Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No: 5 1366- BR

PROJECT APPRAISAL DOCUMENT

ON A

Public Disclosure Authorized PROPOSED LOAN

IN THE AMOUNT OF US$650.4 MILLION

TO THE

STATE OF SA0 PAULO

WITH THE GUARANTEE OF

THE FEDERATIVE REPUBLIC OF BRAZIL

Public Disclosure Authorized FOR A

SA0 PAULO METRO LINE 5 PROJECT

MARCH 3,2010

Sustainable Development Department Brazil Country Management Unit Latin America and Caribbean Regional Office

Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY

CURRENCY EQUIVALENTS

(Exchange Rate Effective June 2009)

Currency Unit = Brazilian Real R$1.77 = US$1

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

ATC Automatic Train Control BNDES National Economic and Social Development Bank (Banco Nacional de Desenvolvimento EconGmico e Social) BUI Single Integrated Fare Ticket (Bilhete Unico Integrado) CBTU Brazilian Urban Train Company (Companhia Brasileira de Trens Urbanos) CETESB Environmental Technology Company (Companhia de Tecnologia de Saneamento Am biental) CDTI Integrated Transport Coordination Commission (Comite' Diretor de Transporte Integrado) CMSP Siio Paul0 Metro Company (Companhia do Metro de SGo Paulo) also known as METRO (see below) CPTM Siio Paulo Metropolitan Train Company (Companhia Paulista de Trens Metropolitanos) CVA Consbrcio Via Amarela, the construction consortium selected for Line 4 EMTU Metropolitan Bus Company (Empresa Metropolitana de Transporte Urbano) EMU Electric Multiple Unit IBGE Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geogra$a e Estatistica) ICB International Competitive Bidding ICMS Circulation Tax on Goods and Services (Impost0 de Circulacio sobre Mercadorias e Serviqos) IERR Internal Economic Rate of Return METRO S5o Paul0 Metro Company (Companhia do Metropolitano de Si0 Paulo). Same as CMSP MR Metropolitan Region PCU Project Coordination Unit

PITU ' Plan0 Integrado de Transporte Urbano

1 PMU Project Management Unit PPP Public-Private Partnership SEAIN Federal Secretariat for Foreign Affairs Secretariat for the Environment SMA (Secretaria do Meio Ambiente) SPM SBo Paulo Municipality SPMR ,580 Paul0 Metropolitan Region SSP State of SBo Paulo STM SBo Paulo Municipal Secretariat for Transport (Secretaria de Transportes da Prefeitura do Munickio de Sdo Paulo) STMSP SBo Paulo State Secretariat for Metropolitan Transport (Secretaria de Transportes Metropolitanos Regido Metropolitana de Sdo Paulo)

Vice President: Pamela Cox Country Director: Makhtar Diop Sector Director: Laura Tuck Sector ManagedSector Leader: Aurelio Menendez/Jennifer Sara

Task Team Leader: Jorge M. Rebelo i

.. 11

BRAZIL Si40 Paulo Metro Line 5 Project

CONTENTS

Page I . STRATEGIC CONTEXT AND RATIONALE ...... 1 A . Country and Sector Issues ...... 1 B . Rationale for Bank Involvement ...... 6 C . Higher level objectives to which the project contributes ...... 7 I1 . PROJECT DESCRIPTION ...... 7 A . Lending instrument ...... 7 B . Project development objective and key indicators ...... 7 C . Project components ...... 8 D . Lessons learned and reflected in the project design ...... 9 E . Alternatives considered and reasons for rejection ...... 10 I11 . IMPLEMENTATION ...... 11 A . Partnership arrangements ...... 11 B . Institutional and implementation arrangements ...... 11 C . Monitoring and evaluation of outcomeshesults ...... 11 D . Sustainability ...... 12 E . Critical risks and possible controversial aspects ...... -12 F . Loadcredit conditions and covenants ...... 15

IV . APPRAISAL SUMMARY ...... ;...... 15 A . Economic and financial analyses ...... 15 B . Technical ...... 16 C . Fiduciary ...... 17 D . Social ...... 17 E . Environment ...... 18 F . Safeguard policies ...... 19 G . Policy Exceptions and Readiness ...... 21

... 111 Annex 1: Country and Sector or Program Background ...... 22 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 29 Annex 3: Results Framework and Monitoring ...... 31 Annex 4: Detailed Project Description ...... 34 Annex 5: Project Costs ...... 43 Annex 6: Implementation Arrangements ...... 46 Annex 7: Financial Management and Disbursement Arrangements ...... 49 Annex 8: Procurement Arrangements ...... 56 Annex 9: Economic and Financial Analysis ...... 60 Annex 9a: Impact of Line 5 Extension on Low-Income Population ...... 75 Annex 9b: Fiscal Analysis of S30 Paulo State Government, 2003-2008 ...... 78 Annex 10: Safeguard Policy Issues ...... 80 Annex 11: Project Preparation and Supervision ...... 90 Annex 12: Documents in the Project File ...... 91 Annex 13: Statement of Loans and Credits...... 92 Annex 14: Country at a Glance ...... 96 Annex 15: Maps IBRD 36790 ...... 98

iv BRAZIL

SA0 PAUL0 METRO LINE 5 PROJECT APPRAISAL DOCUMENT

LATIN AMERICA AND CARIBBEAN LCSTR

Date: March 3, 2010 Team Leader: Jorge M. Rebelo Country Director: Makhtar Diop Sectors: General transportation sector (1 00%) Sector ManagedDirector: Themes: Access to urban services and housing Aurelio MenendedLaura Tuck (PI Project ID: P 116170 Environmental screening category: A Lending Instrument: Specific Investment Loan Project Financing Data [XI Loan [ ] Credit [ 3 Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 650.4 Proposed terms: Commitment-linked, with all the conversion options, US$ denominated IBRD flexible loan with variable spread option, repayable in 30 years, including 5 years grace and level

Source Local Foreign Total Borrower 1,385 -23 0.00 1,385.23 International Bank for Reconstruction and 0.00, 650.40 650.40 Development Inter American Development Bank 0.00 480.97 480.97 (IADB) * TOTAL 1,385.23 1,13 1.37 2,5 16.60

V L Estimated disbursements (Bank FY/WS%m) FY 10 11 12 13 14 Annual 1.6 191.6 302.5 154.3 0.4 Cumulative 1.6 193.2 495.7 650.0 650.4

Does the project depart from the CAS in content or other significant respects? [ ]Yes [ x ] No Does the project require any exceptions from Bank policies? [ ]Yes [x]No Have these been approved by Bank management? n/a ]Yes [ IN0 Is approval for any policy exception sought from the Board? [ ]Yes [x]No Does the project include any critical risks rated “substantial” or “high”? [x]Yes [ ]No It might have prolonged litigation in procurement award of traindsystems Does the project meet the Regional criteria for readiness for implementation? [ x ]Yes [ ] No

Project development objective (PDO): To improve the mobifity ofpublic transport users in the Capiio Redondo-Largo Treze-Chdcara Klabin corridor in a cost-efficient and environmentafly-Jriendfymanner. The Bank will finance, however, only a portion of the overall project, related to the provision of trains and signaling equipment.

The proposed Project which is expected to cost US$2,5 16.6 million will extend the existing Line 5 by approximately 12 km from the southwest of the city to the expanded center by 20 13 and will be co-financed by the State of Sgo Paulo, IBRD and the IADB as described in detail in Annexes 4 and 5. The State will fully finance all the civil works and permanent way as well as its project management and supervision. IADB will finance in full the modernization of 8 trains which already operate in the existing Line 5 and will partially finance with the State the energy supply, the telecommunications and control system, the auxiliary systems and the low-income population impact studies for a total of US$481 million. The IBRD will finance the acquisition and supervision of delivery and implementation of 26 new trains, the CBTC signaling system and platform screen doors and climate change related studies for a total of US$650.4 million (Parts A1 and B1 of the Project). After the extension, the line (herein for consistency with the legal agreement called Extended Line 5) will consist of a 20.1 km metro line going from Capdo Redondo station to Chcicara Klabin station and including the 15 intermediate stations. The proposed Project consists of the following parts:

Part A: Infrastructure and Equipment 1. Provision of financing for the acquisition and/or installation of: (i) at least twenty-six (26) new train sets (EMUS) of 6 (six) cars each and related accessories, to operate on the Extended Line 5; (ii) Communication Based Train Control (CBTC) signaling systems for the Extended Line 5; and (c) platform screen doors for all stations of the Extended Line 5. 2. Carrying out of works and provision of financing for: (i) the rehabilitation and modernization of 8 trains which already operate in the existing Line 5; and (ii) the installation of the energy supply, telecommunications and control and auxiliary systems required for the extension systems. 3. Carrying out of civil works for the construction of approximately 12 km of tunnel and for

vi the construction of 11 new stations, the permanent way and the Guido-Caloi train yard.

Part B: Technical Assistance and Institutional Development 1. Provision of financing and technical assistance for the: (i) supervision of the manufacturing and delivery of the new trains acquired under Part A. 1 of the Project; (ii) supervision of the supply an installation of the CBTC signaling systems; and (iii) carrying out of specific studies to support the development of SP Metro’s climate change strategy and to assess the impact of the Extended Line 5 on greenhouse gas emissions. 2. Carrying out a study assessing the impact of the Extended Line 5 on the low-income population in the Capdo Redondo-Chdcara Klabin Corridor. 3. Provision of financing for Project management and civil works supervision consultants.

Which safeguard policies are triggered, if any? Environmental Assessment, Involuntary Resettlement, Physical Cultural Resources and Pest Management, Significant, nonstandard conditions, if any, for: As conditions of effectiveness, the project must be registered at the Central Bank and the subsidiary agreement between the State and the Ssio Paulo Metro signed.

Covenants applicable to project implementation: 1. The Ssio Paulo State Secretariat for Metropolitan Transport must maintain throughout the project a Project Coordination Unit responsible for the overall coordination of the project and to implement the studies included in the institutional component related to sector policy strengthening. 2. Ssio Paulo Metro must maintain throughout the duration of the project a Project Management Unit in charge of managing its respective components of the project and tracking physical and financial progress. 3. The Borrower will, within the limits of its authority, commit to preserve the.CDT1 and the Bilhete-Unico Integrado (BUI) at all times during execution and until completion of the Project, in the present or other format as long as it continues to enhance the mobility and affordability of metropolitan transport users, particularly those of low-income. In addition, the Borrower shall undertake its best efforts to extend the BUI to other modes of transportation and expand the CDTI to include other municipalities of the SPMR. 4. The Borrower shall ensure that the relevant funds for the financing of Parts A.2, B.2, A.3 and B.3 of the Project, as described in the Loan Agreement, shall be provided as required. 5. The Borrower, through STMSP, shall enter into an agreement (Subsidiary Agreement) with SP Metro, under terms and conditions approved by the Bank, which shall include, inter alia: (i) SP Metro’s undertaking to comply with the safeguards, fiduciary and technical requirements applicable to the Project in accordance with the provisions of this agreement; (ii) SP Metro’s undertaking to carry out the Project in accordance with the provisions of the Anti-Corruption Guidelines; and (iii) the Borrower’s undertaking to make the necessary proceeds of the Loan available to SP Metro to carry out the Project.

vii

I. STRATEGIC CONTEXT AND RATIONALE

A. Country and Sector Issues

1. Introduction: This document describes a project to support an extension of Line 5 of the Silo Paulo Metro (subway system). The first phase of the Line 5 project was financed by the Inter-American Development Bank (IADB) in 1994. The State of Silo Paulo received approval from COFIEX (Brazilian External Financing Commission) on July 13, 2009 to obtain financing from the World Bank and IADB for the second phase of Line 5 for an amount of US$650.4 million and US$481 million respectively, in addition to US$1,385..2 million from the State in counterpart funds.

2. The Bank has been actively supporting a long-term program of mass transit investments in the Silo Paul0 Metropolitan Region (SPMR) since 1992. Table 1 describes a chronology of milestones since the first World Bank-financed mass transit loan in the SPMR. Following a loan to the federal government to support the transfer and modernization of the federally-owned and operated Silo Paulo subdivision of the Companhia Brasileira de Transportes Urbanos to the State, the State of Silo Paulo requested loans to interconnect the two existing suburban railway systems in the SPMR, to build Silo Paulo Metro’s Line 4, to acquire new trains and signaling systems for the Metro and Companhia Paulista de Trens Metropolitanos (CPTM), and an additional financing loan for Line 4 to cover for the US Dollar devaluation in relation to the Brazilian Real. The support was anchored on a long-term integrated urban transport, land use and air quality strategy and master plan (known as the PITU) prepared since the first loan and periodically updated by the State. The State has recently requested a loan for phase 2 of Line 4, an additional loan to acquire more trains for CPTM and the loan described in this appraisal document to finance the extension of Line 5 in parallel with IADB.

