Guide to Improving Protected Area Budgets PDF

GUIDE GUIDE TOTO IMPROVING THE IMPROVING LESSONS FROM CHILE, THEBUDGET BUDGETAND ANDFUNDING OF GUATEMALA AND PERU PROTECTED AREA SYSTEMS...

GUIDE GUIDE TOTO IMPROVING THE IMPROVING LESSONS FROM CHILE, THEBUDGET BUDGETAND ANDFUNDING OF GUATEMALA AND PERU PROTECTED AREA SYSTEMS FUNDING OF NATIONAL LESSONS FROM CHILE, GUATEMALA AND PERU PROTECTED AREA SYSTEMS Authors: Marlon Flores and Andrew Bovarnick Editor: Amy Sweeting Designer: Fast Lines Inc. Photo credits: p. 1, Peru/Marlon Flores; p. 3, Chile; p. 7, Ecuador/Marlon Flores; p. 11, Chile/Fernando Valenzuela; p. 13, Peru/Mey Lin Chiang; p. 22, Chile/Iñaki Martínez; p. 24, Guatemala; p. 28, Peru/Mey Lin Chiang; p. 31, Chile/ Iñaki Martínez; p. 33, Guatemala; p. 35, Peru/Helen Gomero; p. 36, Guatemala Citation of Publication: Flores, M., and Bovarnick, A. (2016). Guide to improving the budget and funding of national protected area systems. Lessons from Chile, Guatemala and Peru, July 2012 – April 2014. UNDP. Copyright © UNDP, 2016  Guide to Improving the Budget and Funding of National Protected Area Systems Lessons from Chile, Guatemala and Peru July 2012 – April 2014 Marlon Flores and Andrew Bovarnick GUIDE TO IMPROVING THE LESSONS FROM CHILE, BUDGET AND FUNDING OF GUATEMALA AND PERU PROTECTED AREA SYSTEMS Acknowledgements The authors would like to thank the Governments of Chile, Guatemala, and Peru for their support and openness in working on this innovative project, as well as the respective UNDP and TNC teams who led the project’s implementa- tion and produced sub-regional lessons reports. Thanks also to the staff of UNDP in the Latin America and the Caribbe- an Regional Service Centre: Christopher Briggs, former Regional Practice Leader for the Environment and Energy Group, UNDP-LAC; Matilde Mordt, Sustainable Development Practice Leader, UNDP-LAC; Helen Negret, Regional Technical Advisor, LAC-RSC-UNDP; and Lila Gil, who led the TNC team in this project. UNDP and TNC thank the Gordon and Betty Moore Foundation and the Government of Spain for their kind contribu- tions, which made this project possible. The authors also thank those who offered valuable peer reviews and input, including Aaron Bruner, Paul Critician, Lila Gil, Juan Carlos Godoy, Luis Alberto Gonzales, Juan Ladrón de Guevara, Fernando León Morales, Isnardo López, Matilde Mordt, Caroline Petersen, and Leonel Tapia. Project Team Andrew Bovarnick, UNDP Project Director Marlon Flores, UNDP Senior Technical Advisor and Project Manager Lila Gil, TNC Team Leader Chile Juan Ladrón de Guevara, National Project Coordinator Raul O’Ryan, former Environment Officer, UNDP Chile Francisco Solís, TNC Country Representative Guatemala Carlos Rodríguez Oliver, National Project Coordinator Flor Bolaños, Environment Officer, UNDP Guatemala Juan Carlos Godoy, TNC Country Representative Peru Abel Aucasime, National Project Coordinator James Leslie, Environment Officer, UNDP Peru Luis Alberto Gonzales, TNC Country Representative Foreword Institutions in charge of National Protected Area Sys- challenging issue of providing adequate long-term tems are engaged in an enterprise of unprecedented funding to national systems of protected areas. relevance—conserving their nation’s natural heritage for the use, benefit and enjoyment of present and future The United Nations Development Programme (UNDP) generations. They are the stewards of pristine public and its national partners feel fortunate to have the op- land, ecosystems and ecosystem services that are indis- portunity to work with National Systems of Protected pensable to ensure long-term sustainable development Areas with the common objective of improving how of their nations. Equally important is the National Pro- annual budgets are formulated and executed. The tected Area Agencies’ responsibility of managing, with preparation of this Guidance represents a small but the highest professional standards, the public funding unique undertaking in the history of national systems allocated to them to conserve these indispensable nat- of protected areas in Latin America. We are grateful to ural resources. the Moore Foundation and the Government of Spain for their generous support for the preparation of this The United Nations Development Programme (UNDP), Guidance. through projects financed by the GEF and other sourc- es, has supported the establishment, consolidation and The development of this guide is also an important step effective management of protected areas in Latin Amer- in building political understanding of the value of in- ica and the Caribbean for almost two decades. One cru- vesting in protected areas. Analyzing how institutions cial action to ensure effective protected area systems that manage protected areas prepare and execute bud- in the region and thereby enable the provision of key gets is a critical step to strengthen transparency and ecosystem services vital for development, is to provide accountability standards, and therefore, professional- them with stable and predictable financing. ize financial management. Improving protected areas budgets will also help to prioritize operations, improve To assist governments of the region to address the is- spending quality, demonstrate return on investments, sue of financial sustainability of their protected area and secure adequate and sustainable long-term central systems, UNDP produced, in 2007, a Financial Sustain- funding. We trust that this new Guidance will be a useful ability Scorecard as an instrument to assist managers tool to budgeting officials and decision-makers of Na- and decision makers to identify and present financial tional Protected Areas System Agencies across the LAC needs and gaps in a systematic and periodic manner. region. More recently, in 2010, UNDP in collaboration with The Nature Conservancy, produced the Report “Financial Sustainability of Protected Areas in Latin America and the Caribbean: Investment Policy Guidance”. This report Jessica Faieta compares and aggregates official financial data and UN Assistant Secretary-General and qualitative insights about the health of Protected Area UNDP Regional Director for Latin America and the Caribbean financial sustainability for 20 Latin American and Carib- bean (LAC) countries. Following these studies and prac- tical tools, we are pleased to present this new “Guide to improving the budget and funding of protected area systems: Lessons from Chile, Guatemala and Peru”, an effort to continuing to help governments address the —i— Acronyms and Abbreviations AECID Spanish Agency for International Cooperation (Spain) CER Cost-Effectiveness Ratio CPA Central Planning Agency CONAF National Forestry Corporation (Chile) CONAMA National Environment Commission (Chile) CONAP National Protected Areas Council (Guatemala) ECLAC United Nations Economic Commission for Latin America and the Caribbean EII Economic Impact Indicator FPI Financial Performance Indicator GDP Gross Domestic Product GEF Global Environment Facility HPP Hydropower Plant IBA Incremental Budgeting Approach INAB National Forestry Institute (Guatemala) LAC Latin America and the Caribbean MoE Ministry of Environment MoF Ministry of Finance MoEF Ministry of Economy and Finance (Peru) MH Ministry of Hacienda (Chile) MINAM Ministry of the Environment (Peru) NGO Non-Governmental Organization PA Protected Area PAS Protected Area System(s) PBB Priority-Based Budgeting Approach PROFONANPE National Fund for Natural Protected Areas (Peru) RBCI Results-Based Conservation Indicator RBI Results-Based Indicator RBM Results-Based Management Framework (of the GEF) RSCLAC–UNDP Regional Service Centre for Latin America and the Caribbean—UNDP SERNANP National Service of State Natural Protected Areas (Peru) SERNAPESCA National Fisheries Service (Chile) SIGAP Protected Areas System of Guatemala SINANPE National System of State Natural Protected Areas (Peru) SNAP National System of Protected Areas (Chile) SNAPSE National System of Natural Protected Areas (Chile) TNC The Nature Conservancy TSA Targeted Scenario Analysis UNDP United Nations Development Programme — ii —  Table of Contents Table of Contents Foreword.................................................................................................................................... i Acronyms and Abbreviations.................................................................................................. ii PART I: Introduction................................................................................................................. 