenance of cadastral information and municipal services (US$13.32 million approx.). The objective of this component is to develop the framework at the national and municipal level to support the field surveys to keep cadastral information updated and incorporate it into initiatives for local development and territorial planning. This component will finance the establishment of RIC s municipal cluster offices to cover the municipalities in the seven new departments, fieldwork to update the cadastral database, the development of the normative and technical framework for its maintenance, training to build capacity in the municipalities and for private surveyors and notaries, and implementation of land use plans based on the cadastral information. A percentage of the activities in this component will be implemented in El PetCn, because the municipalities in this department have the most complete cadastral databases. The experience generated in El PetCn will facilitate the implementation of this framework in the other municipalities. These activities are fundamental for the sustainability of the project s objectives and will complement the Government s strategy for decentralizing land administration services. Component 3) Legal reforms and institutional strengthening for land administration (US$7.76 million approx.). The objective of this component is to improve the legal framework for land administration in Guatemala and strengthen the institutional capacity of the agencies involved in its application. It will finance (a) the formulation and promotion of legal and regulatory instruments linked to the cadastral and regularization process; (b) the strengthening of the institutions involved, including the training of their staff; and (c) the development and implementation of an integrated cadastre-registry computerized system. Component 4) Project management and monitoring and evaluation (US$8.62 million approx.). This component covers the costs of the Project Coordination Unit (within the existing organizational structure of the RIC), monitoring and evaluation systems, including participatory evaluation mechanisms, independent evaluations and audits, and inter-institutional coordination activities. It will finance the provision of technical assistance, equipment, training, workshops, and incremental operating costs to ensure adequate project coordination and supervision, and will also support the development and operation of the Spatial Data Infrastructure. 5. Lessons Learned and Reflected in the Project Design Phase I of the Program, along with parallel projects supported by other donors (Germany, the Netherlands, Sweden, and the European Union), has yielded important lessons, which have been incorporated into the design of Phase 11. In particular: Integration of the Cadastre and Registry: This process is already taking place gradually. The property registry is already undergoing important reforms (for example, for the first time in its history, its financial operations are incorporated and disclosed in the Banksupported Integrated Financial and Administrative System (Sistema Integrado de Znformacidn Financiera, SIAF) used by the Government. The project will invest in developing a technological platform to link the cadastral and registry s databases through an intranet-based portal. Social communication and beneficiary participation: Following the successful partnership with the Catholic Vicariate in El PetCn, the project will continue establishish 7

15 strategic alliances with local governmental and nongovernmental organizations to disseminate information about the key aspects of the process and provide assistance to beneficiaries throughout project implementation. Role of municipalities: The participation of municipal governments was a critical ingredient in the successful regularization of urban lands and territorial planning during Phase I. During Phase 11, RIC will sign Cooperation Agreements with participating municipalities to establish municipal cluster offices and develop their technical capacity. 6. Alternatives Considered and Reasons for Rejection The idea of incorporating Phase I1 of the program under a series of Development Policy Loans (DPLs) was considered but rejected. Stand-alone projects, particularly long-term APLs, are appropriate instruments for land administration projects, because they require significant investments in key areas, concentrate on capacity building of key entities, and demand predictable annual budgetary allocations, which should not be subject to large swings due to fiscal constraints. Also, the idea of adding a land redistribution component to Phase 11, to compensate for the lack of a second phase to the Land Fund project, was considered and rejected. This program is very complex, and adding a component which, although related, is also very complex and with a different objective (more equitable distribution of land) would seriously undermine the prospects of successful achievement of either objective. Finally, since parallel financing arrangements by other donors during Phase I of the program worked very well (ensuring consistency of approaches through the same institutional framework, while allowing operational independence between projects), the possibility of co-financing of Phase I1 was rejected in favor of the continuation of parallel financing. C. IMPLEMENTATION 1. Partnership Arrangements (if applicable) The project will be implemented in seven new departments (in addition to El PetCn) where other donors (Germany, the Netherlands, Norway, Sweden, and the European Union) supported pilot projects over the past few years. The Bank-financed Phase I1 is expected to carry out cadastral works in these departments. Now that the RIC Law is effective, GoG expects other donors to increase their support to land administration efforts in the country through parallel financing arrangements, but using the same methodologies and institutional framework under the leadership of RIC. 2. Institutional and Implementation Arrangements RIC will be the implementation entity for this project. The RIC was created by Legislative Decree (RIC Law) approved by Guatemalan Congress on June 15, 2005, as an autonomous public institution, with the objective of establishing, maintaining, and updating the cadastre (both at the national and municipal level) in Guatemala. All the responsibilities of UTJ were transferred to RIC when the new law became effective on August 2005, including the management of the Bank-financed Land Administration I Project, which was Phase I of the Program. The Project will be implemented based on the successful experience of Phase I. 8

16 RIC s organizational structure consists of a Directive Board (Consejo Directivo), a National Executive Director (Director Ejecutivo Nacional), and Municipal Offices. The Directive Board is comprised of seven members: the Minister of Agriculture (its President), the General Registrar of Property (the head of the RGP), the Director of the National Geographic Institute (Instituo Geogrufico Nacional, IGN), an appointee of the National Association of Municipalities (Asociacion Nacional de Municipalidades), and appointees of the Civil Engineering, Agronomic Engineering, and Lawyer-Notary Federations. The Directive Board has the responsibility of approving any agreements that the RIC enters into with public and private entities and appointing the National Executive Director. The National Executive Director, under the overall supervision of his Board, will have the overall responsibility for supervising the staff of the RIC in their planning, organizing, and executing of all of the day-to-day administrative, technical, and legal activities of the Project. In the context of Phase 11, RIC will coordinate the various participating agencies by means of agreements that will become effective, to the World Bank s satisfaction, before the corresponding activities begin. All implementation arrangements will be consistent with the RIC Law, which provides for inter-institutional cooperation and arrangements with other relevant government ministries, agencies and institutions. Phase I1 anticipates a much stronger institutionalization of the project in its administrative, procurement, financial, and technical areas. The United Nations Development Programme (UNDP) will no longer be used as the procurement and financial agent (see Annex 7.) During Phase 11, RIC will directly manage the Project s financial and administrative aspects, including loan funds, through its administrative and financial units (see Annexes 7 and 8). For Phase 11, RIC will create a Project Coordination Unit (Unidad de Coordinacibn del Proyecto, UCP) within its existing organizational structure to coordinate, monitor, and evaluate the Project s activities and assure overall project coordination both internally and externally, with participating agencies and the World Bank. Internal Coordination: Internally, the UCP will coordinate with: 0 The RIC Administrative and Financial Direction for the procurement of goods, works, and/or services and administrative and financial management; and The RIC Technical and Juridical Departments with regard to cadastral and regularization activities and technical supervision, in particular, of international cadastral contracts. External Coordination RIC will also coordinate with the other key participating entities for Phase 11, which are the Property Registry (RGP) (for Components 1 and 3), the Land Fund (Fondo de Tierras, FONTIERRAS) (for Component 1: titling of national rural lands), the Secretariat of Agrarian Affairs (SAA-CONTIERRA) (for Component 1: rural land conflict resolution), the National Institute of Anthropology and History (IDAEH) (for Component 1: demarcation of historical sites), the National Council for Protected Areas (CONAP) (for Component 1: demarcation of protected areas and areas of special interest), the Office of Territorial Reserves (Oficina de Control de Areas de Reserva del Estado, OCRET) (for Component 1: demarcation of territorial reserves), and the municipalities (for Components 1 and 2). RIC will enter into a Participation 9

17 Agreement with each participating agency and a Municipality Agreement with each municipality where the project will take place. These agreements, described below, will clearly define the roles and responsibilities of each participating entity and municipality. For the execution of Component 1, RIC will establish 8 Municipal Cluster Offices in zones undergoing the RIC cadastral process. Their basic purpose is to ensure inter-institutional coordination at the local level and that the project s objectives and results are met effectively and efficiently at the local level. The Project s Operational Manual will specify the duties and responsibilities of all institutions participating in project implementation, RIC as the executing agency, and the above-mentioned agencies as participating agencies. Likewise, it will include the project s technical, legal, administrative, financial, procurement, and monitoring procedures. 3. Monitoring and Evaluation of Outcomes/Results During Phase 11, RIC will largely build on the existing monitoring and evaluation system developed for Phase I. The current system has proven to be an efficient mechanism to report dayto-day project performance data and periodic information on intermediate project results and higher-level outcomes or impacts. The primary sources of data will be: (a) field reports from RIC s technical team, contractors, and so forth; (b) field reports and quarterly/annual financial statements and performance reports of executing agencies; and (c) specially commissioned assessments and surveys, including a baseline survey. This system, called the Sistema de Seguimiento y Evaluacidii del RIC (SISERIC), is being upgraded into a fully integrated management information system (MIS), combining project financial inputs, physical outputs, and results indicators (detailed in Annex 3), which will be fully operational by project effectiveness. In addition, the Project will implement, in collaboration with local stakeholders, participatory evaluation mechanisms to receive feedback from the final beneficiaries, including indigenous and nonindigenous peoples, and ensure that they are adequately included and consulted and receive the appropriate benefits from the project. This evaluation will be done through qualitative surveys and quantitative interviews with targeted group (see annex 12 for more details on participatory evaluation mechanisms). 4. Sustainability The Government of Guatemala has shown its commitment to land administration reform by enactment of the RIC Law and successful implementation of Phase I, which establishes a solid legal and institutional foundation for cadastral works. The critical success factor for sustainability of the project is the existence of the appropriate institutional framework created by the RIC Law, including the establishment of the RIC and the collaboration mechanisms mandated by the law to integrate the cadastre and the registry and to coordinate demarcation and titling activities with FONTIERRAS, OCRET, IDAEH, CONAP, and the municipalities. 10

18 Now, the main challenges are to consolidate the new entity, further link the cadastral process with the property registry, expedite the rural titling process by FONTIERRAS, increase decentralization of land administration functions to the municipal level, implement more expedient conflict resolution mechanisms, and achieve long-term financial sustainability of RIC to cover the marginal administrative costs of providing recurrent cadastral services. 5. Critical Risks and Possiblt I Risks Loss of political will to carry out essential legal reforms, including the land regularization law. Zon troversial Aspects Mitigation Measure Strong support to regulatory reforms early in project implementation. Risk Range Modest Weak budgetary support to RIC and overdependence on the project for its overall operational costs. Poor integration between RIC and RGP. Severe conflicts arise during project implementation, including conflicts related to indigenous land claims. Leverage the Peace Accords to maintain commitment. Project includes strict monitoring of RIC budget, including an institutional maturity trigger measuring how RIC will recover by the end of the project the marginal costs for the new services provided (e.g., cadastral certifications). RGP will sign a participating agreement and is one of the major project beneficiaries. Project includes an integrated information system between RIC and RGP. RIC Law imposes stricter coordination between RIC and RGP. Director of RGP is a member of RIC s Board. Project provides financial support to Secretariat of Agrarian Affairs (SAA)/Special Commission of Land Conflict Resolution (SAA- CONTIERRA). Project proposes alternative conflict resolution mechanisms, including the participation of local entities, which proved very successful during Phase I (e.g., agreement signed with the Catholic Church in the PetCn). Modest Modest Substantial 11

19 FONTIERRAS lags behind in regularizing and titling of rural national lands. Project establishes participatory evaluation and social control mechanisms with final beneficiaries. FONTIERRAS signs a participating agreement with RIC and will be strengthened during the project. RIC Law imposes stricter coordination between RIC and FONTIERRAS. Substantial Limited participation of final beneficiaries and civil society organizations. Fiduciarv Financial Management Procurement Overall Risk Rating Project finances social communication and education campaigns in order to establish active feedback mechanisms with key stakeholders. Project provides free legal assistance through grassroots organizations. Staff responsible for financial management under Phase I is transferred to Phase 11. FM task are concentrated in a single agency (RIC). Staff responsible for procurement under Phase I is transferred to Phase 11. Hire additional procurement staff with previous experience in Modest Low Modest 6. Loan Conditions and Covenants Effectiveness conditions: - Signing of a subsidiary agreement between the Borrower and RIC; - Operations Manual adopted by RIC Board (OM was approved by Bank before negotiations and has now to be vetted by RIC Board). Disbursement condition: Approval and publication of the specific regulations to the RIC Law for the cadastre of communal lands for disbursements under technical services (cadastral fieldwork) 12

20 Legal covenants: - Six months after signing of the loan, approval and publication of RIC general regulations and signing of participating agreements with RGP, Land Fund, IGN, IDAEH, OCRET, SA4 and the municipalities; - Twelve months after signing of the loan, adopt a consultative system with indigenous participation; - Three years after effectiveness, furnish draft Land Regularization Law. D. APPRAISAL SUMMARY 1. Economic and Financial Analyses The project is economically and financially viable for Guatemala (see Annex 9 for details). The project s economic analysis shows that the expected benefits far outweigh the costs. The net present value (NPV) of benefits is US$64.3 million, and the Internal Rate of Return is 40 percent. Economic benefits should accrue from the long-term investments made in response to new opportunities to use property as collateral for loans, resolution of land disputes, and guaranteed property rights. These benefits are estimated based on the added property value observed from previously regularized properties. A financial analysis for RIC was carried out to assess the capacity of the new institution to be sustainable in the provision of services. The analysis considered the issuance of cadastral certificates as a source of income. The results, however, estimate that the income generated from this activity would not be enough to cover the production cost. Since the financial sustainability of RIC is vital for the strengthening of the new institution, the financial analysis will be conducted again during project implementation with more data and exploring other alternatives for income generation. It is, however, expected that before the end of the project, RIC will recover at least the marginal costs associated to the new services provided (for example, cadastral certifications). 2. Technical The technical design of the project incorporates the main lessons from Phase I. In particular, during Phase 11, the project will rely on: (a) a streamlined, standardized, and participatory land regularization process that allows massive cadastral surveying; (b) an integrated cadastre/registry technological platform based on international best practices (Honduras and El Salvador are being used as examples); and (c) continued support to conflict resolution mechanisms through SAA- CONTIERRA. To reach the goals of approximately 350,000 urban and rural parcels surveyed, the project will build on international best practices. Specifically, consistent with the new RIC Law, the project will rely on systematic reconciliation of field data and existing data from RGP and the Land Fund. In addition, there will be a separation between the delimitation and investigation steps from legalization and titling to prevent bottlenecks caused by unresolved titling or contested issues. RIC already has detailed operational procedures and effective quality control mechanisms that will be further strengthened as the regulations to the RIC Law are approved based on the experience of Phase I. 13

21 The project will finance institutional strengthening and training of public servants in cadastrehegistry technologies, conflict resolution, and broader issues, including gender equity, social inclusion, and environmental concerns. Costs of project technical activities are consistent with similar projects in the region. The Project Operational Manual will include a technical section that details the technical procedures for the cadastral survey and regularization of lands. The Bank will carry out regular technical, economic, institutional, social, and environmental reviews and monitor the effectiveness of the land regularization process and the quality of institutional strengthening. 3. Fiduciary Financial Management The loan borrower will be the Republic of Guatemala, represented by the Ministry of Finance (MINFIN). GoG will sign a subsidiary agreement with RIC. Within RIC, the Administrative and Finance department, through its Projects Financial Unit (PFU), will be directly responsible for financial management (FM) tasks for the proposed project. These will basically include: (i) budget formulation and monitoring, (ii) cash flow management (including processing loan withdrawal applications), (iii) maintenance of accounting records, (iv) preparation of in-year and year-end financial reports, (v) administration of underlying information systems, and (vi) arranging for execution of external audits. Disbursement and bank account management responsibilities will remain within RIC s Treasury Unit. The Projects Financial Unit (PFU) is located within RIC s Administrative and Finance department and is responsible for the fiduciary aspects of all externally financed projects executed by RIC. PFU reports to the Director of RIC s Administrative and Finance department and will coordinate with RIC s Project Coordination Unit (UCP) responsible for overseeing the technical aspects of the proposed project. PFU has a Coordinator and will have dedicated to the proposed project a Budget Officer, an Accountant, and an Administrative Officer. The Financial Management Capacity Assessment was completed before appraisal and an action plan has been agreed with the Borrow (see Annex 7 for more details). The FM risk for the project is low. Procurement Procurement for the proposed project would be carried out in accordance with the World Bank s Guidelines: Procurement Under IBRD Loans and IDA Credits, dated May 2004; and Guidelines: Selection and Employment of Consultants by World Bank Borrowers, dated May 2004, and the provisions stipulated in the Legal Agreement. The Procurement Plan agreed between the Borrower and the Bank for the six years of the project includes the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame. RIC will update the Procurement Plan annually and submit it to the Bank for review. Overall project coordination and administration will fall 14

22 under the newly created Registry of Cadastral Information (RIC). Within RIC, a Project Coordination Unit (UCP), in coordination with RIC s Procurement and Institutional Purchase Unit (Unidad de Adquisiciones y de Compra Institucional, UACI), will be in charge of the procurement tasks for the proposed project. GoG has decided to discontinue the use of the UNDP as procurement agent. RIC, having demonstrated it has achieved an acceptable level of capacity to implement procurement, will carry out all procurement actions through the UACI. The Procurement Capacity Assessment was completed before appraisal and an action plan has been agreed with the Borrower. The procurement risks rating for the project is modest. 4. Social Land tenure insecurity is one of the main social problems in Guatemala affecting the indigenous and nonindigenous populations. Nevertheless, the special land problems of indigenous communities are highlighted due to their historic and traditionally close ties to their lands and other natural resources, and the absence of an inventory and appropriate legal instruments to protect their lands. To address these social issues in the project, the Government of Guatemala carried out social and environmental assessments, conducted an extensive consultation process with representatives of indigenous peoples communities and other main stakeholders in the project area, and prepared an Indigenous Peoples Development Plan (IPDP, see Annex 12) in compliance with OD The IPDP allocates adequate technical, financial, and social resources for the participation of indigenous peoples in the project. However, due to the complexity of the issue and the need for further substantive and procedural clarifications in the legislation, the project will include legal provisions in the loan agreement, and the Bank will conduct specialized supervision and specific monitoring and evaluation of the IPDP s implementation to mitigate the risks and potential negative impacts on indigenous populations. The project is an opportunity to contribute directly to improving the legal and institutional framework and to carry out field investigations of indigenous lands. A participatory social impact assessment was carried out to: (a) analyze key socioeconomic factors, (b) identify possible risks and impacts and recommend measures to minimize or mitigate them, (c) analyze and characterize key stakeholders and provide recommendations for incorporating them in project design, and (d) identify and recommend mechanisms for the regularization of indigenous peoples lands. The assessment carried out detailed interviews with key stakeholders in the project area, including three consultation workshops held in October 2005, in Alta Verapaz, Zacapa, and Guatemala City. Also, the GoG organized an additional round of consultations with representatives of indigenous communities and other stakeholders in Alta Verapaz, Izabal, and Sacatepequez during November For the preparation of the IPDP, the GoG carried out a round of consultations in September A summary of the main points raised during the consultations and their incorporation into project design is included in the IPDP. The environmental assessment conducted to comply with OP 4.01 also included an identification and analysis of communal lands, because many of these are still covered by native (primary or secondary) forest. Indigenous communities in Guatemala have been dispossessed of their ancestral lands as a consequence of political, economic, and social factors. During the Agrarian Reform of 1950s, the 15

23 State made efforts to increase the land tenure security of indigenous communities, but these were often insufficient or reversed by subsequent legislation. The current legal framework regarding the lands of indigenous communities is based on the National Constitution, the Peace Accords and the Framework Law of the Peace Accords (Decree ), the Law Fund Law, and the RIC Law (Decree ). They represent a new attempt to amend past injustices in that they establish the basis for the recognition of indigenous community lands and forests. The IPDP is based on the provisions stipulated in the existing legal systems, particularly the RIC Law, regarding indigenous peoples, and incorporates elements from the consultation process. The IPDP includes, inter alia: (i) social communication activities to inform indigenous populations about the project before and during field activities, (ii) capacity-building activities to train indigenous peoples on general aspects regarding their rights to land under the existing framework, (iii) identification of communal lands and sacred sites previous to the cadastral field survey and the legal research and analysis necessary for their regularization, (iv) alternative conflict resolution mechanisms accessible and culturally accepted by indigenous communities, and (v) mechanisms to regularize and protect the rights of indigenous peoples on their lands. Indigenous peoples will have access to project-financed personnel that speak their native language, including bilingual technicians in the field brigades and conflict mediators. Also, the RIC Law will be translated into five native languages. A gender equity approach will be incorporated into the process as well. 5. Environment The only significant environmental impacts from this Category B project relate to induced changes in land use by project beneficiaries-specifically, the extent to which project activities would lead to the conservation of forests and other natural habitats, versus deforestation or other environmentally damaging land use practices. On balance, the overall environmental impact of this project is expected to be positive, due both to: (i) positive environmental impacts typically associated with land tenure security; and (ii) the Environmental Management Plan (EMP), which seeks to enhance the project s positive environmental impacts, and to mitigate and monitor any negative ones (see Annex 10 for details). The EMP is mainstreamed within the overall project (Components 1 and 2), rather than being a separate component. The EMP provides for: (i) physical demarcation of protected area boundary corners; (ii) demarcation and legalization of indigenous community lands (which will be positive from a forest conservation standpoint); (iii) demarcation of archaeological and other sites of cultural significance; (iv) delineation of natural hazard zones in municipal land use plans; (v) communication activities for environmental aspects to rural project beneficiaries; and (vi) land use impact monitoring. The activities outlined in the EMP will be included within the project s Operational Manual and in other project legal and technical documents, as appropriate. 16