3. Despite an impressive effort in the last 6 years by the State of Silo Paulo to improve urban transport in the Silo Paulo Metropolitan Region (SPMR), its subway network is still comparatively small for one of the largest metropolitan areas in the world and the most important economic region of Brazil. Passenger density per kilometer of line is one of the highest in the world, particularly at peak-hours due to the small extension of the network and its limited coverage. To fbrther improve mobility in the SPMR, the State decided to prioritize the implementation of key missing links of the subway network in its Urban Transport Master Plan (PITU) to better integrate the existing commuter rail and bus network with the subway. Line 5, which began construction in 1994 and has been in operation since 2002, is currently only half completed fiom Capilo Redondo to Largo Treze. A map of the system and project alignment is provided in Annex 15. The State has realized that, in order for Line 5 to have a significant impact on the SPMR, it needs to extend this line as originally planned from Largo Treze to Chacara Klabin, thereby linking the very busy Santo Amaro area to the expanded city center. With this link operational, Line 5 will greatly enhance accessibility of important employment areas as well as health and education facilities to a very large population whom at present only have access by road-based transportation modes.

1 - Table 1: Seauencine of Reforms and Investmen s in SPMR -Year Institutional Milestone Phvsical Investment Related World Bank Operation 1992 Federal Government decides to Modernization of plant SBo Paulo Metropolitan transfer CBTU-SP to the State and rolling stock of CBTU- Transport Decentralization State agrees and draws Long- SP project (Ln. 3457-Br) with Term Strategy with Bank support Federal Government - (US$126M) approved in 1992. 1996 State assumes CBTU-SP and State starts hrther SBo Paulo Metropolitan -98 merges it with State commuter railway modernization of CPTM Transport Decentralization (FEPASA) creating CPTM with own funds project closed in 1998. State creates the Regional Transport Coordination Commission - under the name of CBmara Temcitica 1999 State decides to physically The old CBTU-SP Slo Paulo Integrated Urban -00 integrate the suburban rail networks of network is linked to FEPASA Transport Project, the Barra CBTU and FEPASA and to improve network through Barra Funda Funda -Roosevelt link (Ln. some CPTM corridors to facilitate free -Roosevelt link 43 12-Br) to the State (US$45M) access between them Dramatic improvements approved in 1998. to key transfer stations such - as Luz and Bras 200 1 State decides to continue the SBo Paulo Metro Line 4 S?io Paulo Metro Line 4 Project -02 physical integration between Metro planned to link Metro and (Ln. 4646-Br.) to the State and CPTM and introduces free CPTM networks (US$209M) approved 2002. transfer between the two systems State decides Line 4 would have major private sector participation through a - concession or PPP 2004 SBo Paulo Municipality Integration investments SBo Paulo Integrated Urban -06 introduces free transfer between buses including BUI. Transport Project, the Barra State creates the CDTI, the Funda -Roosevelt link, closed in successor to the Cdmara Temcitica 2004. State and Municipality introduce - the Bilhete Unico Integrado 2006 Demand for rail increases Determination of need to State requests financing for SBo -07 dramatically increase carrying capacity Paulo Trains and Signaling Line 4 PPP (the first in Brazil) is and peak hour frequencies project (US$SSOM) and signed additional financing for Phase 1 - of Line 4 (US$95M). 2008 Intermunicipal buses to be State to continue to Trains and Signaling (Ln,7506- -09 included in the BUI as State and increase carrying capacity BR) and additional financing for Municipality sign an agreement to Phase 1 of Line 4 (LnS7536-BR), have a common smart card for all both approved in 2008. buses and rail based systems State requests financing for - Phase 2 of Line 4. 2009 State requests Bank financing for State to continue to World Bank preparing a Brazil- additional 9 trains for CPTM upgrade CPTM’s carrying GEF ($8,5M Grant) for State requests Bank financing for capacity and extending Metro Sustainable Transport to include - extension of Metro Line 5 studies in Silo Paulo 2010 Line 4 (Phase 1) to enter in Construction of Phase 2 SBo Paulo Metro Line 4 Project operation of Line 4 to start around (Phase 1) closing June 2010; Modal integration to continue March 2010 2012 Increased private sector Completion of Phase 2 Trains and Signaling project - participation planned of Line 4 around June 20 13 closing June 20 13.

2 4. Evolution of the Metropolitan Transport System of the State of Sfio Paulo: The Silo Paulo Metropolitan Region (SPMR) has 19 million inhabitants spread irregularly over 8,000 square kilometers. Although dominated by the Silo Paulo Municipality (SPM) with 11 million inhabitants, SPMR is made up of 39 municipalities. The passenger and freight transport needs of such a region are enormous. The region generates more than 20% of Brazil's GDP and is considered to be the most important economic region of the country. The region continues to grow despite the negative impacts of the global financial crisis that began in 2008. Over the decades, rapid urbanization has resulted in uncontrolled urban sprawl with associated traffic congestion and increasing travel distances, exacerbated by social problems including crime and unemployment. Of the 26 metropolitan regions in Brazil, SPMR has the highest population density (2,245 inhabitants per square km) and the fourth highest share of people living in slums (9%).' The problems and costs of traffic congestion in SPMR affect both passengers and freight logistics, contribute negatively to the economic development and competitiveness prospects of the region, and tend to have a disproportionate impact on the poor.

5. In the past, a lack of coordination between the State and Municipality of Silo Paulo led to poor tariff and modal integration, lack of prioritization in urban transport investments, and no common policy on pricing and subsidies. However, a number of investments and reforms since the 1990s, including several World Bank-financed projects listed in Table 1, have resulted in many notable achievements such as: (i) the decentralization of the suburban rail network, (ii) consolidation of rail-based systems through physical and fare integration between Metro and CPTM, (iii) the creation and periodic update of the PITU, (iv) increasing private sector participation with Line 4, (v) creation of a regional transport coordination commission (CDTI), and (vi) integrated modal tariff with Municipal buses (Bilhete Unico Integrado, BUI). In particular, the BUI, which allows users to buy a single ticket costing less than the sum of individual tickets and can be used in several modes within a certain period of time, benefited considerably the low- income segments of the population who make the majority of transfer trips. It also contributed to significantly increased ridership on rail-based systems (around 10% per year in the past 3 years), creating an urgent need to increase the supply of trains during peak hours to transport the new demand safely and with an acceptable level-of-service.

6. Overview of Public Transport in SPMR: Each day, around 39 million person-trips take place, of which 13 million (33%) are by foot, 14 million (37%) by car and the rest by public transport (23% by bus, 4.5% by metrorail and 2.5% by suburban rail). Of the 12 million trips taken by public modes, about one-third of the passengers use more than one mode of transport and require some sort of modal transfer. In fact, 78% of all metrorail trips on the Silo Paulo Metro Company (Metro), 61% of all suburban rail trips on the Silo Paulo Train Company (CPTM), and 16% of all bus trips require one or more transfers to be completed. Despite an existing 3 15 km rail-based network (see Annex 1 for information on the Metro and CPTM rail systems), the lack of full physical and tariff integration between the bus, metro and the suburban trains has over the years discouraged low-income users from using rail. This has led to an over-reliance on less efficient and less environmentally-friendly road-based modes, including buses and automobiles, and contributes to the heavy congestion experienced in the SPMR. With the introduction of the BUI, the rail-based demand increased and the main issue is now providing enough capacity to transport the users with an acceptable quality-of-service, Low-income urban households, as the

' Brazil SBo Paulo: Inputs for a Sustainable Competitive City Strategy, World Bank, 2007 3 main users of public transport, bear the brunt of the low-quality of the service and consequently suffer from: (i) extreme overcrowding of trains (more than 8 passengershquare meter) due to shortage of capacity at peak hours; (ii) long work journeys (2.5 hourslday from the metropolitan periphery to the urban centers) with often more than two modal transfers; and (c) high costs of personal transport (particularly for informal workers who do not receive a transport subsidy) resulting in the need to spend between 15% and 20% of income towards fares.

7. The over-reliance on road-based modes in SPMR also has a negative impact on air quality, resource consumption, and road safety. There are roughly 5 million road vehicles currently registered in the SPMR. Air quality is degraded by the presence of excessive levels of carbon monoxide, ozone and particulate matter. During 2006, health warnings due to air pollution from carbon monoxide were issued for a total of 250 days, ozone for 108 days, and particulate for 54 days. Vehicles account for 73% to 94% of most air pollutants in the SPMR, and contribute to 3 1% of particulate matter. To combat this, most new vehicles in Brazil already meet the equivalent of Euro IV standards and SBo Paulo has been a pioneer in implementing car and truck restrictions in the expanded city center by time of day and day of week. Vehicular air pollution has also been somewhat mitigated by the widespread use of sugar cane-based ethanol in lieu of gasoline, but greenhouse gas emissions and energy use from urban transport continue to increase with rapidly growing private vehicle ownership and use. Vehicular accidents also continue to increase and pose added health risks. In 2006, there were about 150,000 road accidents in SBo Paulo Municipality (SPM) which accounted for 35,000 injuries and about 1,500 deaths, with a cost conservatively estimated at US$1.5 million per day. According to the SPM's Traffic Engineering Department, congestion has been increasing at a rate of 20 percent per year and the economic cost of time and fuel lost due to traffic congestion has been estimated at US$6 million per day.

8. The extension of Line 5 is a priority undertaking for the State. An 8.4 km segment of Line 5 has been in operation between CapBo Redondo-Largo Treze (including 6 stations) since October 2002, connecting densely-populated and low-income areas in the southwest of the city to a major employment and commercial center at Santo Amaro. The initial operating segment of Line 5 currently carries only 117,000 passengers per day, or one-fourth the average ridership per km of the other SBo Paulo Metro lines, mainly because of Line 5's short length and lack of connectivity with the rest of the rail network (except to CPTM at Santo Amaro, as shown in Annex 2). However, initial demand studies of the extended Line 5 (20.1 km) forecast an opening year demand of approximately 644,000 passengers per day by completing an important missing link to the expanded city center and better balancing demand in both directions and beyond the peak-hour.

9. State Strategy for the Sector: In 2007, the State Government decided to investigate why the low-income population made few trips in general and fewer on rail-based modes; the findings pointed to the inadequacy of the public transportation service to meet its mobility needs coupled with the un-affordability of public transport tariffs. These results were confirmed in the last Origin- Destination (OD) survey which helped identify the main causes of the low usage of public transportation by low-income groups who used to make lengthy trips by foot: a) Unaffordable fares: most of the people surveyed indicated their inability to pay the fares given their low-income and the rather extensive need to use more than one mode-and hence pay more than once-to reach their destination. This reason also highlighted the lack of an integrated fare across transit modes in the SPMR. The State and Municipality corrected this problem by introducing the BUI; b)

4 Poor Micro-accessibility : transit supply in areas where the low-income population lived was inadequate. Namely, bus stops or stations were far and there was a lack of integration between bus and high-capacity modes (train or metro). Further, riders had to cross unsafe areas to walk to the bus stop or rail station; c) Low frequencies, delays and unreliable service: service was not frequent enough and was unreliable causing long waiting periods and delays; d) Long travel times: caused by road congestion in the case of buses and frequent breakdowns in the case of trains. Indeed, the 2002 OD survey showed that the average duration of a trip by public transport for this income group was 1.5 hours, and in some more peripheral areas it exceeded two hours and e) Uncomfortable and unsafe travel conditions: overcrowded vehicles (buses and trains) were common. Additionally, users faced unsafe conditions to get to the bus stop or train station, and there were instances of assaults and violence within the vehicles, mainly in buses. Since 2007, and to address these issues, the State pursued the policies and investments described below.

10. Ongoing system integration is improving the accessibility of the low-income population, in particular to employment opportunities as well as to health and education facilities. With these projects and other investments, the State is successfully achieving the interconnection of its entire rail-based transport network and facilitating the integration with buses and other transport modes. In a cost-efficient way, the State has therefore been able to vastly expand the reach of the relatively small 60 km of subway network with an existing 275 km suburban rail network and associated bus routes.

11. At the same time that physical improvements in infrastructure are being made, the State has progressed in the more challenging institutional aspects of the strategy. Of special importance is the operationalization of the regional transport coordination commission with the Municipality of SZio Paulo. This group is now called Integrated Transport Coordination Committee (Comite' Diretor de Transporte Integrado - CDTO and has been responsible for the introduction of an integrated tariff (Bilhete- Unico Integrado-BU., which allows users to buy a single ticket that can be used across transport modes during a two-hour period. The integrated tariff is less expensive than the sum of individual tickets, and has a particularly positive impact on the poor, who tend to travel longer distances and more readily switch transport modes.

