Guatemala-Land Administration Project

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Name Region Sector Project ID Implementing agency Borrower Report No. PID4636 Guatemala-Land Administration Project (@+) Latin America and the Caribbean Natural Resources and Rural Poverty GTPE49616 Ministry of Agriculture, Livestock and Food 7 Ave. 12-90, Zona 13 Guatemala, Guatemala (502) 230-4450; fax 334-3510 General Property Registry 9A Av. 14-25, Zona 1 Guatemala, Guatemala (502) 253 9548; fax 232 6739 Government of Guatemala Date this PID prepared September 1997 Date initial PID prepared September 1996 Projected Appraisal date December 1997 Projected Board date June 1998 Country and Sector Background 1. Guatemala signed a comprehensive Peace Accord on December 29, 1996, to end thirty-six years of civil conflict. The Accord supports establishing democracy and introducing economic policies which will foster sustainable growth. The promise of peace has provided Guatemalan society with a point of convergence, opening spaces for the Government of Guatemala (GoG) to pursue fiscal, institutional and legislative reforms to support its development agenda. The Accords land-related commitment include establishing a cadastral-based land registry, which would be supported under this operation. Other commitments include establishing of a Land Fund, which the GoG has requested be supported under a separate operation, and land conflict resolution mechanisms, which would be supported under both operations depending on their nature. Guatemala's greatest challenge is to reduce the poverty which afflicts over 75t of the population, 86t of the rural population and 93t of the indigenous population. tc " Since the return of civilian rule to Guatemala in 1985, progress towards negotiating a lasting peace, establishing democracy and introducing economic policies which will foster sustainable growth has been slow and uneven. Government's inability to overcome conservative private sector opposition to tax system reform and enforcement has resulted in significant fiscal problems. Guatemala's greatest challenge is to reduce the poverty which afflicts over 75t of the population, 86t of the rural population and 93t of the indigenous population." 2. In Guatemala, the agricultural sector generates one quarter of GDP, 55t of foreign exchange earnings and over 50t of employment. It is dualistic, consisting of a modern sector dedicated primarily to export crops and a traditional sector which largely produces basic grains. Agricultural

growth has grown relatively steadily since 1990 at about 2.7 percent per year (less than population growth of about 3 percent per year). Agricultural exports are dominated by traditional products such as coffee, cotton, sugar, and bananas. Total foreign exchange earnings from these products, however, represented 43 W of total export receipts in 1996, down from 58t a decade earlier, owing to falls in production and lower world prices for these commodities. Non-traditional agricultural exports, such as vegetables and flowers, on the other hand, have increased substantially since 1983: they now generate about 12t of total foreign exchange earnings and about 22 ; of agricultural export earnings. tc " The agricultural sector generates one quarter of GDP, 60t of foreign exchange earnings and over 50t of employment. It is dualistic, consisting of a modern sector dedicated primarily to export crops and a traditional sector which largely produces basic grains. Agricultural production has grown relatively steadily since 1986 at between 3 and 4 percent per year. Agricultural exports are dominated by traditional products such as coffee, cotton, sugar, and bananas. Total foreign exchange earnings from these products, however, have declined by about 429 since 1983, owing to falls in production and lower world prices for these commodities. Non-traditional agricultural exports, such as vegetables and flowers, on the other hand, almost doubled in value between 1983 and 1993. They now generate about 12t of total foreign exchange earnings and about one third of agricultural export earnings." Project Objectives 3. The project's objectives are to support the already signed, landrelated commitments under the Socioeconomic and Agrarian and Indigenous Peoples Sub-accords, particularly on land security and access, a key constraint to community and smallholder sustainable land management and a root cause of the civil conflict. The project's specific objectives are to: (a) regularize land tenure in the Peten Department and selected areas, for all property owners, including to strengthen the legal and institutional framework for land registry and cadastre services, promote the maintenance of regularized records and establish conflict resolution mechanisms; and (b) assist the GoG to create a uniform geographic information system (GIS) in the Peten Department for management of protected areas, land registry and cadastre, and support sustainable development initiatives by federal and local authorities, including projects financed by other donors in the Department (IDB, KfW, USAID, NGOs). Poor communities and small-scale land holders would be the principal project beneficiaries because their land security is the most precarious and have least access to land regularization. The regularized land registry and cadastre would be unified for urban and rural land, and the information made accessible at the federal and municipal levels for planning and fiscal purposes. Project Description 4. The project would consist of four components: (a) Land regularization in the Peten and selected areas. This includes aerial photography and complementary topography for cadastral purposes, land registry research, field and office adjudication work and quality control, and integration of both physical and legal information into a large scale geographic information system to establish an integrated modern land registry -2 -