24 6. Safeguard Policies Safeguard Policies Triggered by the Project Yes No Environrncntal Asscssment (OP/BP/GP 4.01) Natural Habitats (OP/BP 4.04) Pest Management (OP 4.09) Cultural Property (OPN 11.03, being revised as OP 4.11) Involuntary Resettlement (OP/BP 4.12) Indigenous Peoples (OD 4.20, being revised as OP 4.10) Forests (OPJBP 4.36) Safety of Dams (OP/BP 4.37) Projects in Disputed Areas (OP/BP/GP 7.60) Projects on International Waterways (OP/BP/GP 7.50) 11 [XI By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties claims on the disputed areas. The project is designed to comply fully with the letter and spirit of applicable World Bank Safeguard Policies (see Annex 10 for details). The project is classified as Category B, consistent with other land administration projects in the Latin America and Caribbean Region. In accordance with this classification, RIC prepared a free-standing Environmental Assessment (EA), which was reviewed by the Bank and found to be satisfactory. The EA identifies potential direct and indirect impacts associated with the project, and concludes that the project s potential negative environmental impacts are limited and far outweighed by the project s positive environmental impacts. The EMP is mainstreamed in the Operational Manual. The project does not trigger the Involuntary Resettlement policy (OP 4.12), because no resettlement or restriction on access to resources will result from project activities. Specifically, the project will only identify and demarcate protected areas on a gross scale, and no project activity will restrict access to resources for people living in or near protected areas. The project triggers the Indigenous Peoples policy (OD 4.208), because indigenous peoples will be project beneficiaries. RIC has prepared a Social Assessment and an Indigenous Peoples Development Plan (IPDP). Drawing upon informed participation, the IPDP aims to ensure that indigenous peoples are not adversely affected by the project and that they receive culturally compatible benefits. The project triggers the Natural Habitats (OP 4.04) and Forest (OP 4.36) policies because the EA identifies sites in the project area that are classified as critical for conservation according to the Bank s policies. These sites include protected areas and official proposed protected areas. The Operational Manual includes special provisions for project activities in these areas to avoid any activities that may lead to significant degradation of critical natural habitats or critical forests. 8 OD 4.20 applies because the Project Concept Meeting took place before July 1,

25 Also, the project triggers the Cultural Property policy (OPN 11.03) because the project area is known to have culturally valuable sites and artifacts. In accordance with the Bank s Information Disclosure Policy (BP 17.50) copies of the EA and IPDP, in Spanish, are available for public view at the RIC office in Guatemala (21 Calle Zona 13, Colonia Aurora 11). A copy of these documents was sent to the Bank s Infoshop. 7. Policy Exceptions and Readiness The project does not require any exception from Bank policies. The project meets the regional criteria for readiness for implementation. The fiduciary arrangements are in place. Adequate monitoring and evaluation capacity is already in place. The EA and IPDP have been disclosed in the country and are available at the Bank s Infoshop. 18

26 Annex 1: Country and Sector or Program Background GUATEMALA: LAND ADMINISTRATION I1 PROJECT Guatemala is the largest economy in Central America, with a population of 12.2 million and a per capita income of about US$2,000. An area of 108,900 square kilometers, the country is divided into 22 departments and 332 municipalities. The majority of the population (61 percent) still lives in rural areas, where poverty is concentrated. Extreme poverty afflicts 93 percent of the indigenous population. Rural poverty is closely linked to structural inequalities in the access to land and land tenure security. Land is one of the most important assets for the poor. Therefore, addressing these structural inequalities in land has the potential to reduce poverty. The unequal agrarian structure in rural areas and the complex ethnic makeup of the country are two of the structural causes creating land tenure insecurity. Today, Guatemalans face land tenure insecurity in part due to unreliable records of cadastral (exact geographic description of a parcel) and legal (certainty of legitimate owner) information, poorly coordinated land administration institutions, and weak conflict resolution mechanisms. This problem is particularly acute in rural areas, where it is estimated that 40 percent of rural parcels are not registered. Land issues figure prominently in the Peace Accords. Specifically, the Social and Agrarian Accord of 1996 called for the establishment of a legal and institutional framework to ensure land tenure security, and a decentralized, multi-user, efficient, and financially sustainable cadastral-based land registry. Since the signing of the Peace Accords, the Government of Guatemala (GoG) has created commissions, institutions, and programs to addresses land-related issues and find integral solutions for the problems confronted in rural areas. In April 1997, the Inter-institutional Commission for the Strengthening and Development of Land Property Rights (Comisiorz Institucional para el Desarrollo y Fortalecimiento de la Tierra, PROTIERRA) was created through Government Accord No with the objective of coordinating the government efforts to implement the programs and projects regarding land property rights. The Legal and Technical Unit (UTJ) was created as PROTIERRA s operational branch. In 2003, UTJ was assigned to the Ministry of Agriculture (Government Accord No ), with the responsibilities for planning, coordinating, leading, implementing, and administering all cadastral-related activities in the country. First Phase of the Guatemala Land Administration Program In the context of supporting the Peace Accords, the GoG and the Bank agreed to implement a three-phase Adaptable Program Loan (APL, Loan 4415-GU) to implement the Guatemala Land Administration Program for a period of 12 years. The objectives of the APL were to: (a) increase legal security of land tenure in Guatemala, and (b) strengthen the legal and institutional framework for land registry and cadastral services nationwide. Phase I of the program was approved in December 1998 for $39 million ($31 million from IBRD), and concentrated on the Department of PetCn. The Project Development Objectives of Phase I are to: (a) increase the legal security of land tenure in PetCn, and (b) strengthen the legal and institutional framework for land registry and cadastral services in PetCn. In addition, UTJ carried out cadastral activities in selected areas in seven other departments with the financing of other donors. 19

27 During , UTJ carried out cadastral activities in 33 pilot municipalities in seven departments with the technical and financial assistance of the international donor community. Table Al. 1 includes the municipalities and departments covered during this period. Department Izabal Escuintla Baja Verapaz Alta Verapaz Chia uimula Zacapa SacatepCquez PetCn Municipalities Financing Morales. Los Amates Norwav La Democracia, San Jose Sweden Purulha German y/gtz Santa Cruz, Fray BartolomC de las Casas, Chisec Germany/GTZ and World Bank San Jacinto. San Jose de la Arada. hala. Chiauimula Netherlands Huite, Estancuela, Cabaiias, Tculutin, Rio Hondo, Netherlands Usumatlin San Lucas, Santiago, Jocotenango Spain San Francisco, Santa Ana, San Benito, La Libertad, WorldBank Dolores, San JosC, Flores, San AndrCs, SayaxchC, Melchor de Mencos, Poptun, San Luis Second Phase of the Guatemala Land Administration Program (or Land Administration I1 Project) Based on the successful experience of Phase I of the program and the need to expand the program in other areas, the GoG has asked the Bank to prepare Phase I1 of the program, the Land Administration I1 project, focusing on stronger links between the cadastre and registry, and expanding the geographic area to seven additional departments (roughly 29 percent of the country s territory), bringing the total coverage of Phases I and I1 to over 50 percent of the country. The GoG highlighted the importance of the Land Administration I1 project in the most recent Country Assistance Strategy (approved in April 2005). Since the approval of Phase I, the Registry of Cadastral Information (Registro de Informacibn Catustral, RIC) law, approved in June 2005, created a new institutional framework for land administration in Guatemala, and Phase I1 has been prepared to address these new challenges and seize new opportunities. RIC Law. The approval of the RIC Law marks the beginning of a new institutional framework for land administration in the country. After four years of discussions and broad consultations, including indigenous peoples and private farmers, the National Congress approved Decree No in June 2005, through which RIC was created as an autonomous and service-oriented state institution with the objective of establishing, maintaining, and updating the cadastre. The RIC Law provides a legal framework for a series of actions and processes conducted on an ad hoc basis by UTJ-PROTIERRA. The law establishes the legal framework for the cadastral establishment and inter-institutional coordination. Phase I1 will be implemented according to the RIC Law (Component 1) and will support the strengthening of the legal and institutional 20

28 frameworks (Component 3). The implementation arrangements and inter-institutional coordination of the project will also be inserted into RIC s institutional mechanisms (Component 4). Decentralization. One of the most important sociopolitical achievements of Guatemala today is the increasing state decentralization. An important reform package was approved by Congress in 2002, which included the following laws: (a) Law of Rural and Urban Community Councils (Decree ), (b) Municipal Code (Decree ), and (c) the General Decentralization Law (Decree ). The RIC Law is in accordance with this new decentralization framework. The second phase will promote the active participation of the municipal and the local and traditional structures during the establishment of the cadastre (Component 1). The project will strengthen the institutional framework and finance pilot land use plans to provide land administration services at the municipal level (Component 2). Phase I of the program, along with parallel projects supported by other donors (the Netherlands, Sweden, German Technical Cooperation [Deutsche Gesellschaj? fur Technische Zusammenarbeit, GTZ], the European Union), has yielded important lessons. First, effective methodologies for cadastral fieldwork and conflict resolution have been piloted and developed. The project has already exceeded the cadastral surveying targets in urban parcels and is close to meeting the rural targets. However, titling (responsibility of FONTIERRAS) and registration of parcels, particularly in rural areas, have proceeded at a slower pace than anticipated. Thus, for Phase 11, a stronger emphasis on the link between the cadastre and registry is needed. On the institutional side, the role of the Technical and Legal Unit (Unidad Tkcnico Juridica, UTJ)/PROTIERRA has evolved from being just a project unit to becoming a strong national cadastre office. The approval in June 2005 of a cadastre law, creating the Registry of Cadastral Information (RIC), was a major achievement of Phase I and sets the institutional stage for successful implementation of Phase 11. In addition, further reforms of the General Property Registry (Registro General de la Propiedad, RGP), particularly those related to the technological integration of the cadastral and registry databases and its subsequent decentralized maintenance, are fundamental components of Phase 11. Third Phase of the Guatemala Land Administration Program Under the original APL, Phase I11 was planned for a total cost of US$60 million (IBRD: US$50 million; GoG: US$10 million). In real terms, the Bank s contribution to Phase I11 will be reduced about 35 percent to US$41.4 (in 2006 prices), because the GoG has requested the Bank s contribution to Phase I1 to be larger than originally anticipated (US$62.3 million). Phase I11 will cover cadastral and regularization activities in the remaining departments. As in the previous phases, special care will be devoted to continued capacity building and institution strengthening, with an emphasis on quality control and monitoring systems. The triggers to move to Phase 111 established in the APL are: In terms of geographic coverage: Cadastre works complete in the six departments of this phase. Registration offices operating and linked to cadastres. 21

29 In terms of decentralization: 0 Local governments in the departments not yet covered by the Program request its services and are active participants in the design of subprojects. 0 Financial indicators of the General Property Registry-Departmental Branches show that these agencies are self-sustainable. In terms of social monitoring: 0 Full documentation of the social experience of the Program is produced. Evaluations by the communities show acceptance of the project and ownership. In terms of capacity building and institutional strengthening: Departmental offices establish their own monitoring and evaluation mechanisms. Departmental offices establish their process protocols. Participatory and conflict resolution methodology is accepted, as assessed by social monitoring activities. 22

30 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies GUATEMALA: LAND ADMINISTRATION I1 PROJECT Project Name Land Administration ( GU). Closing date: March 2007 Escuintla Cadastre Project Zacapa- Chiquimula Cadastre Project Izabal Cadastre Project Sacatepiquez Cadastre Project Verapaces Cadastre Project Institutional Strengthening of UTJ and IGN Proiect Amount Financier IP/DO (US$) Ratings $31.0 million IBRD IP-s 1 DO-S $2.2 million Sweden n/a $6.9 million Netherlands n/a $4.1 million Norway nla $0.6 million Spain nla $1.3 million GTZ nla $7.6 million Switzerland n/a Sector Issue Land administration Tenure security in selected municipalities of Escuintla Support to technical, legal, and social framework for land tenure in Zacapa-Chiquimula Support to national cadastral process and fieldwork in Izabal Cadastral fieldwork in selected municipalities of Sacatetdauez Cadastral fieldwork in selected municipalities of Alta Verapaz and Baja VeraDaz Topographic equipment and technical assistance to UTJ and IGN 23

31 Annex 3: Results Framework and Monitoring GUATEMALA: LAND ADMINISTRATION I1 PROJECT Table A3.1. Project Results Framework Project Development Objective The objective of the Project is to oster the process of achieving land enure security in the project area hrough the provision of efficient ind accessible cadastral and land idministration services in the project irea. Intermediate Outcomes Cadastral and land regularization: Cadastral process. 80% of new transactions in the project area conducted with validated and integrated cadastral and registral information. 80% of land conflicts identified during the cadastral survey are in a resolution process and out of which 50% are solved. Satisfactory rating (third level on a four-scale basis) by at least 50% of National System of Cadastral Information (SNIC) users. At least 70% of the targeted population in the project area participates in the cadastral survey (at least 40% participating population is of indigenous descent). 80% of surveyed parcels in the project area (including national, private, and communal lands) incorporated into RIC s database (target: 280,000 out of 350,000). 80% of communal lands in the project identified and certified Use of Project Outcome Information PY1-PY3: Ensure the technical platform is properly established, based on international best practices. Ensure effective coordination between RIC and RGP. Ensure the quality of field-level surveying data and results meet the standards. PY2: Ensure that RIC, institutional partners, and private sector have sufficient preparation to meet project targets. PY5: Ensure that the titling process in national and private lands is properly documented and contributes to the revision of the legal framework to systematize the procedures and make them available to the population on a large scale. PY5: Ensure that the municipalities have access to cadastral information for local land administration services. PY6: Review strengths and weaknesses, prepare remedial plans to ensure achievement of Phase I11 triggers, and prepare Phase 111. Use of Intermediate Outcome Monitoring PY1-PY6: Assess quality of work and improve process accordingly. PY3: Assess the social factors involved in the certification of communal lands. PY3: Evaluate the mechanisms for inter-institutional coordination. 24

32 Land regularization and titling. according to the process established in the IPDP. 13 protected areas demarcated in the project area. 250 archeological sites identified and demarcated in the project area (for sites in a protected area, only the area will be demarcated). 2,800 lineal km of municipal boundaries identified and agreed among the relevant parties. 60% of parcels in national lands identified as eligible for new titling are titled and registered in General Property Registry (RGP). 60% of parcels in private lands identified as eligible for the special titling procedure prescribed in the RIC Law are titled and registered in RGP. 10% of identified communal lands are regularized and registered in RGP. PY3: Review the regulatory framework for the demarcation of municipal limits. PY1: Review the program objectives to ensure compliance with the legal framework in view of proposed reforms. PY2: Review the coordination mechanisms between RIC and FONTIERRA. PY3: Evaluate quality and speed of titlinghegistration. Reallocate resources to titlinghegistration agencies if necessary. PY5: Systematize the regularization process for Phase 111. Maintenance of cadastral information and municiual services: Establishment of RICs municipal cluster offices. 8 cluster offices in the project area issue cadastral certificates. PY3-PY4: Gradual expansion into new municipalities. Maintenance of cadastral information. Provision of land administration services at the municipal level. 50 surveyors certified and registered in RIC s Registry of Surveyors. At least 80% of new land transactions in Petin are incorporated into SNIC. 20 municipalities have land use plans based on cadastral information. PY2: Assess jointly with the private sector the regulations for maintenance of cadastral information. PY: Design a communication campaign to inform the population about the benefits of registration. 25

33 Legal reforms and institutional strengthening for land administration: Policy framework and institutional strengthening. 8 Integration of the RegistryKadastre System. Project management, monitoring, and evaluation: 8 Project administration. Inter-institutional coordination. A draft Land Regularization Law prepared by RIC, RGP, Land Fund and SAA. Regulations on the RIC Law and regulations for the certification of communal lands approved by RIC. 500 technicians trained in land administration through RIC s Land Use and Cadastre Training Center. An integrated Registry-Cadastre operates as per article 44 & 45 of the Law RIC. 8 Budget, annual operative plans, M&E issued on time as per the loan agreement. Spatial Data Infrastructure in operation (application and standards). PY1-PY4: Adjust efforts to advocate policy reforms. PY1: Revise the indicators for the regularization of irregular parcels in the context of an approved Land Regularization Law. PY2: Assess the long-term plan for inter-institutional coordination between RIC and RGP. PY6: Incorporate management and M&E lessons into design of Phase 111. PY2: Ensure information sharing among institutional partners. 26

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38 Annex 4: Detailed Project Description GUATEMALA: LAND ADMINISTRATION I1 PROJECT The passage by the Guatemalan Congress of the Cadastral Registry Law in June 2005 (effective August 2005) allows for the definition of Phase 11 s development objective more precisely than originally envisioned at the concept stage. The law creates the Registry of Cadastral Information (Registro de Informaci6n Catastral, RIC) to establish and maintain the national cadastre and to coordinate its activities with ke a encies dealing with land, including the General Registry Property (RGP), the Land Fund B, and g the municipalities. The new law provides for a detailed process for the establishment of the cadastre. The Land Administration I1 Project Development Objective is to foster the process of achieving land tenure security in seven new departments (Alta Verapaz, Baja Verapaz, Chiquimula, Escuintla, Izabal, Sacatepequez, and Zacapa) and the municipality of Palachum in the Department of Quiche, through the provision of efficient and accessible cadastral and land administration services. In the context of the Project, cadastral and land administration services include a systematic diagnostic of beneficiaries, a communication campaign, mapping, verification of rights, delimitation of properties, field conflict resolution, notification of results, and the transfer of information into the cadastral registry, as well as day-to-day integrated cadastral and property registry services (for example, individual title registration, issuance of cadastral certificates). For those cases that fall within certain special titling provisions of the Cadastral Registry Law, the Project will support the titling and regularization of previously unregistered lands. The Project will be implemented in a participatory manner to ensure broad participation of indigenous and non-indigenous beneficiaries. In particular, the Project will support broader efforts to develop methods for improving the land tenure security for indigenous communities, including through the development of appropriate participatory procedures and conflict resolution mechanisms (see annex 12 for more details). These aspects of the Project may therefore have the benefit of supporting the GoG s efforts to improve the legal framework for land regularization, which will otherwise lie outside of the scope of the Project. Under Phase 11, the Program will expand its coverage to selected areas of seven new departments of Guatemala (Alta Verapaz, Baja Verapaz, Chiquimula, Escuintla, Izabal, Sacatepequez, and Zacapa) and one municipality in the department of Quiche. This geographical coverage 9 The World Bank financed Phase I of the Land Fund APL, which closed in June The development objective of the program was to assist GoG to: (a) establish a program to facilitate beneficiaries access to land; (b) support beneficiaries access to technical assistance and productive subproject financing; and (c) improve the legal and institutional framework so that land markets could work more efficiently. Ratings in the Implementation Completion Report of Phase I convey a satisfactory project outcome, likely sustainability, and modest institutional development impacts. IO Chapter I1 of Title VI1 of the Cadastral Registry Law, which is described in greater detail in Annex 11 of this PAD. 11 The municipality of Palachum in the department of Quiche was included in Phase I1 because it forms part of a cluster of municipalities (rnancornunidad) with those adjacent municipalities in the department of Alta Verapaz. The socioeconomic and environmental features of this municipality are similar to those found in Alta Verapaz. 31

39 represents roughly 22 percent of the country s territory, bringing the total coverage from Phases I and I1 (which includes El PetCn) to about 50 percent. The expected development indicators are: 80 percent of new transactions in the project area conducted with validated and integrated cadastral and registral information. 80 percent of land conflicts identified during the cadastral survey are in a resolution process, out of which 50 percent are solved (see the social assessment for more details on the conflicts typology). Satisfactory rating (third level on a four-scale basis) by at least 50 percent of the National System of Cadastral Information (Sisternu Nacional de Inforrnacibn Catustral, SNIC) users. At least 70 percent of the targeted population in the project area participates in the cadastral survey. See map of project area. 32

40 f i COMPONENT 1. Cadastral and land regularization (US$31.95 million, amrox.1 This component will make it possible to implement the cadastre processes in 55 municipalities of seven departments in Guatemala, through participatory approaches and local-level capacity building. These cadastral processes are in line with the cadastral efforts and processes clearly 33

