IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical environmental and social information submitted by the project sponsor, discussions with government representative in the sector including the Tourism Investment Fund (Fonatur) and the Ministry of Tourism (SECTUR). The following potential environment, health and safety and social impacts of the projects were analyzed. development and land use planning; regulatory schemes and enforcement; project facilities compliance with development requirements water, wastewater and other utilities management; opportunities for energy conservation and efficiency in building design and operations; life and fire safety; quality and environmental issues management; and occupational health and employee training programs.

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements, host country laws and regulations, the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. Further information is provided in the attached documentation. Development and land use planning. Urban and environmental planning in the Mexican Riviera Maya and Cozumel are well developed. Specific technical goals and requirements are captured in the Mexican National Development Plan 2001-2025; Quintana Roo State Development Plan for 2001-2025; and, state regional plans (i.e. northern Zone of Quintana Roo Cancun-Riviera Maya and the southern zone Chetumal-Costa Maya) and at host municipal levels in the defined areas. Complementing the national and state development plans are the land use plans. Quintana Roo’s development plan is entitled Sub Regional Urban Development Program for Cancun-Riviera Maya. The land use plan is the Programa de Ordenamiento Ecological Territorio (POET). This Territorial Land Use Plan defines specific land uses and zones (conservation, development, protection, and restoration). The POET defines other considerations. For example the preceding 1994 POET allowed a total of 250,000 resort rooms. The 2001 POET trimmed this number to 90,000. The developments in which the project hotels are located, Playa del Carmen (Playacar) and in Cozumel, are in compliance with the requirements of development plans land use restrictions in effect at the time of development. Regulatory schemes and enforcement. Government entities at the Federal, State and Municipal levels oversee implementation of National Development plans and take responsibility for interpretation and adherence to specific land use requirements defined in the POET. In this scheme the federal secretary of environment and natural resources (Semarnat) and its three branches (Enforcement, National Ecology Institute (INE), and Environmental Protection), which extends to state organizations, is responsible for monitoring and enforcement. General, large-scale development and for specific properties are subject to inspections from government entities to ensure ongoing compliance. Project facilities compliance with development requirements. The four hotels included in this project were designed and built according to the requirements of the older POET and state development planning, regulatory and government enforcement schemes provide for adequate environmental protection that is integrated into individual hotel developments. Occidental’s four hotels include two older Allegro resorts in Playa del Carmen (Playacar) and in Cozumel and the newer Royal Hideaway and Real Cozumel (respectively in Playacar and Cozumel). The system requires master plans and environmental evaluations for large-scale developments then individual environmental impact assessments for the individual developments within the larger scheme. Manifestations of environmental impact were prepared for each of the hotels and approved to obtain construction permits. Construction was monitored by regulatory agencies and based upon approval of the works, permits to operate were granted. Continuing compliance requires the project proponent or manager to adhere to the environmental impact mitigation measures described in each resort property’s environmental impact assessment. Occidental will implement a quality management system that will help to ensure that indicated tasks are integrated into routine operations and that appropriate levels of responsibility are assigned. Water , wastewater and other utilities management. Water and utilities management methodologies vary. In Cozumel hotel wells provide brine containing half the concentration of seawater. Reverse osmosis is used to lower the content of dissolved solids to potable levels and the resulting RO brine, which has approximately the same TDS as seawater, is discharged into deeper wells with approximately the same water quality thus avoiding the potential impact to reefs and to water quality. Cost for water generated by the hotel using RO is roughly $1.3 per cubic meter. Older developments in Cozumel discharge treated wastewater effluent into the brine disposal wells. Newer developments utilize the treated wastewater for landscape irrigation. Storm water is used for landscaped areas and is carefully segregated from sanitary wastewater. Newer hotels such as the Real Cozumel utilize treated wastewater for landscape irrigation. Solid waste is managed by the municipality of Cozumel in a sanitary landfill operated in the north-central part of the island. Developments more heavily affected by the newer planning requirements such as Playcar benefit from centrally distributed services such as telephones, power, TV cable, hydraulic works, potable water supply, sanitary wastewater collection, and solid waste collection and management. Hotels are responsible for LPG gas storage and distribution as in Cozumel. Water provided in Playcar area is potable but resorts such as the Royal Hideaway retreat the water to ensure potability. Royal Hideaway demineralizes, sand and carbon filters, and UV sterilizes the water prior to adding chlorine residual. The untreated water is expensive at $2.6 per cubic meter and the RH uses it for landscape irrigation. The hotel is considering seeking permission to RO salt water for irrigation purposes. The cost of water for Occidental hotels in Playacar and Cozumel is high. The sponsor will implement a water savings program to reduce this cost of operations in its hotels. Wastewater management in the Playacar development is centralized. Storm water is segregated and used for landscaping and publicly maintained lands. Wastewater is well treated and then chlorinated and stored in ponds along the golf course for irrigation of the fairways and greens. Neither storm water nor treated effluent with attendant silt and organic loads are discharged to surface waters thus providing reef and flora and fauna protection. Vector control is provided by outside contractors. Service contracts for vector control and use of chemical pesticides will be modified to ensure that preference is given to biological control methods and that chemical control methods comply with IFC policy and guideline requirements. Opportunities for energy conservation and efficiency in building design and operations. Occidental will review proposed building modifications to ensure a high level of energy efficiency is incorporated into building design taking into account lighting and associated heat load as well as ventilating and air conditioning systems. Similarly, water use reduction methodologies will be incorporated into redesign of the properties. Life and fire safety. There are life and fire safety issues in the four hotels with potentially more significant and pervasive problems in the older Allegro resorts. These issues will be examined and resolved in audits of the four hotels, preparation of a corrective action plan for each hotel and longer-term development of a life and fire safety master plan for each property. Occidental will undertake a system-wide life and fire safety evaluation of its hotels and implement the requirements of IFC’s guidelines for all properties. Quality and environmental issues management. Occidental will develop the infrastructure and implement procedures and training required for quality management in Occidental hotels operations. Occidental will incorporate environmental and social management requirements into the quality management framework to ensure compliance with host country regulatory and IFC policies and guideline requirements. Quality and environmental management program management is required to ensure compliance with myriad environmental and social compliance requirements including occupational safety and health programs, employee training, management and monitoring of discharges to the environment, prevention of employee illness, management of waste and management of other hotel-specific environmental and social issues. Occidental will elect an internationally reputable quality certification or accreditation system to achieve the objectives described above. Occupational health and employee training programs. Occidental will expand its existing training programs to ensure that all facility, food service and support staff is trained in the specific occupational hazards that confront them in work settings. Additionally, Occidental will monitor in-house occupational safety and health statistics to ensure that training programs are continuously updated to reflect the needs of the hotel communities. Occidental occupational safety and health programs will be upgraded in accordance with the attached CAP.

Corrective Action Plan (CAP), attached.

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: (i) the status of implementation of all requirements in the Corrective Action Plan (see attached document) and (ii) ongoing performance of project-specific environmental, health, safety and quality management programs. Periodic site supervision visits will also be conducted.