1 1.1 Summary and key findings.......................................................................................................................................................................................................1 1.2 Purpose of this guide....................................................................................................................................................................................................................4 1.3 The importance of optimizing protected areas system central budgets.................................................................................................4 PART II: Context of the National Budgeting Process.............................................................. 7 Phase 1: Budget formulation........................................................................................................................................................................................................10 Phase 2: Negotiations at the executive level: Ministry of Finance and central planning agencies.............................................14 Phase 3: Approval at the legislative level..............................................................................................................................................................................18 Phase 4: Budget execution and evaluation........................................................................................................................................................................20 PART III: Performance Indicators........................................................................................... 22 3.1 Findings...............................................................................................................................................................................................................................................25 3.1.1 Results-based conservation indicators (RBCI)...........................................................................................................................................25 3.1.2 Financial performance indicators (FPI)..........................................................................................................................................................25 3.1.3 Economic impact indicators (EII).......................................................................................................................................................................25 3.2 Recommendations......................................................................................................................................................................................................................25 Annexes................................................................................................................................... 28 Annex 1. Key functions for the PAS budget working group...................................................................................................................................28 Annex 2. Strategies to introduce priority-based budgeting (PBB).....................................................................................................................29 Annex 3. Template to define cost-reduction strategies.............................................................................................................................................32 Annex 4. The 5-step approach to developing effective communications strategies...........................................................................33 Annex 5. Template for formulating SMART performance indicators for PAS..............................................................................................33 Annex 6. Results-based management definitions.........................................................................................................................................................35 References............................................................................................................................... 36 — iii — — iv — PART I: Introduction 1.1 Summary and key findings cial support from the Gordon and Betty Moore Founda- tion and the Government of Spain. The key objectives of Over the last decade, the United Nations Development the Project were to provide technical support to improve Programme (UNDP) and The Nature Conservancy (TNC) the formulation, negotiation, and approval of budgets of have supported governments across Latin America in national PAS in the three pilot countries: Chile, Guatema- strengthening the financial sustainability of their pro- la, and Peru; and to systematize lessons through a guide tected area systems (PAS). Much of UNDP’s support to to improving the budget and funding to PAS. The project countries has been made possible through finance from filled an important gap related to PA finance. In order to the Global Environmental Facility (GEF). Through the ex- achieve the above-indicated objectives, the Project ex- perience and multi-country analysis the importance of amined four separate stages of the PAS budget cycle: central budgets in PAS financing was identified. Based on 1. Formulation; this, UNDP, in collaboration with TNC, initiated and imple- 2. Negotiation; mented the Protected Areas Budget Negotiation Support Project (BNSP), hereafter the Project, between July 2012 3. Approval; and and April 2014. The Project was implemented with finan- 4. Execution and Evaluation. —1— Guide to Improving the Budget and Funding of Protected Area Systems This guide presents lessons learned on how to increase servation results, cost efficiencies, and a develop- central budget allocations to PAS through a strength- ment return on investment. ened budget negotiation process, based on the experi- When allocating public funds, the MoF mainly con- ences and results generated by the Project. The analysis siders opportunity cost, i.e., how they can best spend of the PAS budgeting cycle in the three target countries their funds; estimates of PAS financial needs alone are revealed weaknesses in each phase, partially as a result not sufficient to result in budget increases. of major functional disconnects between each phase. The most important findings and recommendations of Although PAS have been working on PA econom- the Project include: ic valuation in recent years, the formulation and introduction of economic impact indicators have General been neglected. PAS still do not use indicators that capture and report their contribution to economic PAS budgets are not decision-maker focused, i.e., cur- development; hence budgets cannot demonstrate rent budgets cannot be used by the Ministry of Envi- their value to MoF. ronment (MoE) and the Ministry of Finance (MoF) to Currently, the MoF does not require these indicators make the case for increasing the PAS budget. and does not communicate to PAS which indicators There is a serious lack of adequate data to support would be useful for budget increases. Conversely, the PAS budget cycle, including conservation results PAS do not reach out to understand what the most and related realistic costs, financial needs, and eco- important “decision-maker” (the MoF) needs in order nomic impact and results-based indicators. to increase budget allocations. Protected area (PA) managers are generally neither Some PAS, such as in Peru, have started to shift consulted nor prepared to provide inputs during the from traditional activity budgeting to results-based preparation phase of a PAS budget (although Peru is budgeting. an exception to this finding). International and national initiatives to promote in- The formulation of a PAS budget often fails to meet creasing government funding to PAS mainly focus overall national budget formulation deadlines, early on increasing the recurrent costs component of the in the year (January-April). Therefore, the budget is PAS budget, and neglect capital investments and typically based on the budget of the previous year. increases through the formulation of public invest- ment projects. Phase 1- Budget formulation PA management plans are not used to support bud- PAS annual budgets tend to be based on previous get planning. years’ allocations and use an incremental budget- ing approach, i.e., requesting a percentage increase Phase 2- Budget negotiation (which may result in marginal increases, depending on availability of funds). Investment priorities are Revision and negotiation of the PAS budget at the generally not addressed during formulation. executive level (MoF) is critical, because this is where major cuts or increases to the PAS budget may occur. Under the incremental budgeting approach/bud- In such case, the MoE may decide to pass the cut to get ceiling, PAS agencies are not required to prepare the PAS budget because the PAS usually ranks lower long-term investment plans (5+ years). The lack of compared to the priority of other departments of the long-term investment plans is one of the reasons MoE. Commonly, when the MoE manages protected why the MoF can cut the PAS budget, as there are no areas, the PAS budget competes with other depart- visible consequences. ments of the MoE that may have higher priority. To consider budget