41 defined in the RIC Law. In this institutional context, the component proposes registry research and socioeconomic diagnostic to understand landownership and support fieldwork; social communication; geodetic and mapping activities; systematic parcel-based field surveys; conflict resolution, where necessary; analysis of cadastral and legal information; and, where the legal framework so permits, the provision of legal titles for properties. The component also finances the definition of municipal boundaries and the demarcation of protected and public areas and of those indigenous or archeological areas requiring special protection. This is the project s key component; it absorbs 50% percent of financial resources in the execution of the cadastral survey of areas addressed by the project. This component is divided into the following subcomponents. Subcomponent 1.1 Cadastral process Preparatory activities for cadastral fieldwork This activity will take place prior to the declaration of cadastral zones (zonas catastrales) where the cadastral field survey will take place. This activity is aimed at generating knowledge about landownership, socioeconomic, cultural, and linguistic aspects, and the types of organization in municipalities for the purpose of formulating criteria for the planning of social communication activities and cadastral field surveys. This diagnostic is based on fieldwork with interviews and participatory methods, and also on research of information stored in the General Property Registry (Registro General de la Propiedad, RGP) manual and electronic books from 1887 to the present. Participatory diagnostics related to the identification and inventory of indigenous claims on lands are contemplated by the project and documented in the Indigenous Peoples Development Plan (IPDP). The project will finance: (a) consultants to carryout the registral diagnostics in the RGP; (b) consultants to carryout the participatory socioeconomic diagnostics; (c) workshops to consult with the population; (d) consultants to prepare a tract index to include information on real rights and other conveyances; and (e) technical services related to the review of maps, preparation of field services and consolidation of the geodesic network Social communication This activity includes the application of the RIC social communication strategy, using the media for the mass dissemination campaign of the cadastral process that will be implemented in cadastral zones (zonas catastrales). The purpose of this activity will be to create a cadastral culture and promote a favorable climate for cadastral establishment in these zones. There are plans to train local leaders and authorities and to coordinate with grassroots organizations to apply the social communication strategy and follow up on the cadastral process. Special communication aspects are contained in the indigenous development plan, including participatory evaluation mechanisms. Environmental awareness efforts are part of the project s communication process (deforestation, protected areas). 34

42 The project will finance: (a) consultants for the preparation and implementation of the communication campaign; (b) materials and services for the implementation of the communication campaign including, inter alia, radio spots to publicize and inform the population on the cadastral survey; and (d) training of local institutions and organizations Cadastral fieldwork Systematic parcel-based survev: This activity includes all the work needed for the cadastral survey, using supervision and quality control mechanisms. The cadastral survey consists of a systematic visit of each parcel, urban and rural, the measurement of such parcel, and the filling out of a form for each parcel including the name of the owner/possessor and the parcel s main characteristics. The survey will be performed mainly by means of bids from private firms. In this regard, the key role of the RIC at this stage will be to supervise and verify the quality of the process. Participation of indigenous peoples: When the cadastral field activities relate to land owned by or in possession of indigenous peoples, specific procedures that ensure the active participation of the beneficiaries and their organizations must be followed. Specifically, indigenous peoples who own or possess the land to be surveyed and their neighbours will participate in the process, with the support of the local authorities and organizations, and will sign the document validating the parcel s boundaries. Delimitation of administrative boundaries: Based on the experience gained in Phase I, a methodology has evolved for new working fronts, in which jointly agreed municipal and departmental boundaries will be delimitated by the municipalities with RIC and IGN technical support. Delimitation and demarcation of protected areas: In collaboration with the National Council for Protected Areas (Consejo Nacional de Areas Protegidas, CONAP), RIC will delimitate the protected areas and areas of special environmental interest with the objective of identifying and georeferencing their physical location. The protected areas and cultural/archeological sites delimitated in the cadastral survey will be physically demarcated. No cadastral work will be carried out in the protected areas. The physical demarcation of these areas will not result in relocation, loss of assets, involuntary restrictions of access and it will not impact the rights of individual and communal lands. A detailed treatment of the demarcation process for protected areas and cultural/archeological sites is included in Annex 10. The project will finance consultants, small works, and operational support to CONAP and IDAEH for the physical demarcation of the protected areas and cultural/archeological sites surveyed during the field survey. Delimitation of public areas and territorial reserves: In collaboration with the Office of Territorial Reserves (Oficina de Control de Areas de Reserva del Estado, OCRET), RIC will delimitate the public areas and territorial reserves with the objective of systematically incorporating them in OCRET s inventory for future management. 35

43 Delimitation of cultural and archeological - areas reauiring special Drotection: In collaboration with the Guatemalan Institute of Anthropology and History (Instituto de Antropologia e Historia de Guatemala, IDAEH), RIC will delimitate areas of cultural and archaeological value with the objective of systematically incorporating them into IDAEH s registry for future protection and management. This process will assist in the protection and enhancement of cultural and archeological sites found in the project area, mitigating the loss or damage to cultural property and benefiting indigenous population that utilize these sites. Conflict resolution: RIC will work with the Secretariat of Agrarian Affairs (Secretaria de Asuntos Agrarios, SAA-CONTIERRA) and local stakeholders (Municipalities, nongovernmental organizations [NGOs], communities, civil society organization) to provide on-the-ground technical and legal assistance to beneficiaries for alternative (that is, nonadministrative or judicial) conflict resolution during the survey process. There will be ongoing monitoring of the reception and perception of beneficiaries and related institutions with regard to project activities including conflict resolution. The project will finance: (a) cadastral technical services to conduct a parcel-based field survey in the seven new departments; (b) training of cadastral brigades; (c) consultants (including NGOs and local organizations) to provide assistantship to beneficiaries during the field survey (d) operational support to SAA/CONTIERRA to provide technical and legal assistance to beneficiaries for alternative conflict resolution; and (e) cadastral technical services and operational support to co-executing agencies for the delimitation of administrative boundaries (IGN), protected areas (CONAP), cultural/archeological sites (IDAEH), and territorial reserves (OCRET) Analysis of cadastral information This activity will consist of analyzing and comparing sources of existing registry information and the data collected during the field surveys. This phase is extremely important and by law cannot be delegated; thus, in principle, it will be carried out by the administration. When the desk review is completed, a series of public presentations are planned to inform the population about the results and provide feedback for the analysis with additional, relevant information. The project will finance: (a) consultants and office equipment to conduct the technical analysis of the data collected during the field survey; and (b) public viewings to display the preliminary results to beneficiaries Legal analysis and investigation The objective of the legal analysis and investigation is to examine the legal status of the information collected in the field to determine if the parcel is regular or irregular. The RIC Legal Analysis Unit will examine the parcel-based report prepared by the RIC Cadastral Analysis Unit. To declare a parcel regular, it must be determined particularly during the investigation that the parcel does not overlap with a protected area, an area of special 36

44 protection, an area of cultural or archeological value, an area where there is an existing or potential claim from an indigenous community, or any other area where there is a restriction as indicated by the RIC Law (for example, areas prone to natural disaster). The RIC will coordinate with the relevant entity to receive its approval before determining whether the parcels are regular or irregular. The project will finance: (a) consultants and office equipment to conduct the legal analysis of the information collected in the field survey and rectified in the technical analysis; and (b) consultants and motor vehicles to notify the results of the legal analysis to beneficiaries. Subcomponent 1.2 Land regularization and titling The RIC Law only provides a framework for the carrying out of cadastral work that will lead to the designation of cadastered parcels of land as either regular or irregular and does not provide a framework for land regularization. Guatemala does not currently have a Land Regularization law which would address all land tenure irregularities that may be identified in the cadastral process or the procedures for regularizing and titling such lands (see Annex 11). Under the current legal framework, the Project will be only be able to regularize parcels in cases that meet the very narrow provisions described in subcomponent and below Annotation of titles in the RGP If the legal analysis and investigation determines that the parcel is regular, the RIC will register the property in the RGP, assigning it a unique cadastral code. This code will become part of the property's identification data. If the legal analysis and investigation determines that the parcel is irregular, the parcel holders will be notified. They will have 30 days to request a technical review before the designation of irregularity becomes permanent. Once this period has expired or if no solution is found, the RIC will notify the RGP to make a special annotation noting the property's irregularity. This irregularity will not affect the sale or rental of the property. The project will finance the operational costs for the inscription of regular or irregular status in the RGP Implementation of special titling Special titling refers to the titling and registration of those properties that, following legal analysis, have the sole irregularity of not having been previously recorded in the Property Registry. Special titling does not apply in cases where the parcel is covered by an existing registration with the RGP regardless of the person in whose name it is registered (Le. the Republic, any municipality or any private person), the circumstances surrounding such registration (e+ the date of the initial registration), or any rights or claims that the current tenant or possessor of the land may have against the registered owner. In cases where special titling can apply, Decree requires the RIC to prepare the documentation for inscription in the RGP, and publication in the Official Gazette of the Republic of Guatemala (Diario de Centroame'rica) of the edict indicating that the property is in the process of being registered. If there is no opposition, the RIC will record ownership in the RGP. If there is 37

45 opposition, the RIC will send the documentation to the relevant court and should notify the interested parties. In this regard, these activities will be aimed at determining the legitimacy of landownership by individuals and communities, including indigenous lands, recognizing possession that is peaceful, ongoing, in good faith, and under ownership title, to consolidate the right of ownership for public purposes that are mandatory for all inhabitants of the country. Due to the country s limited experience with the special titling process, especially for private lands, spaces will be provided for reflection, learning, and systematization of the experiences of this process. The project will finance: (a) operational costs for the preparation of the files for the adjudication process; (b) publication of the edicts in the official diary; and (c) operational costs for the inscription of the new titles in the RGP Regularization and titling of national areas (Land Fund) In the project zone, RIC will coordinate with the Land Fund the regularization of lands handed over, or in the process of being handed over, by the State to indigenous and nonindigenous peoples, as was the case for the LAP I. The project will in particular provide specific logistical and managerial support to the Land Fund so that it can carry out this task in a much more efficient manner than during the Land Administration I project. The project will finance: (a) consultants to assist the Land Fund in the adjudication process and digitizing of paper information related to the adjudication process; (b) office equipment and vehicles; and (c) training activities Certification and registration of communal lands (RIC and RGP) In accordance with RIC Law, RIC will make an administrative declaration (declaratoria administrativa) and issue a certificate for each of the communal lands identified during the cadastral survey that was declared as regular or irregular by the legal analysis (Art. 65). The certificate of communal land will be registered in the RGP in the cases where it is applicable. The process for the declaration and registration of communal lands is included in the IPDP (see annex 12 for more details). The project will finance operational costs for the certification of communal lands and their inscription in the RGP. COMPONENT 2. Maintenance of cadastral information and municidal services (US$13.32 million, adprox.1 The aim of this component is to create the local capacity to coordinate the cadastre and regularization process in each municipality. This includes the mechanisms and human skills needed to ensure the maintenance of cadastral information, develop cadastral information products and services, and establish-initially in municipalities of the department of PetCn-land administration services aimed at land use planning and management. This component is divided into three subcomponents. 38

46 Subcomponent 2.1 Establishment of RIC s municipal cluster offices The RIC Law envisions the installation of offices in municipalities undergoing the cadastral process. For project purposes, cluster offices will be established in zones undergoing the cadastral process, with the infrastructure needed to carry out institutional tasks and supervision of the processes of establishing and maintaining the cadastre. The minimum structure of these offices in zones undergoing the cadastral process is described in the institutional arrangements for project implementation. The project s aim is to establish eight offices for zones undergoing the cadastral process. The project will finance: (a) civil works; (b) office equipment; (c) salaries of incremental staff; (c) vehicles; (d) consultants for the supervision of cadastral activities; and (d) incremental operating costs. Subcomponent 2.2 Maintenance of cadastral information via private intermediaries The maintenance of cadastral information is the essence of the RIC s medium- and long-term efforts. This maintenance requires unique work with various actors in the real estate transaction system in order to identify changes in real estate ownership. The RIC has the power to authorize technicians and/or professionals who have graduated with degrees related to land surveying, to carry out cadastral operations, for which it will keep records. In cadastral maintenance operations, separation plans must be presented to the Cadastral Information Registry to ensure that they comply with quality standards in order to be included in the cadastre. The project envisions training and building the capacity of civil engineers and agronomists to begin the operation of cadastral maintenance. The RIC Law also substantially changes the activities of notaries with regard to ownership transactions. In order to draw up deeds on the unification or separation of properties, notaries must have the certificate issued by the Cadastral Information Registry, containing graphic and alphanumeric information on the parcel in question. The project envisions training and building capacity of notaries on new procedures indicated in the RIC Law. The project will finance: (a) technical assistance for the elaboration of norms and procedures for cadastral maintenance and the creation of a technological-operational platform for cadastral maintenance, including exchange of information with municipalities, private surveyors, and notaries; (b) consultants for the implementation of the platform; and (c) training activities for municipalities, private surveyors, and notaries. These efforts will be concentrated in the Peten and the seven new departments. Subcomponent 2.3 Provision of land administration services at the municipal level It is essential that municipalities be users of cadastral information for their own needs, especially for local development and land use planning in their respective jurisdictions. The expected output is 20 municipal land use plans based on cadastral information. The strengthening of 39

47 municipal capacities to produce the land use plans and use the cadastral tool will require training and the development of pilot applications based on cadastral information. The project will finance: (a) technical assistance for the formulation of the land use plans and modernization of the municipal cadastre offices; and (b) training activities to municipalities. COMPONENT 3. Legal reforms and institutional strengthening for land administration [US$7.76 million, amrox.) The aim of this component is to strengthen the legal framework and institutional capacity of the institutions involved in the cadastral and land regularization process, including the RIC, SO it can efficiently and effectively perform its duties and legal mandates, particularly in terms of coordinating with the General Property Registry to implement the RegistryKadastre system. The component is structured in two subcomponents: (a) review of legal and institutional frameworks, and (b) integration of the cadastre and registry systems. Subcomponent 3.1 Review of legal and institutional framework Legal and institutional framework As indicated in Annex 11, 12 and subcomponent 1.2, it is necessary to review and complete the legal and institutional framework related to the regularization and titling of lands in Guatemala. This subcomponent will focus on two key legal reforms in this area. First, it will support the preparation and approval of the general RIC regulations and specific regulations for the regularization of the communal lands mandated by Article 65 of the RIC Law. These regulations will help clarify the cadastral process for communal lands claimed by indigenous peoples. They will have to be based on the Guatemala Constitution and the International Labor Organization (ILO) Convention No. 169 with regard to the inclusion of and respect for indigenous rights. Second, the project will help develop and pilot methodologies to regularize lands, in particular indigenous lands, including appropriate participatory procedures and conflict resolution mechanisms, The results and findings of these activities will feed into the process for the preparation of the draft Land Regularization Law by RIC. The project will finance: (a) civil works in RIC s office in Guatemala; (b) consultants for the elaboration of RIC s normative and proposals for legal reforms; (c) publication of materials; and (d) training activities to disseminate these proposal Capacity building This activity is aimed at facilitating and promoting technical and professional training and skills updating processes to achieve scheduled objectives and targets in this second phase of the project. A results-oriented vision will be promoted at all levels of work. Training is 40

48 planned not only for the RIC but also for the various other actors involved in cadastral maintenance, especially at the local level. In this context, this activity will be aimed at supporting and strengthening the cadastre school that the RIC Law mandates. The project will finance: (a) training activities, including the provision of scholarships, to RIC staff to upgrade their knowledge of land administration; and (b) training programs to build the capacity of municipalities, local organizations, and private companies to participate in the cadastral process. Subcomponent 3.2 Integration of the registry/cadastre system Technological and operational platform of an integrated registry and cadastre system These activities are aimed at strengthening coordination and negotiation mechanisms between the RGP and RIC for the smooth functioning of the integrated registryhadastre system. The intention is to define the informatics and communication structure between the databases of the General Property Registry and the RIC. The system will be developed on the basis of the following components: Intranet: It is proposed that a dedicated data link be established between the central offices of the RGP and the offices that the RIC opens nationwide. This link will serve as a means to share information. Thus, an internal network (intranet) will be formed to allow users to have easy, efficient access to the information contained in the RGP s electronic system and the cadastral information system. Large-scale collection of registry data: The recent RIC Law obliges the RIC to issue a declaration of the zone to be cadastred, the zone cadastred, and cadastred regular or irregular properties. These declarations require a prior registry investigation. For this purpose, it is essential to have large-scale, easy, quick, and efficient access to the information that the General Property Registry processes and maintains. Coordination of RGP and RIC information systems: the RIC and RGP have their own information systems, both of which are based on a single identifier. For the RGP, the identifier is the number of the property, page, book, and denomination (FFLD). For the RIC, it is the Cadastral Classification Code (CCC) consisting of the department, municipality, polygon, and correlate of the property. To maintain access in both systems, a model will be created based on a table of relationships that will store the relationships between farms and properties as stipulated in Articles 44 and 45 of the RIC Law. The project will finance: (a) technical assistance for the development of the technological platform; (b) office and technological equipment for the installation of the platform in RGP s and RIC s central and regional offices; (c) collection of data in the RGP; and (d) training of RGP and RIC staff in the use of the platform Modernization of the RGP 41

49 The project will support the modernization of the RGP with the aim of creating optimum conditions for the implementation of the registry/cadastre system. The modernization of the RGP will address the following aspects: Clean-up of Registry Information: For purposes of the RGP and to meet the obligations established for the RIC, a mechanism will be created to allow both institutions to establish, analyze, and rectify inconsistencies detected during registry investigation and analysis. Virtual Library: Plans are underway for a virtual library the components of which stem from the provision of 30 computers that will facilitate user searches, and the modification and remodeling of the place where books will be stored. The virtual library will allow users to check the content of ledger books through the use of the national banking system. Technical Data Sheet Project: Efforts are aimed at the creation of a technical data sheet which, together with the creation of the registry s database (Fhix I11 internal project), aids the current understanding of the status of each registered farm, thus facilitating registry operations and strengthening the principle of legal security. The project s development requires a systematic study of the records of each farm registered in the system (2,000,000 farms). The project will finance: (a) office equipment for the installation of a virtual library at the RGP; and (b) consultants to provide technical assistance for the modernization of the RGP s database Development of FUC business plan A strategy should be defined to allow RIC self-financing in the long term, containing a longterm plan (RIC business plan) in which cadastral products and services (for example, cadastral certifications) are the source of such financing. This strategy requires the formation of a users committee and of specific pilots with various users, such as the banking sector, to define products and services. The project will finance consultants to develop a customer-service plan, develop specific products and services for the financial sector, and define a marketing strategy for cadastral products. Component 4. Proiect management, monitoring, and evaluation (US$8.62 million, approx.) This component covers the costs of the Project Coordination Unit (within RIC), monitoring and evaluation systems, independent evaluations and audits, and inter-institutional coordination activities. It will finance the provision of technical assistance, equipment, training, workshops, and incremental operating costs to ensure adequate project implementation (Subcomponent 4.1 Project administration). It will also support the inter-institutional coordination, via UCP, to implement the project at the central and local level and will seek coordination among different public entities to implement a parcel-level spatial data infrastructure system (Subcomponent 4.2 Inter-institutional coordination). 42

50 The project will finance: (a) the project s management costs including incremental salaries, technical assistance, equipment, training, workshops, and operating costs; and (b) technical assistance, equipment, and workshops for the establishment of a spatial data infrastructure system. 43

51 Annex 5: Project Costs GUATEMALA: LAND ADMINISTRATION I1 PROJECT Local Foreign Total Project Cost By Component and/or Activity US$ US$ US$ Million Million Million 1. Cadastral and land regularization 1.1. Cadastral process Land regularization and titling Subtotal Component Maintenance of cadastral information and municipal services 2.1. Establishment of RICs municipal cluster offices 2.2. Maintenance of cadastral information Provision of land administration services at the municipal level Subtotal Component Legal reforms and institutional strengthening for land administration 3.1 Review of legal and institutional frameworks 3.2. Integration of the Registry/Cadastre System Subtotal Component Project management, monitoring, and evaluation 4.1. Project Administration Inter-institutional Coordination Subtotal Component Total Baseline Cost Physical Contingencies Price Contingencies Total Project Costs Interest during construction Front-end fee (not included) 0.00 Total Financing Required

