E1550

BRAZIL: ALTO SOLIMÕES BASIC SERVICES AND SUSTAINABLE DEVELOPMENT PROJECT

ENVIRONMENTAL ASSESSMENT REPORT1 (Executive Summary)

Public Disclosure Authorized INTRODUCTION The State of Amazonas is preparing the Alto Solimões Basic Services and Sustainable Development Project (Alto Solimões Project) to support the ‘Green Free Zone” Program.2 The proposed project would be co-financed by the World Bank. The overall project objective is to improve the economic and social conditions based on the sustainable use of natural resources in the interior of State of Amazonas, with a special focus in the Alto Solimões Region. Primary objectives include: (i) raising income, (ii) increasing access to potable water and basic sanitation; and (iii) improving health outcomes of targeted populations. A secondary objective is to improve the management capacity and administrative efficiency of the state’s public sector.

Public Disclosure Authorized The proposed project would achieve its objectives through the implementation of five mutually-reinforcing components (described below), within the framework of an integrated regional development strategy, which includes: (i) Policy and Institutional Strengthening for Regional and Cross-sectoral Development; (ii) Sustainable Development; (iii) Water Supply and Sanitation; (iv) Basic Health Care; and (v) Project Management. Total Project Costs are estimated at US$35 million.

The Environmental Assessment of Alto Solimões Project was prepared in accordance with World Bank safeguard policies and aims to: (i) identify potential environmental impacts of the Project and to propose a range of mitigating and compensatory measures in the event of potentially negative impacts, and (ii) in the case of positive impacts, to identify measures that can enhance them further. Public Disclosure Authorized

This Executive Summary summarizes the Environmental Assessment Report (EAR). The EAR is available on the site www.seplan.am.gov.br and www.amazonas.am.gov.br as of August 26, 2006.

The overall environmental assessment of project components is positive in part because the Project’s concept focuses on sustainability. This concept, embedded in the design of the project draws on the following principles: (i) valuing culture and ethnic diversity; (ii) valuing environmental services; (iii) assuring sustainable management of natural resources; (iv) preserving protected areas and biological diversity; (v) economic growth with regional added value; (vi) raising income while improving living conditions and Public Disclosure Authorized 1 This is an executive summary of the Environmental Assessment Report and Management Plan (EAR), which was prepared in Portuguese. 2The Green Free Zone Program (ZFV) is a State program that combines income and employment generation, natural resource conservation and improvement of social conditions in the State’s impoverished interior. It does not entail establishing a free trade or industrial zone.

1 social participation; (vii) institutional capacity building; and (viii) applying a cross- sectoral regional development approach.

1 –PROJECT AREA The proposed project focuses on the meso-region of the Alto Solimões, comprising the municipalities of Amaturá, , Benjamin Constant, Santo Antonio do Içá, São Paulo de Olivença, , Tonantins, Jutaí and Fonte Boa. (See Figures 1 and 2 below).

This region, located in the far western part of , near the border of Colombia and Peru, has a population estimated at 240,000 inhabitants. The population composition of Alto Solimões is highly complex. It contains a large cross-section of Amazonian Indigenous tribes. This area is the homeland for 11 of the 86 ethnic groups of the state of Amazonas, of which six are relatively numerous (Ticuna, Kokama, Marubo, Matsé, Kaixana e Kanamari). Between 15 and 20 percent of the population of Alto Solimões is indigenous, most residing in demarcated Indigenous reserves. Alto Solimões population’s growth rate is a high 4.7 percent per year, compared to 3.3 and 1.6 percent for Amazonas State and Brazil respectively.

In the region there are several federal and state protected areas, as well as 26 indigenous lands of several ethnic groups that span 9 million hectares. The map below (Figure 3) highlights the legally protected areas in the State of Amazonas. Federal areas are marked in green, state areas in blue, and indigenous lands in red.

Figure 1 – the Nine-state Region known as Figure 2 – Targeted Region–Alto the Legal Amazon Solimões in the State of Amazonas.

2 Figure 3 – Legally protected areas in the State – indigenous lands and protected areas.

Alto Solimões was selected by the State of Amazonas as a priority region because of its low level of economic and social development, and growing threats to the environment from unmanaged and often illegal exploitation of natural resources. Despite its richness in natural resources, the economy of Alto Solimões accounts for less than 2 percent of the State’s gross domestic product (PIB). Government is the major employer as well as the main driver of the economy, including commerce. Production activities are mainly based on extractive activities (fishing, logging and non-timber forest products) and small scale agriculture. Most of these activities do not benefit from value added through processing as there are few industries in the region. The purchasing power of the population is severely constrained by high levels of illiteracy, high unemployment and low levels of economic growth. Levels of poverty are very high and per capita income is between one- tenth and one-fifth of the level of income of , the capital city. Indices of health status are among the lowest in the state and are attributable in part to low access to basic health, water supply, and sanitation services. Table 1 presents summary demographic, economic, and social indicators. The Municipalities of Alto Solimões have low rates of land occupation and deforestation. This region is beyond the settlement frontier of the broader Amazon Region, touching only the southern part of the State. Deforestation is very low (1 percent). The original forest cover remains in 75 percent of region, reaching 85 percent in the municipalities of Jutaí and Fonte Boa.

The population of Alto Solimões is at an early stage of the epidemiological transition in which the so-called diseases of childhood combined with other communicable diseases are the main causes of mortality and morbidity. For example, incidence of diarrhea and respiratory diseases is unacceptably high, with diarrheal disease accounting for a large number of deaths, and probably is the main killer of infants. Communicable diseases such as malaria, leishmaniasis, meningitis and hepatitis are endemic in many interior regions (incidence is two to three times national levels). In addition to low coverage of

3 basic health care, another contributing factor to low health outcomes is low coverage and poor coverage of water supply and sanitation (WSS).