12. An important consequence of the improvements in the metropolitan transport system has been the dramatic increase in user demand for rail-based systems. Annex 1 presents the growth in Metro ridership, which has averaged around 10% per year since 2005. This significant growth in demand has led to the urgent need for increasing the carrying capacity and frequency of trains, especially at peak hours, in order to maintain an acceptable level-of-service that ensures passenger safety while minimizing waiting time at stations. In addition, the continuation in the improvement of the carrying capacity of the system is expected to fwther attract additional users from road to rail, thereby containing or reducing congestion while also contributing to positive environment impacts and the climate change agenda.

13, Key Development Issues: SPMR has worked steadily towards improving the four pillars of its long-term urban transport strategy, namely: (1) regional coordination, (2) an integrated urban transport, land use and air quality strategy, (3) financing mechanisms, and (4) the progressive participation of the private sector in operations and construction. In the last 6 years, the strong alliance between the State and the Municipality of SBo Paulo has produced significant

5 improvements in terms of tariff and modal integration and infrastructure investment coordination. The key issues to be addressed by the project are: a) Institutional: mainly the continued strengthening of the regional coordination arrangements; b) Improvements in the quality of services for users: to be achieved through gains in accessibility, availability, acceptability and affordability of public transport services, particularly for low-income segments of the population served by Line 5; c) Local and global emissions in the corridor: fostering rail-based travel by increasing the number of transfer nodes in the Metro network will increase modal integration, increase ridership, and decrease the length of trips by more polluting road-based modes. Initial studies estimate a total reduction in travel time of roughly 30 million hours per year (65% on home-to-work trips). The completion of Line 5 is also expected to reduce the number of vehicle- km by road-based modes, particularly buses, which will shorten their itineraries by feeding the Metro stations. This reduction in vehicle-km and a decrease in the level of congestion on affected roads are expected to reduce the emissions of local pollutants and greenhouse gases when compared to a future scenario without the project; and d) Cost recovery: the need for Metro to maintain a working ratio equal or less than one through a combination of good financial management and by setting tariffs which, when added to subsidies, will cover at least its long-run marginal cost.

B. Rationale for Bank Involvement

14. The Bank?s strategy in Brazil is to support policies and investments that will encourage economic growth and social development in a context of macroeconomic stability. The emphasis is on efficient resource allocation, increased efficiency in the public sector and the appropriate targeting and delivery of support systems to the poor. The proposed Project is consistent with the World Bank Group?s Country Partnership Strategy (CPS) for 2008-201 1 discussed by the Board in May 1, 2008 (Report 42677-BR). This CPS will continue to support the same four main pillars namely equity, sustainability, competitiveness and sound macro-economic management endorsed in the previous country strategy. The proposed project objectives are in line with the Bank?s Transport Sector objectives, namely: (i) to promote financial viability of public enterprises and their reform, including decentralization to various levels; (ii) to contribute to poverty alleviation; and (iii) to reduce Government subsidies through better tariff policies and improved financial management. Through its involvement, the Bank has already helped in the decentralization process of the metro from Federal to State and is now assisting the State in the consolidation of its rail- based systems and in the tariff and modal integration process.

15. The State has adopted a strategy aimed at improving metropolitan coordination, updating and implementing an urban transport, land use and air quality strategy (PITU), looking for financing mechanisms other than government budgets, and progressively promoting the participation of the private sector in operations and investment in the sector. The main beneficiaries of the above projects have been primarily the low-income users who make up more than 50% of the rail-based system users. The State has shown commitment and has given priority to Bank-financed urban transport projects even in times of budget restrictions.

16, The proposed Project also directly builds on previous and ongoing Bank-financed efforts in urban transport in the State, as indicated in Table 1. The main beneficiaries of the present and previous projects have been low-income users who make up a majority of the rail-based system ridership. In addition, the Bank has a very strong program with the State of Si30 Paulo which 6 accounts for about 23% of the total Brazil active portfolio. When the Governor came to office, he requested close to US$2 billion in Bank assistance, primarily in infrastructure projects to reflect the State’s priority in this area. In July 2009, the Federal Government agreed to an additional US$lbillion in State borrowing from IBRD (including this proposed Project and a second phase to the recently approved Feeder Roads project). The Bank has responded quickly to the State’s request for support, evidenced by: (a) the recent Board approval of two projects (a US$167 million roads project and a US$104 million waterhrban upgrading project)2, (b) invitations issued to negotiate four new projects (a US$78 million rural development project, an innovative US$78 million results-based water resource management project, US$135million for the second phase of Metro Line 4, and a US$113 million additional financing for suburban trains, and (c) undertaking of a AAA to evaluate the performance of private hospitals.

C. Higher level objectives to which the project contributes

17. Affordable and accessible urban transport services contribute to higher equity and poverty reduction by allowing all segments of society, and particularly those with low-income, to be able to reach employment areas, health, education and leisure facilities, thereby contributing to an improvement of quality of life. This Project seeks to improve the rail-based urban transport system to the benefit of the low-income population and will also make a potentially important contribution to the improvement in air quality and reduction in vehicle emissions. As such, Line 5 can be considered a part of the State’s climate change agenda and was discussed with the Metro in the context of developing a greenhouse gas emissions reduction plan.

11. PROJECT DESCRIPTION A. Lending instrument

18. The Project will be implemented as a Specific Investment Loan (SIL) to be disbursed over FY 2010-2014.

B. Project development objective and key indicators

19. The PDO is: To improve the mobility of public transport users in the CapSo Redondo- Largo Treze-Chdcara Klabin corridor in a cost-efficient and environrnentally-fkiendly manner. The Bank will finance, however, only a portion of the overall Project, related to the provision of trains and signaling equipment. This objective will be achieved by extending the existing Metro (subway) Line 5 by approximately 12 km from Largo Treze to Chacara Klabin, and by integrating it both physically and tariff-wise with the rest of the subway, commuter rail and bus network, thereby improving the accessibility of major employment, commercial, health, recreation, and educational facilities located in the expanded central area of the city to its users. In addition, by shifting passengers from road to rail-based modes, the project is expected to improve the current trajectory of road accidents and carbon dioxide emissions in the corridor.

Integrated Water Management in Metropolitan Sflo Paulo Program (Ln. 7662-BR) SBo Paulo State Feeder Roads Project (Ln. 7688-BR)

7 20. The PDO will be achieved by reducing travel times between origins and destinations within the area of influence of Line 5 and by guaranteeing a smooth integration between metro and other modes, particularly bus. To enable this improvement in mobility and quality of service to the urban transport users, the Bank will finance the new rolling stock and associated systems required to carry the additional demand generated by those stations. The key indicators will include: a) Travel time plus waiting time between 2 pairs of stations (in minutes);b) Percentage of new stations integrated with bus lines (integration related 0bjective);c) Number of passengers boarding in new stations; d) Number of low-income (less than 4 minimum salaries) riding on Line 5;e) Number of bus-km in the corridor; and f) Metro and Line 5 working ratio.

2 1. The proposed Line 5 extension will include 1 1 new stations providing access to some of the most important employment, educational, recreational, and health centers in SPMR, such as: Largo Treze, Av. Santo Amaro, Av. Jose Diniz, Av. Roque Petroni, Av. Monunbi, Moema, Ibirapuera, Vila Clementino, Vila Mariana, numerous universities, and seven hospitals (Santa Casa de Santo Amaro, Evaldo Foz, Gastroclinica, Servidor, A.A.C.D., Siio Paulo, and Santa Cruz). During project preparation, the team will assess the number of jobs that will be made accessible to the low-income population residing in the area of Capiio Redondo. The project will also interconnect with existing Metro Line 1 at Santa Cruz and Line 2 at Chacara Klabin facilitating access to other sectors and employment centers of SPMR. It will also support improved pedestrian and universal accessibility features in and around stations, the rationalization of bus lines to feed the Metro stations and integration with complementary investments, such as a planned busway between Morumbi and Diadema, and a planned Light Rail Transit line (LRT) serving Congonhas Airport.

22. The Project's primary target groups are existing and potential users of public transport system, particularly low-income residents living or working in the catchment area of the project in the Capiio Redondo area. The State has determined that extending Metro Line 5 is the best alternative to improve the quality of public transport services in that corridor. The network of bus routes that currently serve the area near the project alignment will be rationalized and integrated with the new stations of Line 5.

C. Project components

23. The proposed Project which is expected to cost US$2,516.6 million will extend the ' existing Line 5 by approximately 12 km from the southwest of the city to the expanded center by 2013 and will be co-financed by the State of Siio Paulo, IBRD and the IADB as described in detail in Annexes 4 and 5. The State will fully finance all the civil works and permanent way as well as its project management and supervision. IADB will finance in full the modernization of 8 trains which already opefate in the existing Line 5 and will partially finance with the State the energy supply, the telecommunications and control system, the auxiliary systems and the low-income population impact studies for a total of US$48lmillion. The IBRD will finance the acquisition and supervision of delivery and implementation of 26 new trains, the CBTC signaling system and platform screen doors and climate change related studies for a total of US$650.4 million (Parts A1 and B1 of the Project). After the extension, the line (herein for consistency with the legal agreement called Extended Line 5) will consist of a 20.1 km metro line going from CapSo Redondo station to Chdcara Klabin station and including the following intermediate stations: Campo Limpo, Vila das Belezas, Giovana Gronchi, Santo Amaro, Largo Treze, Adolfo Pinheiro, Alto da Boa Vista, Borba Gato, Brooklin Campo Belo, Agua Espraiada, 8 Ibirapuera, Moema, Sewidor, Vila CLementino, and Santa Cruz. The proposed Project consists of the following parts:

Part A: Infrastructure and Eauipment

1, Provision of financing for the acquisition and/or installation of: (i) at least twenty-six (26) new train sets (EMUS) of 6 (six) cars each and related accessories, to operate on the Extended Line 5; (ii) Communication Based Train Control (CBTC) signaling systems for the Extended Line 5; and (c) platform screen doors for all stations of the Extended Line 5.

2. Carrying out of works and provision of financing for: (i) the rehabilitation and modernization of 8 trains which already operate in the existing Line 5; and (ii) the installation of the energy supply, telecommunications and control and auxiliary systems required for the extension systems.

3. Carrying out of civil works for the construction of approximately 12 km of tunnel and for the construction of 11 new stations, the permanent way and the Guido Culoi train yard.

Part B: Technical Assistance and Institutional Development

1. Provision of financing and technical assistance for the: (i) supervision of the manufacturing and delivery of the new trains acquired under Part A.1 of the Project; (ii) supervision of the supply an installation of the CBTC signaling systems; and (iii) carrying out of specific studies to support the development of SP Metro’s climate change strategy and to assess the impact of the Extended Line 5 on greenhouse gas emissions.

2. Carrying out a study assessing the impact of the Extended Line 5 on the low-income population in the Caplo Redondo-Chdcara Klubin Corridor.

3. Provision of financing for Project management and civil works supervision consultants.

24. The IBRD loan of US$650.4 million will fully finance Parts A1 and B1 of the Project. Part A1 will account for 96% of the loan and Part B1 the remaining 4%. In Part A1 (not including contingencies), the acquisition of the 26 new trains and accessories is estimated to cost US$422.82 million, the communication based train control signaling (CBTC) is estimated to cost US$88.29 million and the platform screen doors are estimated to cost US$34.47 million. Part B1 (not including contingencies) is estimated to cost US$23.13 million. A detailed cost table for all Project components is given in Annex 5.

D. Lessons learned and reflected in the project design

25. The major lessons learned from other Bank-financed rail projects in SZlo Paulo and others in the urban transport sector are:

9 The service order for civil works should only be signed once there is a firm date for expropriations and physical relocation of people and businesses to be completed to avoid paying penalties for delays. Therefore, the funds for expropriation must also be made available by the State very quickly and the process of valuation of properties and court decisions about the value of the expropriation be advanced and expedited. Bidding of major civil works projects quite often leads to litigation, and therefore advanced procurement, even before the loan is approved, is recommended to minimize delays. Tunneling and construction of station shafts are very complicated works which may cause accidents. Proper design and strict supervision is required and safety procedures, including emergency evacuation from the site, must be ensured. Environmental impacts of the construction must be monitored very carefully, particularly those impacting the surrounding housing and buildings. The project management and civil works supervision team must monitor these impacts carefully as done in Line4. The coordination between the different levels of government (State, Municipalities) in urban transport is fundamental for medium and long term planning and for the implementation of a truly integrated system, both modal and tariff-wise. The policy for the sector must be strengthened to minimize distortions resulting from inefficient physical and financial coordination between modes and to promote multimodal integration. The tariff levels should allow for significant cost recovery of working costs and must be complemented by financing mechanisms which cover the shortfall. Demand forecasts include inherent uncertainty and therefore should be carefully scrutinized in the economic and sensitivity analyses. Availability of counterpart funds and of fiscal space for the project must be assured to avoid costly construction delays.

