Mexico: World Bank Approves $60 Million For Environmental Services

Contacts:

In Mexico: Gabriela Aguilar (5255) 54-80-4252

Gaguilar2@worldbank.org

In Washington: Alejandra Viveros (202) 473-4306

Aviveros@worldbank.org

WASHINGTON, March 29, 2006—The World Bank’s Board of Directors approved today a $45 million loan for Mexico, as well as a $15 million grant from the Global Environment Facility (GEF), to improve the provision of environmental services.

“The project will benefit members of the mostly poor rural communities that will be paid to provide environmental services, and users who will be protected from degradation of those environmental services,” said Mark Austin, World Bank task manager for the project. “In addition, the global community will benefit through the conservation of biodiversity and increased carbon sequestration.”     

The Environmental Services Project seeks to facilitate decentralization of environment management and increased public participation, promote payment for environmental services programs, decrease loss of temperate and tropical forests, conserve biodiversity, and increase sustainable water resource management. The project will do so by strengthening and expanding the national Payments for Hydrological Environmental Services Program (PSAH) and the Program to Develop Environmental Services Markets for Carbon Capture and Biodiversity and to Establish and Improve Agroforestry Systems (CABSA).

The PSAH and CABSA were designed by the Government of Mexico to provide economic incentives to avoid deforestation in areas where water problems are severe, but where in the short- or medium-term commercial forestry could not cover the opportunity cost of switching to agriculture or cattle ranching. Direct payments are made to landowners for watershed conservation, management, and restoration aimed at preserving temperate and tropical forest lands associated with the supply of water to communities.  

Specifically, the project will support the following activities:

(i)                   Develop new, sustainable financing mechanisms for environmental services based on payments from service users, which could then be channeled either through the PSAH or through stand-alone local payment of environmental services (PES) mechanisms. To achieve this objective, this component will help develop financial mechanisms based on the main types of environmental services: water quality and regulation, biodiversity conservation, and carbon sequestration.

(ii)                 Strengthen and improve the efficiency of existing PES programs by increasing the efficiency and capacity of both PSAH and CABSA to handle the greater and more complex demand as intermediaries between service users and service providers.

(iii)                Support environmental service providers by removing obstacles that may prevent communities from participating in either national or local PES mechanisms, with a particular focus on problems faced by poor communities.

(iv)                Assist local communities in service provision by financing and making actual payments to environmental service providers and ensuring that they are being compensated properly.

The $45 million single currency, fixed-spread loan from the International Bank for Reconstruction and Development (IBRD) has a repayment schedule linked to disbursements. The repayment schedule for each disbursed amount will have a grace period of four years and a final maturity of nine years. The last maturity date of the repayment schedule is August 15, 2020. If any one or more installments of principal of any disbursed amount would be payable after August 15, 2020, the borrower shall also pay on such date the aggregate amount of all such installments.