Table 1: Summary Indicators of Municipalities in Alto Solimões POPULATION INDICATORS Per Municipalities Population Urban Rural Total HDI % Poor. Capita - 2005 2000 2000 Pop. R$ Benjamin Constant 14,171 9,048 23,219 26,191 0.640 75.9 2,266 Atalaia do Norte 4,175 5,874 10,049 11,294 0.559 76.7 2,035 Tabatinga 26,637 11,282 37,919 43,974 0.699 56.0 2,350 Amaturá 3,930 3,378 7,308 8,865 0.631 79.6 2,177 Santo Antônio do Içá 7,906 20,307 28,213 34,875 0.525 82.6 1,129 Tonantins 4,382 11,150 15,532 18,830 0.587 81.5 2,009 São Paulo de Olivença 8,770 14,343 23,113 28,861 0.536 84.8 1,881 Jutaí 7,725 14,775 22,500 27,110 0.533 69.6 1,795 Fonte Boa 11,633 19,876 31,509 37,595 0.532 70.6 2,624 Total 89,329 101,893 193,115 237,595 Manaus 1,396,768 9,067 1,405,835 1,644,690 0.774 35.2 13,535 STATE 2,107,222 705,335 2,812,557 3,148,420 0.713 53.0 8,374

Economic development of the State’s interior will depend on sustainable development policies that foster efficient use of natural resources, protection of environmental resources and improvement of social conditions. Raising income and improving the quality of life in the interior through creating sustainable economic opportunities and improving social conditions is a major policy objective of the State Government. To achieve this objective, in 2004 the Government launched its flagship program, known the Green Free Zone Program (ZFV) – a program that combines income and employment generation, natural resource conservation and improvement of social conditions in the State’s impoverished interior. ZFV is the centerpiece of the State’s Pluri-Annual Plan for 2004-2007. More broadly, it aims to transform the current development model, which traditionally has been centered on industrial development in the Manaus Free Trade Zone, into one that is more diversified and better integrated with economic activities elsewhere in the State. The program aims to promote integrated development of the State and to become an effective tool for the reduction of the poverty levels. The proposed project will support the ZFV through a phased-approach (APL) initially focusing on the Alto Solimões Region, one of the most economically depressed and impoverished areas of the country as measured by economic, poverty and social indices.

The proposed project would support Government efforts to implement the program in the impoverished Alto Solimões Region through (i) building institutional capacity and introducing organizational arrangements to support planning, implementation, management, and monitoring of economic and social activities; (ii) financing critical actions and development priorities in the areas of sustainable development, water supply, sanitation and health; (iii) providing technical assistance while fostering research and

4 evaluation to provide value added to the entire Program; and (iv) assisting the State implement the Program and improve the efficiency and effectiveness of its activities.

It is worth mentioning that the concept of the proposed Project (and ZFV Program) benefited from a series of studies and initiatives conducted in the region over the past five years including an exercise known as "Participative Economic Ecological Zoning".3 The proposed project represents a response to the demands of local society including concerns regarding the general environmental scenario of ‘abandonment’ and ‘neglect” of the populations already residing in the region.

The complexity and multi-sectoral nature of the problems combined with geographical and logistical challenges of the State’s interior suggest an incremental, process-learning approach to addressing economic and social development. Such an approach enables the development of an appropriate policy and institutional environment to support proposed investments, testing innovative approaches to income generation and service delivery that account for local conditions, and evaluating results prior to rolling out activities elsewhere in the State’s interior or committing significant resources. Lessons learned in Alto Solimões during the first phase of the proposed APL would be the basis for the preparation and subsequent implementation of a second phase in other regions of the State’s interior. This project should be considered a first but relatively modest step in improving economic and social conditions in the State’s interior.

The proposed first phase project would have a total cost of US$35 million and an implementation of period of three years (2007-2010). With a total cost of US$75 million, the second phase would implement during a five-year period (2010-2015). Table 2 presents the investment framework for the proposed first phase project:

Table 2: Investment Framework for APL Phase 1 Investment US$ million 1 – Components 32.3 A – Institutional Strengthening for the Regional Development 6.40 B – Sustainable Development 7.31 C – Water Supply and Sanitation 12.72 D – Health 5.90 2. Management and Administration 1.60 3 . Reserve of Contingency 1.07 TOTAL 35.00 Note: The reserve of contingency should be applied to any of the components above in function of the demand during the execution of the Project.

2 - INTERVENTIONS PLANNED FOR IN THE 1st PHASE OF THE PROJECT

Phase 1 of the proposed projects comprises the following components:

3 This exercise consists of the use maps and other information (such as soil type, land cover, parks, population, economic pressure, economic activity, biodiversity value of the areas, etc...) for land use planning at macro level.

5 Component A – Policy and Institutional Strengthening for Regional and Cross-sectoral Development. The main objective of this component would be to establish an enabling regional institutional environment in Alto Solimões that (a) supports high-performing and sustainable government development policies and program implementation and (b) facilitates the delivery of the outputs and outcomes anticipated in Components B, C and D. The secondary objective would be to promote cross-sectoral linkages among sectoral activities. Project interventions would center on (i) capacity building, technical assistance and logistical support; (ii) introduction of cost-effective information and communications technologies; (iii) effective disbursement and finance mechanisms for sector-specific activities; and (iv) application of flexible mechanisms for contracting and managing human resources.