26. In addition, recommendations emerging from the Independent Evaluation Group review of the transport sector (A Decade of Action in Transport: An Evaluation of World Bank Assistance to the Transport Sector, 1995-2005) have been taken into account in terms of building up the sector’s monitoring and evaluation efforts and aligning them with the new strategy, which emphasizes urban transport and multimodal transport. This is being achieved through the use of relevant intermediate indicators that can be readily measured and are applicable to a broad range of projects.

E. Alternatives considered and reasons for rejection

27. At the time the first link of Line 5 was designed, alternative project scenarios were analyzed to assess whether the projected demand between the proposed stations could be adequately served by reserved bus corridors. Once the metro rail option was selected, there was additional analysis to prioritize the construction of the stations in the event of insufficient budget. This led to the selection of the link which was built between Capgo Redondo and Largo Treze and financed by the IADB. The decision to move ahead with the extension from Largo Treze to Chacara Klabin was also made after the underground metro option was compared with surface alternatives which would require a much higher number of expropriations. Overall, the proposed Project was considered the best alternative from the economic, operational, social and environmental standpoints.

10 111. IMPLEMENTATION

A. Partnership arrangements

28. The Project is financed in parallel by the World Bank (US$650.4M), the Inter American Development Bank (IADB, US$481M) and the State of Silo Paulo (US$lY385.2M). The appraisal of the economic evaluation and the safeguards assessment of the Project were done jointly by the Bank and IADB. Sub-components under the Bank-lending operation will be fully financed by the Bank.

B. Institutional and implementation arrangements

29. The Secretary of Metropolitan Transport of the State of SBo Paulo (STMSP) is the main Government agency responsible for the Project. The SBo Paulo Metro Company (Metro) reports to the STMSP. The Borrower is the State of Silo Paulo who will delegate the project implementation to Metro. A Subsidiary agreement will be signed between the State and Metro to delegate this implementation. Overall project oversight will be the responsibility of STMSP on behalf of the State through an established Project Coordination Unit (PCU) that will oversee the implementation of this project and other ongoing projects, including Line 4 (Phase 1). In addition, Metro will continue to have a Project Management Unit (PMU) which will be in charge of the implementation of its respective components. The PMU is headed by a Project Coordinator who would report directly to the Director in charge of the implementation of the project. The PMU is staffed with regular staff from Metro and supported by Project Management and Supervision consultant in charge of providing technical support in areas such as engineering, procurement, environment and financial management. Metro has considerable experience with this PMU unit, acquired in ongoing and/or previous Bank-financed projects. Metro has also created a Line 5 Implementation Department (GC5) in charge of managing and supervising the actual implementation of the works.

C. Monitoring and evaluation of outcomes/results

30. Project Progress Reports will be prepared by the PMU on a semi-annual basis, and submitted to the Bank for review. These project reports should indicate the progress made under the different components of the project and measure the performance against the indicators established in the results framework (see Annex 3). In addition, project reports will include the following: (i) disbursement performance over the period covered by the report and updated disbursement schedule; (ii) updated procurement plan for activities under each of the project?s components; (iii) a description of progress achieved in the implementation of environmental and social aspects of the project; (iv) a section describing potential developments that could affect project implementation, which could consist of a review of the main risks and the impact of mitigation measures suggested at appraisal (see Section on risks).

3 1. Through their vast experience in the sector and many other similar projects, the STMSP and Metro have ample institutional capacity to carry out the monitoring and evaluation as part of the normal business activities. As required in the Line 4 Phase 1 Project, Metro, with the help of consultants, is presently undertaking an impact evaluation of the project on low-income focus

11 groups. The travel patterns and generalized travel costs of those users were mapped out before Line 4 was built and will be again measured after one year of operation of Phase 1; this will already be done during the proposed Phase 2 project. In addition, the impact evaluation of Line 4 on surrounding real estate has also been started by Metro and its consultants and will be continued during Phase 2. A review of the impact on the mobility of the low-income population due to the introduction of the Bilhete- Unico Integrado (BUI) and the most recent State investments on rolling stock and infrastructure'is available in the Project File. The percentage of low-income users has steadily increased both in Metro and CPTM from 2001 to 2008 and the percentage of household income spent by users who make a bus/metro/bus trip with an integrated fare dropped from 37.5% to about 20%. For Line 5, a similar study evaluating the impact on low- income population will be undertaken and financed by the IADB.

D. Sustainability

32. The sustainability of the Project results will depend on: (i) continued ownership and priority given to the urban transport sector by the State administration; (ii) timely implementation and funding of rehabilitation and maintenance interventions to keep the infrastructure and equipment in good condition; and (iii) maintenance of integrated tariffs such as the BUI, which benefits primarily the low-income segments of the population. The State has demonstrated its ownership of the Project and support to the sector in the last 8 years by giving priority to investments in this area. The timely implementation and funding of rehabilitation of infrastructure and equipment suffered during the periods of fiscal space restriction, but even then the State provided the funds necessary to maintain the infrastructure and rolling stock or sought mechanisms to provide the funds. The BUI is likely to continue because both the State and Municipalities have understood how important it is for the low-income segments of the population. The State is in charge of capital investments and Line 5 will be operated and run by Metro as is the case for the initial operating segment between Capilo Redondo and Largo Treze. Silo Paulo Metro, as a whole, only receives compensation for special tariffs (e.g. elderly, students) imposed by the State which has been paid timely by the State. Therefore, the financial sustainability of the project is likely and the institutional framework is robust.

E. Critical risks and possible controversial aspects

33. The Silo Paulo Metro has maintained a good implementation record and demonstrated satisfactory project management capabilities through the implementation of two similar Bank- financed projects. Through these and other ongoing projects, Metro has acquired and demonstrated its capacity to develop high-grade urban transport projects, including underground infrastructure and the acquisition of trains and equipment. This experience has reduced the preparation and implementation risks of the Project. In view of this, the overall level of risk associated with the implementation of this Project is assessed as Moderate after mitigation. The main risks involved are listed below:

12 Risk Minimization Measure Mitigation Delays in effectiveness due to State is submitting the negotiated legal slow approval by Federal Senate: agreements to the Comissi7o de This has been a major reason for AvaliaqJo Econdmica do Senado Moderate project delays and subsequent (CAE) to speed up approval. This Low extensions process was used in the Slo Paulo Trains and Signaling loan (Ln.7506- BR) and was successful in shortening the time required for effectiveness. Prolonged litigation in the award The Bank experience has been that the of trains and signaling: It is not Borrower must have a very good legal uncommon in Brazil that the team on call to respond to any Substantial second ranked proponent would injunction (liminar) and avoid that its Moderate try to go to court to stop the judgment drags through the courts. signing of the contract Metro has an experienced legal team. This also requires that the bidding documents and process respect all the guidelines. Monitoring of implementation of Safeguard Action Plans. safeguard action plans will be undertaken by Metro and its Substantial consultants and reported periodically Moderate to the Bank to ensure compliance with agreed procedures.. As the major activity of this loan Advanced procurement will be undertaken to ensure that any delays is one large contract for the Substantial Moderate procurement of trains $the will be minimized. The goal is to have bidding fails and the bid requires the bids issued before Board re-issuing, there could be major presentation. Borrower will bear all delays to project implementation risk of advanced procurement and will have to seek Bank?s no-objection to launch bidding process. Timely availability of counterpart The State was asked at negotiations to funds and budget priority: State undertake its best efforts to exempt Government elections in 201 0 and Moderate counterpart funds for this Bank loan Moderate a deepening global economic Fom budgetary restrictions, that is, to crisis may alter current priorities. give priority to the investments financed by the Bank in case of fiscal restrictions. State is also arranging a standby loan with BNDES.

13 ~ Civil works costs higher than Metro has completed prequalification those confirmed at appraisal: for the engineering of the first stage. This component is fully financed Advanced engineering design has been by the State, and procurement will completed for the entire alignment. be under national law 8.666. Substantial Bidding documents have been Substantial Costs may be higher than prepared and it is expected that the appraised if the number of major Brazilian contractors will consortia bidding is smaller than compete. expected. Delays in some non-Bank Metro is used to manage projects with financed components could several co-financiers and is expected to jeopardize the achievement of provide the coordination required to PDO: Careful coordination is minimize schedule disruptions. Delay needed in the implementation of Substantial risk should be mitigated by very close Moderate the major components given supervision of the project by the State. ongoing operations of the initial The delivery of rolling stocMsystems segment of Line 5 and the current lots will be timed so that it coincides as project schedule. much as possible with the opening of each link. Since the trains in the existing link will be rehabilitated to meet the new signaling requirements, the first lot of new trains will replace them while they undergo modernization. Also, the existing link will be the first to receive the new signaling system. In case of major construction delays trains not used in the existing links could be temporarily allocated to another Metro line with the same gauge. Construction accidents: The civil Enforcement of strict construction works (to be financed entirely safety measures not only in the with local funds) will involve worksites but also in the areas above Substantial Moderate some 1 I km of tunneling and the shafts, particularly during the use accidents are possible, even with of the shield machine or the precautionary measures and safety application of the NATM (New practices in place. Austrian Tunneling Method). Lessons learned from the Line 4 project and Pinheiros station accident in 2007 will be taken into account. This is an indirect risk because Bank is not involved in the civil works. Lower than expected demand due The risk from competition is mitigated to issues of competition or by the project’s promotion of affordability: The projected Substantial intermodal integration and Moderate demand may be impacted by affordability is helped by the delays in integration with buses or expansion of the Bilhete Unico by changes in the tariff structure. Integrado. Also a reorganization study of the bus lines in the area of influence of Line 5 was prepared by Metro, Municipal bus agency (SPTRANS) and State inter-municipal bus agency (EMTU) Substantial Moderate

14 F. Loankredit conditions and covenants

34. As conditions of effectiveness, the Project shall be registered at the Central Bank and the subsidiary agreement between the State and the Si30 Paulo Metro shall be signed.

Covenants applicable to project implementation:

35. The Si30 Paulo State Secretariat for Metropolitan Transport must maintain throughout the project a Project Coordination Unit responsible for the overall coordination of the project and to implement the studies in the institutional component related to the sector policy strengthening

36. Sa0 Paulo Metro must maintain throughout the duration of the project a Project Management Unit in charge of managing their respective components of the project and tracking its physical and financial progress.

37. The Borrower will, within the limits of its authority, commit to preserve the CDTI and the Bilhete-Unico Integrado (BUI) at all times during execution and until completion of the Project, in the present or other format as long as it continues to enhance the mobility and affordability of metropolitan transport users, particularly those of low-income. In addition, the Borrower shall undertake its best efforts to extend the BUI to other modes of transportation and expand the CDTI to include other municipalities of the SPMR.

38. The Borrower shall ensure that the relevant funds for the financing of Parts A.2, B.2, A.3 and B.3 of the Project, as described in the Loan Agreement, shall be provided as required.

39. The Borrower, through STMSP, shall enter into an agreement (Subsidiary Agreement) with SP Metro, under terms and conditions approved by the Bank, which shall include, inter alia; (i) SP Metro’s undertaking to comply with the safeguards, fiduciary and technical requirements applicable to the Project in accordance with the provisions of this agreement; (ii) SP Metro’s undertaking to carry out the Project in accordance with the provisions of the Anti- Corruption Guidelines; and (iii) the Borrower’s undertaking to make the necessary proceeds of the Loan available to SP Metro to carry out the Project.

IV. APPRAISAL SUMMARY

A. Economic and financial analyses

40. Economic evaluation of Line 5 as a whole and of the proposed extension alone were undertaken by Metro, reviewed by the Bank, and compared the situation with and without the project. For that purpose, Metro estimated through demand modeling the passenger hours and passenger-kms with and without the project and converted them into time savings and operating cost savings. An estimate for the reduction of accidents and road-based vehicle emissions was made using the same data and compared to the investment costs (see Annex 9 for detailed description of economic and financial analysis). The results of the cost-benefit analysis are a net present value (NPV, discounted at 10%) of US$ 1,208 million and an internal economic rate of return (IERR) of 17%. For the IERR to be below lo%, the investment costs would have to

15 increase by about 67%, which is unlikely. IERR would be below 10% if the travel time savings are reduced by more than 72%.

41. A project financial analysis was performed by comparing total investments versus savings due to lower operating, maintenance, and management costs, and higher revenues as a result of the Project. No travel time savings or indirect benefits were considered, which explains the difference from the economic evaluation. The results of financial analysis indicate a financial internal rate of return (FIRR) of 10.3%. Financial projections were prepared for Metro as a whole and Line 5 for the 2010-2028 period. They show that the working ratio for Line 5 which at present is 1.88 will be equal or less than one by 2013 when the extension is completed, since, at that time, operating costs are expected to be below operating revenues.