increases, the MoF, which ap- The negotiation phase is a unique opportunity to pres- proves all budgets, needs to see how the PAS sup- ent data that is normally not included in a PAS budget. ports local and national economic development and that they are a cost-effective investment; therefore, Budget reviewers at the MoF are open to receiv- PAS budgets must include clear information on con- ing explanations and supplementary information —2—  PART I: Introduction through face-to-face meetings to better understand increases in a sector agency such the MoE, and this PAS needs and the benefits from investment. can negatively affect the PAS budget. The MoF welcomes economic development indica- Therefore, comprehensive communications cam- tors linked to conservation results and supplementa- paigns to support the PAS budget approval process ry data from PA valuations. may decrease the likelihood of budget cuts at the legislative level and can assist legislators requesting PAS budgets may be reviewed by a budget specialist increases. This communications campaign should at the MoF who has limited understanding of con- address both legislators and the public (voters) and servation results, so key data could be translated into be focused on how investments in PAS contribute to economic impacts. For example, eliminating poach- economic and social development. ing of spectacled bears, at a minimal possible cost, may also result in increased tourism-related benefits, such as new jobs, increased revenue, and tax reve- Phase 4 - Budget execution and evaluation nue from the tourism sector. Budget execution is evaluated by comparing the level of spending to what was allocated, to deter- Phase 3 - Approval at the legislative level mine if there are any unused funds that can be real- located either within the MoE or directly by the MoF Once a PAS budget has been cleared at the execu- to another sector. tive level (MoF), it needs approval at the legislative level and is sent to a congressional budget commis- PAS budget evaluation closely follows what has been sion for review. During negotiations, the PAS budget, approved, because budget allocations are not based which is usually part of the Ministry of Environment on results or priorities; rather, the majority of funds (MoE) budget, may be discussed by legislators who are allocated to recurrent costs, such as salaries, ben- are not interested in supporting budget increases in efits, and operations. A budget execution evaluation the MoE budget and who also have limited under- could be more effective when the PAS budgets is standing of conservation results. linked to results. Peru, for example, is in the process of shifting to results-based budgeting. PAS budgets are commonly “hidden” within the bud- get of the MoE (when the PA agencies are under the PAS budgets lack results-based indicators (conserva- MoE), and legislators from the budget commissions tion, cost-effectiveness, and economic impact), and may not have time to look at the details of the PAS there is no mechanism within the MoF or MoE to eval- budget. Legislators can also object to overall budget uate the impact of investment in the PAS when budget —3— Guide to Improving the Budget and Funding of Protected Area Systems execution is evaluated. This creates a vicious circle, as crease in hydropower production, or percentage data is then not produced for the next budget cycle increase in tourism tax revenues to government. to show the impacts of the funding investment. The lack of these performance indicators to support PAS budgets reinforces the notion that PAS are only a cost to Performance indicators the economy, with no benefit. As PAS budgets are not linked to measurable per- More detailed recommendations for how to improve formance indicators, the MoF cannot assess return each part of the budgeting process and how to formu- on investment (ROI). The types of indicators that the late and use results-based indicators are provided in MoF is interested in assessing when considering Parts II and III of this guide, respectively. budget allocations include: Results-based conservation indicators (RBCI). 1.2 Purpose of this guide These are metrics used to measure and com- municate the expected conservation results on This guide serves to: the basis of programmes and activities that are included in a PA management plan or annual op- explain the different steps involved in the formula- erating plan. Examples of such indicators might tion and approval of a PAS budget; include: a 50-percent reduction in the rate of il- legal hunting of spectacled bears, a 25-percent identify weaknesses in the PAS budget planning process; reduction in area with invasive species, a 50-per- cent reduction in illegal logging for firewood, a provide budget planners at the PAS level with a tool 30-percent increase in annual visitation to a spe- for assessing the quality of their PAS budget, and un- cific PA, or a 50-percent increase in area covered derstanding the financial risks of taking no action to with endemic plant species. improve the PAS budget formulation process; Cost-effectiveness indicators (including effi- offer recommendations for improving each of the ciency and transparency). These indicators mea- budget preparation phases and formulating re- sure financial viability by looking at whether the sults-based indicators; PAS produced adequate results for the amount of money spent, for example whether the PAS met assist government officials in developing a budget that ensures returns from investment in PAS; the proposed conservation results using minimal and diversified financial resources. Efficiency indi- provide recommendations for developing a PAS cators measure whether PAS meet their proposed budget that is easier to negotiate and fund at all lev- results with a minimum amount of time, effort and els of government; and technical skills. These indicators can also be used prompt further debate and actions to improve the to assess improvements in transparency, such as quality of PAS budgets and public funding allocations. providing greater access to information within the PAS financial management systems to key stake- holders (e.g. MoF, the legislature, local govern- 1.3 The importance of optimizing ments, communities, the public, and donors). protected areas system Economic impact indicators (EII). These indica- central budgets tors assess the economic impact of conservation interventions in PAS, for example, how sustainable The national budget is the most important financial ecosystem management in PAS results in increased management tool for all central sector agencies, includ- and sustainable output of economic sectors that ing the MoE and the PAS. It is both a financial instrument depend on PA ecosystem services. Examples of that channels the government’s spending priorities and such indicators might include: percentage of new the mechanism to ensure that the necessary financial jobs in the tourism sector, level of increased pro- resources are available to meet the country’s economic ductivity of irrigated agriculture, percentage in- and social development goals. —4—  PART I: Introduction Figure 1. PAS budget composition in selected Latin American countries VENEZUELA BRAZIL URUGUAY COLOMBIA DOM. REP. CHILE MEXICO ARGENTINA GUATEMALA Government COSTA RICA funds specific ECUADOR for PAs PARAGUAY HONDURAS International CUBA cooperation PERU (including trust PANAMA funds) NICARAGUA PA revenues EL SALVADOR BOLIVIA Other 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Bovarnick et al. (2010) Public funding to PAS from the national budget is a core Although central government funding represents the high- component of PAS funding and key to achieving financial est share of total funding to PAS in many countries in the sustainability of national PAS. On average, according to Latin America region, this has by no means guaranteed 2010 data, public funding accounts for about 60 percent budget stability. PAS budgets are easy targets for budget of the available funding for PAS in Latin America. In the cuts. Funding to PAS is also generally inadequate. On aver- same year (2010),1 public funding accounted for more age, existing central funding to PAS covers less than what is than 50 percent of the total budget in Chile and Guate- needed for basic conservation management, representing mala, while Peru was below average with less than 20 per- only about 36 percent of the financial needs for the opti- cent.2 Figure 1 provides an overview of the PAS budget mal funding scenario.4 According to the World Bank (2010), composition and percentage in the Latin America region current PAS’ budgets are not keeping pace with the needs in 2010. Public funding levels can dramatically increase in and international cooperation is unlikely to fill the gap. On a given year, depending on the government’s occasional average, Latin America and the Caribbean governments short-term