PERU CONAM Institutional Capacity Strengthening The proposed IDF seeks to strengthen the overall administrative and technical capacity of the National Council for Environment (CONAM). As the main environmental authority in Peru, CONAM currently faces a number of challenges which hamper its overall ability to carry out its functions and ensure an efficient environmental management. Among the challenges faced by CONAM (as per the 2007 Peru Country Environmental Assessment) are: (i) a limited capacity to carry out an efficient financial management of its operations (including financial accountability); (ii) lack of planning and weak capacity to establish environmental (and fiduciary) priorities; (iii) lack of monitoring and evaluation systems.  In addition, the general law of the environment which provides a number of institutional reforms which could strengthen CONAM needs to be regulated. The proposed IDF, which has been requested by CONAM would contribute in addressing the above referenced institutional challenges by strengthening its internal planning and administrative capacity (particularly with regards to financial management): its ability to carry out monitoring and evaluation of its projects and programs (which would allow it to make strategic decisions), and improve its overall environmental monitoring systems.  Lastly, the IDF would contribute in identifying the legal reforms (and regulations) which could enhance the overall capacity of CONAM The IDF would complement the Environmental DPL programmed for Peru (FY09). Peru is one of the most ecologically diverse countries in the world, endowed with a wealth of natural resources and varied territory. But economic development, occurring in the absence of adequate environmental safeguards throughout Peru#s history, has degraded its natural resources and resulted in serious environmental problems. Unsustainable mining, fishing and agricultural practices and pollution from domestic and industrial sources have generated significant negative impacts on Peru#s ecosystems and public health. Massive overcapacity of the fishing fleet undermines sustainability and threatens a collapse of the anchoveta industry key sector of Peru#s economy. Waterborne diseases and health problems associated with indoor and outdoor air pollution have very high public health costs. According to the 2007 Country Environmental Analysis (CEA), these costs reach 3.7 percent of GDP per year, and primarily affect the poor. Urban air pollution, one of the most serious problems in Peru#s cities, is responsible for an estimated 3,900 premature deaths per year.  The Government of Peru has responded to these challenges by strengthening the environmental management framework. The National Code for Environmental and Natural Resources, adopted in 1990, is a milestone in Peru#s environmental regulation and the first effort to integrated different actions by different entities to control air, water, noise and visual pollution. Since 1993, the National Institute for Natural Resources (INRENA) is the principal agency responsible for natural resources management in Peru; special directorates in sectoral ministries perform additional regulatory and environmental management functions. In 1994, Peru created the National Council for the Environment (CONAM) as an inter-institutional coordinating body with a mandate to propose, manage and evaluate national environmental policy.  Despite significant progress towards a stronger environmental management framework and coordination between different agencies and actors at national and regional levels, CONAM#s implementation capacity remains weak. It lacks real power to monitor and enforce the application of environmental laws and regulations, and has been characterized as a frail agency that has a low profile and lacks citizen participation, a major handicap in the environmental institutional framework in Peru. Furthermore, environmental expenditures are very low by international standards, only about a quarter of a percent of GDP, contributing to weak institutional capacity. The Government is seeking to improve the effectiveness of environmental regulation and monitoring through strengthening CONAM#s enforcement capacity and improving allocation of public expenditures.  The World Bank has received a request for an IDF grant from Peru's National Council for the Environment (CONAM) in order to strengthen the overall technical and administrative capacity of the institution. The IDF would seek to support: (i) an increase in the ability of CONAM to carry out financial planning and improve its administrative capacity to channel resources to priority programs/activities; (ii) mainstream and expedite the financial management procedures; (iii) develop the capacity to monitor and evaluate CONAM#s programs and activities in order to draw lessons, make corrections, assess overall impact. The above in turn would contribute in strengthening CONAM#s tools for environmental management (i.e. environmental monitoring, policy formulation, licensing, inter-institutional coordination etc.) since public resources would be timely and efficiently allocated.  Thus the institution#s environmental management capacity would be improved.  The proposal is a priority for the CMU and the LCSEN Unit as it directly supports the objectives of the Government, as identified in the CPS, and the proposed Environmental DPL for Peru.