42. Fiscal impact: The Brazil Secretary of the Treasury (STN) does an exhaustive and highly-professional analysis of state debt capacity. It is on the basis of such analysis that the State is allowed to borrow with a guarantee from the Federative Republic of Brazil. The Bank undertook its own analysis of the State debt capacity and the fiscal impact of the proposed loans. The fiscal impact of the Project on the State finances was evaluated. A summary of the findings is provided in Annex 9B and the full assessment can be found in the Project File. The debt assumed by the State for this project and other loans approved at the same time for preparation was part of the debt renegotiations with the Federal Government. The Project itself and the other loans under preparation would have a minor impact on the State’s finances. Counterpart financing would equal 1 1YO of projected capital spending during the implementation period. Annual interest on the two loans (Bank and IADB) in nominal terms would total about 445 million Reais (about US$251 million) once they are fully disbursed, or less than 0.5% of net current revenues.

B. Technical

43. As mentioned above, when Line 5 was designed, an analysis of the alignment was undertaken and then the completion of the proposed stations was prioritized in the event of budget restriction. Once the decision was made on the alignment, additional technical evaluations were undertaken to examine alternatives to the proposed design. Metro reviewed several alternative designs for the stations and suggested some changes, which were taken into account by Metro project consultants. As has been the practice in the past, Metro will be supported by specialized consultants to assist with technical supervision of the works, equipment, and project management oversight.

44. New and existing stations for Line 5 will include modern accessibility features for pedestrians and the mobility-impaired, as well as facilities for bicycles, bus terminals and/or bus bays, and car parking for easy modal integration where appropriate. The stations will be equipped with elevators and will comply with all Brazilian regulations for universal accessibility for the disabled as mandated by law. Finally, all trains which will run in Line 5 have regenerative braking, which will lower the consumption of energy and reduce carbon dioxide emissions. As already stated, the bus-kms in the corridor will be reduced with the operation of the Line 5 extension through rationalization and integration with the new metro stations. These two aspects should become part of Metro’s overall climate change mitigation strategy and will contribute to the climate change agenda of the State. 16 C. Fiduciary

45. Metro has extensive experience with Bank fiduciary requirements and a successful history of financial management in recent loans with the Bank. The financial management reporting and auditing of ongoing Bank projects, Phase 1 of Metro Line 4 and the SFio Paul0 Trains and Signaling Project, have been rated as satisfactory. Metro has experienced staff working in their accounting departments to ensure that financial management will be carried out according to Bank guidelines. Auditing is carried out by independent consultants selected on a competitive basis according to Bank procurement guidelines. The overall financial management arrangements are considered satisfactory and the associated risk is rated as moderate. Retroactive financing up to US$130,080,000 (20% of the value of the proposed loan) will be made available for payments made within one year prior to loan signing date but on or after September 30, 2009, for eleigible expenditures. (See Annex 7 for a complete discussion of financial management and disbursements). Procurement for the proposed project would be carried out in accordance with the World Bank “Guidelines: Procurement Under IBRD Loans and IDA Credits” dated May 2004 (revised in October 2006), “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004 (revised in October 2006), and the provisions stipulated in the Legal Agreement. Annex 8 provides a complete discussion of procurement arrangements. The overall procurement risk is considered average. The State will ensure that the project is implemented in accordance with the Guidelines on “Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” dated October 15,2006.

D. Social

46. Metro network. The Project will increase the quality and availability of mass transport within the SPMR and provide the commuting public with alternatives to private automobiles, buses and vans. Direct impacts of the new stations include increasing the accessibility of public transport to employment centers, health, education, and leisure facilities. Improving metrorail services in general increase the access of the low-income and mobility-impaired population to employment centers and facilitates and their transfer between rail, municipal and inter-municipal bus networks. Extension of the “single ticket” (bilhete zinico) will result in savings to people who, up to now, had to use multiple modes of transportation or more than one bus. Aside from possible temporary traffic disruptions and short-term delays at the proposed station locations, the impact on existing bus operators from rationalization of routes, and some intermittent nuisances such as noise during construction, no adverse social impacts are expected from the proposed project and the benefits will be overwhelmingly positive. In addition, increased use of public transport will help reduce traffic congestion and air pollution, thereby contributing to overall improvements in the quality of life in the Metropolitan Region and the State’s climate change mitigation agenda. another benefit of Line 5 extension will be a reduction of travel time for its users. Estimates suggest that by 20 13 assuming that the extension will be in operation, the travel time between selected stations such as Largo Treze and Chacara Klabin stations will decrease from 72 minutes (trip time by bus) to 21 minutes-- a savings of about 51 minutes. If the trip is from between CapFio Redondo and Praqa da Se, the savings will amount to about 55 minutes.

17 47, The proposed Line 5 extension crosses one of the most dynamic areas of the SPMR in terms of economic activities and will facilitate access to about 980,000 jobs in 2013 (in 2007 it was estimated that there were 874,000 jobs), in its surrounding area. The majority of these jobs require medium-level qualifications (such as secondary school education). However, about 1 8% of the jobs in the area of influence of the new extension require low qualifications and will be readily accessible to the low-income population. The accelerated dynamics of the real estate market suggests that by 2013, the concentration of employment could be even higher than currently estimated. A summary of the impact of the Line 5 extension on the low-income population can be found in Annex 9A and the full report in the Project Files.

E. Environment

48. The Project will cause significant environmental impact during the construction phase, but most of the works for Line 5 will be carried out deep underground by specialized tunneling equipment. The sites on the surface where station entrances and ventilation shafts will be built have been selected to minimize the impact and interference with existing infrastructure. No large buildings and no cultural landmarks of any kind are expected to be affected by these works. Overall and in the long-term, the proposed Project is expected to have a positive impact on the environment. The traffic that may be induced by the project around the proposed stations will be mitigated by the project’s design and station area plans that emphasize appropriate integration with other modes (particularly bus) and non-motorized access. Congestion and air pollution are currently some of the main environmental problems that the metropolitan region is facing. Providing a high-quality, cleaner and safer transport alternative to private vehicles will help contain the rapid increase in motorized trips and related social and environmental impacts.

49. The Project will also support the reorganization of the bus network and the quantification of long-term environmental impacts in terms of the modal ‘retention’ or shift and the associated emission benefits. This effort will support and complement the government’s long-term strategy to reduce congestion and mitigate greenhouse gas emissions. The bus operators affected by the reorganization of the bus lines in the project corridor are expected to be reassigned to other bus lines in the city’s large bus network without any impact on their employment. The operators are represented by labor unions in any negotiations with private companies that employ them and the government agency that manages the network.

50. To the extent that neighborhoods and communities within a given area could be affected by multiple projects simultaneously, the STM and Metro will coordinate with different agencies at State and local level to develop satisfactory mitigation measures. Metro will coordinate and plan interventions to reduce the cumulative impacts of simultaneous construction. However, in some cases it may be impossible to avoid these impacts as contractors and agencies strive to complete their projects in a timely and cost-effective manner. In those cases, significant adverse impacts from cumulative impacts could result, as detailed in the Environmental Assessment.

18 F. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [XI [I Physical Cultural Resources (OP/BP 4.1 1) [X 1 [I Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OP/BP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety of Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP 7.60)* [I [XI Projects on International Waterways (OP/BP 7.50) [I [XI

51. Environmental Assessment. The proposed Metro Line 5 extension Project has received an Environmental Category “A” rating in accordance with OP 4.0 1 (Environmental Assessment), as was the case with Line 4 Project. The Environmental Assessment and Environmental Management Plan were prepared and submitted to Infoshop on November 25, 2009. An Executive Summary of the Environmental Assessment was submitted to the Board on December 15, 2009, prior to Project appraisal. Independent environmental consultants prepared an Environmental Assessment (EIA-Rima and EMP) that have been reviewed by the relevant State environmental agencies (Secretaria do Meio Ambiente and CETESB) and received a “preliminary environmental license” (Licenp Pre‘via) on February 2, 20 10. The proposed Project was presented in several public meetings and open hearings most recently on August 6, 2008 and May 7, 2009 in the general area of the proposed Project. The Bank reviewed and disclosed the full set of environmental documentation prepared by the Metro consultants. The documents were found to be satisfactory and the Bank will supervise the proper implementation of the proposed actions by Metro. Metro also prepared an Environmental Management Plan, which adequately incorporates the lessons learned from the implementation of Line 4 Project and Metro’s vast experience, including the following:

0 Environmental Control Program needs to be implemented during construction including solid and liquid wastes, surface drainage, safety issues, contaminated soils, vegetation, impact to the surrounding community, public utilities and buildings, transport of materials and equipment, traffic management, and disposal; 0 Environmental Education Program is important and needs to include training of professionals to implement the EMP; 0 Monitoring Program of environmental quality and impact including air, noise, and vibration, settlement due to tunneling works needs to be undertaken; 0 Emergency Action Plan, to ensure safety of workers and people in the area surrounding the construction sites 0 Social Communications Program to keep the general public informed of the progress of the works

* By supporting the proposedproject, the Bank does not intend to prejudice the final determination of the parties‘ claims on the disputed areas 19 0 Cultural Resources Program to ensure that any objects or construction found during the works are adequately evaluated and disclosed to the public 0 Environmental Control Program during Operations needs to build on previous experiences and include certifications, description of activities, and recommendations 0 Institutional Program needs to define institutional interactions, public transport and traffic integration, monitoring of mobility and land use impact from the Project, 0 Environmental Compensation Plan

52. Brazilian federal legislation requires an environmental compensation for this Line 5 extension project. The EINRIMA recommended specific compensation measures and Metro is discussing with the competent authorities the areas which will receive the proposed compensation. None of the areas to be protected or created as a result of the project (including the parks) are expected to lead to any physical displacement or changes in access to natural resources. Any other economic or physical displacement not yet explicitly identified, but that may become apparent during implementation, will be addressed using the same principles as those defined in this Resettlement Action Plan and consistent with World Bank safeguard policies.

53. Involuntary Resettlement. The civil works for the proposed Line 5 project will be financed and executed by the Borrower (State of Silo Paulo) and will involve expropriation and resettlement, and therefore trigger the involuntary resettlement policy (OP/BP4.12). Based on currently available information, the total number of properties to be expropriated for the purpose of constructing Line 5 is 400. Of these, some 50 properties have already been expropriated as part of construction that already begun (associated with the Patio Guido Caloi, EstaGZio Adolfo Pinheiro and POGODelmiro Sampaio segments) and were acquired in anticipation of the proposed project and for the same project objectives. A follow-up study was undertaken by Silo Paulo Metro consultants to ensure that the affected parties were accorded benefits compatible with World Bank policy and has been reviewed by the Bank. Of the remaining 350 properties, there are 281 occupied properties, 39 vacant properties, and 30 open lots. In the 281 occupied properties, there are 135 occupied residences and 2 16 non-residential uses including businesses, industry, public agencies and NGOs (yielding a total of 35 1 occupancies). It is important to note that there may be multiple occupancies in some properties (such as two residences or businesses in the same property). Sixteen families have tentatively been identified as “vulnerable.” The various companies and businesses operating in the affected buildings employ approximately 5,600 people. These persons would also be affected by the relocation of their place of employment.

54. As mentioned above, the Silo Paulo Metro Company (Metro) has presented the proposed Project in several public meetings and open hearings most recently on August 6,2008 and May 7, 2009 in the general area of the proposed Project. The main comments received during the last public meeting related to (i) improving the timing and form of communications with the project affected people, (ii) the criteria used to select the project alignment and design, and (iii) potential impacts on local and cultural resources of concern to the community. Details of the Public Consultation program planned by Metro are given in Annex 10. A Resettlement Action Plan developed by specialized consultants and reviewed by the Bank was submitted to the Infoshop on November 25,2009.

20 55. The Borrower and Metro have had experience with Line 4 (Phase 1 and 2) managing a Category A project that required an Environmental Assessment and Resettlement Action Plan with compensation policies consistent with Bank policies.

56. Physical Cultural Resources. Although no direct impact on physical cultural resources were identified in the environmental documentation, OP4.11 was triggered by the possibility that subproject construction could have unanticipated negative impacts on historical artifacts or sites if they were to be discovered during implementation. Most of the works for Line 5 will be carried out deep underground by specialized tunneling equipment. There are some 25 sites on the surface where station entrances and ventilation shafts will be built. These sites have been selected to minimize interference with existing infrastructure. No large buildings and no cultural landmarks of any kind are expected to be affected by these works. All contractors on the project have agreed to special conditions regarding the possibility of chance finds of archaeological materials and Brazil has regulations that are compatible with the Bank’s requirements. If such materials are found, the local authorities responsible for historical preservation (National Institute for Historical and Artistic Heritage, IPHAN) will be notified and work will be suspended until such findings can be investigated by experts and a determination can be made regarding how to manage such finds.

57. Pest Management. Since the implementation of civil works requires the demolition of existing structures, it is common practice to spray the debris with pesticides to prevent the spread and infestation of rodents. For that reason, the pest management safeguard policy (OP 4.09) was triggered, the Bank will ensure that Metro’s practices follow Bank pest management guidelines and the contractors will be monitored to ensure that they comply with such practices.