52 Annex 6: Implementation Arrangements GUATEMALA: LAND ADMINISTRATION I1 PROJECT The project will be implemented following the successful experience of the Guatemala Land Administration Project, Phase I. Unlike Phase I, the Registry of Cadastral Information (Registro de Informaci6n Catastral, RIC) will be the overall implementation agency for this project, replacing the Technical and Legal Unit (UTJ) of the Ministry of Agriculture. RIC was created by Legislative Decree (Ley RZC) approved by Congress on June 15, 2005, published in the Official Gazette N 22, Volume N 277 on July 20, 2005, and in force since August 20, 2005, as an autonomous public institution, with the objective of establishing, maintaining, and updating the cadastre in the national territory. RIC s organizational structure consists of a Directive Board, a National Executive Office, and Municipal Offices. The Directive Board is the entity in charge of defining cadastral policies, overseeing the organization and functioning of RIC, and coordinating with the public institutions and social organizations involved in the cadastral process. The Directive Board is comprised of seven members: the Minister of Agriculture, the General Registrar of Property, the Director of the National Geographic Institute (IGN), an appointee of the National Association of Municipalities, and appointees of the Civil Engineering, Agronomic Engineering, and Lawyer- Notary Federations. The Minister of Agriculture is the President of the Board, and in his or her absence, the Vice-Minister is assigned. The Directive Board will approve all the agreements that RIC enters into with other public and private entities, appoint the National Executive Director, approve the operational manual and annual operative plans, and enact the official declaration for cadastral fieldwork in the project areas. The National Executive Director, under the overall supervision of his or her Board, will be in charge of planning, organizing, and executing all the administrative, technical, and legal activities of the project. In the context of Phase 11, RIC will coordinate the various participating agencies by means of agreements that will become effective, to the World Bank s satisfaction, before the corresponding activities begin. All implementation arrangements will be consistent with the Ley RZC. Unlike Phase I, Phase I1 anticipates a much stronger institutionalization of the project in its administrative, procurement, financial, and technical areas. The United Nations Development Programme (UNDP) will no longer be used as the procurement and financial agent (see Annex 7). During Phase 11, RIC will directly manage the project s financial and administrative aspects, including loan funds, through its administrative and financial units (see Annex 7 and 8). For Phase 11, RIC will create a Project Coordinating Unit (Unidad Coordinadora del Proyecto, UCP) (see Figure A6.1 for the UCP organizational chart), to coordinate, monitor, and evaluate the project s activities and assure overall project coordination both internally and externally, with participating agencies and the World Bank. The UCP will include, among others, a project coordinator, a procurement officer, and a financial officer placed in the Administrative and 45

53 Financial Direction. UCP is also responsible for preparing the progress report and coordinating with and reporting to the Bank, including facilitating the Bank supervision. Internal Coordination Internally, UCP will coordinate with: The Administrative and Financial Direction in the procurement of goods, works, and/or services and administrative and financial management; and The Technical and Juridical Directions with regard to cadastral and regularization activities and technical supervision, in particular of international cadastral contracts. Annexes 7 and 8 detail the roles of the UCP and the Administrative and Financial Direction for the management of Procurement Administrative and Financial Functions. For technical activities, the UCP will coordinate the work between the Technical and Juridical direction and the private companies contracted to carry out the field survey. The Unit for Cadastral Analysis within the Technical Direction will be responsible for comparing the data from the Registry s past records with the data coming from the field surveys. The personnel in this unit will prepare parcel-based reports and deliver them to the Unit for Legal Analysis, within the Juridical Direction, which will examine the legal situation of the property and its relation with the subject. The results of the cadastral and legal analyses will be used to establish whether the property is regular or irregular. External Coordination (see Figure A6.2 for the external coordination between RIC and the other agencies). RIC will enter into a Participation Agreement with each participating agency, and into a Municipality Agreement with each respective municipality where the project will take place. These agreements, described below, will clearly define the roles, responsibilities, and management of funds for each of the participating entities and municipalities. For Component 1 with the General Property Registry (Registro General de la Propiedad, RGP): RGP was created by Article 230 of the Constitution. It is regulated by Legislative Decree 106 and by Article 1124 of the Civil Code. Its main functions are to register, annotate, and cancel all acts and contracts related to land and real estate properties and movable assets. RIC will notify the RGP about the areas that have been selected for the cadastral process to initiate the inter-institutional coordination. RIC will compile the registral information relative to ownership and other rights over properties inscribed in the RGP, which will be used in the preparation of the property diagnostics, and the cadastral and legal analyses. Decree guarantees RIC free access to RGP records. After an area has been selected to undergo the cadastral process, RGP will notify RIC about any modification in its records. In the case of any incongruence in the registral records, RIC will deliver this information to the RGP to verify the results of the analysis and make the respective amendments. After RIC has conducted the cadastral-legal analysis and concluded whether the property is regular or irregular, RGP will be 46

54 notified to make the respective inscription in its records. The registral inscription will include the cadastral classification code assigned by RIC and the property s territorial data that were collected in the field. RIC will be responsible for the administration of information related to the physical description of properties, and RGP will continue to be responsible for the administration of information related to ownership and other rights, preventive annotations, limitations, and any other legal situation of the properties. For Component 1 with the National Geographic Institute (Instituto Geogrufico Nacional, IGN): IGN (Instituto Geografico Nacional Ing. Alfred0 Obiols Gomez) was created on December 28, 1964, by Executive Decree as a dependency of the Ministry of Public Works and Communications, renamed on January 1, 1998, as the Ministry of Public Works, Transport, Communications and Housing, and currently the Ministry of Communications, Infrastructure and Housing. IGN s regulations were approved by Governmental Accord No It is responsible for establishing and maintaining the country geodetic framework and basic topographic maps. RIC will coordinate activities with IGN for: (a) densification and use of the geodesic network, (b) drafting terms of reference for the execution and supervision of aerial photography and the generation of other photographic products, and (c) exchanging information referring to the identification of departmental and municipal boundaries. For Component 1 with the Land Fund (Fondo de Tierras, FONTIERRAS): FONTIERRAS was created by Legislative Decree (Ley del Fondo de Tierra) approved by Congress on May 13, 1999, published in the Official Gazette N 77, Volume N CCLXI on June 16, 1999, as an autonomous and decentralized public institution, with the objective of (i) supporting access to land for poor people, and (ii) regularizing state lands that had been adjudicated or in process of adjudication, in coordination with the rural development policy. RIC will coordinate with FONTIERRAS for the surveying of parcels in areas prone to adjudication and the regularization of parcels under the responsibility of this agency. For Component 1 with the National Council for Protected Areas (CONAP) and the State Reserve Control Office (Oficina de Control de Areas de Reserva del Estado, OCRET): CONAP: On February 7, 1989, Legislative Decree No (Ley de Areas Protegidas) created the Guatemalan System of Protected Areas (Sistema Guatemalteco de Areas Protegidas, SIGAP) modified by Decrees No , , and Article 1 states that biological diversity is an integral part of the natural patrimony and therefore its conservation through the creation of officially established and adequately administered Protected Areas is of national interest. Article 59 creates the National Protected Areas Council (Consejo Nacional de Areas Protegidas, CONAP) with its own legal personality under the Presidency of the Republic. CONAP is the superior body in charge of inventorying, managing, and coordinating the Guatemala Protected Area System (Sistema Guatemalteco de Areas Protegidas, SIGAP). 47

55 OCRET was created by Legislative Decree No (Ley Reguladora de las Areas de Reservas Territoriales del Estado de Guatemala) and is the superior body in charge of inventorying and managing the country's public areas and reserves. RIC will coordinate with CONAP and OCRET all activities related to the demarcation of lands under their jurisdiction. For Component 1 with the History and Anthropology Institute (Instituto de Antropologia e Historia de Guatemala, IDAEH): IDAEH is a Public Agency under the Ministry of Culture and Sport that was created on February 23, 1946, by Legislative Decree No. 22, which was amended in 1996 (Ley para la Proteccibn del Patrimonio Cultural de la Nacidn). IDAEH is the official institution in charge of inventorying and managing the areas of archaeological or cultural value, including the indigenous ones. RIC will coordinate with IDAEH all activities related to the demarcation of lands under their competence. For Component 1 with the SMSAA-CONTIERRA: SAA/SAA-CONTIERRA: The Secretaria de Asuntos Agrarios de la Presidencia de la Republica was created by Executive Decree No dated April 29, Article 2 states that the following two agencies are transferred to SAA: (a) the Technical and Legal Unit of the Institutional Commission for the Development and Strengthening of Property Rights (Comisidn Institucional para el Desarrollo y Fortalecimiento de la Propiedad de la Tierra), and (b) the Presidential Dependency for Legal Assistance and Conflict Resolution on land issues (CONTIERRA). CONTIERRA was created by Executive Decree No , published in the Official Gazette on June 25, 1997, and Stara operating on June 15, 1997, under the Private Secretariat of the Presidency. CONTIERRA is the official body for managing land conflict resolution and coordinating such activity with other national or local agencies, NGOs, and civil society stakeholders. RIC will coordinate with SAA-CONTIERRA on conflict resolution. SAA-CONTIERRA has already established two inter-institutional regularization tables (mesas de regularizacidn) in Izabal and Zacapa-Chiquimula. In Alta Verapaz, SAA-CONTIERRA is a member of an autonomous regularization table that includes municipal and traditional authorities and members from civil society. SAA-CONTIERRA also has a presence in Baja Verapaz, Escuintla, Sacatepequez, and PetCn. If an agreement is reached between the affected parties, SAA- CONTIERRA will notify RIC to issue a conciliatory act and include the agreed boundaries in the field report. If no agreement is reached within 60 days, RIC will declare the property as irregular.'* '* SAA-CONTIERRA is not the only entity available to provide services for conflict resolution; a number of other public and private entities also provide these services. Decree states that community authorities can be 48

56 For Components land 2 with Municipalities: The Constitution designates the Municipalities as autonomous. The Municipal Code (Legislative Decree No ) regulates the municipalities, The municipal code gives power to municipalities to delimitate their boundaries and coordinate with local stakeholders in any matters related to municipal development, including land activities. RIC will coordinate with municipalities with respect to: (a) design and implementation of the social communication campaign and accompaniment of field activities and public viewing; and (b) demarcation of the municipal boundaries, in coordination with the surrounding municipalities. For Component 3 with the General Property Registry (RGP): RIC will work with the RGP to develop an integrated registry-cadastre technological platform that will allow RIC and RGP to jointly input, analyze, and rectify parcel-level data in their databases using the respective identification systems. Finally, for the execution of Component 1: RIC will establish eight Municipal Cluster Offices in zones undergoing the RIC cadastral process. Each cluster will cover five to eight municipalities, and will be composed of social, technical, and legal specialists. Their basic purpose is to ensure that the project s objectives and results are achieved effectively and efficiently at the local level. The agency s key functions are: 0 Local-level inter-institutional coordination with government entities, municipalities, and communal organizations. Ensuring the execution of efforts and processes to establish land surveys, including the coordination of local-level social communication processes. Execution of jointly formulated operating plans, implementing technical actions at the local level. The Project s Operational Manual will specify the duties and responsibilities of all institutions participating in project implementation, of RIC as the executing agency, and of the abovementioned agencies as participating agencies. Likewise, it will include the project s technical, legal, administrative, financial, procurement, and monitoring procedures. Figure A6.1 illustrates the structure of RIC, including the UCP position indicated with a red dot. invited by the affected parties to participate as mediators, and indigenous peoples have the right to choose resolution mechanisms that are traditionally used by them. 49

57 . 1...,...).,! 1... j CadastraX Zones ~~~icipa~ Cluster Offices Local support offices

58 Figure A6.2. External Coordination between RIC and the other Agencies RIC's Directive Board Federation of Federation of Strategic guidelines, political support, verification for Federation of Civil management, and institutionalization of coordination mechanisms. COORDINATION AGREEMENTS L I 1 I Coordination I Coordinate Project Activities I lnstitutinnalixatinn - Attend Project Demands - Execute according to Action Plans I I Reonrts I * Operational EXECUTION ' Municipal Cluster Offices in Caclastral zones 'r Provide the institutional support for the execution of the Project in their plans, inter-institutional operational coordination, supervision, and monitoring, report to RIC's Directive Board through the I Field operations r I I coordination at the local level, implementation of cadastral activities, operative plans I 51

59 Annex 7: Financial Management and Disbursement Arrangements GUATEMALA: LAND ADMINISTRATION I1 PROJECT Summary Conclusion of Financial Management Assessment. On the basis of the assessment performed, the financial management team presents the following conclusions: The executing agency, the newly-created RIC, will be responsible for managing the fiduciary aspects of the proposed project. In essence, RIC is the re-embodiment of UTJ, which was the entity assigned by the Ministry of Agriculture to manage the Land Administration I project financed by the World Bank. The fiduciary aspects of the proposed project will be managed by RIC s Administrative and Finance department, through its Projects Financial Unit (PFU). The fact that RIC has ongoing experience managing projects financed by donors and the World Bank, for which it has basic administrative structure and systems in place, puts it in a good position to take over the financial management functions of the proposed project. However, the FM Assessment (FMA) has identified project-specific actions in order to strengthen the financial management (FM) capacity of RIC and enable to it to carry out the financial activities of the proposed project effectively. Therefore, assuming that RIC carries out the proposed action plan presented in this assessment, it would have in place adequate financial management arrangements that meet the Bank s minimum fiduciary requirements to manage the specific financial activities of the proposed project. Organizational Arrangements The loan borrower will be the Republic of Guatemala, represented by the Ministry of Finance (MINFIN). Overall project coordination and administration will fall under the newly created Cadastral Information Registry (RIC). Within RIC, the Administrative and Finance department, through its Projects Financial Unit (PFU), will be directly responsible for financial management (FM) tasks for the proposed project. These will basically include: (i) budget formulation and monitoring; (ii) cash flow management (including processing loan withdrawal applications); (iii) maintenance of accounting records; (iv) preparation of in-year and year-end financial reports; (v) administration of underlying information systems; and (vi) arranging for execution of external audits. Disbursement and bank account management responsibilities will remain within RIC s Treasury Unit. The Projects Financial Unit (PFU) is located within RIC s Administrative and Finance department and is responsible for the fiduciary aspects of all externally-financed projects executed by RIC. PFU reports to the Director of RIC s Administrative and Finance department and will coordinate with the RIC s PCU responsible for overseeing the technical aspects of the proposed project (see organizational chart below). PFU has a Coordinator and will have dedicated to the proposed project, a Budget Officer, an Accountant and an Administrative Officer. 52

60 It is important to note that PFU will be staff mainly with personnel who were responsible for the fiduciary aspects of the Land Administration I project (IBRD Loan No.4415-GU), which had a Satisfactory Financial Management rating in the latest ISR. However, due to the entity s decision not to use UNDP as the funds administrator (UNDP was the funds administrator for the pervious Land Administration project) and the resulting increase in fiduciary workload, it was agreed that an additional Accounting Officer would be added to the Treasury unit of RIC (within the UDAF). The person will be dedicated to the project, but be located within RIC s UDAF (in the Treasury unit). Budget Planning Between January and April of each year, RIC will prepare its investment program for the next year. The program should be consistent with the budget policy provided by MINFIN and be incorporated into the national public investment system (SNIP). This budget, in turn, will be incorporated by MINFIN into the general state budget for its submittal to Congress in September. On the basis of the approved budget, RIC will adjust as needed its project annual work and procurement plan (POA), which will be reviewed by the Bank. Accounting and Financial Reporting Accounting Policies and Procedures. The main FM regulatory framework for the project will consist of (i) the Organic Budget Law (LOP) and its Regulations, which norm the public sector FM systems, (e.g., budget, accounting, treasury, and public credit); (ii) the annual Law of the General State Budget; and (iii) MINFIN s manuals based upon the cited laws. Project-specific FM arrangements that are not contemplated in the documents cited above will be documented in a concise FM section of the project s operational manual. Among others, specific reference will be made to: (i) the internal controls applicable to the project and (ii) the formats of project financial and audit reports. Information Systems. In compliance with internal regulations, RIC will operate financial transactions using the government-wide integrated accounting system (SICOIN). It will be the responsibility of the PFU to maintain accounting records specific to the project and ensure that project implementation information is recorded into SICOIN, in coordination with the UDAF of RIC. RIC has a computerized financial management system (designed specifically for the accounting of externally-funded projects), which was adequate for the accounting of the previous project (IBRD Loan No.4415-GU). However, some necessary modifications were identified during the evaluation of the project, such as the ability to monitor expenditures based on project components and sub-components, the implementation of a procurement module, as well as the ability to produce certain financial reports automatically. The improved system will be implemented and operational before the effectiveness date of the project. Financial Reports. On a quarterly basis, RIC will prepare and submit to the WB an unaudited interim financial report (formerly called FMR) containing: (i) a statement of sources and uses of funds and cash balances (with expenditures classified by subcomponent); (ii) a statement of budget execution per subcomponent (with expenditures classified by the major budgetary 53

61 accounts); (iii) a projection report; (iv) a designated account activity statement (including a copy of the bank statement); (v) a summary statement of designated account expenditures for contracts subject to prior review; (vi) a summary statement of designated account expenditures for contracts not subject to prior review; (vii) a physical progress report; and (viii) a procurement report. The unaudited interim financial report will be submitted not later than 45 days after the end of each quarter. The unaudited interim financial report will be used for monitoring and disbursement purposes. On an annual basis, RIC will prepare project financial statements including cumulative figures, for the year and as of the end of that year, of the financial statements cited in the previous paragraph. The financial statements will also include explanatory notes in accordance with the Cash Basis International Public Sector Accounting Standard (IPSAS), and RIC s assertion that loan funds were used in accordance with the intended purposes as specified in the Loan Agreement. These financial statements, once audited, will be submitted to the WB not later than six months after the end of the Government s fiscal year (which equals the calendar year). The supporting documentation of the quarterly and annual financial statements will be maintained in RIC s premises, and made easily accessible to WB supervision missions and to external auditors. Flow of Funds WB Disbursement Method. Note that since no new advances can be provided to Designated Accounts in Guatemala until the unrecovered balance of a PHRD grant from another project has been reimbursed to the World Bank, initially only the reimbursement and direct payment methods will be available to the project. Once this situation has been resolved and the reimbursement received by the World Bank, loan proceeds would be withdrawn by RIC using the advance method with supporting documentation based, at least in the beginning, on statement of expenditures (SOE) (the SOE method will be utilized for a period of six months to one year to enable the testing of the system for the preparation of IFRs). Once the preparation of IFRs has been tested and with the agreement of the World Bank, unaudited interim financial reports or IFRs (formerly called FMRs) could be used as supporting documentation. During implementation, RIC will: (i) maintain satisfactory FM arrangements; (ii) submit unaudited interim financial reports consistent with the agreed form, content and due date; and (iii) submit acceptable audited financial statements by their due date. If RIC does not continue to meet these criteria, the supporting documentation requirements will be changed to statements of expenditures or records only (provided the WB does not suspend disbursements because of noncompliance with the obligation to maintain an adequate FM system). Other Procedures. The use of direct payment will probably be needed for the cadastral technical services contract. Under this modality, the Borrower will follow the guidelines provided in the Disbursement Letter. WB Designated Account. Once the situation with the reimbursement of the unrecovered balance from a PHRD grant has been resolved, MINFIN s National Treasury Directorate (Treasury) would open and maintain a segregated account in US Dollars in the Bank of Guatemala 54

62 (BANGUAT), called a designated account, to be used exclusively for deposits and withdrawals of loan proceeds for eligible expenditures. After the conditions of effectiveness have been met, and the designated account has been opened, RIC would submit its first disbursement request to the WB, together with the expenditure and financing needs forecast for the next six months. For subsequent withdrawals, RIC would submit the disbursement request, along with the appropriate documentation (SOE or IFR), the DA bank statement and a reconciliation of this bank statement.. Flow of Funds -In General. RIC would open an operational account in a commercial bank in local currency (Quetzales), funded on the basis of advances from the designated account in order to execute payments in local currency. RIC will record expenditures through a regularization process in SICOIN. WB Table of Loan Proceeds 1. ComDonent 1 2. Component 2 3. Component 3 4. ComDonent 4 5. Unallocated Total Expenditure Category Loan % of Expenditures to Amount be Financed (US$) % % % % Audit Arrangements Internal Audit. In the course of its regular internal audit activities vis-&vis the institutional budget, RIC s internal auditors may include project activities in their annual work plans. RIC will provide the WB with copies of internal audit reports covering project activities and financial transactions. External Audit. As stated earlier, RIC managed the previous Land Administration project (IBRD Loan No.4415-GU), for which no audit compliance issues have been identified. The audit reports for the above mentioned project were received on time and presented unqualified opinions. The annual project financial statements prepared by RIC will be audited following International Standards on Auditing (ISA), by an independent firm (or the Controller General of Accounts, subject to prior agreement with the Bank) and in accordance with terms of reference (TORS), both acceptable to the WB. The audit opinion covering project financial statements will contain a reference to the eligibility of expenditures. In addition, memoranda on internal controls ( management letters ) will be produced on a semiannual basis. 55

