J.1 Section C SOO.pdf

Request for Proposal 72052322R00001 Southern Mexico – Generating Employment and Sustainability

Attachment 1—Section C–Statement of Objectives

ATTACHMENT J.1 SECTION C – STATEMENT OF OBJECTIVES

C.1 PURPOSE OF THE STATEMENT OF OBJECTIVES (SOO)

This Statement of Objectives (SOO) provides the objectives of the contract and is included in this Southern Mexico - Generating Employment and Sustainability (SURGES) Request for Proposal in lieu of a Statement of Work (SOW). Contractors must propose a realistic and cost- effective technical approach to maximize the results described herein. This SOO will not become part of the final contract but will be replaced by the final Performance Work Statement (PWS) submitted by the successful Offeror.

C.2 SCOPE

This Activity will work with various stakeholders (such as smallholder farmers, women and youth led enterprises, private sector, select state and federal Government of Mexico (GOM) institutions, and intermediaries) in three to five states in the south of Mexico, using an inclusive market systems approach. The contractor must work in Chiapas and Oaxaca and will be able to propose additional states from the following list: Campeche, Quintana Roo, Yucatan, Tabasco, and Veracruz. The Contractor will propose additional states using an analytic framework that will consider the highest potential to achieve the activity’s goals including increased employment, sales, investment and positive environmental impact. While proposed states, market systems and a framework for analysis must be included in the PWS, final selection will be negotiated with USAID post-award.

USAID expects the majority of the work will take place at the state level.

C.3 BACKGROUND

C.3.a GENERAL BACKGROUND AND COUNTRY CONTEXT

Challenge 1: Poverty and migration dynamics. Mexico faces high poverty and extreme income inequality, especially in its southern states.0F

1 Poverty worsened from 2018 to 2020 and was further exacerbated as COVID restrictions on travel and commerce took an economic toll. By the end of 2020, 44 percent of Mexico’s population was living in poverty.1F

2 Poverty in southern Mexico is even higher. Of the eleven states with the highest poverty in Mexico in 2020, seven are in the south (see Figure 1).

Poverty is one driver (among others) for out-migration from southern Mexico. From 2000–2010, emigration ranged from 17.6 percent of the population in Oaxaca to 5.1 percent in Tabasco. As a result of this focused poverty, and its role as a driver of out-migration to the United States, both the governments of Mexico and the United States have identified economic development of Mexico’s southern states as a mutual priority and target of US foreign assistance.

Challenge 2: Low investment and uneven business enabling environment. Growth and private investment lags across the region. A high perception of risk from financial institutions precludes

1 For the purposes of this activity, southern Mexico includes Campeche, Chiapas, Oaxaca, Quintana Roo, Yucatan, Tabasco, and Veracruz.

2 Porcentaje, número de personas y carencias promedio por indicador de pobreza, 2018 – 2020, CONEVAL.

Attachment 1—Section C–Statement of Objectives many in southern Mexico from accessing even small loans to start or expand small businesses, especially women and young entrepreneurs. Without sufficient capital to invest in new technologies and quality inputs, agricultural and non-agricultural productivity has stagnated, and entrepreneurship opportunities remain limited. Mexico’s business environment is unattractive for many businesses. Southern Mexico has poor connectivity between its territories and the north of Mexico, due to a rugged topography that hinders the construction of adequate roads and digital infrastructure. Further, southern Mexico has the highest priced and least reliable energy. Despite growing availability of finance for economic investments nationwide, southern Mexico lacks bankable projects for investment. For these reasons, and others, much of southern Mexico has been excluded from the incremental growth experienced in Mexico’s northern and central states.