political will to support PAS. This was the case allocate to protected areas just 1 percept of national envi- in 2013 in Ecuador, which received more than 90 percent ronmental budgets. of its total PAS budget from public funding that year.3 1 Bovarnick et al. (2010). The basic management scenario (basic level) is the min- 4  2 A more recent unpublished study “Evaluation of Costs and imum level of funding required to operate key conservation Income Options to Sustainably Finance SINANPE,” prepared programmes while meeting basic programme requirements bythe Universidad del Pacifico (December, 2014) indicates to sustain functions of ecosystems in protected areas. The that in 2013 SINANPE’s ordinary income (from the central bud- optimal management scenario (optimal level) is the ideal get) reached 46.7% of the total income; and has had an aver- level of funding required to operate all programmes to reach age annual increase of 12.7% between 2010-2015. However, and sustain optimal functions of ecosystems in protected the study notes that despite the annual increases, the financial areas. Optimal describes the ideal state of the programme if deficit continues to escalate due to the decrease in funding all necessary funding, personnel, equipment, and other re- from international cooperation and SINANPE’s growing recur- sources were available to achieve that state. This would ensure rent costs (staff salaries and benefits). achievement of short-, medium-, and long-term goals for the 3 Mid-Term Review of the UNDP-supported GEF-financed proj- protected areas, in accordance with the highest environmen- ect; Financial Sustainability of SNAP. UNDP (2014). tal, social, and economic standards (Flores et al., 2008). —5— Guide to Improving the Budget and Funding of Protected Area Systems Table 1. Public expenditure in selected sectors in the LAC region, as a percentage of GDP COUNTRY % Public Spending % Public Spending % Public Spending % Public Spending on Health (2004) on Education on Military (2005) on Protected Areas (2002-2005) (2008) Argentina 4.30 3.80 1.00 0.005 Bolivia 4.10 6.40 1.60 0 Brazil 4.80 4.40 1.60 0.006 Chile 2.90 3.50 3.80 0.003 Colombia 6.70 4.80 3.70 0.005 Costa Rica 5.10 4.90 NA 0.055 Cuba 5.50 9.80 NA 0.005 Dominican Republic 1.90 1.80 0.50 0.02 Ecuador 2.20 1.00 2.60 0.002 El Salvador 3.50 2.80 0.60 0.002 Guatemala 2.30 NA 0.30 0.013 Honduras 4.00 NA 0.60 0.006 Mexico 3.00 5.40 0.40 0.005 Nicaragua 3.90 3.10 0.70 0.01 Panama NA NA NA 0.006 Paraguay 2.60 4.30 0.70 0.002 Peru 1.90 2.40 1.40 0.001 Uruguay 3.60 2.60 1.30 0.002 Venezuela 2.00 NA 1.20 0.006 Source: Bovarnick et al. (2010) Public expenditure on PAS averages only 0.008 percent portant to recognize, however, that there is no single op- of GDP in the Latin America region.5 Currently, few PAS timal level of investment in PAS as a percentage of GDP, generate their own revenue, for example through PA because PAS financial needs may vary according to their entry fees, and fewer are permitted by law to retain managerial objectives and a range of variables, such as self-generated revenue to increase their budgets. the cost of reducing threats to PAs. Thus, spending in PAS as a percentage of GDP, in both developing and devel- In most countries in Latin America, for example, the im- oped nations, is merely referential. pact of tripling the PAS budget to meet optimal fund- ing levels would still bring it to an average of only about Nevertheless, to date, not much has been done to assess 0.024 percent of GDP. Table 1 shows the current relation- and improve PAS budget allocations from government, ship between public spending on PAS in Latin America with few exceptions. PAS managers have argued for de- and spending in other priority sectors, as a percentage cades that PAS are not a high government priority and of GDP. In Chile, Guatemala, and Peru in 2008, public that other sectors, such as education, health, and public spending on PAS represented only 0.003 percent, 0.013 works, have the government’s attention, making it al- percent and 0.001 percent, respectively, of GDP. It is im- most impossible to negotiate budget increases. The rest of this guide shows how to rectify this problem. 5 Bovarnick et al. (2010). —6— PART II: Context of the National Budgeting Process A country’s national budget is prepared annually by its The content of the national budget indicates priorities MoF6 (or Hacienda, depending on the country). The na- for government spending, for all central agencies such tional budget defines how money is allocated to sectors as the ministries of the executive branch, as well for the such as education, health, security, science and technol- legislative branch and the judiciary and Supreme Court. ogy, agriculture, energy, public works, and the environ- Each year, the MoF prepares and publishes the contents ment, as well as other areas, including pensions and debt of the approved national budget, to enable the public payments. The budget is executed by various ministries to better understand the national budget and the use of and other government agencies. public resources. 6 The term Ministry of Finance is used to describe the government Government agencies use different approaches to pre- agency responsible for reviewing the PAS budget proposal be- pare the budget, including the incremental budget- fore it goes to the legislature. In Chile and Colombia, this is the Ministry of Hacienda, while in Peru it is the Ministry of Economy. ing approach (IBA) and priority-based budgeting —7— Guide to Improving the Budget and Funding of Protected Area Systems Table 2. Institutional context of PAS budgets Country Officially recognized Main agency managing PAS Under the Ministry of Budgeting approach PAS Environment? Chile National System of CONAF (Corporación Nacional Fores­ No (CONAF is a IBA/ceiling defined Natural Protected tal)/Ministerio de Bienes Nacionales* private entity under by the MoF Areas (SNASPE) (National Forestry Corporation/Minis- the Ministry of Agri- try of National Assets) culture) Guatemala Protected Areas CONAP (Consejo Nacional de Áreas No (under the Office IBA/ceiling defined System of Guatemala Protegidas (National Protected Areas of the President) by the MoF (SIGAP) Council) Peru National System SERNANP (Servicio Nacional de Áreas Yes IBA/ceiling defined of State Natural Naturales Protegidas del Estado) by the MoF Protected Areas (National Service of State Natural (SINANPE) Protected Areas) * The Ministry of National Assets is responsible for maintaining and updating the cartographic, legal, and statistical information of fiscal assets, including the state-owned protected areas. (PBB).7 IBA, which is the most common approach used increases or decreases), even in years where the overall for developing PAS budgets, provides a basis for manag- national budget has increased. In such a case, an opti- ing annual income (annual budget allocation from the mized PAS budget will be useful to negotiate an increase. government) and expenses. Budget increases under IBA may be feasible when there is, for example, an overall The PAS budget is often part of the MoE’s budget. How- annual increase in revenue of the national budget (e.g., ever, while this is the case in Peru, the annual PAS bud- 5-10 percent) compared with the previous year. In such a gets in Chile and Guatemala are not linked to the MoE case, the PAS budget may increase accordingly, and bud- budgets. In Chile and Guatemala, protected areas are get increments can be distributed among major areas, managed by autonomous agencies or depend on agen- such as salaries, fuel, maintenance and utilities, and cies other than the MoE. Table 2 shows the institutional equipment and vehicles. However, when central budget context of PAS budgets and their budgeting approach allocations decrease, across-the-board cuts are common in the three pilot countries, Chile, Guatemala and Peru. practice under IBA, even though such cuts are not stra- All three PAS agencies in the pilot countries (Chile, Gua- tegic and may undermine the achievement of the PAS temala, and Peru) use IBA or a ceiling defined by the MoF. goals. Increases or decreases in the national budget de- However, in recent years, governments have begun to termine the “budget ceiling”8 that each agency will use push for prioritization and results-oriented budgeting to prepare its budget. An agency’s budget ceiling may approaches; this is the current case in Peru. also be equal to the budget of the previous year (i.e., no The different stages in the formulation and approval of Priority-based budgeting (PBB), is also known as budgeting 7  the national budget together make up the annual bud- by results. Through this approach, PAS could identify the most get cycle, a dynamic and flexible process through which important strategic priorities among conservation programmes the government programmes, executes, and evaluates and rank the programmes according