and cadastre. The integration of cadastral information into the land registry would allow locating property rights on the land and therefore avoid overlapping claims. This component would also include legal and institutional framework improvement, for both affected communities and Government institutions. For the communities, this would include providing legal information and support for knowledge on land law, support for municipal/community organizational activities and establishment of legal entities able to own land, legal assistance for land tenure regularization, and in the translation and articulation of legal concepts with customary law. For the Government institutions, institutional strengthening would support the decentralization of cadastre works supervision and maintenance to the Peten, and to improve access to information to municipal centers. The component would finance civil works building and rehabilitation (to locate the new Peten Geographic Information Service), and cadastral works (aerial photography, restitution, production of cadastral maps), equipment (vehicles and computer equipment for geographic information systems and office use), technical assistance and training to create capacity in the new streamlined legal and cadastral procedures and information management not currently available in the public sector, documentation systems and training in public and private conflict resolution mediation and other mechanisms, information campaigns and dissemination, and recurrent costs on a declining basis. b) Land Registry Component, involving the establishment of Guatemala's third registry (only the two main cities have land registries: Guatemala City and Quetzaltenango). The registry would be the pilot for decentralization of registry offices, as mandated by the 1985 Guatemalan Constitution. The pilot would be a modern registry, automated, and integrating cadastral information. It would serve first the Peten area, and it would be ascertained later whether and how coverage should be extended. The component would finance civil works to house the new registry; vehicles and office equipment; technical assistance and consultant services to transfer of land records from the Guatemala office, the scanning and setting up for business using traditional metrology but improving access, the establishment of a modern data base to convert to new business methods when cadastral and field information are available. Other investment costs would include training of registry staff in the new procedures, and studies to: (i) review and propose appropriate legislation to facilitate installing new systems; (ii) develop streamlined and automated systems for land registry and cadastre security and updating; (iii) review tariffs and potential new products to promote financial accountability in the land registry; and (iv) propose legislative initiatives to prepare for upscaling registry activities to the rest of the country. In addition, the project would finance recurrent costs on a declining bases to start up the new registry, aiming at self-sustainability. (c) Geographic Information System in the Peten. This would include the establishment of a geomatics capability to integrate all spatial information available in the Peten. The component would finance civil works and mapping activities (including purchase of satellite imagery), vehicles, office and field equipment, technical assistance, training, and recurrent costs on a declining basis. (d) Project Management Unit to finance the management, administration, coordination, auditing and accounts, procurement, disbursement and studies for the project al all involved levels of the Government: federal, Department, municipalities, as well as for coordinating with donors, NGOs and other -3 -

partners and local constituencies. Of particular importance would be the financing of technical assistance and training for procurement and works supervision activities. The component would finance vehicles, field and office equipment, technical assistance and training, and recurrent costs on a declining basis. Project Costs and Financing Project Coordination and Implementation 6. Because land is an important issue and many GoG institutions have different mandates regarding land policy and management, the GoG has established a high-level commission to make policy and strategic decisions and coordinate on all activities related to land both within the GoG and with donors and civil society. In April 1997, the GoG established PROTIERRA (Institutional Commission for the Strengthening and Development of Land Property Rights), including the Ministry of Finance, the Peace Secretariat (SEPAZ) and MAGA (coordinator) heads, as well as the Planning Secretariat (SEGEPLAN), the General Property Registry (RGP), and the Military Geographic Institute (IGM). PROTIERRA is supported by a technical-juridical unit (UTJ), funded by Sweden. PROTIERRA coordinates all land-related activities, including donor-supported projects in land registry and cadastre, land conflict resolution, Land Fund, geographic and statistical information, land taxes and rural investment. The Viceminister of MAGA, Board Director of the Presidential Office on Land Conflict Resolution and the Coordinator and a member of the UTJ are the Government's four representatives to the Paritary Commission on Land Issues established under the Indigenous People Sub-accord commitment. 7. PROTIERRA also coordinates closely with the two official Commissions in the Peten: the Peten Sustainable Development Commission (PSDC) headed by the Peten Governor, and the Peten Land Commission (PLC) headed by MAGA. The PSDC coordinates all Peten projects, so will have access to all data on the Peten, whether generated by the GoG or donor projects. The PLC is in charge of land policies in Peten, including adjudication; this is different from the rest of the country because has the Peten Land Law 38-71. 8. PROTIERRA's office in the Peten, or Field Project Management Unit (PMU) would be the main implementing unit, together with the Peten land registry. It would coordinate closely with entities under the PSDC and PLC to carry out activities. The PMU would be established with PPF financing to prepare the project and implement start-up activities. The PMU would implement the GIS component directly and in coordination with the PSDC. The PMU would also help set-up the pilot land registry in the Peten, which would become, over implementation, a modernized and decentralized land registry including cadastral and GIS capabilities to update the regularized land records for public and private land in the Peten. For protected areas, the PMU would support the functions of the Regional Unit of the National Commission of Protected Areas (CONAP), including protected area demarcation and property rights. 5. Total estimated project costs are US$ 33 million with a proposed loan of $25 million. In August 1996, the Bank approved a $2.0 million PPF (P- 300-0-GU); these funds are now being processed for administration by UNDP under a Cost-Sharing agreement to facilitate disbursements. -4-