Challenge 3: Natural assets are disappearing, and climate change is looming. Southern Mexico is rich in natural resources. However, the accelerating rates of deforestation have a deleterious impact on its trajectory, and alarms all from indigenous communities to commodity exporters, to the international community.2F

3 Further, the impact of climate change has become increasingly evident. A joint report by the Food and Agriculture Organization and the GOM showed that parts of the Yucatan Peninsula, Veracruz, and Oaxaca are at risk of complete loss of agricultural production by 2099 due to climate change.3F

Opportunity 1: Linking southern Mexico with Mexico’s economy. Mexico has the world’s 15th largest economy with a per capita income of nearly $10,000, and its domestic market offers tremendous potential for generating sales and investment. Mexican consumers’ tastes are growing in sophistication and conscientiousness, presenting opportunities to grow value chains domestically that are marketed by their climate and environmental benefits. Further, the GOM has stated that addressing poverty and inequality is among its highest priorities. To this effect, GOM is promoting significant infrastructure upgrades, such as the Trans-Isthmus Corridor, port upgrades, and increased internet connectivity, as well as subsidizing new tree crops for small holders.

Opportunity 2: Greater GOM recognition of climate impacts and the need for adaptation.

Climate smart practices, including efficient water usage, use of adequate crop varieties, soil conservation and reducing deforestation, have been recognized by the GOM as key to economic sustainability. The 2020-2024 GOM Agricultural and Rural Development Sectoral Program identifies sustainable production practices as a key strategy for the development of the agricultural sector. Under this program, Mexico commits to increasing the number of farmers implementing sustainable practices from 46 percent in 2017 to 75 percent in 2024. Such efforts are expected to contribute to a climate resilient agricultural sector.

Opportunity 3: Willing private partners. International companies are concerned about the long-term viability of their supply chains. Many have expressed interest in co-investing with USAID to increase the sustainability of their value chains, as well as their own competitiveness.

C.3.b RELATIONSHIP TO OTHER ACTIVITIES

3 According to the Forests Global Watch (2020), Mexico has the fifth highest deforestation rate in Latin America and the 10th highest in the world driven mostly by expansion for agriculture and ranching. In 2019, Mexico experienced the highest deforestation rate of the past 20 years, with Campeche leading the list of states with highest forest loss, followed by Chiapas, Quintana Roo, and Yucatan.

4 FAO-SAGARPA, (2014) Mexico: The agricultural sector before the challenge of climate change.

https://www.gob.mx/cms/uploads/attachment/file/616555/PROGRAMA_SECTORIAL_2020_2024baja.pdf

Attachment 1—Section C–Statement of Objectives

This Activity directly supports USAID/Mexico’s newly approved Country Development Cooperation Strategy. At the highest-level, the activity contributes to the CDCS goal of U.S.- Mexico Strategic Partnership Advanced through Mutual Security and Prosperity in several ways.

First, the activity’s purpose is aligned with the CDCS Intermediate Result (IR) 2.1 of “Developed, sustainable and integrated supply chains.” In addition, Activity outcomes will contribute to all three CDCS Sub-IRs under IR 2.1 - 2.1.1 Increased Access to Finance for Sustainable Enterprises,

2.1.2 Increased Supplier Compliance with Sustainable Practices and 2.1.3 Strengthened Connections Among Ethical Market Actors.

The Activity is also expected to contribute to both USAID’s Climate Change Strategy helping mobilize funding for equitable climate solutions in alignment with Mexico’s climate ambition goals.

This Activity requires the Contractor to undertake close collaboration with state governments, other donors, private sector, local communities, and other counterparts. The Contractor will seek opportunities to collaborate with other donors working in the same geographic area to create synergies and complementarity.

Similarly, the Contractor will coordinate with other relevant USG activities with which this Activity will need to work in tandem.

USAID Activities

This Activity will build upon, and complement, USAID/Mexico’s various ongoing sustainable landscapes activities. Specifically, it will complement efforts to promote sustainable value chains by partners such as the Rainforest Alliance, the Consejo Civil Mexicano para la Silvicultura Sostenible (CCMSS), ProNatura, Conservation International, and The Nature Conservancy, which have provided and developed extensive capacity building courses to communities and community owned enterprises to be able to access additional markets while decreasing land use change.