Component B – Promotion of Competitive Sustainable Development Production

The objective of this component is to promote the development of the Alto Solimões Region based on the organization of competitive economic clusters fostering the sustainable use of regional renewable natural resources. This Component consists of activities that would promote the sustainable use of natural resources and productive activities such as forest management, fishing, fish-farming and small-scale agriculture. This Component aims to: (i) increase the income of 2,000 rural families in 20%, benefiting around 10,000 inhabitants, with environmentally sustainable productive and income generator projects; (ii) strengthen the social organization of communities to increase the productive capacity of 1,500 families of producers in an environmentally sustainable manner, benefiting about 8,000 inhabitants

The component would finance four sub-components: (i) Policy framework and institutional development for productive activities; framework to support the sustainable production; (ii) Support for productive activities; and (iii) Micro-business Management Incubators; and (iv) Training and Extension Program to Support Productive Activities.

The direct beneficiaries of productive activities would mainly be rural producers, wood workers, fish breeders, fishermen and small-scale entrepreneurs of the wood, fishery and non-timber product productive chains. The selection of producers in each of the activities below would be made in accordance with criteria of potential economic output within a framework of sustainable use of renewable natural resources. Grants would be provided for the following activities:

• Forest management for timber extraction: An estimated six investment grants would receive technical and financial assistance to: (i) implement IPAAM-approved Forest Management including support for efficiency improvement of logging operations and the provision of working capital to finance extraction; (ii) increase the value added of logging operations; (iii) address the main bottlenecks faced in log transport; (iv) improve marketing arrangements for timber and wood products, and (v) design and implement a certification or green labeling system.

6 • Improvement of Timber Processing: A single pilot investment grant would be financed to improve the overall sustainability of the industry and the quality of processed wood.

• Non Wood Forest Products (NWFPs): This activity would support three investment grants financing technical assistance and investment grants. The first involves increasing the output and improving the processing of Brazil nuts (Bertholletia excelsa). The second and third would entail improving the quality of oils extracted from forest species, such as andiroba (Carapa guianensis), buriti (Mauritia flexuosa), and murumuru (Astrocaryum murumuru). These investment grants would finance activities that would lead to the improvement of product quality, pricing and marketing arrangements.

• Management of Fisheries Resources. This activity would promote the management of fish resources, including pirarucu (Arapaina gigas), one of the most important species of the Amazon. It is estimated that six investment grants would be financed. These investment grants would support: (i) participatory management and monitoring of fish resources in community fishery reserves; and (ii) the improvement of marketing capacity.

• Quality of fish production. This set of activities would provide technical and financial assistance through grants to fishermen organizations to develop and operate adequate post-harvest management infrastructure.

• Fish Farming: Investment grants would build upon ZFV-sponsored initiatives already under implementation in the municipalities of Tabatinga, Benjamim Constant, São Paulo de Olivença and Amaturá. In each of these municipalities infrastructure to support fish farming exists, including a fish hatchery that produces fingerlings and a feed-producing factory. The investment grants would finance technical assistance and seed money for producers to improve the quality and quantity of their products. It is estimated that six investment grants would be financed. Only native species would be farmed, and no species external to the local habitat would be introduced.

Finally, this Component would also support the creation of favorable organizational and business environment that yields an increase of the productivity of small-scale economic activities, implemented by local residents and communities, particularly but not only, those integrated by indigenous peoples. The financing concentrates on the creation of micro-business incubators that would organize services designed to nurture small scale businesses and increase the output of existing ones. A wide range of services would be offered, including management assistance, assistance with access to financing, organizational and technical support services, and the organization of shared inputs, as access to equipment and space. It is expected that the subcomponent would offer optimal results through a replication effort during the second phase of the proposed project, when lessons would have been learned about the right incentives to make local production efforts economically viable.

7 Component C – Water Supply and Sanitation: This component would aim to contribute to the improvement in the quality of life and the health of the populations living in the nine targeted municipalities in the Alto Solimões Region by improving the coverage, efficiency and quality of WSS services in the region through the development and implementation of (i) a new institutional, regulatory, legal, operational and financial framework for WSS service provision for the interior of Amazonas state, generally, and (ii) new service delivery models and approaches for urban and rural WSS and urban solid waste management in Alto Solimões, specifically. This Component consists of four sub- components: C.1 – Institutional framework and planning for WSS in Amazonas state; C.2 –Development and implementation of new WSS urban service delivery model; C.3 – Piloting of service delivery in Alto Solimões (rural water supply in two municipalities; sustainable sanitation for a municipal capital; sustainable solid waste disposal for a municipal capital); and C.4 – Capacity strengthening, monitoring and evaluation.

Component D – Health. This Component would consist of two objectives: (i) improve the access to and quality of primary and secondary care services for populations residing in the Alto Solimões region; and (ii) improve the efficiency and management capacity of state-financed health services. The overall strategy to achieve these objectives consists of developing the know-how, instruments and information environment to improve the performance and sustainability of publicly-financed health services in the State of Amazonas. This would be achieved through activities divided into two subcomponents: D1 - Coverage Extension and Quality Improvement in Alto Solimões, and D2 – Modernization of the State Health Secretariat.

Potential impacts of project components: In terms of possible environmental impacts, the actions to be carried out under Component B (Sustainable Development) and Component C (Water Supply and Sanitation) deserve special attention. Component B includes small- scale interventions that would take place in or near forests. Component C includes civil works activities with potential to cause some temporary negative environmental impacts during construction. The rest of this component’s activities will have a positive impact on the environment through: the more rational use of water supplies, and through the piloting of wastewater management solutions and solid waste disposal solutions for municipal capitals. Component D (health) does not involve new construction since works will be restricted to internal rehabilitation of existing units.