Project Sustainability 9. By transferring essential resources and skills to public agencies at the federal, department, and municipal level as well as communities and small property owners, the project will improve land administration and provide information for better land and protected area management. Two elements of sustainability are critical: (a) community knowledge and participation to understand the uses and functions of the land registry and cadastre, so that they ensure tenure security by conveying and updating information to the land registry; and (b) financial sustainability of the land registry. In Guatemala, the RGP's budget is generally in surplus; it is expected to remain financially healthy and be able to contribute to financing cadastral updating as a quid pro quo for integration and increased coverage (currently estimated at 309 of all property owners, mostly urban). tc " By transferring essential resources and skills to farmers, grassroots rural producers' organizations, and small property owners, project impact on growth and poverty alleviation will be sustainable and will be maintained beyond the life of the project." Lessons Learned 10. For more than two decades the Bank has been involved in land reform and land tenure issues under its poverty-oriented rural development strategy. In 1975 the Bank published a land reform paper. Evaluation of projects in Thailand and Kenya suggest that land administration programs are most cost-effective and contribute to equity objectives when they are area wide and combined with agile conflict-resolution mechanisms. The projects showed that land titling is an important step in increasing rural productivity in areas where (a) population densities are high; (b) freehold tenure is a reality; (c) traditional systems of land allocation and dispute adjudication have broken down; and (d) formal credit systems are willing and able to lend to small farmers against the security of land titles. These reflect accurately the situation in Guatemala, except for (d). With respect to (d), the credit link is still weak in Guatemala but there are a number of initiatives, including the preparation of a World-Bank supported Rural Investment Project, which are addressing the issue. 11. A review of World Bank experience with rural land titling projects throughout the world reported that, except for the Thailand Land Titling I and II projects (Loans 2440-TH and 3254-TH, respectively), the 12 operations surveyed performed poorly. The main problems were: lack of political support; conflicting bureaucratic priorities; lack of institutional capacity or support; and complex multiple objectives of which titling was only an adjunct. By contrast, the Thailand projects were relatively successful due to: full political and institutional support; Government commitment to adequate resources; single titling objective; and a relatively favorable land policy environment. Although the proposed project has objectives beyond titling, its other GIS management objective is a complementary one. The proposed project is also characterized by full political support -- as included in the Peace Accords and demonstrated by the establishment of PROTIERRA. The GoG proposed starting project activities in the Peten Department because of its relatively favorable land policy environment, and because its Peten Land Law allows regularization with minimal, if any, legislative changes. This should provide a conducive ground for testing methodologies, legal and technical specifications and community information programs which, once refined, can be - 5 -