The Activity, through its grants under contract component, will also build upon ongoing efforts by other partners and stakeholders in the states and commodities identified to promote increased diversification, increase sales and investment, and strengthen the enabling environment needed to achieve the Activity’s objectives.

Other USG and Donor Coordination

The Activity will contribute to and collaborate with U.S. Government interagency efforts to ensure alignment with commitments between the U.S. Government and the GOM to promote sustainable economic growth in southern states. The Activity will also seek opportunities to coordinate and collaborate with other donor funded programs in southern Mexico seeking to promote sustainable market systems, conservation of protected areas, and work in alignment with Mexico’s ambitious climate goals.

C.4 DEVELOPMENT HYPOTHESIS

https://www.usaid.gov/mexico/cdcs https://www.usaid.gov/mexico/cdcs

Attachment 1—Section C–Statement of Objectives

IF producer households, business owners, and other value chain actors are able to meet market standards in terms of product quality and quantity through inclusive, sustainable and climate smart practices (supply) WHILE public and private actors (processors, exporters, retailers, etc.) are willing to increase investment, incorporate new suppliers, and increasingly value and promote environmentally sustainable investments (demand), and WHILE barriers are reduced to mobilize investment in selected value chains and diversify income (enabling environment) within market systems, THEN employment, sales, and investments can sustainably increase while preserving the environment in southern Mexico.

C.5 ACTIVITY GOAL AND OBJECTIVES

On the supply side, SURGES will elevate producers and enterprises in selected value chains to reach higher levels of quality and quantity to meet market demands while diversifying their income stream. On the demand side, SURGES will establish no fewer than 30 public-private partnerships in selected value chains and/or market systems. For the purposes of this solicitation, a public-private partnership is defined as an arrangement between two or more public4F

5 and private sectors5F of a long-term nature that involves the mobilization of public or private capital towards the financing of projects or services. These public-private partnerships will be the anchors for linking producers and entrepreneurs to more stable markets, creating employment, and generating investments that lead to long-term economic growth. The Contractor must work in Chiapas and Oaxaca and will be able to propose additional states from the following list: Campeche, Quintana Roo, Yucatan, Tabasco, and Veracruz. The targeted value chains and/or market systems will be proposed by the Contractor. The criteria for selection will include potential to generate positive impacts on employment and income generation (livelihoods); potential to mobilize sustainable increased public and private investment; ability to increase productivity and value; and climate and environmental benefits (e.g., reducing deforestation and greenhouse gas emissions from land use change).

In addition, SURGES will work along the value chain and market system to unleash capital that will bring greater levels of productivity. This includes partnering with financing institutions to deploy innovative financial products and services; partnering with local governments and private companies to mobilize investment in infrastructure that increase the competitiveness of the selected value chains (i.e., roads, aggregation centers, digital connectivity, etc.); promoting investment de-risking mechanisms and strategies to unleash available capital; and linking a pipeline of bankable investment opportunities to existing sources of capital. These efforts will be supported by improving attitudes and beliefs towards climate smart products, practices, and services, targeted technical assistance to support private partners.

Lastly, SURGES will empower market system actors6F

7, which include government and non-government stakeholders, to improve the business enabling environment. SURGES will facilitate this multi-stakeholder policy dialogue, planning and coordination and target those constraints that will have the greatest impact on selected value chains and market systems, with special emphasis

5 Public sector refers to Agencies of the Government of Mexico at the Federal and State level, International Financial Institutions, International Public Organizations, and Foreign Governments.

6 Private sector refers to local or multinational companies and their affiliated foundations, commercial banks, business associations cooperatives, small and medium enterprises, investors, or entrepreneurs.

7 This is a catch-all term for producers, buyers, intermediaries, etc.

https://en.wikipedia.org/wiki/Public_sector https://en.wikipedia.org/wiki/Private_sectors https://en.wikipedia.org/wiki/Private_capital https://en.wikipedia.org/wiki/Private_capital

Attachment 1—Section C–Statement of Objectives on strengthening the participation of women, youth and other vulnerable populations. The Activity will achieve these results through three key objectives:

Objective 1: Incomes increased through sustainable market systems.