3 – LEGAL AND INSTITUTIONAL FRAMEWORK

The State Law 2407/96 created the State System Environment, Science and Technology 4 under the State Council of Environment, Science and Technology5. The State system for environmental policy consists of several agencies: Sustainable Development Secretariat (SDS)6, State Institute for Environmental Protection (IPAAM)7, the Amazonas Agency

4 Sistema Estadual de Meio Ambiente, Ciência e Tecnologia 5 Conselho Estadual de Meio Ambiente, Ciência e Tecnologia 6 Secretaria de Desenvolvimento Sustentável (SDS) 7 Instituto de Proteção Ambiental do Amazonas (IPAAM)

8 for Forests and Sustainable Economic Activities (AFLORAM)8, and Indigenous Policy Foundation (FEPI)9.

The state legal framework covers environmental policy, water resources, solid waste, fishing, protected areas and economic instruments supporting environmental management.

Federal agencies (IBAMA, INCRA, FUNAI) are responsible for international borders and rivers, federal protected areas, indigenous lands, federal lands. In 2003 an agreement was signed between IBAMA and the State of Amazonas allowing the state to grant licenses for simplified forest management10 (up to 500 ha) and potentially polluting activities.

State Decree no. 10.028/87 established procedures for environmental licensing of potentially impacting activities. The activities supported by Alto Solimões Project requiring licenses include: (i) timber and non-timber extraction; (ii) agriculture; (iii) commercial fishing and fish-farming; (iv) health centers, and (v) waste treatment systems and final destination of solid and liquid wastes. Licensing is the responsibility of IPAAM according to procedures and criteria set forth in the Normative Ruling 001/97.

4 - INSTITUTIONAL ARRANGEMENT FOR PROJECT IMPLEMENTATION

Project implementation will be coordinated by CIAMA/SEPLAN (Amazonas State Development Corporation) and in technical partnership with participating line secretariats (SEPROR, SUSAM, SDS and SEINF), and a number of entities of the civil society, municipalities and communities.

The institutional implementation framework includes:

ƒ Project Coordination Unit (PCU, would be created within CIAMA to coordinate and monitor overall project implementation. The PCU would make use of the existing facilities and organizational structure (technical, human resource, procurement, and financial management) available from CIAMA. Participating secretariats (SEPROR, SUSAM, SDS and SEINF) would provide technical staff to coordinate and oversee projects activities. The PCU would consist of a Project manager, a technical management group of professionals from the 5 State agencies involved in the execution of the Project, including SDS and its affiliates IPAAM, AFLORAM, and FEPI; and a financial and administrative group. The PCU will be responsible for approving productive and sanitation projects.

ƒ Advisory Committee to be created by state decree coordinated by SEPLAN and equally composed of representatives of the State and the Civil Society. It will

8 Agência de Florestas e Negócios Sustentáveis do Amazonas (AFLORAM) 9 Fundação de Política Indigenista do Amazonas (FEPI) 10 A forest management plan is a licensed plan to exploit forest resources in a continuous but sustainable way in a specified area of forest.

9 responsible for: (i) propose guidelines to ensure transparency, effectiveness and efficiency of financing procedures of productive projects; (ii) oversee planning, implementation, monitoring and assessment of all the subprojects; and (iii) provide recommendations based upon progress reports of each component.

ƒ A Regional Management Office to be located in Tabatinga (in Alto Solimões) with the following technical coordinating units: (i) Sustainable Development-- composed of SDS (AFLORAM, IPAAM, FEPI) and SEPROR, and responsible for the selection and monitoring of productive subprojects; (ii) Water Supply and Sanitation – responsible for the coordination of WSS activities in the region, especially the planning and supervision of works and other activities; and (iii) Health – responsible for supporting and supervising health actions in the region.

ƒ Local Coordination offices located in 5 municipalities of the region, to provide support to productive subprojects.

ƒ Municipal Committees for the Sustainable Regional Development (CMDRS). These advisory committees will be composed of representatives of the government and the civil society. They will be responsible for monitoring the selection and implementation of the productive subprojects, and to recommend adjustments, as needed.

5. CONSULTATIONS

During the concept phase of Project preparation, a first round of consultations were conduced with government and non-government agencies (including, NGOs, Indigenous communities and organizations, rural producers, and local leaders in Manaus and in Alto Solimões. Consultations were held with the following agencies and organizations in January and February, 200611:

SEPLAN: Secretariat of Planning SEPROR: Secretariat of Fish Production and Integrated Rural Development SDS: Secretariat of the Environment and Sustainable Development SUSAM: Secretariat of Health SEINF: Secretariat of Infrastructure IDAM Amazonas Institute for Agricultural Development AFLORAM: Amazonas Agency for Forests and Sustainable Economic Activities COSAMA: State Water Company FUNASA: National Health Foundation ARSAM Regulatory Agency for Public Services Concessioned by Amazonas CNS: National Council of Seringueiros (NGO) GTA: Amazon Working Group (NGO) OELA Lutia School of the Amazon (NGO CPT Pastoral Commission of the Earth (NGO)

11 Consultations with Indigenous peoples also took place and the list of participants is presented in the IPP.

10 CIMI Indigenous Missionary Council (NGO) Municipal Association of Amazonas Archdiocese of Benjamin Constant Municipalities --- meetings held with mayors and municipal council members in all nine municipalities of Alto Solimões 4 Indigenous organizations Health Facilities -- meetings held with personnel of Tabatinga Hospital, Benjamin Constant Hospital, Indigenous Health House of Conceição Alencar, and the following health Posts: Santa Rosa, L. Silva, A. Castelo Branco, Dona Joana.