58. Supervision. The Bank’s supervision plan will include supervision of the entire Line 5 project, and in particular the safeguard aspects. To ensure the compliance with Bank safeguard related covenants and also to assist the Borrower in its institutional strengthening activities, the Bank will carry out at least two supervision missions per year which include social development and environmental specialists. The Bank will review quarterly reports of Line 5 environmental management and supervision to be provided by Metro in order to be informed of any relevant social and environmental issues regarding the development of civil works in advance of the missions. If needed the Bank will request additional information on any issues pointed out by the environmental supervision reports and schedule additional missions to follow-up on these issues.

G. Policy Exceptions and Readiness

59. The Project does not require any exceptions to Bank policies and is deemed to be ready for implementation. The bidding documents for trains and signaling systems have been submitted to the Bank for review and clearance and the bidding process should be underway by Board presentation.

21 Annex 1: Country and Sector or Program Background BRAZIL: S5o Paulo Metro Line 5 Project

Evolution of the Metropolitan Transport System of the State of Si40 Paulo

1. The foundation for the partnership between the State of Silo Paulo and the Bank in the urban transport sector was cast about 15 years ago when the Federal Government of Brazil initiated the decentralization of the federally-owned and operated suburban rail system (known as CBTU). This decentralization was mandated by the 1988 Constitution which assigned the responsibility of urban and metropolitan transport to the local State and Municipalities authorities. At that time, the State received from the Federal Government the CBTU-SP rail network spread throughout the entire SPMR and faced major challenges in integrating that system with the other public transport modes already existing in the metropolitan region. As part of this process, the State prepared with Bank support a long-term metropolitan transport strategy, anchored in four pillars: a) establishment of a regional transport coordination commission with the municipalities, operators and users; b) implementation of an integrated land use, urban transport and air quality strategy; c) financing mechanisms which would guarantee the long-term sustainability of SPMR’s urban transport system; and d) the progressive participation of the private sector in the investment and operational management of the systems. The Bank-supported Silo Paulo Metropolitan Transport Decentralization Project (Ln. 3457-BR) played an important role in allowing for the decentralization and modernization of CBTU to the State and laid the foundation for metropolitan coordination and the implementation of the long-term strategy (see Table 1).

2. Upon the successful completion of the decentralization of the federal system in the late 1990’s, the State requested Bank support to link the CBTU-SP to its existing suburban railway system (FEPASA) as a means to better physically integrate the systems and improve the key transfer stations for passenger use. During the initial discussions, the intention was that the same Bank project would finance a new subway line (Metro Line 4) to connect the expanding suburban rail system with the existing, small, subway network. However, due to fiscal constraints in the State this request was split into two projects. The first Bank loan (Ln.4312-BR) was approved in 1998 and contributed to the financing of the SBo Paulo Integrated Urban Transport project (the Barra Funda-Roosevelt link). The project was completed successfully and resulted in connecting the two suburban railway networks (which together make up the present CPTM network) and improving the Luz and Bras stations, which are key for intermodal transfers. The second loan, approved in early 2002, is the ongoing Metro Line 4 Project (Ln.4646-Br). The main objective of this project, expected to be completed by early 2010, is to go a step further in improving the quality and long- term sustainability of urban transport in SPMR by interconnecting the existing subway, commuter rail and bus networks through the construction of Metro Line 4. In addition, it introduced, for the first time, a Build-Operate-Transfer type scheme, partially financed by the private sector. Finally, in November 2006, the Government successfully awarded a 30-year concession for operation of Line 4. This was a landmark event and the first public-private partnership (PPP) signed by any public sector agency in Brazil since the passage of the PPP legislation.

22 Siio Paulo State Government's Urban Transport Sector Strategy

3. The State of Sa0 Paulo urban transport strategy for the SZio Paulo Metropolitan Region is anchored in 4 pillars: a) to establish with the municipalities, operators and users a regional transport coordination commission (RTCC); b) to develop and update on a periodic basis, an integrated land use, urban transport and air quality strategy; c) to introduce financing mechanisms which will guarantee the long-term sustainability of the urban transport systems; and d) to promote progressive private sector participation in the investment and operations management of those systems. SSP has shown a remarkable progress towards the above objectives. First, there is an RTCC (named CDTI) functioning which functions as a forum for discussion of metropolitan policies for prices and subsidies as well for discussion of common issues such as multimodal tickets and major investment projects. Second, SSP has refined an integrated land use, urban transport and air quality strategy using sketch planning techniques (PITU), which is now a major planning tool and continuously updated. This strategy has been used for decision-makers and stakeholders to discuss proposed projects. SSP has explored several financing mechanisms for the urban transport sector other than government budgets. It has accelerated the rental of station spaces, in-vehicle and off-board advertising, has created partnerships for shopping centers close to metro stations, and sells space in the right-of-way for cable services in an effort to increase non-operating revenues. Last, conscious of the scarcity of resources it faces, SSP has sought a progressive participation of the private sector in the operation of its systems: the Sa0 Mateus-Jabaquara busway was successfully concessioned out to the private sector for 20 years, and the PPP for Line 4 of the Metro was signed. Several activities of the Metro and CPTM were outsourced to the private sector and they attempt to reduce costs or generating non-operating revenues. The construction of Line 4 under a public- private partnership is a pioneering project because it starts a trend towards investment of the private sector in the construction of new infrastructure and equipment.

4. SSP's strategy is therefore to integrate the existing systems, to offer an acceptable level of service to the user and to reduce operating subsidies. But it is also a State goal to improve rail-based urban transport in low-income areas to facilitate the access to employment centers, health, education and leisure facilities. Finally, the State has clearly decided that a major improvement of the rail-based network, particularly the CPTM network, is a cost-efficient priority, upgrading it to surface metro like operation.

5. A number of key issues must be addressed in order to improve the supply of urban transport services and to guarantee their orderly development and sustainability in the long term for the SPMR. They are:

0 Institutional Issues. The most critical institutional issues are: (a) the fine-tuning of relations between state and municipal governments and a clear definition of their respective roles in the financing, planning and operation of urban transport services in accordance with the 1988 Constitution; and (b) A clear definition of the funding mechanisms of the sector at the metropolitan level through an agreement between State and Municipalities of the region. The Government's strategy was to create a regional coordination entity empowered by the SPMR for planning, coordinating and setting priorities for new investments and modal integration. This entity (CDTI) meets frequently and is primarily a forum for discussion of metropolitan transport policies and projects. Its first product was 23 the introduction of the Bilhete-Unico.

0 Cost Recovery, Financial Management and Funding Issues. The need to address cost recovery from a more commercially-oriented standpoint by: (a) setting tariffs which, when added to subsidies, cover at least the long-run variable costs (defined as out-of- pocket costs plus depreciation of equipment and cost of capital) of the service provided; (b) controlling fare evasion; (c) appropriate peak and off-peak pricing; (d) improving the financial management of the systems through wide-ranging cost cutting measures and generating more non-operating revenues through advertising, station space rentals and use of the right-of-way; and (e) revamping the funding mechanisms in order to guarantee adequate financing for the implementation of new mass transit systems and the sustainability of the existing systems. Since 1992, to help achieve these goals, the Silo Paulo State Government has embarked on an aggressive campaign to promote private sector participation in the urban transport sector, to reduce fare evasion, to cut costs and to generate more non-operating revenues. But much more needs to be done and, in the proposed project, the institutional and policy development component includes studies to assist the State in this area.

0 Environmental Issues. Air pollution, noise, traffic congestion, and road accidents are major environmental issues to be addressed in the SPMR. The reduction of the environmental impacts of urban congestion and noise pollution in the urban area could be done through: (a) the allocation of responsibilities across government levels for the enforcement of the law and definition of tougher standards; (b) the use of cleaner and quieter systems; (c) where appropriate, the use of non-motorized transport; (d) improved traffic management and control; and (e) the strengthening of traffic safety education and the enforcement of traffic regulations. Construction of Line 4 and the proposed improvements on Metro and CPTM will most likely reduce the number of bus-kms in the corridors where they are happening and consequently will reduce vehicle emissions. The existing municipal legislation, by which vehicles with plates ending with a certain number cannot circulate during peak periods of one day of the week (rodizio) continue with some success. This has reduced the number of vehicles per day by 600,000 during those peak periods providing some reduction in congestion and emissions. Both Metro and CPTM are now preparing plans to reduce their carbon dioxide emissions using trains with regenerative braking, changing the type of lights they use at stations, control centers and workshops.

0 Transport Planning Issues. The need to continue to strengthen SPMR's transportation planning, traffic data base, traffic management, and economic and financial evaluation of new investments was emphasized during the preparation of the project and was addressed by the SPMR. STMSP is equipped with a battery of sketch planning, demand and supply models which will test different land use, air quality, and urban transport scenarios. Furthermore, an integrated land use, urban transport, and air-quality strategy (PITU) exists and should continue to be fine-tuned with more attention to the land use and environmental aspects.

Brief Look at the Companhia do Metropolitano de Sa'o Paul0 (Metro) 6. The basic network of the Silo Paulo Metro is comprised of four lines in operation (a map is provided in Annex 15): Line 1 (Blue) linking Jabaquara to Tucuruvi; 'Line 2 (Green) from Alto

24 do Ipiranga to Vila Madalena; Line 3 (Red) from Barra Funda to Corinthians-Itaquera, and Line 5 (Violet) from CapBo Redondo to Largo Treze, in a total length of 61.3 km and 55 stations. In addition, it is integrated with several transport modes (metropolitan train, urban bus, intermunicipal bus, inter-state bus and cars).

7. In 2006, the Metro accounted for 13.8% of the total motorized trips made by public transport in the SBo Paul0 Metropolitan Region. Figure 9-2 presents the number of passengers carried by each metro line in 2006. Figure 9-3 is a summary of the network characteristics and operations. Figure 9-4 shows a slight increasing trend in total passengers carried and passenger- kms over a decade and the breakdown by line.

Figure 1-1: Siio Paulo Metro (CMSP): Average Demand by Line in 2008

DEMAND Line Line Line Line Total Number of Passengers entries - 2008 1 -Blue 2-Green 3-Red 5-Violet Total (thousands) 264,157 73,758 312,756 33,695 684,367 Average Working Day 885,618 261,169 1,045,665 118,052 2,310,503 Average Saturday 499,908 104,399 596,462 65,827 1,266,596 Average Sunday 287,366 56,761 346,234 35,557 704,672 Maximum reached per day 992,377 288,955 1,157,387 139,469 2,562,460

Figure 1-2: Metro Network Characteristics and Operating Summary in 2008

Line Blue Green Red Violet Total Start of commercial operation 1974 1991 1979 2002 Present length of lines (km) 20.2 10.7 22.0 8.4 61.3 Stations 23 11 18 6 55 (1) Transfer stations 3 2 1 3 Stations connecting with the railway 1 1(2) 4 1 7 Stations with urban bus terminals 6 1 10 5 22 Stations with inter-city bus terminals 2 1 3 Number of cars of the fleet (3) 306 72 282 48 708 Number of cars used at peak hours 252 90 252 30 624 Minimum headway (seconds) 109 146 101 307 Maximum speed (km/h) 87 87 87 68 Commercial speed (km/h) 32 35 42 41 Passenger entry (million) (4) 264,2 73,8 312,8 33,7 684,4 Passenger entrylkm of line (million) (4) 19.70 11.18 18.22 3.75 11.65 Note: (1) The transfer stations were stated in both lines they serve - S6 (L1 and L3), Ana Rosa (L1 and LZ), and Paraiso (L1 and L2) - but only once in the entire network; (2) Connection carried out by Orca Shuttle; (3) One train comprises 6 cars, and, (4) Data related to 2008.

25 Figure 1-3: Evolution of Passengers Carried and Passengerkm (000’s)

n 5 76 1,798 3,402 9,638 12,888 17,037 23,374 TOTAL 463.282 448,946 431,919 422,825 417,972 419,750 404,466 397,299 394,972 436,276 471,802 529,094 673,997 1658,603 1688,681 1714,810 1731,935 171 1,546 1699,708 1710,484 I 774,641 1844,548 1 945,772 1 Passenger- 1 kms 1 4.381 1 4,276 1 4,174 1 4,757 1 4,945 1 5,096 1 4,947 I 4,846 1 4,947 1 4,983 1 5,808 1 6,482 I (millions) I I I I I I I I I I I I I I Further information can be found at www.metro.swov.br

8. The SBo Paulo Metropolitan Region (SPMR), an area of 8000 sq. km and 18 million inhabitants spread irregularly over 39 individual municipalities, is dominated by the SBo Paulo Municipality (SPM) with 11 million inhabitants. The SPMR generates roughly 20% of Brazil’s GNP and is considered the most important economic region of the country. Each day, 39 million person trips take place in the SPMR of which 33% are walking, 37% by private auto, and the rest (30%) by public transport (23% by bus, 4.5% by metrorail and 2.5% by suburban rail). Of the 12 million trips by public modes, about one-third use more than one route or mode, requiring some sort of transfer: 78% of all metro trips, 6 1% of all train trips and 16% of all bus trips require one or more transfers to be completed. This level of urban transport activity dominated by road-based motorized modes has significantly negative impacts on SPMR’s environment, air quality, and safety .