Objective 2: Investment in sustainable productive and natural ecosystems catalyzed.

Objective 3: Improved policy and regulatory environment for sustainable public and private investments in productive and natural ecosystems.

Objective 1: Incomes increased through sustainable market systems Work under Objective 1 will aim to increase producer and small business on farm and off farm sales and integration into market systems while preserving the environment. It will also strengthen business management skills, enhance value perceptions of environmental and social sustainability through targeted social behavior change communications. When adequate, work under this Objective will foster increased productivity and sales, through targeted interventions such as small-scale construction.

Minimum required results:

1. Value of beneficiary sales of sustainably produced goods of at least USD 200 million

2. 30,000 hectares under improved management

3. Forty percent increase in beneficiary’s household income

4. At least 30 public-private partnerships established.

Work under this objective will also contribute to building capacity of producers and enterprises to meet market standards and access improved transaction conditions. Indicators and targets for these efforts will be developed post award.

Objective 2: Investment in sustainable productive and natural ecosystems catalyzed Work under this Objective aims to facilitate linkages with current and planned investment funds and credit facilities focusing on most limiting factors to investment and growth and on the most significant investment bottlenecks in priority value chains. SURGES will also aim to facilitate more direct linkages to input and output markets (buyers) and catalyze increased access to debt finance and investment capital (including green finance mechanisms). USAID believes that opportunities exist to tap into existing and planned investment funds rather than creating new funds.

Minimum required result:

1. Value of public or private investment facilitated as a result of USG assistance of at least USD 50 million.

Objective 3: Improved policy and regulatory environment for sustainable public and private investments in productive and natural ecosystems SURGES will promote stakeholder coordination and dialogue to promote a policy and regulatory environment that addresses challenges related to investment, inclusive market access, Attachment 1—Section C–Statement of Objectives entrepreneurship, opening a business, agribusiness development, and trade. To the extent possible, SURGES will leverage existing policy dialogue and information sharing mechanisms.

Minimum required result:

1. At least ten local or federal policies strengthened or proposed to promote investment and increase inclusive market access.

C.6 PERFORMANCE WORK STATEMENT RESULTS AND INDICATORS

Outcomes, Indicators, and Targets

Minimum Outcome Measurement indicator End of Activity Target

Incomes increased through sustainable market systems

% of increase in average households’ income increased as a result of USG assistance

EG. 3.2-2619. Value of annual sales of farms and firms receiving USG assistance

EG.13.8 Number of hectares under improved management

Number of beneficiaries (PS, SME’s, SHF) that report improved perception of benefits from adopting climate smart agriculture

Reduction in GHG emissions

Number of direct and indirect jobs (full time equivalents) created as a result of USG assistance

40 percent

$200 million

30,000

20,000

1.8 million tons of CO2 equivalent

30,000

Investment in sustainable productive and natural ecosystems catalyzed

Value of investment facilitated

$50 million

Improved policy and regulatory environment for sustainable public and private

Number of laws, policies or regulations that address biodiversity conservation and/or other environmental themes or promote investment and entrepreneurship proposed as a result of

Attachment 1—Section C–Statement of Objectives investments in productive and natural ecosystems.

multi stakeholder dialogues.

The percent increase in household income will be calculated using, as a baseline, the average monthly household income reported by INEGI as of 2020 (data included in attachment J.19). For all other indicators listed above an initial baseline of zero will be considered. Attachment J.19 includes additional data on the hectares under production for selected value chains. The Contractor will ground truth these baselines and develop final baselines and targets in consultation with USAID. In addition, the Contractor is required to include at least one standardized “F” indicator from the Bureau for Foreign Assistance (F).