A second round on public consultations to validate the design was held on September 2006 to discuss and propose recommendations regarding the environmental safeguards policy. The preliminary report was made available at UGD’s sites www.seplan.am.gov.br and www.ciama.gov.br on August 28, 2006. In addition, the State government sent invitations for the consultations to government agencies involved in project preparation as well as to municipal authorities in the Alto Solimões Region. The full list of entities is attached to the EA/EMP and IPP, and available in Appendix 10-D of the PAD. The consultation meetings centered on the Project Design and Environmental Assessment preliminary report, and consisted of the following format:

A. Pre-Meeting on Program Design and Environmental Assessment with local NGOs

On August 30, 2006 a pre-meeting was held with the principal NGOs in the Amazon Region invited by UGD/GovAm. About 20 NGOs representatives attended the event. The purpose of the meeting was to present the Project Design and Environmental Assessment, which resulted from previously discussions (on project concept) with local NGOs (In January, 2006). This pre-meeting served to prepare for subsequent consultations in September.

B. Meetings with key partners on project content: sustainable development, health, water and sanitation:

B.1. Indigenous People: This consultation took place in Benjamim Constant, (Aldeia Filadélfia) on Sep. 12, 2006. Attendees included representatives from Indigenous communities, Indigenous organizations, government and civil society. All were from the Alto Solimões Region.

B.2. Tabatinga: This meeting took place at the Father Ciro Aprígio Training Center of the Diocese of Alto Solimões on Sep. 13, 2006. Attendees included Government technical staff, regional civil society groups, and local producers associations.

B.3 Manaus: This meeting was held on Sep. 15 with the participation of government agencies, civil society (ONGs) and technical staff involved in project preparation.

11 The principal items raised by the participants during the second round of consultations are as follows:

• Create mechanisms for indigenous participation in Project management and implementation. • Establish partnership with FUNASA to improve access of Indigenous Peoples residing in Aldeias to water supply and sanitation services. • Direct interventions in water supply, sanitation and health to support communities benefiting from investments in productive activities, with special focus on rural agricultural workers and fishermen. • Set an agenda a meetings with NGOs to detail activities financed under Component A (Policy and Institutional Strengthening for Regional and Cross-sectoral Development).

6. ENVIRONMENTAL ANALYSIS OF PROJECT COMPONENTS

Sustainable Development Component - The productive subprojects to be funded under this component (timber and non-timber forest products, fishing products, micro- agricultural projects) are all small-scale initiatives with great potential to raise the income of poor communities living in the area. However, they have some potential to impact the local environment. In this regard, the EAR presents a series of criteria and procedures to analyze and approve the subprojects, including advice on monitoring of subproject implementation. This will ensure environmental integrity and the application of mitigation measures.

Water Supply and Sanitation Component: This component includes: (i) improvement of the existing water supply systems in urban areas of the nine municipalities12 including physical interventions to optimize water production, treatment and distribution, and a new institutional model for service delivery, (ii) development and implementation of a pilot sanitation intervention in the urban area of one of the nine municipalities; (iii) development and implementation of a pilot solid waste disposal intervention in one of the nine municipalities; and, (iv) development and implementation of a pilot rural water supply interventions in two of the nine municipalities.

These are small-scale interventions designed to develop and test institutional and technological solutions to the serious WSS problems of local populations, for subsequent adaptation and roll out in the second phase of the Project.13 These interventions may present moderate risks during the construction phase which can be minimized by the adoption of suitable technical criteria during their implementation. The EAR presents environmental specifications for the design and review of the WSS interventions.

Any impact during implementation of the civil works interventions under the WSS Component can be minimized through adequate civil engineering construction methods

12 Population ranges from 4,500 to 14,000 inhabitants (2003), except for Tabatinga that has approximately 30,000 inhabitants. 13 No new construction is contemplated.

12 and techniques. Environmental good practice specifications for the civil works construction activities will be included in the procurement documentation (see guidelines annexed to the EAR).

In sum, all civil works interventions under the WSS Component are small scale and are not likely to result in meaningful negative environmental impacts during construction.

Health Component: The infrastructure interventions of this component consist of rehabilitation of already existing ambulatory health units and a minor upgrading of emergency services in a regional hospital (Tabatinga Referral Hospital “Unidade Hospitalar de Referência de Tabatinga”).

These already existing units in the municipalities produce medical wastes that, in general, do not have proper management and disposal. As such, EAR proposes an action plan for the management of health wastes, which was included in component design and is part in the Environmental Management Plan.

7. OVERALL ASSESSMENT

The EAR analyzed the potential environmental impacts (positive and negative) of the interventions to be supported by the Alto Solimões Project.

Overall, expected project impacts are positive and beneficiary to the environment. Project activities have been designed to promote the sustainable use of the natural resources and to improve health and sanitary conditions of the population of the area.

Potential negative impacts are localized, reversible and temporary. Potential negative impacts from civil works under the WSS Component will be minimized by adopting preventive measures and best-practice construction techniques, and by taking the same into account during the design phase.

Project activities, including productive subprojects, will not take place in protected areas. Any activity that may involve the participation of the Indigenous population will be discussed with these communities and fully comply with the requirements of Brazilian law and World Bank safeguards. The scale of interventions is small and is not likely to result in increased pressure on either fish or tree species. Management plans for timber will include the protection of individual seed trees, and thus mitigating potential genetic erosion. Subprojects for fish production will not result in increased pressure on selected species because: (i) fish farming of high value species will reduce the pressure for these species, (ii) fisheries management subprojects will foster conservation and sustainable use of threatened species as well as the establishment of fisheries reserves, and (iii) subprojects will follow existing regulations specifying fishing periods and limiting fish size and catch volume.

To strengthen and guarantee the beneficial effects of the interventions, the Program prepared an Environmental Management Plan (EMP), consisting of the development of

13 subprograms aimed at: (i) Project environmental management system; (ii); instruments for managing and controlling the subprojects (iii) social communication; (iv) strengthening of environmental management in the target Region; (v) environmental and health education; and (vi) environmental monitoring.