to how well they align with their priorities. Because resources could subsequently be its financial activities and budget. Typically, the MoF bud- allocated in accordance with the rankings, it is critical that PAS get office is responsible for leading the annual budget management plans clearly define priorities among their conser- cycle, with support of a central planning agency. To this vation activities, programmes, objectives, goals, and outcomes. end, the budget office prepares a range of guidelines and Strategies to introduce PBB to PAS are included in Annex 1. technical norms so that the budget cycle is completed 8 The term “budget ceiling” most commonly applies to national budgets. Nations calculate budget ceilings on an annual basis, in a timely manner. The PA budget cycle comprises four in accordance with revenue generated through taxes, fees, fines, phases: and other sources. With a budget ceiling in mind, the government allots funds for all public projects for the coming fiscal year. Gov- Phase 1: Formulation ernments can raise budget ceilings by raising taxes: http://www. ehow.com/info_8403809_budget-ceiling.html#ixzz2vah9u55d. Phase 2: Negotiation —8—  PART II: Context of the National Budgeting Process Figure 2. PAS budgeting cycle in Chile, Guatemala, and Peru (2014-2015) 2014 Phase 1. Formulation Phase 2. Negotiation Phase 3. Approval Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Phase 4: Phase 4: Phase 4: Execution starts First evaluation Execution ends, Final evaluation Phase 3: Approval Figure 3. Current situation Phase 4: Execution and evaluation The actual planning process, which includes Phases 1-3, takes place during the first year, while Phase 4 (execution and evaluation) takes place the following year (see Fig- ure 2). There are no significant differences in the timing of the four phases among Chile, Guatemala, and Peru. The effectiveness and functional connections between each of these phases is critical for an effective annual budget cycle. Overall findings Formulation Approval A review of the PAS budgeting cycle in the three tar- Negotiation Execution & evaluation get countries during the planning stage of the Proj- ect revealed weaknesses in each phase, which are Figure 4. Ideal situation after intervention partially caused by major functional disconnects be- tween the phases. Therefore, it is critical to improve each of these phases and their connectivity. Figure 3 illustrates the current gaps in the process, while Figure 4 shows an ideal situation after intervention. One of the major bottlenecks affecting the budget- ing process, particularly the formulation phase, is the lack of adequate data to support PAS budgeting (i.e., expected conservation results, realistic costs and financial needs, cost reduction strategies, and results-based indicators). Furthermore, neither PAS agencies nor central budget planning agencies pro- mote cost-efficiency in a systematic manner. Typically, PA managers are neither consulted nor prepared to provide inputs during the preparation Action within phase phase of the PAS budget. PAS receive a budget that Connection betwen phases —9— Guide to Improving the Budget and Funding of Protected Area Systems Table 3. Budget phases and institutions Phase Institution Deadline 1. Formulation PAS/Ministry of Environment or other January-April 2. Negotiation Planning Agencies/ Ministry of Finance May-September 3. Approval National Congress October-December 4. Execution and evaluation PAS/Ministry of Environment or other January-December (the following year) has been prepared by the MoE based on the bud- Phase 1: Budget formulation get of the previous year, with a small increase or decrease depending on the situation of the annual This is the most critical phase of the annual budget cycle. national budget (i.e., incremental budget approach). The formulation phase establishes the connection and In Peru, however, the PA agency SERNANP is in- interaction with the subsequent phases. stitutionalising a coordinated system in which PA managers prepare a draft budget that is first sent to During formulation, each central agency, such as the SERNANP’s central office for processing, then to the MoE, prepares a budget proposal. As part of this process, MoE for review and finally to the MoF. all dependent units, including the PAS, prepare their The PAS budget is not decision-maker focused. Be- own individual budget proposals. The full proposal will then go to the central planning agency and/or the MoF, cause of how PAS budgets are prepared, i.e., without where it is reviewed and adjusted to fit within the limits accurate data on costs, financial needs and gaps, of the national budget. Each agency prepares its budget cost-reduction strategies, or concrete results sup- using the budget ceiling provided by the MoF or central ported by measurable indicators, neither the MoF nor the MoE are able to demonstrate to the legisla- planning agency, based on the forecast for the national ture that there is a case for increasing PAS budgets. budget. Additionally, the MoF and the legislature, in general, Ideally, PAS agencies’ objectives should be linked to the are less interested in increasing investments in activ- strategic objectives of the MoE, and the strategic objec- ities or sectors that are not able to show clear returns tives of the MoE should in turn be linked to the macro on investments. objectives of the National Economic Development Plan. When planning an intervention to improve the PAS This is necessary to establish a link between PAS/MoE budgeting process, timing is critical. The official budgeting and central planning priorities. deadlines of the national budgeting process set the framework for intervention. These deadlines are list- Findings ed in Table 3 (there are small variations from country to country). The formulation of the PAS budget often The review of the formulation phase in the three pilot fails to meet the formulation deadline early in the countries and subsequent discussions with authorities year. Therefore, the budget is typically based on the in MoF budgeting offices indicated that PAS budgets budget of the previous year. However, this may vary face a range of challenges9 during this phase. Structural from country to country and year to year; for exam- challenges, such as budget ceilings and different central ple in Peru, the process is improving. government priorities, result in lower priority ranking. In addition, they face a number of qualitative challenges, Based on the programming deadlines indicated in including: Table 3, improving the 2017 PAS budget would require intervention beginning the year before, in January 2016; In order to consider a budget increase, the MoF, the impact of this intervention could then be assessed which approves budgets, needs to see that PAS in early 2018. Thus, improving the PAS budget is a multi- year process. 9 Challenges identified by senior representatives of the Ministry of Hacienda of Chile, MoF of Guatemala, and the MoF of Peru, Specific lessons and recommendations related to each during the First Regional Meeting of the Project in April 2013 Phase are provided in the next sections. in Panama City, Panama. — 10 —  PART II: Context of the National Budgeting Process budgets include defined conservation results and demonstrate their cost-effectiveness. When allocating budgets, the MoF mainly considers the opportunity cost of investing in PAs; estimates of PAS financial needs are not sufficient to support bud- get increases. It is difficult for PA agencies to demon- strate returns on investments (ROI),10 because the MoF usually measures ROI in financial and econom- ic terms. Conventional financial accounts generally do not reflect environmental and socio-economic values, such as communities in and around PAs em- powered to patrol and conserve the PA or to support nature-based tourism activities. Nevertheless, the MoF is interested in additional indicators that can show social impact. PAS do not use indicators to capture and report their contributions to economic development, making it difficult for PAS budgets to demonstrate their rele- vance. For example, high-level officials from the Min- istry of Hacienda (MH) of Chile have noted that, un- der current circumstances, the PA budget sent to the ment plan anchors the annual budgets, because it Ministry of Hacienda is “dead on arrival.”11 Although links short-term plans with long-term objectives (5+ PAS have been working on PA economic valuation years). This is important, because when long-term in recent years, the formulation and introduction of investment plans are available, the MoF can better economic impact indicators have been neglected. assess the possible negative long-term impacts of Currently, the MoF does not require indicators/ reducing the PAS annual budget. The lack of long- results-oriented budgets and does not communi- term investment plans is one of