PROJECT INFORMATION DOCUMENT (PID)

APPRAISAL STAGE

Report No.: AB3305

Project Name

/ Lake Titikaka Local Sustainable Development
Region / LATIN AMERICA AND CARIBBEAN
Sector / Other industry (25%), Sanitation (20%), Other social services (25%), Water supply (15%), Solid Waste Management (10%)
Project ID / P101426
Borrower(s) / GOVERNMENT OF BOLIVIA
Implementing Agency / Vice Ministry of Tourism
Environment Category / [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined)
Date PID Prepared / November 2, 2007
Date of Appraisal Authorization / October 29, 2007
Date of Board Approval / December 20, 2007

1.  Country and Sector Background

Bolivia’s options for economic development are largely defined by its geography, nowhere is this more apparent than Lake Titikaka[1]. The area’s striking geography has resulted in the world’s highest navigable Lake, with unique landforms, flora, and fauna. Lake Titikaka is an important ecosystem and a world-class attraction[2]. In 2005, tourism was the fourth most important component of Bolivia’s GDP, with a share of 4.6%, generated by national and international tourists[3].

The basin is one of the most important archeological resources in South America. Inca cosmology believes that the Lake is the origin of human life; various cultures have continuously lived near the Lake for over 8,000 years. The area provides evidence of one the longest constant relations between humans and nature in the Americas. Ancient traditions are still largely preserved and the rural population surrounding the Lake is almost all indigenous Aymara.

Despite the Lake’s unique natural history and preserved cultural integrity, pollution is starting to threaten the health of the Lake and the sustainability of the communities that depend on the Lake for their livelihoods. The communities surrounding the Lake are among the poorest in the region. Poverty levels have stubbornly remained at 1976 levels – therefore a long-term sustained improvement, based on relevant local economic development, broad based local support, and locally applicable interventions is most likely to succeed. The total population of the 17 municipalities that make up the Lake Titikaka Mancomunidad is approximately 324,400, of which 93% have unmet basic needs. Almost all of the altiplano’s rural population lives in poverty. Morbidity and infant mortality rates are among the worst in the Americas[4].

Although there are various opinions on what pollutants and land-use changes most threaten Lake Titikaka, many of these opinions have little technical support, and some are politically driven. Despite numerous studies on the Lake there is no accepted or consistent baseline data, nor community consensus on priorities for local economic development or ecosystem protection. International donor assistance in the Lake-area is often fragmented and complicated by joint Peru-Bolivia jurisdiction.

Many issues need to be addressed to foster sustainable development of the Lake Titikaka region. For example:

(i)  Community Support. Historically communities around the Lake often feel excluded from national economic growth and the political decision making process, and there is increasing impatience with the levels of inequality[5]. This discontent can be exacerbated when, according to the Government’s National Tourism Plan, community-based tourism, with a 71% market share receives only 5% of the overall tourism revenues. Private operators obtain about 80% of tourist revenues. Much of the community’s discontent stems from a mistrust and misunderstanding of the private sector’s needs and abilities.

(ii)  Stakeholder Participation. The Government’s newly development Tourism plan is predicated on broad stakeholder participation. Any new tourism effort needs to garner greater public support and this support needs to be developed in a manner that reflects the unique local cultures and organizations.

(iii)  Weak institutional and planning capacity. In 1994 the central government delegated to the municipalities the responsibility of managing their own finances and providing specified public services (Ley de Participación Popular[6]). This was not matched with a commensurate increase in overall municipal finances or staff capacities. Long term strategic planning is particularly absent and un-checked and inappropriate growth is threatening the Lake and local communities.

(iv)  Lack of infrastructure. There is a considerable backlog in infrastructure and basic services such as water supply, sewage, and solid waste management are sporadic and unsustainable. Management of EPSAs (local utilities) is hampered by staff capacities and poor cost recovery.