applied to the rest of the country and provide a more promising vehicle for land administration and policy improvement. 12. The proposed project also draws lessons from the implementation of the pilot project in the Sonsonate Department in El Salvador, financed under PRISA (Ln. 3576-ES), which has become a showcase for other Central American countries. This pilot has covered the 160,000 hectares of Sonsonate Department. This first phase showed that the registration program was highly popular, and enhanced when adequate local publicity was given before visits by field teams. It also provided the first set of hard data on the magnitude of the problem and target group: it was found that, in the first two municipalities, about 60 percent of properties were registered, and less than half have cadastral references. Moreover, of the unregistered parcels, most were small (76 percent of the urban were below 500 m2 and 91 percent of the rural were below 3 ha). It also demonstrated that conflicts are rare, even in an area with a legacy of massive population displacement and where land records would be expected to be contested. The pilot also showed that, even if the methodology of systematic adjudication is well understood, these projects cannot be turn-key because the private sector is not always accountable or capable to deliver the quality product required to quell the populations' land security concerns, particularly because the GoES is the ultimate bearer of responsibility for the project These data confirmed the poverty reduction potential and the public goods generation nature of the proposed project. Furthermore, the pilot experience in cost minimization yielded costs per hectare similar to recent experiences in similarly densely populated countries in East Asia. 13. Finally, the proposed project is a response to the explicit GoG commitments under the Peace Accords. The establishment of PROTIERRA reduces the potential for conflicting bureaucratic priorities. Lack of institutional capacity is dealt with in the current project by technical assistance, training, informed participation, and community development within the context of Peace Accords and GoG commitment. Poverty Category 14. The project would have a heavy poverty focus and would be included in the World Bank's Program of Targeted Interventions. Project beneficiaries would be all those with land rights in the Peten but particularly those so far excluded from land registry and cadastre services who are overwhelmingly poor and indigenous. Of the population of Peten, 12.7 W are indigenous and 58.4w live in extreme poverty. Environmental and Social Aspects 15. The project has been assigned an environmental classification of B. There are two aspects to be considered: impact on the environment and on indigenous peoples. Environmental issues include regularizing possessory rights over land (secure land tenure is expected to lengthen farmers' planning horizon for better land management and promote investment) and impact on socially disadvantaged groups. Because land regularization involves acquired possessory rights as confirmed by public entities and/or neighbors and communities, it potentially (i) avoids creating incentives for deforestation because no evidence of use is required; and (ii) decreases settlement pressure on protected areas because titled farmers have more secure tenure permitting - 6 -

more intense farming and less need to migrate, and can be more relied upon to control open access to adjacent protected areas. The project does not include involuntary resettlement, because would recognize possession within the existing legal framework and establish conflict resolution mechanisms. 16. With respect to indigenous peoples, the Indigenous Peoples Subaccord constitutes an impressive framework of commitments in policy and specific activities consonant with O.D. 4.20. A full Social Assessment and Participation Plan will be available at the Public Information Center at or prior to appraisal. As inputs to the Social Assessment, the Bank organized two broad consultations with Mayan Elders in September and December of 1996, and drafted an Indigenous Peoples Profile. Within this framework, clear guiding principles to operationalize commitments were discussed with the GoG in March 1997, including informed participation, concertation and consultation, access to provision or management of project services, and training of indigenous peoples. The proposed Land Administration project design and implementation will reflect the results of this participatory process. Program Objective Categories 17. Program of Targeted Interventions (PIT). Contact Points The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Cora M. Shaw Task Manager (202) 473-9263 Guatemala Land Administration Environmental Annex The project has been assigned an environmental classification of B. The Guatemala Land Administration would address two main aspects: impact on the environment and on indigenous peoples. Environmental issues include regularizing possessory rights over land (secure land tenure is expected to lengthen farmers' planning horizon for better land management and promote investment) and impact on socially disadvantaged groups. Because land regularization involves acquired possessory rights as confirmed by public entities and/or neighbors and communities, it potentially (i) avoids creating incentives for deforestation because no evidence of use is required; and (ii) decreases settlement pressure on protected areas because titled farmers have more secure tenure permitting more intense farming and less need to migrate, and can be more relied upon to control open access to adjacent protected areas. The project does not include involuntary resettlement, because would recognize possession within the existing legal framework and establish conflict resolution mechanisms. With respect to indigenous peoples, the Indigenous Peoples Sub-accord -7 -

constitutes an impressive framework of commitments in policy and specific activities consonant with O.D. 4.20. A full Social Assessment and Participation Plan will be available at the Public Information Center at or prior to appraisal. As inputs to the Social Assessment, the Bank organized two broad consultations with Mayan Elders in September and December of 1996, and drafted an Indigenous Peoples Profile. Within this framework, clear guiding principles to operationalize commitments were discussed with the GoG in March 1997, including informed participation, concertation and consultation, access to provision or management of project services, and training of indigenous peoples. The proposed Land Administration project design and implementation will reflect the results of this participatory process. Hans P. Binswanger and Klaus Deininger, "World Bank Land Policy: Evolution and Current Challenges." This paper was prepared for the World Bank Agricultural Sector Symposium, 1994. Environment Department, Research and Policy Division Working Paper No. 1992-35, March 1992. -8-