9. Despite an existing network of 61 km of metro and 255 km of suburban rail (see Figure 1 for data on the Silo Paulo Metro network, and Annex 2 for a map of the rail system), the lack of full integration between the metro and the suburban trains discourages more rail trips, in favor of buses and the automobile. This creates heavy congestion during peak hours, thereby significantly increasing home-to-work trip times. The urban poor are the main users of public transport and bear the brunt of these problems: (i) shortage of capacity at peak hours resulting in overcrowded (>8 pass/m2) and often unpleasant conditions, (ii) long work journeys (as high as 2.5 hourdday) from the metropolitan periphery to the urban centers, with often more than two modal transfers; and (c) spending 1520% of their total income towards transport tariff (if not formally employed). Lack of coordination between the 3 levels of government responsible for urban transport, particularly between the State and Municipality, led in the past to poor tariff and modal integration, lack of prioritization in urban transport investments, and no common policy on pricing and subsidies. This lack of coordination hurt the SPMR for several years, but by the end of 2006, the State and Municipality of Silo Paulo started to coordinate their transport policies and integrate the municipal buses with suburban rail and metro. Table 1 is a summary of World Bank investments and reforms in SBo Paulo since the early 1990s.

26 Figure 1: Basic Operating Characteristics of the Existing Metro Network

10. The recent introduction of an integrated modal tariff, the Bilhete-Unico, which allows a user to buy a single ticket which costs less than the sum of individual tickets and can be used in several modes within a certain period of time, was one of the major victories of the previous and present administration and benefited considerably the low-income segments of the population. It also increased demand significantly (by 12% in one year) on rail-based systems, creating an urgent need to increase the supply of trains during peak hours so that this surge in demand is safely transported and with a level-of-service and frequency that is acceptable (e.g., travel times and waiting times at stations). Doing so will also attract more users from road to rail with positive impact on the environment by containing or reducing congestion. Not doing so will discourage people fiom using the rail system and perpetuate an over-reliance on inefficient road-based systems that are already congested. Adding metro stations will allow the itinerary of the buses that feed those stations to be shortened and reorganized, and will also increase the accessibility by foot and by car of the SBo Paulo inhabitants that live in the catchment areas of those stations.

1 1. The completion of the Line 5 Project is a priority undertaking within the Integrated Urban Transportation Plan (PITU) for the SPMR. An 8.4 km segment of Line 5 has been in operation between CapBo Redondo-Largo Treze (including 6 stations) since October 2002 connecting densely-populated and low-income areas in the southwest of the city to a major employment and commercial center at Santo Amaro. The initial operating segment of Line 5 currently carries only 1 17,000 passengers per day, which is less than one-fourth the average ridership per km of the other SBo Paulo Metro lines because of Line 5’s short length and lack of connection to the rest of the rail network (except to CPTM Line 9 at Santo Amaro). However, this demand has the potential to grow significantly in both directions and in off-peak periods with better connections to the rest of the rail network and the expanded city center. Figure 2 provides the list of Line 5 integration points with other planned and existing high-capacity public transport lines.

27 12. The proposed project is also a follow-on to previous and ongoing efforts, such as: a) the Si30 Paulo Metropolitan Transport Decentralization Project (Ln. 3457-BR), which succeeded in the decentralization and modernization of the federally-owned CBTU to the State and laid the foundations for metropolitan coordination and a long-term strategy; b) the Barra Funda- Roosevelt Project which allowed the physical interconnection of the formerly state-owned systems with the creation of CPTM and a considerable improvement in the Luz and Bras stations; c) the ongoing Metro Line 4 project (Phase 1 due to be in operation in late 2009, Phase 2 being appraised), which will increase the interconnection between the existing metro and suburban rail network and was the first PPP of its kind signed in the country; and d) The Stio Paulo Trains and Signaling project which was approved in May 2008 and will finance trains and signaling systems for both rail-based systems of the SPMR.

Preliminary Line 5 Construction Schedule by Component

2 SHIELDS llMOELOS * VP

28 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies BRAZIL: SBo Paulo Metro Line 5 Project

Sector Issue Project IEG rating Latest ISR Ratings Implementation Development Piogress (IP) Objective (DO) Bank- financed Decentralization of rail services Sao Paulo S NA NA from federal to state government Metropolitan with system rehabilitation/ Transport modernization. Borrower was Decentralization (Ln. Federal Government 3457-BR) Decentralization of rail services Rio de Janeiro S NA NA from federal to state government Metropolitan with system rehabilitation/ Transport modernization. Borrower was Decentralization (Ln. Federal Government 3 633 -B R) Decentralization of rail services Recife Metropolitan S NA NA from federal to state government Transport with system rehabilitation and Decentralization (Ln. extension. Borrower was Federal 391 5-BR) Government Decentralization of rail services Belo Horizonte S NA NA from federal to state government Metropolitan with system extension. Borrower Transport was Federal Government Decentralization (Ln. 39 16-BR) Decentralization of rail services Salvador Urban MS NA NA from federal to state government Transport Project with system extension. Borrower (Ln ,4494-Br was Federal Government Decentralization of rail services Fortaleza NA MS MS from federal to state government Metropolitan with system extension. Borrower Transport Project was Federal Government (Ln. 7083-Br) Consolidation of the system and Rio de Janeiro Mass NA S S its concession to the private Transit Project( Ln. sector. Borrower was the State of 429 1-Br) Rio de Janeiro Table continues on following page.. ,

29 Table continues from previous page.. . Connection between the ex- SBo Paulo Integrated HS federally owned CBTU system Urban Transport and the State-owned Fepasa Project (the Barra system to create CPTM and Funda-Roosevelt modernization of major link) (Ln.43 12-Br) integration stations. Borrower was the State of SBo Paulo Construction of Line 4 of Siio SBo Paulo Metro Line NA S Paulo Metro under a PPP project. 4 Project (Ln. 4646- Borrower was the State of SBo BR) Paulo Provision of trains, signaling and SBo Paulo Trains and NA S telecom systems for SBo Paulo Signaling (Ln. 7,506- Metro and CPTM BR) Other development agencies IADB-financed improvements of Metro’s Line 5 stations of ex-FEPASA South line, acquisition of rolling stock and construction of Metro’s Fifth Line

In general, all State financed projects have fared very well particularly those in S5o Paulo State and Rio de Janeiro. The federally-financed projects such as Salvador and Fortaleza were highly affected by the fiscal restrictions from 2002-2005 which delayed implementation.

30 Annex 3: Results Framework and Monitoring BRAZIL: Si40 Paulo Metro Line 5 Project

Results Framework

PDO Project Outcome Indicators Use of Project Outcome Information To improve the mobility of a) Travel time plus waiting time 1. How level of service is public transport users in the between 2 pairs of stations (in improved between two points Capao Redondo-Largo Treze- minutes) due to the introduction of new Chacara Klabin corridor in a stations cost-efficient and b) Percentage of new stations 2. How many stations have environmentally-friendly integrated with bus lines (integration physical (in station) and tariff manner. related objective) (Bilhete Unico) integration with bus lines c) Number of passengers boarding in 3. Compare to projected ridership new stations and degree of actual intermodal integration d) Number of low-income (less than 4. Impact of Line 5 on Low- 4 minimum salaries) riding on Line 5 income population

e) Number of bus-km in the corridor 5. Environmental measure

f) Metro and Line 5 working ratio 6. Financial sustainability Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring Component 1 a) % of new trains completed a) Progress in new train delivery Infrastructure and Equipment b) % of CBTC signaling systems b) Progress in signaling systems completed delivery c) % of platform doors completed c) Progress in the installation of Dlatform sliding doors Component 2 Completion of a Metro’s climate To assess the progress made in the Project Management and change strategy and impact preparation of the consulting Supervision and studies assessment of Line 5 contracts agreed

Project Beneficiaries

The direct Project Beneficiaries are low-income residents living or working in the catchment area of the project particularly in the Captio Redondo area. Of these, 50% are estimated to be female. Metro ridership today is about 48% female and in the proposed Line 5 this number is expected to rise to at least 50%. The indirect beneficiaries are the inhabitants of surrounding municipalities such as Embu, Embu-Guaqu, Itapecerica da Serra and Tabogo da Serra of which about 50% are also estimated to be female. Metro conducts bi-annual surveys which will allow to track the impact of the extension as the new stations open for service.

31 Arrangements for results monitoring

Institutional issues: The PMU will be in charge of making sure that the periodic supervision reports include data on the project outcome indicators or/and the intermediate outcome indicators. 0 Data collection: Data collection will be undertaken by the operating divisions of each of the agencies and will be verified by the project management consultants. The low-income participation surveys will be undertaken every two years because they are costly. Capacity: Metro has the capability required to collect the data and prepare the progress reports. In case they cannot do it directly, they will be supported by the project management consultants.

32 T 0 gBbt; t; 55 2

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B 2 Annex 4: Detailed Project Description BRAZIL: ,950 Paulo Metro Line 5

1. The proposed Project which is expected to cost US$2,516.6 million will extend the existing Line 5 by approximately 12 km from the southwest of the city to the expanded center by 2013 and will be financed in parallel by the State of Siio Paulo, IBRD and the IADB3 as described in detail in Annexes 4 and 5. The State will fully finance all the civil works and permanent way as well as its project management and supervision. IADB will finance in full the modernization of 8 trains which already operate in the existing Line 5 and will partially finance with the State the energy supply, the telecommunications and control system, the auxiliary systems and the low- income population impact studies for a total of US$48lmillion. The IBRD will finance the acquisition and supervision of delivery and implementation of 26 new trains, the CBTC signaling system and platform screen doors and climate change related studies for a total of US$650.4 million. After the extension the line (herein for consistency with the legal agreement called Extended Line 5) will consist of a 20.1 km metro line going from Capdo Redondo station to Chdcara Klabin station and including the following intermediate stations: Campo Limpo, Vila das Belezas, Giovana Gronchi, Santo Amaro, Largo Treze, Adolfo Pinheiro, Alto da Boa Vista, Borba Gato, Brooklin Campo Belo, Agua Espraiada, Ibirapuera, Moema, Servidor, Vila Clementino, and Santa Cruz. The proposed Project consists of the following parts:

Part A: Infrastructure and Equipment

1. Provision of financing for the acquisition and/or installation of: (i) at least twenty- six (26) new train sets (EMUS) of 6 (six) cars each and related accessories, to operate on the Extended Line 5; (ii) Communication Based Train Control (CBTC) signaling systems for the Extended Line 5; and (c) platform screen doors for all stations of the Extended Line 5.

2. Carrying out of works and provision of financing for: (i) the rehabilitation and modernization of 8 trains which already operate in the existing Line 5; and (ii) the installation of the energy supply, telecommunications and control and auxiliary systems required for the extension systems.

3. Carrying out of civil works for the construction of approximately 12 km of tunnel and for the construction of 11 new stations, the permanent way and the Guido-Caloi train yard.

Part B: Technical Assistance and Institutional Development

1. Provision of financing and technical assistance for the: (i) supervision of the manufacturing and delivery of the new trains acquired under Part A.1 of the Project; (ii) supervision of the supply an installation of the CBTC signaling systems; and (iii) carrying out of specific studies to support the development of SP

The Borrower has completed negotiations with IADB on February 10, 2010 for partial financing ofthis Project.

34 Metro’s climate change strategy and to assess the impact of the Extended Line 5 on greenhouse gas emissions.

2. Carrying out a study assessing the impact of the Extended Line 5 on the low- income population in the Cap80 Redondo-ChQcara Klabin Corridor.

3. Provision of financing for Project management and civil works supervision consultants.

The IBRD loan of US$650.4 will fully finance Parts A1 and B1 of the Project. Part A1 will account for 96% of the loan and Part B1 the remaining 4%. In Part A1 (not including contingencies), the acquisition of the 26 new trains and accessories is estimated to cost US$422.82 million, the communication based train control signaling (CBTC) is estimated to cost US$88.29 million and the platform screen doors are estimated to cost US$34.47 million. Part B1 (not including contingencies) is estimated to cost US$23.13 million. A detailed cost table for all Project components is given in Annex 5.

2. Civil Works: the extension of Line 5 will link the well at Largo Treze to the Dionisio Costa well for a total of approximately 12km, 11 new stations and the Guido Caloi rail yard. The predominant construction method will be by shield (tunnel boring machine) but will have very small extensions by the New Austrian Tunelling Method (NATM) or by inverted cut and cover particularly in stations. In addition to the line tunnels and the stations 19 Emergency Exit shafts (SE) and Ventilation Shafts (VSE) will be built along the approximately 12 km.