C.7 ACTIVITY PARAMETERS

C.7.a Gender and Social Inclusion

Per ADS Chapter 205, all USAID activities are required to take into account not only the different roles of men and women, but also the relationship between and among men and women, as well as the broader institutional and social structures that support them. The Contractor is expected to carry out a detailed Gender Analysis and submit a Gender Integration Plan for fulfilling the goals and objectives of this activity. In the performance management plan, data will be disaggregated by sex, and custom indicators will be used where appropriate. The analysis must not focus only on numbers but how interventions are likely to impact individuals differently based on their gender roles and cultural norms. Further, given the multicultural context of southern Mexico, the Contractor must describe how interventions will be designed taking into account USAID’s Policy on Promoting the Rights of Indigenous Peoples:

https://www.usaid.gov/sites/default/files/documents/1866/USAID-IndigenousPeoples-Policy-mar- 2020.pdf

In addition, the Contractor is expected to develop and implement an Accountability and Feedback Plan that will take into consideration the perspectives of women, youth, and marginalized communities through the life of the activity. The findings of this analysis should be incorporated across proposed interventions.

C.7.b Youth

Youth is a cross-cutting issue across SURGES. To the extent possible, SURGES should work and collaborate with youth to identify ways to overcome obstacles and economic constraints limiting their inclusion in agriculture. The guiding principles for incorporating these efforts in the work plan will be to recognize youth participation as vital for effective programming and to embrace innovation and technology by and for youth.

C.7.c Local Context and Do No Harm https://www.usaid.gov/sites/default/files/documents/1866/USAID-IndigenousPeoples-Policy-mar-2020.pdf https://www.usaid.gov/sites/default/files/documents/1866/USAID-IndigenousPeoples-Policy-mar-2020.pdf

Attachment 1—Section C–Statement of Objectives

The Contractor must be able to apply a deep understanding and knowledge of sociocultural dynamics in southern Mexico. Further, the Contractor will include a robust Do No Harm (DNH) analysis that demonstrates an understanding of the nuanced cultural and social context in each proposed targeted area and thoughtful consideration of any risks associated with the proposed assistance program. Materials and components of the contract should be based on an agreed-upon definition of the target audiences and delivered in the appropriate language. The Contractor must have access to the necessary resources to ensure timely and quality translation; all translations need to be thoroughly vetted by the Contractor prior to submission to USAID/Mexico. DNH must be reflected in the Monitoring and Evaluation (M&E) plan and ongoing analyses must be incorporated to inform how interventions will adapt to the changing context.

C.7.d Local Systems

The Contractor will engage with local systems to facilitate system interactions without assuming responsibility for performing them directly. The Contractor must recognize that the strength of local systems and its prospects for sustainability depends on its ability to operate unaided, and that intervening too heavily robs local actors of opportunities to craft a true local solution. Local people understand their situations far better than external actors. The Contractor will be expected to regularly seek out local perspectives, paying particular attention to the voices of marginalized populations and apply those lessons in a practical way to maximize results. The Contractor will build on the understanding of a system’s contours elicited during the initial assessment and incorporate discrete interventions that will strengthen local systems and produce sustainable results. The Contractor must partner with local institutions and advisors to the greatest extent possible.

C.7.e Geographic Focus

The activity will be implemented in Chiapas and Oaxaca and offerors will be able to propose up to three additional states from the following list: Campeche, Quintana Roo, Yucatan, Tabasco, and Veracruz. The Contractor will propose additional states based on the highest potential to achieve the activity’s goals including increased employment, sales, investment and positive environmental impact. While proposed states, market systems and a framework for analysis must be included in the PWS, final selection will be negotiated with USAID post-award.

C.7.f Flexibility

The Contractor must ensure technical and programmatic flexibility within and across program components to respond to changing circumstances within the scope of this contract. The Contractor will outline its approach to keep abreast of changes in the situation on the ground, such as a political economy analysis or other assessments, and how it will maintain the flexibility to accommodate changes. The Contractor must include such situational analyses and scenarios as part of its regular reporting and engage with USAID to make appropriate programmatic adjustments.