63 The audit work described above can be financed with loan proceeds. RIC will arrange for the first external audit within three months after loan effectiveness. Each audit engagement is expected to cover at least two years. Risk Assessment Summary The FM risk assessment for this project has been assessed at Low since financial management of the project is concentrated in one agency (the Cadastral Information Registry or RIC), which has prior experience with the fiduciary aspects of Bank-financed projects and which had a Satisfactory Financial Management rating in the latest ISR. Financial Management Action Plan Entity Date 1. Finalize the format of unaudited interim financial reports (formerly called FMRs). 2. Finalize the FM section of the project RIC/WB RIC Before negotiations Before operational manual. negotiations 3. Finalize audit TORS and short list of RIC Before external auditors. negotiations 4. Present a plan for the implementation of the RIC Before modified financial management system. negotiations 5. Modified financial management system RIC Before implemented and operational. effectiveness 6. Contract the additional person needed in the RIC Before Treasurv unit of RIC. effectiveness 7. Contract external auditors. 3 months after effectiveness WB FM Supervision Plan. A WB FM Specialist should perform a supervision mission prior to effectiveness to verify the implementation of the unit and the FM system. After effectiveness, the FM Specialist must review the annual audit reports, should review the financial sections of the quarterly unaudited interim financial reports, and should perform at least one supervision mission per year. I 56

64 Annex 8: Procurement Arrangements GUATEMALA: LAND ADMINISTRATION I1 PROJECT A. General Procurement for the proposed project would be carried out in accordance with the World Bank s Guidelines: Procurement Under IBRD Loans and IDA Credits, dated May 2004; and Guidelines: Selection and Employment of Consultants by World Bank Borrowers, dated May 2004, and the provisions stipulated in the Legal Agreement. The general description of various items under different expenditure categories are described below. For each contract to be financed by the Adaptable Program Loan (APL), the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Procurement of Works: Works procured under this project would include: establishment of RIC s municipal cluster offices (premises) in at least seven departments, strengthening of the institutional framework of the Registry of Cadastral Information (RIC), the General Property Registry (RGP), and other entities involved (remodeling or construction of offices), opening of cadastral offices, and so forth. The procurement will be done using the Bank s Standard Bidding Documents (SBD) for all International Competitive Bidding (ICB) and the National Standard Bidding Document (SBD) agreed with or satisfactory to the Bank. For Shopping the invitation document shall be agreed with or satisfactory to the Bank. Procurement of Goods: Goods procured under this project would include: vehicles, motorcycles, computers, printers, office equipment, communication equipment, furniture, and hardware and software. To the extent possible, contracts will be grouped in bidding packages of more than US$250,000 and procured following ICB procedures using Bank-issued SBDs. Contracts with values below US$250,000 per contract may be procured using National Competitive Bidding (NCB) procedures using bidding documents agreed by the Bank. Contract for goods that cannot be grouped in larger bidding packages and estimated to cost below US$50,000 per contract may be procured using Shopping (National and International) procedures based on a model request for quotations satisfactory to the Bank. Technical Services: Technical services under the project amount to approximately US$17.8 million, and these include land regularization activities covering areas such as geodesy and mapping, field data acquisition, and quality control activities. Land regularization contracts typically combine physical activities (that is, aerial photography, satellite imagery and/or field surveys) with complex logistics, legal tasks, and social actions (that is, analysis of existing land information, resolution of land-related conflicts, and social campaigns to secure residents and local community cooperation). GoG and the Bank agreed to use the customized documents prepared under the Land Administration I Project in El Salvador. Contracts for technical services estimated to cost US$1 million or more will be procured following ICB procedures using the customized document. Contracts estimated to cost between US$lOO,OOO and US$1 million may be procured following NCB procedures using the customized document. Contracts estimated to 57

65 cost below US$lOO,OOO may be procured under lump-sum fixed contracts awarded on the basis of quotations obtained from three qualified domestic contractors in response to a written invitation. Procurement of Nonconsulting Services: Nonconsulting services to be procured under the Project include: advertising in general (notifications, edicts, and so forth), design of radio campaigns, radio advertisements, national campaigns, and communication services in general. Contracts estimated to cost US$250,000 or more will be procured following ICB procedures. Contracts with values below US$250,000 may be procured using NCB procedures using bidding documents agreed by the Bank. Contracts estimated to cost below US$50,000 may be procured on the basis of quotations obtained from three qualified contractors in response to a written invitation. Selection of Consultants: Consulting services from firms and individuals required for the project include impact evaluation studies, financial and procurement audits, advisory services from individual consultants on land administration services, supervision, mapping, legal framework, land regularization and titling, supervision and monitoring of data transfer and linkage, staff, and so forth. Short lists of consultants for services estimated to cost less than US$200,000 per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. In case of engaging Universities, the Project is going to finance scholarships paid directly to students. Probably there will be no direct contracting of Universidad de Sun Carlos de Guatemala and Universidad Rafael Landivar, since subsidies will be provided directly to students. Sometimes teachers from specific areas are going to be financed (including travel costs) to provide training, which will be considered as direct contracts. Operating Costs: Operating costs will be identified in the procurement plan. These costs must be reviewed and found acceptable to the Bank (they will include security services for regional premises, phone payments, Internet services, and so forth). Others: The procurement procedures and SBDs to be used for each procurement method, and model contracts for works and goods procured, will be included as annexes in the Project Operational Manual. 58

66 Summary communication) Consulting (firms) Consulting (individual) Direct contracting Agreements >loo QCBS 100 L e50 QCBS/QBS/FB S/LCS/CQ/SSS f 50 LCS/CQ All processes for each contract above $100,000 and all single-source contracts; first two processes each calendar year for each selection method Section V in All cases above US$50,000 and all single-source - the Guidelines contracts All cases regardless of the amounts involved All cases regardless of the amounts involved

67 policy and the parameters approved for Guatemala in October A transition plan for RIC project staff will be agreed upon prior to loan effectiveness. Some current civil servants will be identified as direct contracts within the Procurement Plan, and a justification must be provided. The procurement team that was part of the Land Administration Project, Phase I was composed of a procurement officer and two assistants. An assessment of RIC s capacity to implement procurement actions for the project was carried out by Procurement Specialist Luis Prada in July The assessment reviewed the organizational structure for implementing the project and the interaction between the project s staff responsible for the Procurement Officer and RIC s relevant unit for administration and finance. The assessment reviewed the organizational structure for implementing the project, previous performance under LAP I, the volume and complexity of procurement actions for the new project, and the new arrangements of the project procurement function. RIC, having achieved an acceptable level of capacity to implement procurement, will carry out through the Procurement and Institutional Purchase Unit (Unidad de Adquisciones y de Compra Institutional, UACI) all procurement actions except for the big contracts (ICB > US$l,OOO,OOO). The procurement function within RIC is staffed by only one person with knowledge of Bank procedures. The key issues and risks concerning procurement for implementation of the project have been identified and include new procurement staff with no experience in Bank procedures. Due to the entity s decision not to use the United Nations Development Programme (UNDP) as procurement agent (UNDP was the funds administrator and procurement agent for the previous Land Administration Project), and the resulting increase in the fiduciary work, it was agreed to finance at least one Procurement Coordinator, and to finance one procurement assistant (by negotiations) and two other procurement assistants that need to be contracted during the first six months after effectiveness, in order to obtain the minimum capacity required to carry out all the procurement processes programmed (including at least 15 technical services contracts). In the case of technical services, RIC could negotiate with UNDP to get their support on these specific activities. The cost of UNDP services will be covered by counterpart funds. The overall project risk for procurement is Modest. Procurement Action Plan Table A8.2. Procurement Action Plan Action I Responsible 1 Completion Date 1. Have monitoring system (physical and financial) in place 2. The Section on Procurement-related issues within the Operation Manual for the project to be approved by the Bank Entity RIC RIC 2 months after effectiveness By negotiations 60

68 3. Hire the procurement staff (1 procurement officer RIC and 1 procurement assistant) 4. Prepare agreements between RIC and other RIC concerned agencies if needed (including universities) 5. Project launch RIC By effectiveness By negotiations Immediately after effectiveness C. Procurement Plan The Borrower, at appraisal, developed a procurement plan for project implementation that provides the basis for the procurement methods. This plan will be reviewed by the Bank and agreed prior to negotiations. The Borrower has agreed to send a draft to be reviewed by September 18, It will be available in the project s database and in the Bank s external website after approval. The Procurement Plan will be updated in agreement with the Project Team annually (preferably in December of the previous year of implementation) or as required to reflect the actual project implementation needs and improvements in institutional capacity. D. Frequency of Procurement Supervision In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended yearly supervision missions to visit the field to carry out post-review of procurement actions. E. Details of the Procurement Arrangements Involving International Competition 1. Goods, Works, Technical Services, and Nonconsulting Services (a) List of contract packages to be procured following ICB and direct contracting: 1 Ref. No Contract Estimated Procure- P-Q Domestic Review Expected Comments (Description) cost ment Preference by Bank Bid- (US$) Method (yedno) (prior/post) Opening Date Vehicles $982,500 ICB No Prior Computer $2,773,44 ICB No Prior equipment, software, GPS equipment Land $17,308,848 ICB No Prior regularization and cadastral (b) ICB contracts of Goods estimated to cost over US$250,000 per contract, ICB contracts of technical services estimated to cost over US$1 million per contract, and all direct contracting will be subject to prior review by the Bank. 61

69 2. Consulting Services (a) List of consulting assignments with short list of international firms Ref. Description of Estimated Selection Review Expected No. Assignment cost Method by Bank Proposals (US$) (prior/post) Submission - Date 1 Diagnostic of $1,890,000 QCBS Prior 2 properties Land $200,000 QCBS Prior 3 administration database Cadastral $250,000 QCBS Prior applications Comments (a) Most consulting assignments are estimated to cost under US$200,000. (b) Consultancy services estimated to cost over US$200,000 for firms and US$50,000 for individual consultants per contract and all single-source selection of consultants (firms) or solesource selection of individual consultants will be subject to prior Bank review. (c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$200,000 per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 62

70 Economic Analysis Summary Annex 9: Economic and Financial Analysis GUATEMALA: LAND ADMINISTRATION I1 PROJECT The project is the second phase of the long-term strategic program of land regularization under the Peace Accord. The first phase of the program, as a pilot, was implemented in the Department of Peten to test the methodology and model. A comprehensive economic analysis was carried out for the first phase. For this analysis, the actual data from Phase I in Peth are used as a reference to estimate the internal rate of return (IRR) and net present value (NPV). The results are shown in Table A9.1. Benefits costs Net Benefit Net Present Value IRR Present Value (US$) $364.4 million $103.5 million $263.4 million $64.3 million 40% Summary of Benefits and Costs Phase I1 of the project will cover 8 departments with 55 municipalities. The project areas cover 18 percent of the national territory, and about 280,000 rural and 62,000 urban parcels would be in the cadastral survey. The following economic analysis includes an estimate of benefits and costs, main assumptions, methodology applied, and analysis of the results. Costs. The costs used in the economic analysis include all costs related to land regularization activities, titling, and registry and cadastre maintenance activities during the project implementation period (six years), and maintenance operations for 16 years, which will be carried out by the Registry of Cadastral Information (RIC). The total project costs are $62.3 million, including direct and indirect costs. The direct costs include all activities related to land regularization: cadastral activities, titling, and registration, and transfer of data to the RIC system. The estimated average cost of conducting the cadastral surveying in a rural parcel is US$67 and in an urban parcel US$23. The indirect costs cover all other related activities including supporting policy reform and strengthening the legal and regulatory framework, strengthening the institutional capacity of RIC, and incremental operating costs of the project s administrative activities. The cadastral maintenance costs for the period between years 7 and 20 are estimated based on RIC s operational costs, which would be $1.9 million per year. Benefits. The main benefits expected to be generated by the project include: (a) improving the security of tenure and therefore increasing property value, (b) increasing private investment in land, (c) facilitating the integration of land markets, (d) access to credits/loans, (e) incentives for 63

71 environmental conservation, (f) reducing social conflict, and (g) assisting local governments with economic development planning. Improving security. As already shown in PetCn, farmers consider tenure security to be extremely important since land is the main source of a family s livelihood. It has been shown that more than 90 percent of farmers were willing to pay for titling. The same situation is expected to occur in the project areas under Phase 11. Increasing land value. Land regularization will have an impact on land value. Three major types of benefits are associated with it: improved investment in land, marketability, and ability to use land as collateral for credits/loans. Estimating the magnitude of the expected increased value for a national program is very complex and difficult because multiple factors, such as location, access to public service, size, value of construction, and use of property, would affect land value. Based on Phase I, it was estimated that the value of rural land (tierra nacional) increased by 17 percent, and the value of urban land (tierra municipal) increased by 35 percent. Increasing private investment in land. As a result of improved tenure security, farmers are likely to make long-term investments to improve land productivity. These investments were made in land infrastructure, such as feeder roads, irrigation ditches, and new crop patterns (planting tree crops, improving pasture, and increasing the intensity of agricultural production). Since the process of titling and registration in Phase I is still going on, only a few farmers have made investment in their land, the major activities of which were land infrastructure. This trend will undoubtedly continue during implementation of Phase I1 of the project. Facilitating integration of land markets. Land regularization and titling provide landowners legal certainty and formal rights of land trade with the proper documents. This means that titled land can be more easily exchanged in the formal land market, and landowners would obtain a significantly different price-ne that matches the quality of their regularized land. According to the Guatemalan Constitution, the rights of private property are recognized and guaranteed, as are the inheritance rights of eligible people under the law. In 2004, 136 of 538 land lots were circulated in the land market (buying and selling) in PetCn. With registered land and titling, the transaction costs would also be reduced. Improving access to creditslloans. Experience in San Francisco, PetCn, has already shown that a very high percentage of titled properties were used as collateral for credits/loans. This implies incremental financing through formal and informal systems. However, the financing system must still overcome numerous weaknesses. Providing an incentive for environmental conservation. On-farm land regularization is likely to result in sustainable resource use by removing the incentive to clear forests from farmers own land instead of retaining forest cover on their land, and increasing the planting of tree crops. In addition, they would improve pasture for increasing the sustainability of livestock production. Off-farm, the project will help alleviate the environmental impact of existing migration flows in protected areas by discouraging settlement in the core and multi-use zones of protected areas and helping channel migration into less sensitive areas. 64

72 Reducing social conflict. Land disputes are one of the main causes of social conflict in Guatemala. Under the Peace Accord, the Government has established an institute, the Special Commission of Land Conflict Resolution (Dependencia Presidencial de Asistencia Legal y Resolucibn de Conflictos sobre la Tierra, SAA-CONTIERRA), to handle land conflict cases. Phase I has supported SAA-CONTIERRA in strengthening capacity and equipment. More than 900 cases (82 percent of 1,140 cases) were resolved by May Phase I1 will continue to support SAA-CONTIERRA. Land regularization makes land dispute cases transparent, and there are fewer cases over unclear ownership, property boundaries, and so forth. Assisting local government in economic planning. The cadastral result will assist local governments in economic development, especially in identifying those residential and commercial properties that receive municipal services. Municipal governments will generate revenue from collecting fees from selling urban land to residents and commercial entities, at US$O.Ol per square meter (/m2) to US$0.13/m2, and then from collecting property taxes. In addition, incremental income with legal certainty would be attractive to businesses, which eventually increase revenue to the municipal government from collecting taxes. Net Present Value (NPV) and Internal Rate of Return (IRR) The NPV of net economic benefits was calculated taking into consideration direct measurable benefits from incremental land value and costs. The main assumptions were: (a) incremental land value in urban areas was 35 percent, and 20 percent in rural areas; (b) the costs were for information maintenance by RIC and for General Property Registry (RGP) in the operating period after project completion; (c) about 40 percent of the cadastre was in process of titling; and (d) proportional parcels are distributed to the urban and rural population. Actually, the experience of land value increases in Pet& has shown that the value of urban land parcels increases by 1,500 percent, and that the price of land increases from US$0.13/m2 to US$1.96/m2. However, the incremental value changes frequently from 20 percent to 50 percent of the original price in urban areas, and 15 percent to 20 percent in rural areas. The discount rate applied in the analysis is 12 percent. The economic IRR was estimated at 40 percent, and NPV was estimated at US$64.3 million. Sensitivity Analysis The purpose of a sensitivity analysis is to test the variation of benefit and discount rate. The assumptions are: By reducing the assumed annual benefit by 10 percent and 20 percent, the IRR will decrease to 34 percent and 28 percent, respectively, and the NPV will decrease to US$51.1 million and US$38.8 million, respectively. 65

73 0 By changing the discount rate to 10 percent and 15 percent, the IRR remains unchanged, while the NPV will be US$79.9 million and US$46.6 million, respectively. The results show that the project is profitable and is fairly robust in terms of changes in the assumption. The key assumption is to change the benefits. Financial Analysis of RIC Introduction A financial analysis of RIC was conducted to test the financial viability and sustainability of the new institution. The intention of the analysis was also to provide a reference for setting a reasonable rate of charges to the users of cadastral information. Income Projection The analysis assumed the generation of income through the issuance of cadastral certificates, estimated at US$2.50 per certificate. The price of US$2.50 was selected based on the international experience that shows that land administration services should be available at a cost accessible to the general public. It is assumed that the demand for cadastral certificates would result from the effort to promote land regularization. Cost Projection The analysis included investment costs and operation costs for establishing RIC, which occur during project implementation (six years) and operation (16 years afterward). The investment costs included the establishment of RIC municipal cluster offices (8 offices), staff as consultants working on project implementation activities, operational costs, and integrating cadastral and registry information. Total investment costs were estimated at $27.25 million. The operational costs for maintaining the information included personnel, updating information, and other administrative costs. An annual total of $1.68 million was estimated. Financial Sustainability The financial analysis indicates that in order for RIC to cover the total costs of issuing certifications at a price of US$2.50, the institution would have to issue at least 672,000 certificates per year. A financial analysis of the marginal cost of issuing certificates would have been more appropriate to determine the financial sustainability of RIC. Nevertheless, the marginal cost is difficult to estimate because currently no existing market price is available as a reference. In addition, RIC cannot depend solely on the issuance of certificates as a source of revenue. The institution could diversify the products it could offer to the public for remuneration. This income could allow the institution to cover their operational costs. In conclusion, the financial sustainability of RIC needs to be tested during implementation, because there are insufficient data to conduct an assessment. 66

74 Fiscal Impact Analysis To analyze the fiscal impact under APL I, the Government of Guatemala would collect propertyrelated taxes on land. In Guatemala, the Real Property Tax (Impuesto Unico Sobre Inmuebles, IUSI) is the most important tax. The basis of the tax was property value assessed by the National Cadastre and Valuation Agency (DICABI) under the Ministry of Finance. However, before 1994 there were three problems: (a) low tax rates, (b) low effectiveness of tax collection, and (c) incomplete information. In 1995, tax administration started to be decentralized to municipal governments. In December 1997, a new IUSI law (Decree ) was approved, with the intention of further strengthening the decentralization process and simplifying the calculation of the IUSI. The tax base was changed to the property s area instead of its value. Rates were determined on the basis of relative location (urbadrural) and use (residential, commercial, and industrial). The main fiscal impact would be at the municipal level, where the governments are expected to collect fees and taxes. During Phase I implemented in Peth, the municipality collected fees of US$0.1/m2 to US$0.13/m2 from selling urban land to the people, also collecting IUSI. The statistics data showed that during the 1980s, only two municipalities (Flores and San Benito) generated income from selling urban land, and total revenue for 10 years was Q55,lOO. From 1991 to 1998, prior to project implementation, 6 municipalities generated income from the same source, and the total revenue generated for 8 years was Q431,425. From project implementation in 1999 until 2003, all 12 municipalities in Pet& sold urban land, the total revenue of which for 7 years jumped to Q11,644,398. The incentive for municipal governments to collect taxes is that, based on the Constitution, the more revenue municipal governments generate, the higher the budget the central government allocates to the municipal government. According to DICABI, in 2005, Q307 million of tax revenue was generated, of which Q134 million, representing 44 percent of the total, corresponded to the municipalities. Now more and more municipal governments are interested in collecting and administering the IUSI. The Capital Municipality collects more than one-third of this revenue source at the national level. By May 2005, 8 municipal governments negotiated to collect the IUSI. By then, 121 municipalities were pending for not collecting the IUSI, but by December 2005, the number had fallen to 104. The total area covered by the 55 municipalities in Phase I1 is 31,096 km2. Approximately 12% of this area is urban land. It is expected that more municipal governments would apply to collect the IUSI. 67