the reasons why the cate its needs to the PAS. Similarly, the PAS do not door is permanently open for the MoF to cut the PAS reach out to understand the needs of the key deci- budget without having to worry about the actual sion-maker (the MoF). impact of the cut. In the pilot countries, representatives of MoFs noted PAS operational plans (PA management plans) are that they are not inclined to increase recurrent costs not necessarily elaborated in coordination with the that are not linked to specific results; however, the PAS budgeting office or the budget office of the MoF may be more open to discuss increases for in- MoE,12 and thus the cost of the PAS management vestment projects that have clearer results and mea- plans is unknown to the budgeting authorities, surable returns. both within and outside the MoE. PA technical staff is commonly isolated from the budget preparation Under the incremental budgeting approach, PAS process; this may happen even within the PAS agen- agencies are not required to prepare long-term cy. This has historically been the case in many PAS in investment plans (5+ years), and PAS long-term in- Latin America. Box 1 provides an example of an im- vestment needs are poorly shown in the long-term provement in Peru, achieved with the Project’s sup- investment plan of the MoE. The long-term invest- port, involving the development of a mechanism to systematize future budget increases. 10 ROI refers to a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit 12 The lack of coordination between PAS operational plans and (return) of an investment is divided by the cost of the invest- budgeting was observed in Ecuador during the Mid-Term ment; the result is expressed as a percentage or a ratio. Review of the UNDP-supported GEF-financed project: Sus- 11 Mentioned during the First Regional Meeting of the PA Budget tainable Finance of the SNAP, Ecuador. January 2014. This defi- Negotiation Support Project, Panama City, April 2013. ciency is also evident in SERNANP in Peru and CONAF in Chile. — 11 — Guide to Improving the Budget and Funding of Protected Area Systems Box 1. Improving budget formulation in SERNANP, Peru (2014) SERNANP’s annual budget was traditionally based on the budget of the previous year, with minor changes de- pending on the actual increase or decrease of the national budget. The Project was successful in improving the structure of SERNANP’s budget programme (Programa Presupuestal 0057, under the new results-based budget approach). Before the Project, the budgets for SERNANP functional areas were prepared by SERNANP’s budget office, without consulting the different technical directorates. Therefore, the budget lacked technical input and realistic needs. It was also submitted to the MoE with a significant delay, i.e., after the MoE’s budget was delivered to the Ministry of Economy and Finance. With project support, SERNANP produced a more realistic and timely budget, with an improved functional struc- ture. This new structure was backed by the Budget Office and the Technical Directorates of SERNANP. The new budget structure for 2015 was supported by technical financial information and presented in the beginning of 2014, and was approved well in advance of the 2015 budget cycle. SERNANP’s budget structure secured the inclusion of several new programmes and activities that will be financed starting in 2015. The exact additional funding was discussed during the 2015 budget negotiation phase and after. The new approved programmes to be funded include: participatory patrolling; evaluation of degraded areas and restoration processes; granting and renewal of permits to use renewable resources within natural protected areas (ANP); granting and renewal of permits to use landscape resources within ANP; developing ecosystem representation to improve the SINANPE; legal support for the defense of ANP; and development of tools for planning and development in ANP. Peru is a good example of a PAS shifting to results-based budgeting that links budget and PA management plans/results. Although structural challenges (budget ceilings and partment and the technical and field units on the different central government priorities) may be be- purpose and scope of work needed to improve yond the control of PAS, the qualitative issues listed the PAS budget (including connecting conserva- above can be addressed. According to the MoF, by tion planners with financial planners within the PAS addressing the qualitative issues, PAS stand a better agency), as well as the need to collaborate with the chance of increasing their budgets. Central Planning Agency and MoF. b) Establish a direct communication link with the MoF These findings constitute major weaknesses in the for- to understand what they want to see in the budget. mulation phase of the PAS budgeting process. It is important to identify the officer(s), or sectorialis- tas,13 in the MoF who are responsible for reviewing Recommendations and approving sector budgets for the MoE, includ- ing the PAS budget. The following process and budgeting actions can help improve the formulation of PAS budgets: 13  Sectorialistas are the sectoral analysts of the Budget Depart- a) Prior to budget formulation, ensure that there is ment within the MoF who are responsible for reviewing cen- agreement between the PAS agency’s budget de- tral sector agency budgets in Chile, Guatemala, and Peru. — 12 —  PART II: Context of the National Budgeting Process c) Establish an ad hoc working group to engage the leadership of the MoF. (See Annex 1 for recommend- ed functions for this working group.) d) Develop criteria and select pilot PAs to test the opti- mized budgets, which will have better structure, ad- equate funding, priority-based resource allocation, cost-reduction strategies, and performance indica- tors. (See Annex 2 for strategies to introduce prior- ity-based budgeting.) Testing optimized budgets at the site level can be a useful initial step before pro- gressively moving to encompass the entire PAS. e) Assess, in a realistic manner,14 the costs, financial needs and gaps of each of the PAs within the PAS; or in the targeted pilot PAs. This is critical for PAS fi- nancial managers to understand and document the need for additional money if necessary, and indicate how PA managers are planning to use the requested additional funding. However, it is important to note that, according to the senior officials of the MoFs in the pilot countries, although defining realistic fi- nancial needs and gaps is an important precursor, it does not provide sufficient grounds for increasing (linking conservation results with sectoral econom- funding to PAS. It is vital for the MoF that the PAS ic development and links to national development measure and demonstrate cost-effectiveness. plans). Section III provides details on indicators. f ) Assess and define opportunities for cost-reduction h) Sponsor workshops to increase the knowledge of strategies. (Annex 3 provides a generic list of com- PAS agencies, central planning agencies, and sec- monly used cost-reduction strategies.) The PAS bud- toral budget analysts about indicators for conser- get must show how cost-reduction strategies are vation results, cost-effectiveness, and sector-based being applied, and what their estimated financial economic impacts of a well-managed PAS. This impact will be. could also be useful during Phase 2 (negotiation). g) Assess existing indicators included in PA manage- i) Using economic impact indicators, link the PAS man- ment plans and indicators used in the budget office agement plans and budget with sectoral develop- of the MoE (or the agency responsible for the PAS) ment strategies (e.g., PAS with the national tourism to verify links between a) conservation results and development strategy and the budget of the Min- budgets, and b) conservation results and econom- istry of Tourism) and inform sector decision-makers. ic impact, to determine where improvements are PAS in collaboration with sectoral agencies could needed. If necessary, draft and propose new addi- carry out studies to generate and present data relat- tional impact indicators. Define indicators in the ed to the management of ecosystems in a manner following categories: conservation results, financial that is more relevant to decision-makers, for exam- results (cost-effectiveness15), and economic impact ple time-bound information that weighs up the pros and cons of continuing with business as usual (BAU), 14 Realistic cost and financial needs and gaps could be defined where limited investment in the PAS and ecosystems by applying results-/activity-based cost accounting. management may result in degradation of ecosys- 15 PAS cost-effectiveness refers to PAS being economical in the tem services and productivity decline, or following results produced for the money spent; i.e., PAS using the mini- a more sustainable path with adequate investments mal