Strengthening Environmental Management and Reducing Degradation in Peru

Challenge

As of 2006, the main causes of environmental degradation in Peru had led to an estimated cost of US$ 2.3 billion, an amount equivalent to 3.9 percent of the nation’s GDP. The highest costs were from outdoor air pollution and lead exposure in urban areas; inadequate water supply, sanitation, and hygiene systems; natural disasters; indoor air pollution; and agricultural soil degradation. The majority of these costs reflected increased morbidity and mortality, as well as decreased economic productivity. In parallel, as of early 2008, Peru lacked a ministry with a clearly defined mandate and centralized responsibilities for environmental management. Core environmental management responsibilities were shared by more than a dozen agencies with inadequate public funding and insufficient technical and human resource capacities. Peru had 60 protected areas, covering 14.8 percent of the nation’s territory or approximately 18 million hectares. Of these, only 30 had an approved management plan, and plans for 8 more were under preparation.

Approach

A project to address these issues took shape as Peru: First Programmatic Environmental Development Policy Loan/DDO. Based on the results of the Country Environmental Analysis (CEA), a series of three programmatic environmental development policy loans (DPLs) supported Peru in adopting reforms targeting two key areas: (i) strengthening the legal and institutional framework for environmental management, and (ii) mainstreaming principles of sustainable development in crucial economic sectors.

Policy actions included the creation of the Ministry of Environment (Ministerio del Ambiente, MINAM) and affiliated agencies, responsible for clarifying the roles and responsibilities of the primary agencies in areas such as environmental oversight and licensing. Additional reforms developed tools to address priority environmental problems, such as outdoor air pollution in urban areas and water quality problems. Those tools ranged from emissions and environmental quality standards to information to support decision making and increase transparency and accountability in environmental management. Other actions ensured that the new organizations had the resources to fulfill their mandates.

Mainstreaming sustainable development principles in crucial economic sectors was fundamental to addressing core environmental issues, particularly in areas experiencing high growth, utilizing natural resources, or relying on exports. The fisheries sector met these characteristics and was in need of reforms, as evidenced by declining biomass and yields, as well as by the overcapacity of fishing vessels and processing plants. Mining was another such sector, both contributing significantly to the Peruvian economy and increasingly associated with socioenvironmental conflicts.

Results

The program’s environmental DPLs supported widespread policy reforms. Achievements linked to these reforms include the following outcomes:

• The environmental agenda is now consolidated under the auspices of MINAM, with a well-defined mandate and a higher budget than the former National Environmental Commission. Between 2002 and 2012, executed environmental public expenditure increased sixfold from US$ 5.8 to US$ 30.3 per capita.
• 17 percent of the country’s territory is covered by a total of 190 protected natural areas (NPAs), and more than 94 percent of the ecosystems in NPAs are in optimal status.
• Despite demographic expansion and a growing vehicular fleet, the period following policy reforms in 2008 has seen measurable improvements in Lima’s air quality.
• The Ministry of Mining identified 8,616 mining environmental legacies (MELs) and prioritized those legacies by risk levels. The government of Peru has confirmed resources to remediate 801 priority MELs (those with high and very high risk ratings) in 44 mining units.
•  As of January 1, 2010, the government of Peru prohibited gas stations in Lima and Callao provinces from supplying B2 diesel with more than 50 ppm of sulfur content for automotive purposes. As of July 16, 2013, commercialization of B5 diesel with more than 50 ppm of sulfur content was banned for all uses in Lima, Arequipa, Cusco, Puno, and Madre de Dios departments and in the Callao province. Additionally, on January 1, 2016, the government of Peru required all gas stations (376) in Junín, Moquegua, and Tacna departments to supply clean diesel.

The anchoveta fleet (approximately 900 vessels) has been regulated by the quota system, and 2,283 workers have benefited from economic incentives provided by the Fishing Compensation Fund to voluntarily leave the fisheries sector.  

Bank Group Contribution

The World Bank prepared a CEA for Peru that provided the analytical underpinnings for the programmatic series of environmental DPLs. The three DPLs financed a total of US$ 455 million to the government of Peru. In addition, the Bank provided the government nonlending technical assistance through the Strengthening Environmental and Natural Resource Institutions project, cofinanced by a grant from the Spanish Trust Fund for Latin America and the Caribbean. This technical assistance supported MINAM in monitoring implementation of specific measures and reforms under the DPL program, as well as in identifying the next stage of environmental policy reforms.

Partners

The KfW Development Bank financed an additional development policy operation supporting needed reforms in the forestry sector. These reforms complemented the policies supported by the third environmental DPL under the Bank program.

Moving Forward

The program’s series of environmental DPLs supported first-generation reforms providing the institutional and regulatory conditions for improved environmental management and outcomes. Further investment in more complex reforms and actions that build upon the foundations of the environmental DPLs is needed, however. In this context, based on preliminary assessments of policy reforms, the government of Peru has requested Bank support through an investment loan under the Peru Investments for Environmentally Sustainable Development Project, approved in January 2017. This operation aims to support the government in improving its environmental monitoring and analytical capacity, providing the public with timely access to information on environmental quality, and promoting informed public participation in environmental quality management. Additionally, building on the success of the quota system for anchoveta fisheries, the government is considering establishing quotas for other at-risk species.

Beneficiaries

Edgar Manrique was 18 years old when he joined the fisheries sector. After more than 20 years working in anchoveta vessels, he left the sector and registered in the compensation program. Edgar opted for the culinary course. “I chose the culinary school because I have always liked the art of cooking. I took the course with passion. Though I have never completed secondary education, now my wife and children are proud of me.” After completing his training, Edgar became the executive chef and manager of a restaurant.