75 Environmental Analysis Annex 10: Safeguard Policy Issues GUATEMALA: LAND ADMINISTRATION I1 PROJECT 1. The Guatemala Land Administration I1 Project is Phase I1 of an Adaptable Program Loan (APL), intended to improve land tenure security within the rural and urban areas of Guatemala. This Phase I1 project is intended to extend the systematic cadastre and associated land titling and registry activities from the Department of Pet& (the main focus of the Phase I project) to the departments of Alta Verapaz, Baja Verapaz, Chiquimula, Escuintla, Izabal, Sacatepkquez, and Zacapa. The Land Administration I1 project would primarily work through, and also strengthen, the new Registry of Cadastral Information (RIC), legally established in It would have the following four components. Component 1. Establishment of cadastral and land regularization processes in seven departments, including aerial photography, surveying of inter-municipal and other macro boundaries, parcel-level surveying and validation in urban and rural areas, demarcation of protected area boundary corners, conflict resolution services, titling of private individual and indigenous community land parcels, and title registration. Component 2. Maintenance and updating of cadastral information within the RIC. Component 3. Legal and institutional strengthening, including strengthening the institutional framework of RIC, the General Property Registry (RGP), and other land-tenurerelated entities including municipalities; legal, regulatory, and policy reforms related to land administration and the cadastral process; technological improvements in the cadastre-registry system; and developing an institutional strategy for RIC. Component 4. Project management and monitoring and evaluation, including the project unit within RIC, monitoring systems, independent evaluations and audits, and inter-institutional coordination activities. 2. The only significant environmental impacts from this project would relate to promoting sustainable changes in land use by project beneficiaries-specifically, the extent to which project activities would lead to the conservation of forests and other natural habitats, versus deforestation or other environmentally problematic land use practices. On balance, the overall environmental impact of this project is expected to be positive, due both to: (a) the generally positive environmental features of improved land tenure security; and (b) the Environmental Management Plan (EMP), which seeks to enhance the project s positive environmental impacts and to mitigate and monitor any negative ones. Positive Environmental Impacts 3. Longer-term Land Management. The increased land tenure security expected to result from the project s cadastre, titling, and registry activities is expected to encourage some rural landholders to invest in reforestation, forest management, agroforestry, perennial crops, and 68

76 other land uses with a relatively long-term payoff. These uses are almost always more environmentally friendly than those with a short-term payoff, such as annual field crops and pastures on deforested lands. Moreover, individuals and indigenous communities that receive secure land titles will become eligible to receive financial incentives for reforestation and forest conservation activities (particularly in the departments of Alta Verapaz, Baja Verapaz, and Izabal), under an ongoing program of Guatemala s National Forests Institute (NAB). The project-supported demarcation and titling of indigenous community lands (which, according to the Environmental Assessment [EA] Report, remain largely forested) also implies that these lands are more likely to remain under forest than if they were broken up into relatively small, individual parcels. 4. Reduced Deforestation to Prove Use and Possession, or from Land Invasions. In rural Guatemala, the traditional means of demonstrating possession and use of a parcel of land has often been to remove the forest through cutting and burning. Conversely, forested land lacking demarcation and a clear owner is perceived as being available for settlement and clearing. Thus, landholders who receive legally secure titles as a result of the project-for lands with boundaries that have been verified and physically demarcated through the cadastre-will no longer perceive a need to clear their remaining forest to demonstrate their possession to other potential settlers. Lands with clear private ownership and demarcated boundaries are also much less likely to be invaded or settled by outsiders. A case in point is the mangrove forests of Guatemala s Pacific coast, which cannot legally be titled and (according to the EA report) are often viewed by local people as areas without owners that are thus available for unrestricted exploitation or clearing. 5. Facilitating Private Reserve Establishment. Secure land tenure with clear boundaries is also a de facto precondition for those landowners wishing to establish Private Natural Reserves, a special category of protected area that is legally recognized by the National Council for Protected Areas (Consejo Nucionul de Areas Protegidus, CONAP), but privately owned and managed. According to the EA Report, some 50 private reserves exist today throughout the country, many of them conserving important remnants of threatened natural habitats. The project-supported expansion of land tenure security within seven Guatemalan departments may encourage further private reserve establishment. 6. Appropriate Intensification of Agricultural Land Use. The project is intended to improve land tenure security through cadastre, titling, and registry activities; it might also indirectly lead to increased property taxation and increased access to capital by newly titled landowners. These changes are likely to encourage more intensive use of those lands with good agricultural potential, particularly in the Department of Escuintla (which has a relatively high percentage of Class I and I1 soils). Such lands are often underused as extensive cattle pastures, which provide relatively low employment and income per hectare. In the Guatemalan context, agricultural intensification on these (already deforested) lands could be environmentally beneficial by: (a) reducing the land area needed to produce a given amount of food or income; and (b) providing additional employment to the rural poor, some of whom might otherwise migrate to forested areas as new settlers. 69

77 7. Empirical Evidence. Although there is still much to be learned about the relationship between land tenure security and land use changes, empirical evidence suggests that, on balance, increased land tenure security (through cadastre, titling, and registry) reduces deforestation. The EA Report cites a 2003 study by Loening and Markussen ( Pobreza, Deforestacih y sus Implicaciones para la Biodiversidad en Guatemala, in Econorniu, Sociedud y Territorio, Vol. IV, No. 14, pp ) that conducted regression analysis on rural Guatemalan lands and found reduced deforestation in areas with more secure land tenure (and in those areas with higher education levels and more nonagricultural employment opportunities). Potential Adverse Environmental Impacts 8. Although the project s environmental impacts are expected to be, on balance, largely positive, there are some potential adverse environmental impacts (principally deforestation) that could result from improved land tenure security. Where feasible, these potential adverse impacts will be mitigated and monitored through the project s Environmental Management Plan. 9. Deforestation in Anticipation of the Cadastre. Some landholders might be inclined to accelerate their land clearing activities in advance of the arrival of the cadastre field teams, in order to demonstrate their occupation and use of the maximum possible area of land. To minimize this risk, the project will implement communication campaigns emphasizing that deforestation practices will not influence the final cadastre analysis of the property, and that deforestation is not sufficient to claim possession of, or obtain title to, a piece of land (details below). 10. Increased Land Clearing from Greater Access to Capital. By receiving secure land titles through the project, many landowners might obtain increased access to capital, resulting from: (a) improved access to credit (because the titled land could be used as collateral), and (b) the wealth effect due to the higher price of titled versus untitled land. It is reasonable to expect that some landowners would use part of their increased access to capital for clearing the remaining forest on their property to expand their area of pasture or cropland. 11. Increased Migration to Forest Frontier Areas. By increasing land tenure security and improving cadastre and registry services, the project might lead to increased dynamism in land markets, with more frequent land sales and purchases. As a result, some rural landowners might be more inclined to sell their fully titled land for a profit, and use the proceeds to migrate and clear more land at the forest frontier (although relatively little unclaimed forested land, outside protected areas, still remains available for settlement). Environmental Management Plan 12. The Environmental Management Plan (EMP) is intended to enhance the project s positive environmental impacts and prevent or mitigate the negative ones. The EMP is mainstreamed within the overall project (Components 1 and 4), rather than being a separate component. The activities outlined below in the EMP will be included within the project s Operational Manual (to be finalized prior to negotiations), and other project legal and technical documents, as appropriate. 70

78 13. Demarcation of Protected Area Boundary Corners. Existing protected areas comprise nearly 17 percent of the combined land area of the project departments of Alta Verapaz, Baja Verapaz, Chiquimula, Escuintla, Izabal, Sacatepkquez, and Zacapa. Under Component 1, prior to the parcel-level cadastral survey, the project will delimitate and physically demarcate (with permanent markers called rnojones) the corners of the land boundaries of existing protected areas within the project departments. A social communication campaign will be conducted prior to the physical demarcation to inform the local population. In this manner, when the cadastre teams arrive, they (by noting, with their global positioning system [GPS] equipment, the vectors between the markers) will recognize the special status of those parcels located partially or entirely within protected areas; under existing Guatemalan law, lands within protected areas cannot be privately titled. The cadastre and resolution of land tenure issues within the boundaries of Guatemalan protected areas is a desirable but complex activity that is outside the scope of this particular project. The Operational Manual will specify the procedures to avoid potential disputes where private landholdings appear to overlap with the protected area boundaries. 14. Demarcation of Proposed Protected Areas. In the case of officially proposed protected areas that have been identified by CONAP for protected status (listed in the EA Report), the project will delimitate the area and demarcate the boundary corners. The project will not support any cadastral, titling or regularization activities within these proposed protected areas. The EA Report identified seven proposed protected areas in the project area (called Areas de Proteccibn Especial). An up-to-date list of proposed protected areas has been included in the EA. The project activities will provide geographic delimitation for CONAP to complete the steps to officially declare the areas protected. Also, by excluding any cadastral and regularization activities in these areas, the project will avoid compromising the future conservation options for these areas, consistent with Guatemalan law (Article 90 of Decree 4-89). In this manner, the project will avoid activities that might lead to the degradation of existing and proposed protected areas, which correspond to Critical Natural Habitats and Critical Forests under, respectively, the Bank s Natural Habitats and Forests policies. 15. Demarcation of Archaeological and other Sites of Cultural Significance. Guatemala is endowed with numerous archaeological sites, some of which are world-class tourist attractions, while many others remain poorly known or still undiscovered by scientists. The EA Report confirms that all of the seven project departments harbor significant archaeological sites. Under Guatemalan law, archaeological sites are considered to be part of the public heritage, and are not supposed to be titled to private individuals. Accordingly, the project will promote the identification and demarcation of archaeological sites during the cadastre process, so that these sites will be separated from the lands eligible for titling to individuals. RIC will enter into (or renew, as needed) an operating agreement (convenio) with the Guatemalan Institute of Anthropology and History (IDAEH), to facilitate inter-institutional coordination during the cadastre process. This operating agreement will include: (a) the technical criteria for classifying which types of archaeological remains (or historical, paleontological, or other relics of cultural interest) merit recognition as significant (enough to warrant special land tenure status); and (b) consistent procedures to be followed in the field and subsequently in the offices of RIC and IDAEH. Since most of the cadastre fieldwork in Component 2 is expected to be contracted out, the bidding documents for this work will need to specify the presence of an adequate number of 71

79 qualified archaeologists or other specialists (as needed) to work with the field teams during the cadastre process. 16. Delimitation of Territorial Reserves. Guatemalan law designates the 3-kilometer area adjacent to the ocean coastline and 300 meters around the lakes as state land under the Regime of Territorial Reserve. These areas are important for conservation because many mangroves grow in the coastline. Territorial reserves also constitute a potential source of economic revenue for their tourism potential. The project will finance the delimitation of the perimeter and conduct cadastral surveys within selected territorial reserves. RIC will enter into an agreement with the Office of Territorial Reserves (OCRET) for the execution of these activities. No titling or regularization is expected from the cadastral activities within the territorial reserves, because only concessions are allowed in these areas. OCRET will use the cadastral information collected by the project for better land use planning within the selected territorial reserves. 17. Delineation of Natural Hazard Zones. Many areas in Guatemala are vulnerable to natural disasters, such as floods, coastal storms, earthquakes, and volcanic eruptions. In this regard, areas of highest risk for human dwellings include floodplains, wetlands, steep slopes, lava flows, and beaches. Currently, Guatemalan law does not prohibit the titling of urban or other lands in areas of naturally high risk, except for coastal zones within 3 kilometers of the high-tide line. As part of subcomponent 2.3 (provision of land administration services at the municipal level), the project will finance the formulation of 20 land use plans for selected municipalities in the project area. These plans will delineate the zones of very high risk on detailed maps (using existing data). This information will be disseminated as part of the land use plans, and will thus be available for more informed decisionmaking by both the private and public sector (such as regarding where to locate new housing or infrastructure). 18. Social Communication for Environmental Sustainability. As discussed, the project s support of increased land tenure security is likely to reduce deforestation in net terms. Nonetheless, the project will implement a social communication program that will have as two of its objectives to: (a) minimize deforestation, and (b) promote environmentally sustainable behavior change as part of the cadastre and titling process. In particular: As part of the Social Communications Subcomponent of Component 1.1.2, the project will design and implement communication activities prior to the arrival of the cadastre teams to a particular area in order to inform the beneficiaries about the process and to reinforce the message that deforestation is neither necessary nor sufficient to claim possession of, or obtain title to, a piece of land. Appropriate communication activities and tools should be designed, taking into consideration the culture, language, and social codes of the communities and groups. Also, the communication activities implemented prior to the cadastral work must be viewed as the crucial starting point for building or strengthening trust in the overall process. These activities are intended, among other goals, to minimize any potential induced acceleration of land clearing or forest cutting by landholders seeking to demonstrate their occupation and use of the maximum possible area of land. Under Component 1, the project will support the preparation of simple written/visual/ audio materials to be disseminated throughout the cadastral survey and titling process. An 72

80 analysis of the most appropriate material for the audiences will be conducted during project implementation. These materials would cover environmental topics related to the cadastral process and guaranteeing sustainable land tenure security, such as forest management (including INAB incentives), soil and water conservation, appropriate land use (corresponding with the Land Use Potential Study [Estudio de Cupacidad de Us0 de Tierra, ECUT] classifications), procedures to follow if archaeological relics are discovered, and/or integrated pest management. 19. Land Use Impact Monitoring. As noted, many of the linkages among improved land tenure security, changed landholder behavior, and beneficial or adverse environmental effects are impossible to quantify a priori. Due to these uncertainties, good monitoring and evaluation of the project s environmental effects (particularly concerning land use changes) are all the more important. Under Component 4, the project will support a study of sample rural project beneficiaries, to evaluate the land use changes and other environmental and socioeconomic impacts attributable to cadastre and titling activities (including deforestation, reforestation, and forest management; changes in cropland and pasture area and choice of crops; and relative frequency of post-titling land sales). Baseline data for the sample rural plots will be obtained during Year 1 of the project. Compliance with Safeguard Policies 20. The Guatemala Land Administration I1 Project is designed to comply fully with the letter and spirit of applicable World Bank Safeguard Policies, as indicated below. 21. Environmental Assessment (OP 4.01). This project is classified as Category B, consistent with other land administration projects in the Latin America and Caribbean Region. In accordance with this classification, a free-standing Environmental Analysis Report has been prepared by RIC, reviewed by the Bank, and found to be satisfactory. In accordance with the Bank s Information Disclosure Policy (BP 17.50), copies of this report (in Spanish) are available on request from all RIC offices in Guatemala and at the Bank s InfoShop in Washington. The findings and relevant recommendations from this report are reflected in project design. Consistent with OP 4.01, project preparation included extensive public consultation (about the project s environmental and other aspects) with a broad range of stakeholders, including national and local government entities, producer associations, indigenous and peasant organizations, and environmental and other nongovernmental organizations (NGOs) (see the EA Report, pp , for details). 22. Natural Habitats (OP 4.04) and Forests (OP 4.36). Although it is impossible to predict the project s site-specific induced impacts on forests and other natural habitats, the project s net effects are likely to be positive from a forest conservation standpoint, for the reasons noted above. The EA Report also identifies the areas within the project departments of Alta Verapaz, Baja Verapaz, Chiquimula, Escuintla, Izabal, SacatepCquez, and Zacapa that qualify as Critical Natural Habitats (under OP 4.04) and Critical Forests (under OP 4.36); they comprise both (a) existing protected areas (EA Report, pp ), and (b) officially proposed protected areas (EA, pp. 8-9 and 22-23). By demarcating the boundaries and conducting a topographical survey within these areas, the project will contribute to their improved legal recognition. To avoid 73

81 compromising their legal status from a conservation standpoint, the project will not support any titling or regularization activities in these areas. This approach is consistent with Guatemalan law and with OPs 4.04 and 4.36, which prohibit Bank support for activities leading to the significant degradation of Critical Natural Habitats or Critical Forests. 23. Pest Management (OP 4.09). The project does not trigger the requirements of this policy. As noted, project-supported increased land tenure security is likely to result in the more intensive use of already deforested (mostly pasture) lands with good agricultural potential. Such intensification, while mostly positive from a social and environmental standpoint (especially as an alternative to agricultural expansion in forested areas), is sometimes associated with increased pesticide use, depending on the type of production system involved. However, the project is not expected to lead to substantially greater pesticide use on a departmental or national scale. Nonetheless, the project is expected to include information on safer and more environmentally responsible pesticide use and integrated pest management in the environmental information packets that would be provided to rural land title recipients. 24. Cultural Property (OPN 11.03). Under this project, the cadastre field teams will work with IDAEH to identify and demarcate significant archaeological sites, so that they will (in accordance with Guatemalan law) remain under public ownership, separated from the lands eligible for titling to individuals. The cadastre process is also expected to generate considerable new scientific knowledge about the location and characteristics of archaeological sites within the Guatemalan departments to be covered under the project. The project-supported titling and demarcation of indigenous community lands will also be beneficial from a cultural standpoint, by helping to maintain the integrity of sacred sites for local indigenous peoples. 25. Involuntary Resettlement (OP 4.12). The project will neither require nor support the physical displacement or relocation of any people. Furthermore, although the project will physically demarcate the outer boundary comers of protected areas (to keep cadastral teams from inadvertently entering them), it will not carry out any activities within the protected areas, nor impose new restrictions on natural resource use upon the people living within or near them. Accordingly, the Bank s Involuntary Resettlement Policy is not triggered. However, during negotiations, it was agreed, that while the demarcation of Protected Areas and Proposed Protected Areas under the Project is not expected to result in the loss of access to resources by people living in or near such Protected Areas and Proposed Protected Areas, in the event that any activity under the Project involving a Protected Area could lead to such a loss of access, RIC, prior to initiation of such activity, will develop a process framework, acceptable to the Bank, and thereafter carry out such activity in accordance with the terms of such process framework 26. Disputed Areas (OP 7.60). No activities will be carried out in the areas where the boundaries are not demarcated. In areas where the boundaries are not demarcated, property rights and parcels limits will not be verified within 500 meters of the boundaries represented in the official documents and cartography. 74

82 Consultation and Participation Process. The social assessment (SA) was carried out during project preparation. Among its main objectives are the following: (a) identify key stakeholders and establish an appropriate framework for their participation in the project selection, design, and implementation; (b) ensure that project objectives and incentives for change are acceptable to the range of people intended to benefit and that gender and other social differences are reflected in project design; (c) assess the social impact of investment projects and, where adverse or negative impacts are identified, determine how they can be overcome or at least substantially mitigated; (d) develop ability at the appropriate level to enable participation, resolve conflict, permit service delivery, and carry out mitigation measures as required. An Indigenous Peoples Development Plan (IPDP, see Annex 12) was also carried out during project preparation with the objective of ensuring that indigenous peoples will benefit from the Land Administration Project and to avoid or mitigate potentially adverse effects on indigenous peoples caused by the project and its activities. The priority given to the indigenous peoples is in line with the Constitution of the Republic of Guatemala, International Labor Organization (ILO) Article 169, the RIC Law, and the World Bank Operational Directive (OD 4.20) to ensure that the development process fosters respect for their dignity, cultural integrity, and human and property rights. Consulted People. The consultation and participation process included a wide variety of stakeholders such as the following; 0 Indigenous peoples and farmers. This social and ethnic group comprises those households and communities occupying, using, and/or possessing communal, municipal, and individual lands. The objective has been to include both genders as much as possible despite the fact that indigenous women, particularly, are not much involved in community leadership. Monolingualism and illiteracy are widespread among the poor, vulnerable, indigenous, and rural farmers, but are even more extensive among indigenous and rural women. Community-based organizations. Among these are included elderly groups, community councils, assemblies, community leaders from all forms of local organizations that decide on land property rights and land management. Second- and Third-degree Organizations. Institutions. These involve central, autonomous, and decentralized institutions in both central and local governments (municipalities). Consultation Process. The consultation process began in 2005 with the preparation of the SA and continued in 2006 in September with the first IPDP consultation phase. The second phase is scheduled from October to December For the SA, three consultation workshops were conducted on October and November 2005 in Cobin (Alta Verapaz), Rio Hondo (Zacapa), and Guatemala City to inform stakeholders in the project area about the project and the results of the social and environmental assessments. Participants included representatives from indigenous organizations, Municipal Development Councils (COCODES), and second- and third-tier organizations involved in land issues. In addition, three consultation workshops were conducted 75

83 in November 2005 in Morales (Izabal), Coban (Alta Verapaz), and San Lucas (Sacatepequez) to discuss the Project with representatives of indigenous communities and organizations. Systematic Participatory Process. It is recommended that there be a systematic consultation and participatory process during project execution involving key stakeholders (households, community leaders of both genders, community based authorities; Municipalities). This process is stated clearly in ILO Article 169, endorsed by Guatemala, and in Article 31 of the RIC LAW. Consulted indigenous peoples confirmed their interest in being consulted and included in all project execution phases from dissemination, survey, and identification to monitoring and evaluation. They expressed the position that each community will decide and exercise their rights regarding communal lands. During consultations carried out to prepare the IPDP, almost 100 percent of the consulted indigenous peoples manifested their preference to keep forestlands and water reserves under communal regimes. Some expressed their preference for keeping under communal regimes lands used for production and harvest, while others expressed their preference for desegregating these lands into private parcels. There seems to be a collective agreement regarding residential lands. The consulted population prefers to keep private their residential lands. Finally, consulted people clearly expressed the view that decisions must be taken by the entire community using their own governance and decisionmaking processes. Land Tenure. In the project area, 89 percent of surface is private property and 11 percent is held under other arrangements (rent, sharecropping, usufruct, occupation). The lack of reliable cadastral information in the country makes it difficult to estimate the surface area occupied by communal lands. The social assessment estimates that only 0.4 percent of surface in the country is under communal land regime (comunidades campesinas, comunidades agrarias, or comunidades indigenas), but this percentage could be significantly higher once lands traditionally occupied by indigenous and ladino communities are fully regularized. Communal lands can be classified as: (a) collective property if the community has a title registered in RGP, and (b) collective-public possession if the communities use the land but it belongs to the municipality or State. Vulnerable Population. Poverty is generalized in the project area, with over 55 percent of the population living under the poverty line. Poverty rates are higher in the departments with the highest concentration of indigenous population; for instance, 76 percent of the population in Alta Verapaz live in poverty and 37 percent live in extreme poverty. Sacatepequez is the department with the highest level of human development (65) and Alta Verapaz is the lowest (55). Alta Verapaz, Baja Verapaz, and Izabal are the departments with the highest number of land conflicts. Some of the conflicts in these three departments are related to the uprooting of communities or groups of settlers from estates owned by large landowners. There are a number of mechanisms for conflict resolution accessible to the population in the project area provided by government agencies, municipalities, and NGOs. CONTIERRA has helped establish three interinstitutional mesas (forums) for conflict resolution with the participation of government agencies and civil society. Also, some Municipalities use consuetudinary (customary) Maya Law as conflict resolution mechanisms. 76