8. ENVIRONMENTAL MANAGEMENT PLAN (EMP)

The EAR includes several measures to ensure the environmental quality of the interventions to minimize negative impacts and maximize positive impacts. These measures are part of the Environmental Management Plan. Its costs, schedules and responsibilities are detailed in the EAR. The main measures and programs are presented in Table 3.

Table 3: EMP Summary Features

No. Measures and Programs Costs (US) Responsibilities PCU and Regional Costs included in Management Office staffed 1 Environmental Management System Subcomponent A.2 with environmental specialists. PCU and Regional Costs included in Management Office staffed Instruments of Environmental Management Subcomponent A.2 with environmental and Control specialists.

Costs included in the Environmental Manual for Civil Works 2 bidding contracts PCU and contractors

Preparation of Policy on Land Registration US$ 40,000 included in PCU for the State’s Interior Subcomponent A.1 Support for land registration for Forest US$ 60,000 included in PCU Management Plans Subcomponent B.4 3 Social Communication Program US$ 120,000 included in PCU, Regional Management Subcomponent A 4 Office and consultants 4 Sanitation and Environmental Educational US$ 80,000 included in PCU. Regional Management Programs Subcomponent C 3 Offices, consultants 5 Strengthening Environmental Management ƒ Environmental Technical US$ 265,000 included in Assistance for Productive Subcomponent B1 Activities PCU, Regional Management ƒ Water Quality Monitoring US$ 80,000 included in Office and consultants Subcomponent D1 ƒ Management of Medical Waste US$ 75,000 included in Subcomponent D1 6 Solid Waste Management US$ 20,000 included in

Subcomponent C3 7 Environmental Monitoring Program US$ 130,000 included in PCU, Regional Management Subcomponent A2 Office and consultants

14 8.1. Environmental Management System: An Environmental Management System (EMS) will be established in the PCU and integrated within the Management System of the Project with the responsibility for: (i) coordinating the environmental activities of the Project; (ii) guiding, analyzing and approving (from an environmental perspective) the sub-projects to be funded; (iii) inspecting, following-up and providing guidance in the execution of mitigating measures devised in the assessment mentioned above and required by the environmental licensing authorities and in compliance with the recommendations of the Environmental Manual for Civil Works; and (v) supervising the implementation of the sub-components regarding environmental education and institutional strengthening.

8.2 Instruments of Environmental Management and Control – With the purpose of ensuring the environmental quality of the interventions financed and/or supported by the Project, and to meet the environmental requirements established by Brazilian Laws and the safeguards required by the World Bank, several instruments for environmental management and control have been devised. These instruments are differentiated by project components, as follows: A) Sustainable Development (Component B) – The instruments for this component are: (i) subproject eligibility criteria, (ii) exclusion list, (iii) ex ante environmental check-list, (iv) specific environmental guidelines for each project type; (v) impact mitigation plans, and (vi) environmental monitoring plan. Subproject eligibility criteria: The overall subproject eligibility criteria are in the EAR. In general, the subprojects must: ƒ have a Management Plan approved by IPAAM ƒ be economically viable ƒ take into consideration cultural and environmental values for local development ƒ follow the environmental guidelines listed in the Operational Manual ƒ document land ownership or customary right to it, under applicable law Exclusion List – ineligible projects. – The Operational Manual will detail cases of ineligibility of subprojects, such as subprojects that: ƒ Can cause deforestation, or significant conversion or suppression of forests or include clear cuts of the primary forest ƒ Involve cattle raising projects ƒ Do not apply sustainable harvesting practices (for forestry projects) ƒ Can result in an involuntary resettlement ƒ Interfere with Protected Areas (parks and Permanent Preservation Areas) ƒ Interfere with Indigenous Lands, except for the activities implemented by the indigenous population in their lands ƒ Involve the purchase of pesticides ƒ Involve invasive species, in the case of agricultural subprojects ƒ Involve exotic species, in the cases of fish farming subprojects ƒ Propose practices that contribute to environmental degradation (impact on water bodies, erosion etc.).

15 Procedures for Environmental Assessment of Subprojects - The selection of the subprojects will be executed in two stages: (i) pre-subproject proposal, and (2) subproject assessment. The environmental procedures assessment will be performed by the PCU and follow the following steps: ¾ Pre-proposal – Checking the environmental implications (Screening – or ex ante environmental Check-list). The objective of the screening or check-list is to reject in an early stage initiatives that would negatively affect conservation areas, indigenous lands, APPs or sensitive areas. ¾ Subproject preparation and approval: Subprojects proposals will be prepared by specialists selected by the proponent, chosen from a pool of specialists trained by the PCU. The environmental assessment of the productive projects will be performed by an environmental specialist who is a member of the technical team of the Regional Management Office. This environmental specialist (from IPAAM), will be responsible for the procedures related to the environmental licensing, and may request additional mitigation measures to be included in the proposal. The specialist will be responsible for field inspections in all the projects to be undertaken, prior to their approval, and for assessing the mitigation measures. Once these measures have been approved, they will be incorporated into the specific subproject. Costs will be covered through subproject financing. ¾ The PCU environmental specialist will monitor this process and evaluate the environmental assessment, with support of other technical staff and ad hoc specialists. Annex I of the EAR includes criteria and procedures for environmental subproject assessment of the Sustainable Development Component, such as:

Specific environment guidelines – Specific environmental guidelines and mitigation measures will be developed for each type of subproject (agricultural, forest, fish farming, fish management, etc.) to guide proposal preparation. The Operational Manual will include models of these guidelines. Measures applied to subproject eligibility include: (i) compliance with existing environmental laws, (ii) absence of land disputes in subproject areas; (ii) evidence of strong community support for the proposal; (iii) proposed subprojects are outside of protected areas, areas of restricted use and critical natural habitats; (iv) proposals for subprojects on Indigenous reserves can only be proposed by Indigenous Peoples residing therein: (v) preference for subprojects that propose multiple use of forest resources; (v) protective measures to prevent over-harvesting; and, (vi) each subproject will include a monitoring and evaluation plan. Additional guidelines specific for timber extraction subprojects include: (i) compliance with relevant laws, i.e. the existence of licensed forest management plans by the relevant State or federal agency in subproject areas; (ii) use of low-impact logging techniques (e.g. directional felling of trees to reduce damage on remaining trees, and cutting of vines (if needed); (iii) identification of permanent preservation areas and other areas to be protected, (iv) application of tree inventories to identify the trees to be harvested, retained for future harvests, or preserved as seed trees (the latter measure will mitigate potential genetic erosion) etc.

16 Impact Mitigation Plan (IMP) – When the need for mitigation measures is identified, an IMP would, on a mandatory basis, be prepared for each subproject proposal. This Plan would detail measures to be taken, including costs and responsibilities. The Operational Manual will include a model IMP. Environmental Impact Monitoring Plan (EIMP) – The EIMP is an instrument that will be prepared by the PCU to monitor the implementation of the IMPs and their indicators. Random inspection visits will be undertaken by PCU technical staff. Inspection information will be entered into the databank of the Computerized Project Monitoring System (IS) to enable future analysis and to make any necessary corrections. Monitoring reports will be prepared by the PCU and will be made publicly available on the website of the PCU Alto Solimões Project. In addition to the monitoring performed by the Regional Office and the PCU, a series of training programs will be organized to teach beneficiaries techniques to self-monitor environmental impacts and mitigation measures. A model EIMP will be included in the Operational Manual.

B) Water Supply and Sanitation Component –For the types of interventions expected under this component, (the following instruments of environmental management are to be used: (i) ex ante environmental check-list; (ii) environmental criteria for the preparation of engineering designs; (iii) monitoring plans, and (iv) Environmental Manual for Civil Works. Annex II of the EAR includes criteria and procedures for the environmental assessment of the interventions under the WSS Component. Ex Ante Environmental Check-list – At the stage of evaluation of alternatives, WSS interventions will be verified for their direct or indirect impact on (i) natural habitats and (ii) indigenous populations or lands. The WSS interventions will not involve involuntary resettlement. The WSS interventions will follow applicable environmental regulations regarding Areas of Permanent Preservation such as those spelled out in the Forest Code. Environmental Criteria for the preparation of engineering designs – The EAR includes environmental criteria and guidelines to be used in the preparation and assessment of WSS interventions. Monitoring Plan (MP) – An MP will be prepared to monitor the implementation and operation of WSS systems, based on the environmental assessments. A model monitoring plan is included in the EAR. Environmental Manual for Civil Works: This Manual has been prepared to provide rules on appropriate environmental practices to be followed by the entities contracted to implement the civil works interventions. The Manual will be incorporated in the bidding documents so that participating firms are aware in advance of all the necessary environmental requirements. Compliance with the practices outlined in the Manual will be a contractual obligation of the civil works contractors, and the correct implementation

17 of the Manual’s requirements will be the responsibility of the PCU and the contractors. The Manual is included in the EAR.

8.3 Social Communication Program – The purpose of this program is to foster the implementation of the Alto Solimões Project, through the involvement of the population directly or indirectly benefited by the interventions in the areas of influence of the Project. The PCU and the Regional Management Office will be in charge of this activity.

8.4 Hygiene Promotion and Environmental Education Program - A Hygiene Promotion and Environmental Education Program will be implemented as part of the WSS component to complement the physical and institutional interventions.

8.5 Strengthening Environmental Management – The following actions will be taken to strengthen the state capacity for environmental management:

ƒ Strengthening environmental licensing and enforcement – involving technical and logistical support for IPAAM to undertake activities in the region especially in areas related to the Project. ƒ Environmental Technical Assistance for Productive Activities – providing training for local agents, drawing up environmental manuals, etc. ƒ Management of Medical Wastes – involving activities concerned with improvement of technical skills at state and municipal level, and also in the health units, preparation of plans to manage hospital wastes, and implementation of appropriate infrastructure and supply equipment in the existing units. ƒ Strengthening of Water Quality Monitoring Capacity – aimed at inspecting and controlling the quality of water delivered to the population. It includes local training and other capacity building activities ƒ Monitoring and Evaluation of Productive Activities – a sample of subprojects will be monitored, with participation of independent monitors to check compliance with management plans and social arrangements. ƒ Environmental Monitoring Program –inspections and analyses will be carried out from time to time regarding environmental effects that could possibly result from the investments. ƒ Solid Waste Management of a Municipal Capital, to be undertaken together with the sanitary landfill pilot in the selected municipal capital, involving the preparation of a Municipal Management Plan for Solid Waste, and including the closing of the existing solid waste dump and the elaboration of a social diagnosis of the dump scavengers (catadores) and a strategic plan for formalizing and improving their work, equipping and training them, etc. 8.6 –Indigenous Peoples Development Plan – An Executive Summary of the Indigenous Peoples Development Plan (IPP) is attached to the EAR, and will be disclosed in the InfoShop. Together with the EAR, the IPP was distributed locally on August 26, 2006.

18 9. – BANK SAFEGUARD POLICIES

Bank environmental and social policies and safeguards that apply to the Alto Solimões Project are: (i) Environmental Assessment (OP 4.01); (ii) Natural Habitats (OP 4.04); (iii) Pests and Parasites Control (OP 4.09); (iv) Indigenous People (OD 4.20); (v) Forest Activities (OP 4.36); and (vi) Cultural Property (OP 4.11). Additional policies that not triggered are explained below.