(v)  Very low travel and tourism competitiveness. Along with basic services, tourism infrastructure such as signage, and visitor interpretation facilities and restrooms in main tourist sites around Lake Titikaka (Copacabana, Isla del Sol and Luna, and the ruins of Tiwanaku), is lacking. The lack of facilities constrains tourism development, as seen through: (a) higher transaction costs for tourist operators; (b) disincentives for tourists to stay longer at their final destination as evidenced by the amount of time spent by tourists at the Lake Titikaka region compared to other regions in the country[7]; and, (c) lack of competitiveness compared to other international tourist destinations. According to the World Economic Forum[8] Bolivia is ranked very low in global tourism competitiveness (see Table1), when compared to international destinations for the largely international market.

Table 1. Travel and tourism competitiveness

(vi)  Lack of economies of scale. Despite the fact that 80,000 to 100,000 tourists annually visit the Bolivian side of Lake Titikaka, the size of the economy of this part of the Lake is small and spread over a very large geographic area. Communities are relatively small and are dispersed throughout the region and the migration of people to La Paz is considerable. There are few economic activities to provide incentives for retaining or increasing populations.

(vii)  Environmental sensitivity. Lake Titikaka is a unique lake in that it is almost a closed system with about 95% of its total influent water evaporating due to strong solar radiation and local breezes. About 80% of the Lake’s water originates in Peru, rivers and streams provide about 45% of the water input to the Lake, the rest is local precipitation. Residence time for the whole Lake is about 70 years. Average water depth is 100 meters with the deepest at 281 meters. The Lake is divided into two lacustrine basins; the “minor lake” (or Huinaimarca) and the “major lake” (or Chucuito) are connected at the Tiquina Straight which is 850 meters wide and about 20 meters deep. Lake levels fluctuate annually by about 1 meter and over the last 100 years have fluctuated from a low of 3806 meters asl in 1943 to a high of 3812 meters asl in 1982. As outlined in the Sate of the Lake report (Annex 14) the Lake’s watershed drains an area of 140,000 km2. The watershed is believed to be undergoing a long term drying trend, most likely from hemispheric climate changes. Glaciers that feed the lake are melting rapidly – the potential overall impact of climate change on the Lake is not yet well understood.

(viii)  Threats to the Lake include: climate variability and possible change; inadequate water resources regulations; pollution such as organic loading from human waste, livestock, and industry; sediment loading; invasive species; habitat destruction; heavy metal contamination and industrial pollution from mining; nitrates from fertilizer run-off; land-use changes; and over-fishing. Pollutants enter the Lake from several sources, the largest being the city of El Alto (with more than 500,000 inhabitants), which in addition to municipal waste water, discharges significant quantities of industrial wastes. Two other important sources are the Peruvian cities of Puno (around 100,000 inhabitants) and Juliaca (around 200,000 inhabitants). Nutrient inputs from domestic wastewaters are causing eutrophication at some locations, jeopardizing the Lake ecosystem. As a consequence of poor waste water management, high bacteria levels at some locations pose a threat to public health. Mining activities may result in effluents containing mercury and other toxics, possibly threatening the fishing industry. Additionally, the introduction in the 1940s of non-native fish (trout) to the Lake for commercial farming is depleting the native fish populations as trout have escaped and are significantly influencing native fish population.

(ix)  International waters. Lake Titikaka is shared between Peru and Bolivia. A bi-national lake-management agency (ALT) exists, but is not always well-regarded, especially in Bolivia. More than 80% of Lake Titikaka’s water originates in Peru, yet the most threatened smaller and shallower part of the Lake in the south is virtually fully enclosed by Bolivia.

Government’s strategy

Bolivia’s strategy for fostering sustainable development of the Lake Titikaka area includes the development of a strategic vision among communities and stakeholders, through which local economic activities as well as the provision of basic services will be promoted. The Vice Ministry of Tourism views tourism as the overarching and cross-cutting theme that can support development of the region in a holistic manner as stated in the National Tourism Plan (2006-2011). The plan provides a policy framework that prioritizes the development of sustainable tourism on the basis of community-based tourism, as well as indigenous tourism. According to this Plan, the principles by which sustainable tourism is to be encouraged are: stakeholder participation; equitable distribution of economic benefits; the preservation of natural and cultural resources; environmental protection; and improved services and tourist satisfaction.