84 Annex 11: Legal and Institutional Background GUATEMALA: LAND ADMINISTRATION I1 PROJECT The 1985 Constitution and the 1963 Civil Code provide the overall legislative framework for land administration in Guatemala. The Constitution recognizes the right to private property (Article 39) and provides the basis for the creation of a property registry (Article 230). The Civil Code sets forth the general legal principles on possession, use, and ownership rights over real property, including land, and their registration. The 1996 Peace Accords and the Macro Law of the Peace Accords approved in 2005 contain several specifically land-related provisions. These include commitments relating to the establishment of a decentralized cadastral-based land registry, the creation of a Cadastral Agency (2005 RIC Law), the creation of a Land Fund (1999 Land Fund Law), the creation of a specific agrarian jurisdiction (still pending), and the development of land conflict resolution mechanisms (SAA-CONTIERRA). The Property Registry The creation of a real estate registry dates to 1877, when the Property and Mortgage Registry was established through Decree 175. The current registry system is regulated by Law 106 of 1963, which was incorporated in the Civil Code and which establishes the norms and structure of the Registry. More recent reforms in the early 1980s, a new set of registry regulations in 1987 and 2005, and a variety of other legislation form the legal framework upon which the General Property Registry (RGP) operates. There is one central Registry in Guatemala City and another in Quetzaltenango. The purpose of the Registry, which is an autonomous institution under the Executive Branch, is to provide legal security to property holders by publicly recording their rights and interests. It is the institution responsible for the inscription, notation, and cancellation of all acts, contracts, and rights over real property. It is also responsible for keeping property records updated and accurate by tracking changes in ownership rights and other interests in land. Records are maintained according to the Folio Real system, which tracks transactions as they relate to specific parcels of property. Guatemala s registry system is declarative rather than constitutive: the Registry records rights but does not create them. For property rights to be enforceable against third parties, they must be recorded through presentation of a legal title. The Cadastre Although since 1940 the Registry has required each owner to provide a cadastral plan to register land transactions, until very recently, a cadastre organization as a technical component to the Property Registry had not been established in Guatemala, and a current geographic cadastral map has not been developed. To date, the National Geographic Institute (IGN) has been at the center of the mapping efforts. The focus of its work has been on the gathering of geographic information, which could then be used to create accurate maps. On June 14, 2005, the Congress passed a new law (Decree ), creating the Registry of Cadastral Information (RIC), thereby fulfilling a key commitment of the Peace Accords. The new cadastre agency is an autonomous government institution with a board of directors presided 77

85 over by the Ministry of Agriculture, and including representatives of the Property Registry, the IGN, and the association of municipalities, engineers, and lawyers. Its functions include the establishment, maintenance, and updating of the national cadastre through the gathering of the physical information on all parcels in the national territory. In addition, its responsibilities include providing assistance in the resolution of boundary-related land conflicts through conciliatory activities (see section on Conflict Resolution). Although the RIC and the Registry remain separate autonomous agencies with clearly separate functions-the management of a parcel s physical and legal information, respectively-the law requires the new cadastre agency to closely coordinate its activities with the Property Registry to ensure the provision and maintenance of updated and accurate basic registry-cadastre information for the country. Integration is therefore expected at the data level and not (yet) at the organizational level. Coordination is also required with: (a) the IGN and the municipalities with regard to mapping and surveying activities; (b) the Land Fund created by the Peace Accords (FONTIERRAS) in those areas where the Fund is responsible for land tenure regularization; and (c) any other entity, such as the OCRET, IDAEH, and CONAP, which may have a specific mandate related to cadastral activities. The new law provides for a detailed process for the establishment of the cadastre, including: (a) a preliminary diagnostic and intensive consultation and participatory process, (b) the carrying out of field surveys, (c) the analysis of the physical information gathered during the field activities to verify its consistency with the legal information contained in the Registry, and (d) a legal analysis to determine whether there are any irregularities in the surveyed parcel. When the cadastral field activities relate to land owned by or in possession of indigenous people, specific procedures that ensure the active participation of the beneficiaries and their organizations must be followed (Article 33b). Specifically, indigenous people who own or possess the land to be surveyed and their neighbors will participate in the process, with the support of the local authorities and organizations, and will sign the document validating the parcel s boundaries. The law identifies two cases of standard irregularities (Article 38). Specifically, irregularities can arise from: (a) lack of registration in the Property Registry, and (b) inconsistency between the area as inscribed in the Registry and that surveyed during the field activities (although some exceptions apply; see Article 38b). The inability to locate the parcel, and inconsistencies between the title holder as recorded in the Registry and the title holder as identified during the cadastral activities, are considered special irregularities (Article 39), which are annotated in both the Cadastre and the Registry. However, with the exception of one case, the law does not provide for any solution to these irregularities (see section on Land Titling). Article 23 of the RIC Law gives an official definition of communal lands, and Article 65 of the law asks for specific regulations for the identification and certification of communal lands based on and consistent with the Guatemala Constitution and ILO Convention No Such regulations are being prepared by the RIC. The 2002 Municipal Code identifies municipality responsibilities with regard to cadastre acitivities. Specifically, municipalities are responsible for establishing and maintaining municipal cadastres through the relevant municipal planning office, which is also responsible for 78

86 maintaining up-to-date geographic information for territorial planning purposes (Articles 35x, and 96c and 96i). Similarly, it is the responsibility of the representatives of the communities (alcaldias comunitarias) to cooperate in the surveying activities and updating of the municipal cadastre (Article 58e). Finally, the legal framework for identification and demarcation of protected areas (CONAP), territorial reserves (OCRET), and cultural or archaeological sites (IDAEH) is appropriate for the project. Land Titling From the 1960s through the 1980s, the Instituto Nacional de Transforrnacion Agraria (INTA) was the government agency primarily responsible for (rural) land titling and for distributing state land to state-organized peasant cooperatives. In 1999, the Land Fund (FONTIERRAS) was established by the Ley de Fondo de Tierras (Decree and its Regulation ), with a twofold objective: (a) to purchase (rural) land from the State or on the open market and then facilitate the transfer of these lands to beneficiaries via the extension of low-interest loans and technical assistance, and (b) to regularize the tenure of those state lands transferred to the agrarian beneficiaries and issue land titles accordingly. Municipalities are responsible for titling urban areas that they own. They are also responsible for developing mechanisms for the use, conservation, and administration of the common lands (tierras comunes) that have traditionally been assigned to their administration (Article 109, Municipal Code). Municipal Councils are further responsible for approving requests for supplementary title (Article 16%). Since 1945, when Decree 70 was passed by the Government, it has been possible to obtain ownership of land through possession without having a formal title. In 1979, the rules for acquiring supplementary title (adverse possession) were reformed through the Ley de Titulacion Supletoria (Decree 49-79). This law was modified slightly in 1982 and again in 1985, but the basic legal requirements and the process by which a possessor of land who lacks title may acquire ownership set forth in the 1979 legislation remain unchanged. Guatemala does not currently have a Land Regularization Law (Ley de Regularizacidn), which is supposed to address land tenure irregularities, especially those identified in the RIC Law (Articles 36, 38, and 39), and set forth the procedures to issue titles. As a temporary measure, and until the Land Regularization Law is drafted and approved, the RIC Law (Articles 68-72) gives the cadastre agency the mandate for titling ex officio those lands the only irregularity of which is lack of an existing registration in the RGP (titulacion especial). With regard to regularization and titling of indigenous lands, the Constitution (Article 67) recognizes special protection of indigenous community land, including both individual and communal ownership. Similarly, indigenous identity and rights were included in the agenda of the Peace Accords, through which the Government undertook a series of commitments to regularize indigenous land tenure, to guarantee the right of indigenous communities to participate in national resources management, and to improve the legal protection of the rights of indigenous communities. As a result of the Peace Accords, a joint commission of government 79

87 ~ and indigenous representatives was created to propose legal and administrative reforms relating to indigenous land rights. In addition, Guatemala is also a signatory of International Labor Organization (ILO) Convention No. 169 on Indigenous and Tribal Peoples. The RIC Law includes provision, through specific regulations under preparation, for the regularization of communal lands under certain circumstances, and requires that the process be consistent with Article 67 of the Constitution and ILO 169. A draft land regularization law, including the regularization of indigenous lands, is being prepared by the GoG, which intends to consult and propose the law for consideration by the Congress in Conflict Resolution Guatemala faces a variety of disputes related to property ownership. This remains an important issue and is of particular relevance for the efficiency and long-term success of land registration efforts. Within the Guatemalan judicial system, a land dispute can be resolved through: (a) the regular court system, (b) the parallel indigenous justice system, or (c) an alternative conflict resolution mechanism. Under Guatemalan law, most real property disputes are subject to the ordinary process before a civil tribunal, given that an agrarian tribunal has not yet been e~tab1ished.l~ In 1997, as a result of the Peace Accords, the Special Commission of Land Conflict Resolution (Dependencia Presidencial de Asistencia Legal y Resolucion de Confzictos sobre la Tierra, CONTIERRA) was created by Government Agreement 45-97, to address conflicts related to land in Guatemala, through the provision of legal assistance and mediation. In 2004, CONTIERRA was transformed into the Secretaria de Asuntos Agrarios-CONTIERRA (SAA-CONTIERRA). The RIC Law provides for the cadastre agency to play a conciliatory role in coordination with the SAA-CONTIERRA when a dispute over land boundaries arises during the field survey activities (Article 41). If the conciliation efforts are not successful, the irregularity is recorded and the dispute will be subject to the regular court system. When indigenous peoples are part of the dispute, the indigenous justice system, which is a legally recognized noncodified system operated by indigenous leaders, is applied. When a dispute involves one or more municipalities, the resolution procedure is determined by the Municipal Code. Specifically, conflicts related to the delimitation of boundaries between municipalities are addressed by the Ministerio de Gobernacidn, and finally by the President, who, if deemed necessary, will submit the issue to the Congress for final resolution. Conflicts of jurisdiction between communities within a municipality will be resolved through mediation of the Municipal Council. Alternative Conflict Resolution Mechanisms (MARCs) have, in recent years, played an important role. There exist two types of MARC mechanisms in Guatemala: those that are institutionalized and for which the Secretaria de Asuntos Agrarios is responsible, and those informal ones that have been developed and applied by a number of NGOs. Although these informal mechanisms have been fairly successful in solving land disputes, no mechanisms exist to legally recognize the settlements and record them into the Registry. In addition, a set of uniform criteria for resolution of land conflicts does not yet exist. Rather, the criteria used by the entities operating conflict resolution mechanisms are not consistent-either with those applied 13 Progess preparing the Agrarian Tribunal Law, under the responsibility of the Supreme Court, has been slow. 80

88 by the Secretaria de Asuntos Agrarios or among themselves-thereby creating more insecurity and instability. The project will therefore help systematize and harmonize these experiences, and thus help improve the legal framework related to conflict resolution. Decentralization One of the most important results of Guatemala s contemporary sociopolitical process (1986/2000) is state decentralization. In line with constitutional provisions and the Peace Agreements, Guatemala is a multiethnic, multicultural, and multilingual nation that requires legal provisions to enable greater opportunities for participation and decisionmaking on issues of public interest in communities. As stipulated by the Constitution, the country s municipalities are autonomous entities that regulate their operations in accordance with provisions of Decree , approved by Congress, which contains the Municipal Code. This Code represents a substantial step forward on the subject of recognition of local authorities, as indicated in Articles 8, 66 clause 2, 162, 164, and 165, and is fully in line with the provisions of the RIC Law with regard to the participation of these authorities in the cadastral survey in areas with indigenous populations (Article 33 clause b) and in the conciliatory resolution of controversies by their own methods (Article 41). Under the cadastre process, municipalities will be directly involved in the following aspects (Article 50): Design of the social communication campaign Delimitation of municipal boundaries Adjustment of municipal cadastre data to RIC regulations Establishment of the cadastre Definition of the physical classification of urban and rural parcels. Stemming from the General Decentralization Law contained in Decree , which was approved by Congress, legally organized communities have the right to participate in and make decisions on local public affairs, in coordination with the respective municipality. The Law on Urban and Rural Development Councils, contained in Decree , approved by Congress, regulates these powers through the provisions established for Community Councils (Articles 13 and 14) which, as indicated, participate in the cadastral survey in areas with indigenous populations (Article 41 of the RIC Law). 81

89 Annex 12: Indigenous Peoples Development Plan GUATEMALA: LAND ADMINISTRATION I1 PROJECT The overall impact of the project on indigenous people is expected to be positive. The project, through fostering the process of improving land tenure security, will support the establishment of operational, legal, and institutional bases to ensure that indigenous peoples and peasants' rights to land are respected during the cadastre process. 1.- Indigenous Peoples Development Plan Objectives. On the basis of the Social Assessment and on the consultations with indigenous peoples' communities, the Borrower prepared an IPDP that sets out measures through which the Borrower will ensure that: (a) indigenous peoples affected by the project will receive culturally appropriate social and economic benefits; and (b) when potential adverse effects on indigenous people are identified, those adverse effects are avoided, minimized, mitigated and/or compensated. Design and execution of the IPDP specific actions is the responsibility of RIC, the implementing agency. Other participating agencies such as the Secretary of Agrarian Affairs, CONTIERRAS, FONTIERRAS and municipalities would have to follow the requirements of the IPDP. For that purpose each participating agency would sign an agreement with RIC where their role and responsibilities would be agreed on. In preparing the IPDP, the Borrower, through RIC, consulted and communicated with indigenous peoples about: (a) their land tenure rights as established in the Constitution; the RIC Law, and the ILO article 169; (b) the World Bank Operational Directives on Indigenous Peoples 4:2014 (OD 4.20), Cultural Property 11.03, and Natural Habitats 4.36; and (c) the objectives, scope and activities of the Land Administration I1 Project. In the context of this IPDP and as per OD 4.20, "Indigenous peoples are best defined as groups which are traditionally regarded, and self-defined, as descendants of the original inhabitants of lands with which they share a strong, often spiritual bond." Indigenous peoples are, and desire to be, culturally, socially and/or economically distinct from the dominant groups in society Background. Guatemala is a multi-cultural middle-income country wherein poverty is high and deep. The country has remarkably unequal distributions of income, resources and opportunities particularly within indigenous peoples, farmers and vulnerable rural populations. About 61 percent of the population still lives in rural areas; in 2000 about 56 percent of all Guatemalans (and 76 percent of indigenous peoples) lived in poverty, and about 16 percent lived in extreme poverty. Guatemala's social indicators often fall below those of countries with lower per-capita incomes. After the signing of the Peace Accords ( ), Guatemala is still striving to create a more inclusive society and strengthen public institutions, including with regard to land tenure security. Land tenure insecurity has been and remains one of the key causes of poverty amongst 14 OD 4.20 applies since Concept Review was held before July

90 Guatemala s indigenous and peasant populations and also one of the major sources of conflicts where land tenure is highly unequal. In 1997, the Judicial Technical Unit (UTJ-PROTIERRA) was created under the Ministry of Agriculture to carry out the cadastral process through the implementation of pilot projects, including the Land Administration Project Phase I in the Department of Peten financed by the World Bank. Land Administration I1 project (LAP 11): In 2005, the Government of Guatemala requested the cooperation of the World Bank to implement the LAP I1 in 55 municipalities. The LAP I1 will be implemented by the RIC, the national Cadastral Information Registry, created by legislative decree in RIC took over UTJ functions to implement the cadastre nationwide and coordinate the activities for land titling and registration in the country. The Land Administration I1 Project development objective is to foster the process of achieving land tenure security in seven new Departments and one municipality in the Department of Quiche through the provision of efficient and accessible cadastral and land administration services. In the context of the project, cadastral and land administration services include a systematic diagnostic of beneficiaries, a communication campaign, mapping, verification of rights, delimitation of properties, field conflict resolution, notification of results, transfer of information into the cadastral registry, and titling and registration of lands rights, as well as dayto-day integrated cadastral and property registry services (for example, individual title registration, cadastral certificate emissions). The project will have four components: (a) cadastral and land regularization; (b) maintenance of cadastral information and municipal services; (c) legal reforms and institutional strengthening; and (d) project management and monitoring and evaluation. The project will be implemented in a participatory manner to ensure broad participation of indigenous and non-indigenous beneficiaries. In particular, the project will identify and develop methodologies to regularize indigenous lands, including appropriate participatory procedures and conflict resolution mechanisms, which are described in detail in the Action Plan and monitoring and evaluation system Beneficiaries When the Spanish conquerors arrived, Guatemala was characterized by a diverse socio-political and ethnic landscape. The Mayas were the original permanent inhabitants of this region. According to the linguistic experts, the origin of the Mayan language could be dated back to 7,000 years ago. The geographic isolation resulted in the development of a variety of languages: the proto-k iche and Mam, and in the west, the proto-q anjob and proto-tzeltal. The 30 languages that are currently spoken in Guatemala derive from these two branches. 1.5 The Guatemala Land Administration Phase I was approved by the World Bank s Board in The expected closing date is March The Bank s contribution to the project is a loan of US$ 31 million. 83

91 Guatemala was home of the K iche, whose dominions reached their maximum expansion in the middle of the fifteenth century, extending from the Soconusco into the lowlands of the Pacific, until the highlands of what is today known as the Verapaces. During this time, the K iche controlled about 25,000 squared kilometers of territory and a population of about 1 million. The Mayas Kaqchikeles and the Tz utujiles split and formed their own respective states. The K iche state extended from the north to the east, while the Tz utujiles and the Kaqchikeles extended from the south to the east. The current total Guatemalan population is estimated in 11.2 millions16. According to the latest Census, the Mestizos or ladinos -- who are the result from the mix between Amerindian and Spanish/European -- account for 59.4 percent of the total population, while indigenous populations accounts for 40.6 percent. There are 23 officially recognized Amerindian languages, including Quiche, Cakchiquel, Kekchi, Mam, Garifuna, and Xinca. The K iche represents 9.1 percent, Kaqchikel 8.4 percent, Mam 7.9 percent, Q eqchi 6.3 percent, other Mayan 8.6 percent, indigenous non-mayan 0.2 percent and other 0.1 percent (2001 census). In terms of the language spoken, about 60 percent of the population is Spanish speaker and 40 percent speaks indigenous languages. In the project area, there are 2,595,884 inhabitants of which 43 percent are indigenous peoples. Main indigenous groups are Q eqchi (790,000 people); Poqomchi (100,000 people); Achi (100,000 people); Kaqchiquel (104,000 people); Poqoman (30,000 people); and Chorti (45,000 people). The beneficiaries are rural indigenous and non-indigenous populations residing in the Departments of Alta Verapaz, Baja Verapaz, Izabal, Zacapa, Chiquimula, Escuintla, and Sacatepequez, and the Pachalum municipality, located in the Department of Quiche. Ethnically, the project geographic area includes: (a) 3 Departments with high percentage of indigenous populations such as Alta Verapaz (93 percent), Baja Verapaz (58 percent) y Sacatepkquez (41 percent); (b) 4 Departments with high proportion of ladinos or non-indigenous population such as Zacapa (99 percent), Escuintla (94 percent), Chiquimula (85 percent) and Izabal (77 percent); and (c) Pachalum gathers higher percentage of ladinos (86 percent). Poverty. In general, indigenous peoples register lower social and economic indicators, even lower than the national, in areas such education, health and income. Departments with higher percentage of indigenous population show higher poverty rates. The Departments of Alta and Baja Verapaz show the higher extreme poverty rates, 41 and 23 percent of extreme poverty, respectively. The Departments with higher non-indigenous populations register lower poverty rates, such as Chiquimula and Escuintla, showing 7.0 and 5.3 percent of extreme poverty, respectively. 16 Instituto Nacional de Estadisticas and SEGEPLAN. Census The municipality of Pachalum, in the Department of Quiche, is also included in the project as it belongs to a cluster of municipalities with those located in the adjacent department of Alta Verapaz. 84