financial resources needed to achieve the results deemed necessary to ensure long-term conservation and sustainable function of PAS ecosystems. PAS efficiency is also part of the ment of the necessary conservation results and ecosystem PAS financial management equation; it implies the achieve- functions with the minimum waste of time, effort or skills. — 13 — Guide to Improving the Budget and Funding of Protected Area Systems in sustainable ecosystem management (SEM). The executive branch during Phase 2. The negotiation phase PAS could present data showing the implications includes analysis, discussion, and approval at the execu- of these two contrasting management strategies tive level, generally by the MoF. In Guatemala, negotiation on the basis of relevant socio-economic indicators also includes the central planning agency (CPA). (both quantitative and qualitative) for a specific pro- ductive sector. Such information is indispensable for Prior to negotiations with the MoF, the proposed PAS developing economic impact indicators. Details on budget may be revised by the CPA. The PAS budget should economic impact indicators are included in Part III. be prepared to respond to any questions or concerns raised by the CPA or MoF. CPA representatives may be j) In order to link annual budgets with long-term in- concerned about, for example, why the PAS budget vestment plans, PA managers should plan and cost- proposal goes beyond the pre-established budget ceiling, out PA management plans using a five-year horizon, while MoF concerns may include cost-effectiveness, indicating how resources will be allocated over the efficiency, and how the PAS budget demonstrates five-year period. “spending quality,” i.e., what the government gets out of increasing investment in PAS. Phase 2: Negotiations at the executive level: Ministry of Finance Findings and central planning agencies A review of experience in Chile, Guatemala, and Peru Implementing the above recommended actions in Phase highlighted critical lessons that should be considered 1 could pave the way for smoother negotiations with the during Phase 2: Box 2. Recurrent and investment costs trends in Guatemala’s PAS On average, between 2004 and 2013, 85.6 percent of Guatemala’s PAS budget was allocated to recurrent costs, with a staggering 99.6 percent in 2013, as shown in the graphic below. The need for a more balanced allocation of resources between recurrent and investment costs is critical for improving PAS spending. PAS spending distribution in Guatemala (2004-2013) 100.0% 90.0% 80.0% 70.0% 60.0% 99.6% 99.4% 94.8% 50.0% 88.8% 85.5% 83.5% 88.3% 81.3% 71.5% 40.0% 63.7% 30.0% 36.3% 20.0% 28.5% 18.7% 16.5% 11.7% 14.5% 11.2% 10.0% 5.2% 0.6% 0.4% 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Recurrent spending Investment Source: Project study on PAS budget spending bottlenecks in Guatemala (2014), based on SICOIN data. — 14 —  PART II: Context of the National Budgeting Process Box 3. Budget negotiation in Peru In Peru, the Project aimed to strengthen the investment component of SERNANP’s budget by developing new categories of investment projects that could be approved by the Ministry of Economy and Finance (MoEF), as well as additional activities designed to improve the effectiveness of SERNANP’s recurrent expenses. SERNANP’s Budget Programme 0057 includes two main components: recurrent expenses and capital investments. A pilot investment project was formulated (including results-based indicators) and is currently being considered for funding. Prior to this, new categories for investment projects were negotiated and approved by MoEF, allowing new investment projects to be developed and additional funding allocated to SERNANP’s budget 0057, under the investment component. In order to institute this change, the MoEF will issue a simple “budget actualization.” Budget actualizations are permitted throughout the fiscal year. The recently added categories include: Category Type of intervention Investment purpose Ecosystem services Restoration Water regulation services Soil erosion control services Biodiversity services Restoration Biodiversity protection Installation Habitats Improvement Sustainable management Expansion Conservation of genetic resources Source: Prepared by the authors, based on the team’s quarterly reports. Revision and negotiation of the PAS budget at the vestments, and in most cases PA recurrent costs are executive level (MoF) is critical, because that is where disproportionally larger compared to investments. major cuts or increases to the budget may occur. In The PAS of Guatemala is a good example of this un- such case, the MoE may decide to pass the cut to the balanced situation (see Box 2). It is recognized, how- PAS budget because the PAS usually ranks lower com- ever, that inadequate allocations to recurrent costs pared to the priority of other departments of the MoE. could result in, for example, avoidable acceleration Commonly, when the MoE manages protected areas, in depreciation of PA infrastructure and expensive in- the PAS budget competes with other departments of frastructure rehabilitation. Therefore, a budget with the MoE that may have higher priority; for example, balanced recurrent cost and investment allocations urban pollution control, clean energy development, is more likely to be successful in negotiation. or other climate change-related initiatives that are typically under the MoE’ scope of work. The MoF favours increases in the investments com- ponent of PAS budgets. During negotiations in As noted in the discussion on Phase 1, the PAS bud- Peru, the Ministry of Economy and Finance (MoEF) get includes two major areas where the budget favoured the development of an investment proj- could be increased: recurrent spending and invest- ect as a mechanism to increase the PA budget, ments. Although the MoF will not favour increases not an increase of the already high recurrent costs to recurrent spending (because it is perceived as component (see Box 3). In Chile, the Ministry of Ha- spending with little or no return), it may be more in- cienda also supported the development of a com- clined to increase the investment part of the budget. prehensive web-based administration and financial There are several reasons for this. For example, it is management system (E-Parques) that will help to easier for the MoF to estimate returns on capital in- connect PAS management and finance (see Box 4). — 15 — Guide to Improving the Budget and Funding of Protected Area Systems Box 4. Chile’s E-Parques management system In Chile, as part of the PAS budget improvement process, the Ministry of Hacienda (Treasury) agreed to support a new investment project: E-Parques. E-Parques is a virtual PAS management platform that could solve some critical issues affecting PAs in Chile, including the lack of a central PAS agency or an official PAS, and the lack of coordination among several agencies managing PAS and using different management standards or sub-standards. E-Parques will establish advanced standards, including results-based indicators at different levels, to improve multi-agency PA management (e.g., CONAF, MoE, and SERNAPESCA). At the same time, it will facilitate flow and monitoring of funds, and support a modern financial management information system, including impact monitoring. To this end, the Ministry of Hacienda agreed to create the new budget line to support E-Parques, within the budget of the MoE. Because this new budget line (E-Parques) is already created and seed money has been allocated, nego- tiations in the next budget cycles may be faster (Project Implementations Reports, 2013). E-Parques is considered under the investment com- Once the budget has been approved by the MoF ponent of the budget of the MoE of Chile. and sent to the legislature, the chances of budget cuts are reduced. Nevertheless, past experience One of the reasons why PAS lack funding is that cen- shows that PAS agencies working with national or tral funding agencies consider PA management to international conservation NGOs (sometimes under be ineffective, with limited achievements. During ad hoc agreements) often bypass the MoF and may negotiations, the MoF is reluctant to increase PAS lobby for budget increases directly to the legislature. funding because they cannot see results and eco- While this opportunistic approach may succeed in nomic benefits. For example, eliminating the poach- the short-term, when it is supported by PA-friendly ing of spectacled bears,16 at the minimal possible law makers, budget negotiations are more produc- cost, may also result in increased tourism-related tive and sustainable if they follow the established benefits, including new jobs, increased revenue, and channels, i.e., MoF first and then the legislature. A more tax revenue from the tourism sector. Because good example of this is the experience of CONAP of this perception, however, PAS budgets