OP 4.01 – Environmental Assessment – An Environmental Assessment Report (EAR) was prepared for the purpose of identifying the Project potential environmental impacts, in compliance with the environmental policies of the Bank applicable to Category A projects.

Mitigating measures of potential negative impacts identified in the EAR were included in the government proposal under each component. The EAR includes an Environmental Management Plan with environmental guidelines (including costs and responsibilities) to be followed during the conception and implementation of subprojects (both productive subprojects and WSS interventions).

In the conception phase of the Project government met with government and non- government agencies (including rural producers, local leaderships, in Manaus and in Alto Solimões. A second round of public consultations is planned for mid-September with representatives of the civil society, communities, local leaderships and NGOs. The EAR and project design will be adjusted to reflect the recommendations emerging from these consultations. A complete list of participants on the public consultations is presented in chapter 7 of the EAR.

OP 4.04 – Natural Habitats – These policies are triggered given that the proposed project would finance subprojects related to timber and non-timber, and subsistence production. In the Alto Solimões region there are several protected areas under federal and state management, as presented in chapter 1 of this summary. Project activities will not take place in those areas. However, in the areas where subprojects would be implemented, Areas of Permanent Preservation (APP)14 can be found as well as areas that maintain a reasonable environmental integrity. The procedures to be adopted for the selection and implementation of the subprojects (outlined next) should ensure that these areas will be preserved or managed in a way consistent with Brazilian law.

The Project will also have a positive impact on natural habitats through promoting the strengthening of environmental management capacity (licensing and inspection) by SDS/IPAAM in Alto Solimões. This would contribute directly to the protection of protected and unaltered areas.

OP 4.36 – Forests – The Project would support small-scale subprojects15 for the management of native forests for timber and non-timber forest products. To that end, a

14 APP are areas along water courses and slopes 15 Up to 500 ha each.

19 specific study was carried out on the potentially adverse impacts of these activities, in line with the principles of the Forest Policy (OP 4.36). The results of these assessments have been incorporated in the EAR. The study found that the conceptual approach of the proposed subprojects is adequate and recommends measures to ensure that sustainable forest management complies with OP 4.36 requirements. These measures are included in the Project’s Environment Management Plan.

The Project will support the implementation of State-approved Forest Management Plans conducted by small-scale landholders According to OP4.36 (par. 12) such forest operations do not require to be formally certified, but they must: (i) have achieved a standard of forest management developed with the meaningful participation of locally affected communities, consistent with the principles and criteria of responsible forest management (outlined in OP4.36 par.10); and (ii) adhere to a time-bound phased action plan to achieve such a standard. The action plan must be developed with the meaningful participation of locally-affected communities and be acceptable to the Bank. The project has provisions in its operational manual to ensure compliance with such conditions as set forth in OP 4.36 (pars. 10 and 12).

The State has approved the Forest Management Plans without demanding that "holders" have legal tenure, rather they must demonstrate possession. Since nearly all Forest Management Plans have been granted on public (federal) lands, the holder has the right to claim the land under Brazilian law. However, the convoluted bureaucratic process to secure legal tenure can take up to two years. Three measures will be implemented to address land tenure related to the Forest Management Plans. (i) development and approval of a Land Tenure policy for the State’s interior; (ii) development of a cost- effective and timely system for land registration for small hand holders; and (iii) definition in the operational manual of land tenure related registration criteria to screen potential subproject beneficiaries, selecting those who have the greatest probability of securing legal land registration. These measures are aligned with OP 4.36. In APL Phase 2, only Plan holders with legal registration will be eligible for subproject financing.

OP 4.09 – Pests and Parasites Control - This is a slight possibility that the project would support the acquisition of pesticides or herbicides through grants for productive activities or through micro-projects for organizational development and community production (less than $10,000 each). In the unlikely case this occurs, specific measures would be taken to ensure compliance with OP 4.09. The project will not finance products that fall in World Health Organization classes IA and IB. The project would also require support for training of agricultural producers participating in the Project in the correct management and use of agricultural pesticides (such as the use of protective gear, etc). In addition, the Operational Manual will recommend the adoption of an integrated pest management (IPM) approach whenever possible. Since there are no subprojects currently under consideration that would involve the use of agrochemicals it was not considered necessary to prepare a pest-management manual for the project as a whole.

OD 4.10 – Indigenous People – The Project, in component B – Sustainable Development should benefit the indigenous population in this region. In accordance with the guidelines

20 of OD 4.20 a framework has been prepared specifically for the Indigenous People and an Indigenous Peoples Development Plan (IPP), with the purpose of providing guidance to the approach of the indigenous people in the Project. The framework is based on applicable Brazilian legislation and IBRD safeguards policies.16

OP 4.11- Cultural Property – For compliance with the policy of protection of the physical and cultural property, the operational manual would include a chapter on environmental guidelines for construction containing a section on procedures to follow in case of unexpected findings of objects with possible cultural or archaeological value.

OP 4.12 – Involuntary Resettlement – The project will not support any activities that may lead to involuntary resettlements, as described in OP 4.12, including physical relocation or loss of access to natural resources. The Operational Manual will include screening mechanisms for upgrading water and sanitation systems, ensuring that they do not trigger OP 4.12.

OP 4.37 – Safety of Dams –The project will not finance dams.

16 Annex 3 of the EAR contains a summary of the Indigenous Peoples Framework, Indigenous People Development Plan, and consultation process as well as the results there of. An English language summary is posted in the Bank’s Infoshop.

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