Bolivia now receives 500,000 international and 930,000 national tourists per year, and the Mancomunidad receives 205,000 and 165,000 of these respectively. As outlined in the Government’s Tourism Strategy, the World Tourism Organization believes that Bolivia has a potential to attract 3.5 million tourists a year. The Government wants to increase tourist arrival by 5% a year. Currently, the central government is working on strategies to mobilize and deploy resources that will increase Bolivia’s competitive advantage in terms of its physical and cultural resources. The goal of increased tourist arrivals often conflicts with broader issues such as slow and costly border crossings for tourists, flight disruptions, international visa requirements, and physiologic challenges from altitude.

A Bolivian inter-agency “Comité Permanente” oversees investments in the Lake Titikaka watershed. The investment needs already identified by the Committee are considerable, with investments required in roads, ports, water and sanitation, housing. Therefore, this relatively modest project would finance critical investments with wide-spread consensus and potential for replication. The Bolivian Government designated the Vice Ministry of Tourism to oversee this Project and proposed that the project strive for ‘sustainable economic and social development’ of Lake Titikaka’s municipalities and enhance environmental protection of the Lake. Since some activities are relatively small-scale and urgently needed, the Project envisages an important role for the Prefecture and individual local municipalities.

Project Strategy

Several stakeholders expressed concern that a $15 million project intervention is far too limited to have appreciable long term regional impacts. With little effort the pre-identification mission identified at least $60 million in much-needed investments – the needs around the Lake are considerable. The needs are especially high for infrastructure, including wastewater treatment, water supply, solid waste management, and improvements to roads and ports. Given that the needed investments greatly surpass this credit amount, complimentary interventions from other donors, and complimentary action from Peru is also critical to ensure long-term sustainability of the Lake with associated improvements in the quality of life for local populations. Greater investment and support from the private sector is important and the local and international business community is considered a key stakeholder in the region’s development opportunities. This Project will initiate a broader program of regional assistance structured within a Vice-Ministry of Tourism led strategy that will include:

(1) Develop a shared and relevant vision of Lake Titikaka’s challenges and opportunities. The Project will support the Government’s comprehensive ‘Visioning Exercise’ that will develop a fuller understanding of the economic, social and environmental value of the Lake Titikaka basin resources and the threats it faces, and define and prioritize management needs and actions, and develop a long-term strategy for the region. This program will build on past exercises and will provide stakeholders (domestic and international) an opportunity to discuss their long term vision for the altiplano. This program is likely to progress in phases, with Phase 1 being conducted during project preparation (with a social and institutional risk assessment). During Project implementation, Phase 2 would facilitate an iterative process to obtain a broader consensus on development in the altiplano (largely based on existing studies). The Social Assessment is complemented by a proposed comprehensive social communication campaign that will support the specific implementation of the Project and the broader program objectives. Where practical this vision will be developed with input from Peru. For enhanced understanding and management of the basin’s water resources bi-national institutions and research will be supported and complimentary funding sources sought.

(2) Support a long-term enhancement of quality of life for people living in the TDPS Basin through priority infrastructure investments. Poverty levels have stubbornly remained at 1976 levels – therefore a sustained improvement based on relevant local economic development, broad based community support, and locally applicable interventions is most likely to succeed. The local community needs to be an explicit component of local sustainable development; mobilizing their strong support through the visioning exercise was a key focus of project preparation. Among the expected benefits of the Project are: (a) improved environmental conditions contributing to improving public health and wellbeing; (b) enhanced opportunities for small and micro business; (c) ability to attract and retain tourists, and: (d) improved access to significant cultural heritage through systematic maintenance, preservation, and promotion of cultural resources.

(3) Focus on the sustainable delivery of basic services. Small scale water supply, wastewater collection and treatment, and solid waste management, are critical services needed by local populations and are needed to enhance tourist satisfaction. Consistently surveys of tourist surveys have indicated that the absence of these services is a major shortcoming and increasingly their absence will impact the Lake. The Project proposes a new methodology to monitor the sustainability of service provision (see Annex 3). In addition to funding expanded service provision activities are also included to enhance the EPSAs (local utilities) and provide ongoing feedback on the quality of service provision. These efforts include, for example, cost recovery, staff training, appropriate design and integration across relevant NGOs, varied government departments and levels, and community or user groups.