are consid- in Guatemala during the 2013 budget negotiation ered a low priority compared to other sectors that phase (see Box 5). provide such information. During negotiation, the PAS budget may be re- viewed by a budget specialist who has limited un- derstanding of the new data provided in the PAS Box 5. PAS budget lobbying budget, for example conservation results. Budget in Guatemala reviewers at the MoF and central planning agencies are open to receiving explanations and supplemen- In 2013, during the negotiation of CONAP’s 2014 tary information, such as valuation studies that show budget, CONAP started discussions with the MoF ROI linked to indicators, through face-to-face meet- for an increase from USD 11.4 million (2012 level) ings. The negotiation phase is a unique opportunity to USD 17.1 million, over a three-year period. Simul- to present data that is not normally included in the taneously, environmental NGOs, reportedly in co- PAS budget. ordination with CONAP, prepared a larger increase request (USD 25.3 million) and directly lobbied in 16 The spectacled bear (Tremarctos ornatus), also known as the Congress. These budget increase requests were not Andean bear or Andean short-faced bear and locally as ju- supported by technical evidence of what would be kumari (Aymara), ukumari (Quechua), or ukuku, is the last re- the return on investment, nor with results-based maining short-faced bear (subfamily Tremarctinae). Spectacled bears are the only surviving species of bear native to South indicators, and the approach did not achieve its ob- America, and the only surviving member of the subfamily jective (Second Project Progress Report, July, 2013). Tremarctinae. — 16 —  PART II: Context of the National Budgeting Process Recommendations sector. Through the PA-TSA, the MoF, central plan- ning agencies, the legislature, and private enterprises The following recommendations can help to improve could see actual evidence of the risks and opportu- the negotiation process during Phase II: nities of opting for continuing with business as usual (BAU) or increasing funding to protect ecosystems a) Negotiations with the MoF could be much more in PAS. This data can help them to make informed productive if the PAS budget that is submitted to the policy and management decisions that may result MoF meets the cost-effectiveness criteria that have in more effective and sustainable PAS management. been agreed with the MoF during Phase 1 (mainly Depending on the scope and objective of the study, priority-based budgeting and results-based indica- other methods to value ecosystem services may be tors). The MoF is the key “decision-maker” and the PAS used, including cost-benefit analysis (CBA). However, budget and information that is presented with the TSA was designed to capture ecosystem services val- budget (expected results of investments and related ues beyond the scope of CBA.18 financial needs) must meet the decision-maker’s ex- pectations. Cost-effectiveness criteria also could help d) The cost of assessing the economic impact of PAS the PAS to rank higher within the MoE’s priorities. could be an integrated annual investment pro- gramme with the PAS management plan and could b) PAS budgets should emphasize increased funding in address one or a group of PAs using a sector approach. the investment category and seek to establish a bet- This approach is likely to be favoured by the MoE ter balance between recurrent and investment costs. and MoF. It recognized that assessments such as TSA This could be achieved by improving (or expanding) could be a one-off study and do not replace monitor- the scope for investment projects that can be ap- ing through adequate results-based indicators. proved by the MoF, and the cost of new investment projects could be incorporated into the PAS invest- e) During Phase 2, it is critical to develop common ground ment budget component. This strategy produced among key stakeholders on the structure19 and scope good results in Peru (see Box 3). of results-based indicators, and the potential economic impact of well-managed PAS. This could be achieved c) A PA-TSA17 study can help address the lack of evi- by designing and implementing at least two ad hoc dence-based information that demonstrates how workshops, facilitated by an expert. These workshops well-managed ecosystems in PAS could sustain or could be tailored for the national or regional level and improve productivity at the sector level. The PA-TSA sponsored by the MoF or an international coopera- could accurately capture the value of ecosystem tion agency interested in PA sustainable finance. services in the PAS by comparing the implications of two contrasting management approaches on the f ) Successful negotiations with the MoF require that basis of relevant socio-economic indicators (both all public and private institutions seeking to improve quantitative and qualitative) for a specific productive central budget allocations for the PAS collaborate closely to avoid duplication of efforts and to address, in a systematic manner, the structural and qualita- 17 Targeted Scenario Analysis (TSA) was developed by UNDP in tive aspects that undermine the PAS budget. PAS 2013. It is an analytical approach to valuing ecosystems that budgets should be realistic and, when requesting is designed to help make the business case for sustainable policy and investment choices. TSA can generate and present increments, the reasons for the increments must be data related to the management of ecosystems in a way that well-founded and phased. is more relevant to the choices facing both public and private decision-makers. The TSA approach is decision-maker and sec- tor-focused, aimed at a target decision-maker from a specific 18 Alpizar and Bovarnick (2013). sector who has the capacity to lead policy reform and invest- 19  The structure of results-based indicators should follow the ment decisions. The product of a TSA is a balanced time-bound “SMART” indicator model when formulating conservation, presentation of evidence, for the decision-maker, that weighs cost-effectiveness, and economic impact indicators. Ideally, each up the pros and cons of continuing with business as usual indicator should be: (BAU) or following a sustainable development path in which Specific – target a specific area for improvement; ecosystems are more effectively managed. This alternate Measurable – quantify or at least suggest an indicator of progress; path is termed sustainable ecosystem management (SEM). Assignable – specify who will do it; The TSA methodology is available at: http://www.undp.org/ Realistic – state what results can realistically be achieved, given content/undp/en/home/librarypage/environment-energy/ available resources; and ecosystems_and_biodiversity/Targeted-Scenario-Approach-2013/. Time-related – specify when the result(s) can be achieved. — 17 — Guide to Improving the Budget and Funding of Protected Area Systems Figure 5. Different stages of the budget approval process by legislative level (example from Costa Rica, 2014) Ministry of Finance sends The NLA’s Commission Sub-Commission of Budgeting the budget project of Fiscal Affairs appoints the reports to the Commission of to the National Legislative Sub-Commission of Budgeting Fiscal Affairs about the viability Assembly - NLA to review the proposal of the budget proposal (September) (October) (end of October) Budget approval Budget Law The NLA debates by the Commission is sent to the and approves of Fiscal Affairs Assembly’s Plenary the budget (November) (mid-November) (late November/early December) Phase 3: Approval at The annual budget law proposal sent by the MoF to the legislature includes both domestic revenue and the legislative level external borrowing, when domestic revenue is not sufficient to meet all development needs. Therefore, Once negotiations have been completed at the execu- budget allocations are based on what is available tive level, the next hurdle is to get the PAS budget passed from domestic revenue and external borrowing. at the legislative level. The approval phase includes the When budget shortages are evident, the legislature discussion and approval by Congress or the Legislative may reduce the proposed external borrowing, and Assembly. In Chile, Guatemala, and Peru, the National this will have a negative impact across the board (all Legislative Assembly approves the “budget law,” which sector budgets could be reduced, particularly the contains the national annual budget. Figure 5 illustrates MoE, which is often the most vulnerable). the different stages of the approval process in Costa Rica; the process is similar in Chile, Ecuador, Guatemala, Peru, Having a strategic communications plan to support and many other LAC countries. PAS budget negotiations at the legislative level may decrease the likelihood of budget cuts, especially af- Findings ter the budget has been approved by the MoF. Even