C.7.g Innovation

This Activity offers fertile terrain for innovation. Innovation refers to new technologies, new

Attachment 1—Section C–Statement of Objectives ways of delivering or financing goods and services, more cost-effective adaptations to existing solutions, new ways of increasing implementation of existing proven solutions, policy changes, shifts, or nudges based on insights from behavioral economics, social or behavioral innovations.

The Contractor must address and weave innovation into its approach.

C.7.h Collaborating, Learning and Adapting (CLA)

The Contractor must incorporate a collaborating, learning, and adapting (CLA) approach that: a) generates, captures, shares, and applies information and knowledge to support and improve development outcomes; b) promotes collaborative learning and exchanges with relevant institutions, stakeholders, and development partners; and c) uses information to improve the cost-effectiveness of interventions over the life of the activity. The Contractor must build on lessons learned from relevant initiatives, including those of other donors, to achieve the objectives described in this SOO.

The Contractor will be expected to collaborate with other donor funded activities operating in the geographic areas prioritized. In Chiapas and Oaxaca, the activity will collaborate closely with new USAID activities Sustainable Landscapes Ventures (SLV) and Sustainable Prosperous Communities (SPC). Examples of this collaboration could be to identify infrastructure needs and support investment mobilization, support increased access to markets, and connect their initiatives to additional sources of finance. The Contractor shall demonstrate how the proposed technical approach will complement and collaborate with such activities.

C.7.i Private Sector Engagement

In its private sector engagement policy, released in 2018, USAID defines private sector engagement as a strategic approach to planning and programming through which USAID consults, strategizes, aligns, collaborates, and implements with the private sector for greater scale, sustainability, and effectiveness of development or humanitarian outcomes. During the implementation, SURGES will mobilize market-based solutions for more-sustainable outcomes;

deepen collaboration with the private sector, and leverage private-sector expertise, innovation, and resources to address sales, investment, and environmental concerns. In doing so, SURGES will seek private sector-led opportunities to increase the production of sustainable products;

create a sustainable and profitable market for all producers and raise the communities’ awareness on good environmental practices. The successful engagement of the private sector throughout SURGES will be expected to increase the impact and the sustainability of the results achieved.

C.7.j Security

The security of beneficiaries and the contractor’s staff is of utmost concern to USAID/Mexico.

Given the escalation of violence in Mexico, it is imperative that the Contractor develop a security plan that ensures institutionalized processes to track the security context in different states, evaluates the risks to beneficiaries and the Contractor’s staff, and implements steps to mitigate risks.

C.7.k Market Systems Approach

Attachment 1—Section C–Statement of Objectives

The Activity will be implemented using an inclusive market systems approach. An inclusive market system approach recognizes the complex dynamics between value chains, socio-economical and legal conditions, and the underlying cultural norms that shape behaviors and social outcomes. This might include approaches that look at supporting industries to enable growth in focus value chains—transport, packaging, agricultural inputs. To the extent possible, SURGES should boost and facilitate relationships and dialogue spaces among market system actors, particularly those relationships that can impact multiple value chains across the wider market system.

C.7.l Grants under Contract (GUC)

The Contractor may use a Grants Under Contract (GUC) component of up to $5 million in its Technical Approach. The proposed grants program will provide monetary and in-kind grants to local organizations that result in capacity building of sector actors, and leverage investment from the public and private sector to support SURGES’s objectives. It is expected that the Contractor will engage mostly local partners in program activities to complement Contractor’s activities, while also strengthening the institutional capacity of local organizations. The grant program will ensure local participation in the implementation of the contract and will serve to leverage resources from program participants for an opportunity to maximize results. Grants may be allocated through a competitive or non-competitive process or through a public-private partnership. The Contractor must administer grants and, where appropriate, provide technical assistance, training, and/or other Contractor inputs to Grantees to build the capacity of these organizations to successfully achieve specific objectives.

C.7.m Integration of Activity Components

The Activity’s three objectives are mutually reinforcing and necessary to achieve the highest-level goal. The Contractor shall look for opportunities to connect thematic areas throughout the three components.

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