92 Sacatepequez Escuintla Pachalum Municipality 248, , , Map of indigenous languages in the project area: Land tenure. According to the fourth National Agrarian Census, land tenure regimes include: (a) farmer s ownership: the farmer who works the land has a property title to it; (b) ownership: a property title exists; (c) rent: the farmer pays a fee or in nature to use the land; (d) colonato : the farmer has the right to a piece of the land for its own use in exchange of labor in the owner s fields; (e) usufructo : the land is given for use by the owner, but cannot be transferred; (f) 85

93 occupation: the land is used by others without the consent of the owner (this category includes those lands that hace been invaded). In the project area 78 percent of properties for which some kind of land tenure regime is available is private property, namely 136,740 parcels. These represent 88.6 percent of the total territory, equivalent to 1,415,989 manzanas. Other land tenure regimes (rent, colonato, usufructo and occupation) account for 22 percent of total properties, namely 38,795 parcels, which represent 11.4 percent of the total territory (181,587 manzanas). Despite the fact that the National Agrarian Census identifies a number of categories of property legal regime, it however does not include the indigenous factor. As a result, specific information on indigenous peoples property tenure is not available. RIC will carry out, as one of its priorities, a specific assessment of communal lands and religious sites. Using secondary sources, the social and environmental assessments gathered some information on communal lands, presented below. Communal Lands. Article 23, incise (y) of the RIC Law establishes that Communal Lands are those in property, possession or tenancy of indigenous or peasant communities as collective entities with or without legal entity. In addition, are part of these lands those properties registered in the name of the State or in name of the Municipalities, which have traditionally possessed or have been under the communal regime. Communal lands are under two major tenure regimes: (a) collective property if the community has a title registered in RGP, and (b) collective-public possession if the communities possess or use the land but it is legally owned by the municipality or State. Also, communal lands can be found to a lesser degree in other types of land regimes such as private property, protected areas, and territorial reserves. Not all communal lands are solely used or occupied by indigenous peoples. These are also used or occupied by farmers and/or by both (indigenous and nonindigenous peoples) simultaneously. In the project area the farmers legal status is available for 203, 278 parcels, representing 1,662,464 manzanas: 86 percent are individual producers (174,441 parcels), representing 77 percent of the total area (1,275,820 manzanas). According to the 2003 National Agrarian Census, parcels, representing 0.69 percent of total parcels and 0.41 percent of the total area (6,967 manzuizas) are under communal regime. Sociedad de hecho, cooperatives, sociedad de derecho, state lands account for percent of total parcels (27,426 parcels) and percent of total area (379,677 munzanas). Communal Tenure. Previous studies report that in the project area there are approximately 97 municipal areas, 51 communal areas, and 9 state areas distributed in 58 municipalities. It is estimated that, I total, they represent 63,000 hectareslg. 18 Estudio de Evaluaci6n de Impact0 Social. Proyecto de Adrninistracion de Tierras , pp Plan de Acci6n Forestal para Guatemala and Plan de Acci6n Forestal Maya. 86

94 Table 2. Distribution of municipal, communal and state lands in the Project area Source: Guatemala. Land Administration I1 Project. Environmental Analysis The department with the greater extension of municipal, communal, and state lands is Alta Verapaz, with an estimated 31,946 hectares, followed by Baja Verapaz with 18,365 hectares. These two departments represent about 70 percent of the territory in the project area, while Zacapa represent about 9 percent, Escuintla 4 percent, Izabal and Chiquimula 3 percent each, and Sacatepkquez 1 percent. Of the 157 areas included in the project area, 62 percent are municipal lands, 32 percent are communal lands, and 6 percent are state lands; 28 percent of all these areas are located in Alta Verapaz, 26 percent in Sacatepkquez, 17 percent in Baja Veracruz, 15 percent in Zacapa, 6 percent each in Chiquimula and Izabal, and 3 percent in Escuintla. Porcentaje of comunal land per department in the Project Area

95 At least 30 sacred sites are located in the project area, 27 of which are of Mayan origin and 3 Garifunas. They are part of the following linguistic communities: Q eqchi (20), Poqomchi (7), Achi (2), and Garifunas (3). These sites are used as ceremonial centers. Indigenous spirituality is an essential part of the indigenous vision of the cosmos, as emphasized in the Peace Accords and other international instruments. IV. - Methodology The Borrower used an integral methodological approach, which combined qualitative and quantitative data, to plan the consultations for the preparation of the IPDP. Literature Review. Academic literature prepared by local and international scholars was reviewed. Review of lessons learned from the Land Administration Project Phase I and other projects implemented by other donors and NGOs in Guatemala as well as other World Bank experiences in Land Administration Projects in Central America were carried out. Demographic and socioeconomic data and socioeconomic diagnosis of indigenous peoples communities were also reviewed. Participatory Consultation Phases. The participatory consultation process began during the preparation of the Phase I. For the Phase 11, the consultation process began in 2005 with the preparation of the Social Assessment and continued in September, 2006 with a round of consultations to prepare the IPDP. Consultations with beneficiaries of indigenous peoples are expected to continue with an additional round scheduled from October to December 2006 to update information on communal lands and to review proposed regulations and procedures being developed during project execution. These additional consultations will help improve the project design throughout the process, learning from the experience acquired during project implementation, and permanently monitoring the project impact on indigenous peoples. Consultation Techniques. A combination of techniques was used, which included: (1) semistructured interviews provided to key stakeholders such as municipal and community-based authorities, and to NGO and RIC personnel and consultants; (b) workshops held with direct beneficiaries including community leaders, community members of both gender, municipal authorities and judges; and (c) case studies illustrating land administration and tenure experiences among indigenous peoples. Analysis. The IPDP includes a systematic analysis of the information gathered during the entire consultation process from 2005 to V.- Main Findings Definition of Communal Lands. According to consulted people, these lands are those where ownership and use rights are shared by the members of the community. Communal lands are such based on their form of management, possession, and use rather on the fact that they have 88

96 been legally registered as communal lands. Based on the findings of the field work, the following typology is identified: (a) Possession or tenure. Communal possession refers to the collective tenure of land, where a community (indigenous or nonindigenous) has customary rights and actual rights on a territory regardless of whether these rights are registered or not in the Property Registry in the name of the community. (b) Administration. The administration of communal lands is a function of the following: (i) customary law; (ii) the form of social organization; (iii) the form of social capital; (iv) the form of communitarian cohesion and (v) the form of social relations with external actors. (For more details on the typology please see the IPDP). (c) Land use. Lands are defined as communal when a community uses the soil, water and forest collectively. In the case of communal lands aimed at agricultural production, the land is worked individually. However, the rules for transferring the land can be set by the community (Juntas Directivas and/or Asociaciones Comunitarias). A variety of land uses can be developed, either independently or simultaneously, within the communal lands: Communal forests and water sources are indivisible. The members of the community have use rights and the obligation to ensure the maintenance of the resources. Consulted people requested that these resources remain under communal tenure. Agricultural land. The majority of land for agricultural production has been subdivided among the households of the community. According to the consultations carried out, these lands are worked individually. In the majority of cases, these lands cannot be sold or transferred to outsiders. Findings from the field work reveal that the preference to maintain these lands under individual or communal tenure varies among communities. Residential land. The majority of people consulted expressed a preference for individual/property titles. (d) Cultural identity. Communal lands are a territorial space where processes of ethnic identity and social cohesion occur. The ethnic identity is observed in the management of specific areas for the development of religious/ritual and cultural activities. In nonindigenous communal lands processes of territorial identity and territorial defense are also observed. Gender Participation. In most indigenous societies women s direct access to land through purchase or inheritance is often limited. Participation of women was limited during consultations. Without specific attention to gender inclusiveness, women may be excluded from the benefits of land administration, management, and development schemes. Consuetudinary Law. There is no unique consuetudinary law. It varies among communities and ethnic groups. 89

97 Conflict Resolution Mechanisms. Conflict resolution mechanisms vary among communities. Indigenous peoples preference is that their conflict resolution mechanisms are respected and taken into account in project execution. Local Forms of Organizations. There are indigenous, non-indigenous (farmers) and other organizations gathering both indigenous and nonindigenous peasants. Indigenous Forms of Organization. There are: (a) community based-organizations such as the Cornite de Anciunos (Elderly Committees). In some K iche communities (Totonicapan) persists a pre-colonial organization named Parcialidudes, in charge of protecting forests, natural resources and land use. There are also the Cofrudias and the leadership of the Anciuno; (b) Non- Indigenous and Ethnically Mixed Organizations. Among these are the cooperatives, local non-governmental organizations, and Community Development Councils (COCODES, CODEDES and COMUDES); and (c) National and Regional Coordinating Organizations such as the Coordinadora de Organizaciones Maya de Guatemala or Coordinadora Nacional Zndigena y Campesina (CONIC). Participation and inclusion of these organizations is explained in detail in the Participatory Monitoring and Evaluation System (SEP). Institutional and Organizational Arrangements. At the local level, some of the key institutions during project execution are: (a) Government institutions such as RIC local offices, municipalities, and COCODES; (b) Indigenous and non-indigenous traditional and community based organizations; and (c) regional and national organizations ( coordinadoras ). VI.- Potential Adverse Impacts a) Legal framework for the regularization of indigenous peoples lands There is a risk that communal lands identified during the cadastral survey cannot be regularized in the name of the indigenous peoples. This risk can be classified as follows: 0 Low risk. There is a low risk that communal lands owned by indigenous communities are not regularized, given that a title registered in the Public Registry exists. These lands will be declared as regular by RIC and the Public Registry will be able to proceed with their registration. Medium risk. For those communal lands registered in the name of the state or the municipality, or whose only irregularity is the lack of registration in the Public Registry. Regulations establishing legal mechanisms to transfer ownership from the State or the municipality to the communities do not exist. These lands will be declared as irregular by RIC until they are registered in the name of the indigenous communities following procedures to be determined under new regulations. High risk. There is a high risk that communal lands currently subdivided into parcels and registered in the name of private citizens could not be regularized. A Land Regularization Law identifying the cases and mechanisms for regularization does not yet exist. b) Institutional capacity to deal with indigenous issues 90

98 Currently, there is not enough institutional capacity within RIC and other participating agencies to handle and foster indigenous participation in project implementation. It is expected that conflicts could arise if RIC and other participating agencies do not have the adequate capacity to (a) properly communicate the project, (b) sufficiently foster the participation of indigenous people and; (c) identify indigenous claims and recognize consuetudinary laws that regulate indigenous rights to their lands. c) Indigenous peoples participation Due to lack of reliable information on indigenous peoples land tenure and an inventory of communal lands, the RIC will carry out an assessment of these lands, as one of its first activities, to ensure the p[articipation and inclusion of indigenous peoples. The participation of indigenous peoples in formal procedures to regularize land tenure has been limited, mainly due to social exclusion. Given the current asymmetry of information available to project beneficiaries, it is essential that the project promote a better communication toward and participation of all potential beneficiaries, including the marginalized groups who have traditionally less access to information and fewer spaces for participation than large land owners. d) Conflicts increase In Guatemala, there are many conflicts that are derived from land tenure disputes. The cadastral process would face new and already existing irregularities in land ownership and tenure. Disputes can occur in the following cases: (a) within indigenous communities; (b) among indigenous communities; (c) between indigenous peoples and ladinos, including large land owners; and (d) between indigenous peoples and authorities (Municipal, RIC, etc).there is the risk that the existing institutional and local capacity for conflict resolution is not enough to handle the potential increase of cases resulting from irregularities. Also, there is the risk that consuetudinary conflict resolution mechanisms are not recognized as conflict resolution instruments, e) Sequencing of implementation There are some areas of Guatemala that historically have had more acute land conflicts than others. If RIC conducts the cadastral fieldwork in some of these areas before testing and validating its instruments, there is the risk that the project exacerbates social conflict and fails to recognize the land rights of indigenous peoples. VII. - Mitigation Measures a) Legal framework for the regularization of indigenous peoples lands The project will include the following mitigation measures: 0 Support to the preparation of the General Regulations to the RIC Law, that provides the rules and procedures for, inter alia: (a) the special titling (titulacion especial) of lands by the RIC pursuant to chapter I1 of title VI1 of the RIC Law; and (b) the inter-institutional 91

99 arrangement involved of the process of facilitating the regularization of lands, including, inter alia, communal land (tierras comunales). Support to the preparation of the Specific regulations for communal lands (article 65 of the RIC Law) that: (i) has been consulted with the peasant and indigenous communities in the Project Area; and (ii) sets forth the cadastral process that will be followed for identifying and defining communal lands (tierras comunales) in accordance with ILO 169, including, inter alia, the concept of possession that each community exhibits based on its ancestral form of possession;comments to the draft Land Regularization Law for the regularization of the types of land described in Articles 36, 38 and 39 of the RIC Law;. Preparation of a methodological guide (Guia Metodoldgico) for documenting and systematizing the experiences of the cadastre, regularization and management of communal lands (tierras comunales) as specified in the IPDP; b) Institutional capacity to deal with indigenous issues The RIC will establish a participatory evaluation system (sistema de evaluucion y monitoreo participativo or SEP) which will promote the participation of final beneficiaries, local, regional and national instances, including indigenous organizations, academia and civil society Organizations. To ensure that RIC has the capacity to benefit indigenous people in a culturally adequate way and that it respects their rights, the project will hire indigenous specialists for the implementation and monitoring of the IPDP. c) Indigenous people s participation To guaranty the appropriate inclusion and participation of indigenous peoples during the entire process, RIC will (a) implement a strategy of social communication based upon the characteristics of each municipality; (b) consult indigenous communities before, during and after cadastral survey; (c) select and train cadastral technicians to carry out cadastral activities following the Manual or Guide, and; (d) provide legal assistance to indigenous communities during cadastral activities. This assistance could be executed by NGOs and other social organizations. d) Conflicts increase To mitigate conflicts that could arise during cadastral activities the RIC would have to conduct the following activities: (a) prepare a socioeconomic diagnosis to identify conflict typology in each of the municipalities; (b) provide legal assistance to indigenous peoples communities during cadastral activities; (c) require the signature of all parties, non indigenous as well as indigenous, during the field survey to verify their participation and to confirm the agreement on the outcome of the field survey; (d) facilitate alternative mechanisms for conflict resolution and/or respecthecognize traditional forms of conflict resolution; and (e) seek community approval for measuring and surveying within communal lands. The cadastral teams would certify conflict resolution through the signature of all parties. As explained in the Action Plan,, RIC will work in 92

100 close collaboration with civil society, government institutions and existing local mechanisms to allow peoples participation ( mesas de dialogo, CODEDES, COCODES y COMUDES2 ).. e) Sequencing of implementation As mentioned in the Action Plan, the project cadastral activities will be executed under a pilot strategy during the first two years of implementation, to refine the methodology designed in the methodological guide, and provide inputs into the reform to the existing regulatory framework. The project will generate lessons and recommendations on how to scale up implementation in the rest of the Departments included in LAP 11. VII. - Indigenous Peoples Development Plan The IPDP action plan has the five following components to avoid, minimize, mitigate or compensate for the above mentioned potentially adverse impacts. a) Improvement of the legal framework for the regularization of indigenous lands (US$1.5 million approx.) The Project will contribute to improving the legal framework for the regularization of communal lands through (for more details see table 3): Dissemination of and training on the general regulations for the RIC Law; Advice, support for the consultations, dissemination and training on the specific regulations for the communal lands. Support to the Commission in charge of preparing the draft Land Regularization Law. Preparation and dissemination of the Methodological Guide for documenting and systematizing the experiences of the cadastre, regularization and management of communal lands (tierras comunales) as specified in the IPDP; b) Institutional strengthening (US$2 million approx.) Definition of Roles and Responsibilities. Given the number of institutional agencies that will be involved in executing the project it is recommended to work on defining roles and responsibilities for each of the parties under: (a) a Subsidiary Agreement between the Government of Guatemala, as a borrower, and the RIC; (b) Participation Agreements between RIC and each the governmental participating institutions (FONTIERRAS, CONAP, RGP, SAA-CONTIERRAS, IDAEH and OCRET) and (c) Municipal Agreements. Mainstream Indigenous Peoples Participation. The institutional capacity of the implementing agency should be strengthened to ensure indigenous peoples participation in cadastral process. The following actions will be conducted: - Communal Lands Assessment: RIC will carry out an assessment of communal lands and religious sites. 20 These are participatory local spaces created by the Decentralization Law. 93

101 - Participatory Evaluation and Monitoring: RIC will establish a participatory monitoring and evaluation system (SEP) to ensure the participation of beneficiaries, local, regional and national organizations and institutions, including indigenous communities, academia and civil society organizations. The system will have two modules: i. Monitoring: indicators will include inter alia: (1) number of parcels surveyed with indigenous occupants, (2) percentage of communal lands identified, (3) percentage of communal lands certified and registered, and; (4) percentage of participation of indigenous people. ii. Consultation and social auditing: this will provide the social space for the participation of beneficiaries and key stakeholders in monitoring and evaluation activities. Three levels of participation have been identified: 1. Local level. Direct beneficiaries will participate in the steps for establishing the cadastre, with the support of the local organizations and institutions. 2. Municipal and regional level. Participation in the discussion on the progress of the implementation of the IPDP in the Municipal Councils for Development (COMUDES). 3. National level. A participation space will be created within the Monitoring and Evaluation system of RIC to allow the participation of indigenous organizations and other civil society organizations in the implementation of the IPDP. - Operational level: RIC will finance under the project indigenous specialists for the implementation of the IPDP. The specialists will work in the following units: M&E, communication, field brigades, planning, process and strategy unit and in the legal and technical cadastral units. c) Participative cadastral process (US$12 million approx.) The cadastral process will be implemented through a participatory framework that includes consultations with indigenous peoples before, during, and after the cadastral field survey. The project has provisions to take into account traditional land regimes and consuetudinary practices to make sure that indigenous peoples have their rights safeguarded and receive benefits in a way culturally acceptable to them. The process will include the following activities: - Social Analysis: Elaboration of socioeconomic assessments to collect specific information about each municipality to propose an appropriate strategy for each area where the cadastral survey will be conducted. The assessments will be carried out through a participatory methodology and will collect, inter alia, relevant ethnic, linguistic, organizational, cultural, and land tenure information. - Social Communication: Elaboration and implementation of a social communication strategy that takes into account the recommendations from the socioeconomic assessments to inform the population about the project. The project will make strategic alliances with NGOs and organizations with presence in the communities to assist in the dissemination. The communication strategy will also include training 94

102 - - - activities to build the capacity of the indigenous communities on the land-related legal framework. Cadastral Activities: The project will conduct an investigation of the existing land records (including individual and communal land regimes and religious/ceremonial sites) to identify any registered titles to indigenous communities. Then, it will conduct a cadastral field survey to gather important information about each parcel. In the case of indigenous lands, the cadastre technicians will demarcate the outside boundaries. Only upon the explicit request of the communities, the project will conduct the cadastral survey within the communal lands. The information collected in the records and the field will be analyzed in order to determine if a parcel is regular or irregular. Community members will have opportunities to participate during the cadastral survey to verify their land rights and certify the rights of their adjacent neighbors, and during the public viewings to confirm that the analysis performed by RIC is accurate. Cadastral Brigades: Selection and training of the people who will integrate the cadastral brigades to ensure that they speak the language of the community, possess knowledge of the traditional land tenure systems, and can carryout the survey in accordance with the project s operational manual. Assistance to stakeholders: Provision of operational and legal assistance to ensure community members are well informed of the process and have their rights safeguarded. RIC social unit, NGOs and/or local organizations will provide this assistance to the communities. In this context, and according to article 33 of the RIC Law, the beneficiaries have the right to be accompanied by technical or legal advisers that they consider suitable. d) Provision of specific Conflict Resolution Mechanisms (US$1 million approx.) Provision of alternative conflict resolution mechanisms to treat the conflicts identified during the cadastral survey. The project will assist communities in conflict mediation. The indigenous communities will have the right to use their own traditional mechanisms to solve land disputes if that is their wishes. The project would also provide spaces and instruments for conflict resolution which also inform beneficiaries and parties involved of their rights. To achieve that, RIC will work in close collaboration with SAA-CONTIERRAS and will use existing local mechanisms such as the mesas de dialogo with representation from indigenous communities and public institutions and the Municipal Development Councils (CODEDES, COCODES y COMUDES). e) Designed of Sequenced Implementation Strategy Implementation of cadastral activities would be executed under a pilot strategy during the first two years of the Project to polish the methodology designed in the methodological guide and provide inputs to suggest reforms to the existing regulatory framework. During the first two years, the Project will carry out the systematic land survey in areas with low density of indigenous communities, in area of low conflict or in area where pilot cadastral activities had been carried out in the past. The project will generate lessons and recommendations for how to scale the process in all the Departments of the Project. 95