3. Systems: The extended Line 5 will have the following systems: i) Communication Based Train Control Signalling System for all the line, including existing section, between Largo Treze Station and CapZio Redondo Station, trains on-board equipments and depots; ii) Rolling Stock, 26 new trains and modernization of 8 existing trains; iii) Centralized Control System; iv) Optical Transmission System for all the line; v) Telecommunication System, that it is composed by the following subsystems: a) VoIP Communication; b) Wi-Fi mobile communication; c) Passenger Information System; d) Radio communication; e) Multi-media System and f) CCTV; vi) Access Control System; vii) Local Control System; viii) Ticketing System; ix) High Voltage System (88kV); x) Medium Voltage System (22 kV); xi) Low Voltage System, including no- breaks, batteries and diesel generators; xii) Traction System (1 500 VDC); xiii) Overhead power lines (cathenary); xiv) Escalators; xv) Elevator for reduced mobilility passengers; xvi) Auxiliary Systems, like pumps, fire detection, illumination, air conditioning, etc; xvii) Platform Screen Doors; xviii) Main Ventilation System and xix) Maintenance facilities and vehicles.

4. New Trains: A more detailed description of the characteristics of the new trains, the basic specifications of the CBTC signaling system, the platform doors and the carbon dioxide emissions study follows:

35 TECRMCAL CHARACTERISTICS OF S.&O PACZO YEW 26 ELECTRICAL MULTIPLE LXTS COh4pOSITION OF EhlU MC +M + hl + M + hl + MC Ehlu capacsry (6 standmg passengerslm') 1,500 passengers Seated passenger 18 % of its capacity (with a density of 6 stulding

susm&dAe,-so half of it wltl k attached to end of one car and other half anached to end of other car arid systemCleannce passage id& of at least 1.600 nun

36 04 02 04 Four nnxble camas shall be mstalled hiside each train car. b) each end of the &mi a myable cm dull be iustatled to allow a view of the heahead and bhdthe train. Fre detechon quipmat &dlderect presence of Snmke in passaga cornputruest. and command cabin by means of continw>us air aspiratian. The train &dl be equipped with a fire extinction system using high- gfessure water nust Air rehgwated Each car &all be erlulpped wth, at least. two radepeudent air-refrigmted units, supplied by 380Vac voltage. 3-phaw. 6OHz Black Box Black Box recodng capacity shall allow the recordmg of the last 2 hours of imager of all cameras: with ~imniresoluhon and at lear 15 fianm per second. The train shall be designed wth redundancy in order to in the future the tram mybe conducted usrug “f)nver ks”systgm

37 Signaling System:

Communication Based Train Control CBTC comply with IEEE 1474 standards; Able to operate without train driver and comply with UT0 classification (Un-attendant Train Operation); Able to be commissioned in phases; Automatic train wake-up and automatic train sleep; Automatic train dispatch in the depots and intermediate parking areas; Without track circuits for secondary train detection; Automatic Train Supervision - ATS included to provide UT0 functions; Interface with other OCC systems included; RAMS comply with CENELEC 50126,50127,50128 and 50129 standards; Electro-magnetic compatibility complying with EN 50 12 1 standards; Environmental Conditions comply with EN 50125 standards; On-board equipments comply with EN 501 55 standards; Able to control the next track objects: - 138 Point machines in the main line and 52 in the depots; - Signals in the main line and in the depots; - Platform screen doors in 18 stations; - 12 Turnout areas. Total line length with double track - 21 Km; Number of stations - 17; Number of depots - 2; Number of trains to control - 34; Designed to maximum headway time of 75 seconds; Existing signaling system - Fixed block with speed code; On-board controller to be supplied and installed for all trains; Executive Project, Supply of hardware and software, Installing, Tests and Commissioning, Training, Technical Documentation and Warranty.

Operational Control Center - OCC:

The OCC must have the following functionalities:

About Train Control Functions (ATS): Supervision, control and recording of objects taken from the track; Control and supervision of the travel time and performance of trains; Retention and release of trains at platforms; Passage of train directly through the platform; Supervision and control of time stopped at stations; Order and collection of trains; Control the destination of trains; Transfer of trains; Oversight of the reversal of the trains command cabin; Oversight and control of routes;

38 Oversight and control of maneuver areas; Monitoring and control in case of restriction of energy consumption; Monitoring and control in situations of restricting the movement of trains; Train emergency stop; Provisional link; Permanent monitoring of operational status of the items of SSC; Diagnostics on-line comprehensive system; Diagnosis continuous failure; And it shall provide for the operator to continuously put on display dedicated, panel the following: e Conditions-for continuous tracking and identification of the trains on track; e Position the point machine; e State of Gates in Turnout areas; e Perform Routes e Conditions of platform doors; e Reversal and Retention of cabin; e Modes of control of the regions of AMV and the terminal areas and transfer; e Operational condition of equipment in the system; e Occurrence of alarms; e Restriction on speed in parts of tracks for maintenance purposes; e Condition of loading of the train users; e Condition of degradation of the train; e Identification of the operator of the train; Availability of trains in the yard and parking; e Diagnostic screens of monitored equipment.

About Energy Control: Supervises and controls the electric energy transformation and distribution (low, medium, high voltage and traction). Supervises and controls the automatism of the energy system; Monitors and controls the electric power consumption and demand of the transport system, intervening as required.

About Auxiliary Equipments Control: It supervises and controls the auxiliary services equipment actuating in: 0 main ventilation in tunnels; pumps; 0 fire detection; 0 lighting; 0 river bridge monitoring system; 0 escape route signaling.

0 About Passengers' Flow Control: 0 It supervises and controls the flow of passengers actuating in: - escalators;

39 - fare collection; - elevators; - follow-up of physically disabled people; - CCTV cameras for passenger's monitoring; of, tracks and equipment. - address audio and video messages for passengers.

7. Digital Transmission System (Optical Transmission)

The Digital Transmission System will be the fiber optical back bone communication of Line 5 and it will provide the communication of signaling system, telecom systems, SCADA and administration network to all installations like stations, electrical substations, OCC, maintenance bases and yards. The main characteristics are:

0 Comply with IEC 61 850 and IEEE 1613 standards; 0 Fanless; Double fiber optical cable, installed one cable in each track; 0 High availability (configured to ensure that no single or double failure could result in loss of communication); 0 Double power supply from different energy supply (AC and DC); SDH or Gigabit Ethernet; Able to manage images in real time.

8. Platform Screen door:

0 High panel type comprise sliding doors, with emergency doors between them, and supported by a metallic structure, with transparent glass closure panels;

0 The finishing of panel and door frames in brushed stainless steel;

Vital interface with Signaling System (SIL 4) and comply with IEC 61508 standards;

Able to operate automatically when the Signaling System is in fail condition (degraded mode).

40 9. Impact of Line 5 on Greenhouse Gas Emissions:

The study will establish: (1) a definition for the Line 5 corridor and the area of influence of the project; (2) a database of available traffic data in the corridor (particularly for bus: volumes, vehicle-kms, speeds) before and after the extension project using existing or regularly collected sources; and (3) an estimate of the impact of the Line 5 project on GHG emissions in the corridor using available assumptions about the characteristics of the vehicle fleet and travel behavior.

10. Climate Change Action Plan:

A study will be undertaken to advise Metro on developing a Climate Change Action Plan that supports the State’s agenda and complements related activities by the State Secretariat of Metropolitan Transport. The study may include the following activities: (1) an initial inventory of the primary greenhouse gas emissions by Metro, including the carbon content of the materials and processes used by Metro to provide its services; (2) benchmarking and comparison with peers using, if possible, using standard methodologies; and (3) identifying opportunities in Metro’s existing and future capital investment program that may mitigate carbon emissions, ranking them in terms of cost-effectiveness, and matching these with potential non-traditional sources of funds that have a climate focus to support their preparation, implementation or operation.

11. Among the potential sources of funds are existing methodologies approved under the Clean Development Mechanism (CDM). The following table is an initial list of methodologies that may be considered and applied as part of a Climate Change Strategy and Action Plan for Metro. Detailed descriptions of the methodologies are available at: http://cdm.unfccc.int

__Enero___ Efficiency-7-- in Trt-sport- . ____ AM00 16- Baseline Methodology for Mass Rapid Transit Mass Rapid Transit System or segregated bus lanes in urban or Projects suburban regions, including Bus Rapid Transit systems (BRTs) (for BRTs with feeder plus trunk routes use AM003 1). This methodology should be able to capture mode shift and network rationalization effects from major investments. AMS IIIC Emission Reductions Supports projects that involve purchase of and/or replacing (and by Low-Greenhouse scrapping) inefficient vehicles with new, more efficient vehicle Gas Emitting Vehicles technologies. This methodology can be used for new trains with emission reduction technologies such as regenerative braking, as was done in New Delhi. AMS IIIS Introduction of LOW- Supports project activities introducing low-greenhouse gas emitting Emission Vehicles to vehicles Commercial Vehicle for commercial passenger and freight transport, operating on a Fleets number of identified fixed route Energy Effi AMS IIB Supply Side Energy Applies only if project sponsor relies, partly, on its own power Efficiency generators (as opposed to its connection to a grid) and is

41 Improvements -- considering a switch to renewable energy. Generat ion AMS IIC Demand Side Energy Supports “activities that encourage the adoption of energy-efficient Efficiency equipment, lamps, ballasts, refrigerators, motors, fans, air Improvements conditioners, appliances, etc. at many sites.” AMS ID Grid-Connected Supports “renewable energy generation units, such as AM00 19 Renewable Energy photovoltaics,. , ,that supply electricity to and/or displace electricity Generat ion from an electricity distribution system that is or would have been supplied by at least one fossil fuel fired generating unit. AMS ID refers to small scale projects, and AM00 19 refers to large scale. AMS IIE EE and Fuel Switching Supports any energy efficiency and fuel switching measure for Buildings implemented at a single building or group of similar buildings (e.g.,

Po I ___ AMS IIA Supply Side Ener Supports activities that include Efficiency transmission line,” and proposed projects may apply “. . .to existing Improvements - transmission or distribution systems or be part of an expansion of a Transmission and transmission or distribution system.” Distribution

42 Annex 5: Project Costs BRAZIL: Siio Paulo Metro Line 5 Project

Foreign Local Total Project Cost By Component and/or Activity US $ million US $ million US $ million a. Infrastructure and Equimnents Civil Works and Permanent Way* 1,196.500 1,196.500 Svstems 514.185 110.470 624.655 Signaling 88.29 1 1.700 99.990 Telecommunications and Control* 52.020 15.555 67.575 Energy Supply* 145.860 43.520 189.380 Auxiliaries * 193.545 39.695 233.240 Platform Doors 34.47 34.470 Rolling Stock 439.395 439.395 26 Trains 422.82 422.820

8 Trains Modernization* ' 16.575 16.575 b. Institutional Policies Management Unit* 34.800 34.800 Civil Works Supervision* 23.100 23.100 Systems Supervision 20.25 20.250 Trains Supervision 2.52 2.520 Security Analysis 1.400 1.400 Climate Changes and Carbon Methodology Studies 0.36 0.360 Low-Income Population Impact Studies* 0.850 0.850

Total Baseline Cost 977.560 1,366.270 2,343.830 Physical Contingencies 135.328 18.742 154.070 Price Contingencies 16.844 0.230 17.074 Total Project Costs 1,129.732 1,385.242 2,514.974 Front-end Fee IBRD (0.25%) 1.626 1.626

~~ ~ ~~ ~~ ~ ~ ~~~ ~ Total Financing Required 1,131.358 1,385.242 2,516.600 Other ongoing costs for Line 5:

Expropriation costs (State funds) 262 I 349 262.349 Detailed project design (ongoing IDB Loan 2009-OC- 35.000 Br) 35.000 ~ ~~~~~ ~ ~~~ ~~ ~ Total Project 1,166.358 1,647.591 2,813.949 * There physical and price contingencies for these costs are included in the values listed. The physical and price contingencies listed under the baseline cost refer only to the World Bank-financed components.

43 Breakdown of Costs by Co-Financier Project Cost By Component IBRD IADB* State of SP Total andlor Activity US $ million US $ million US $ million US $ million a. Infrastructure and Eauipments Civil Works and Permanent Way 1,196.500 1,196.500 Svstems 122.760 391.425 110.470 624.655 Signaling 88.290 1 1.700 99.990 Telecommunications and Control 52.020 15.555 67.575 Energy Supply 145.860 43.520 189.380 Auxiliaries 193.545 39.695 233.240 Platform Doors 34.470 34.470 Rollinv Stock 422.820 16.575 439.395 26 Trains 422.820 422.820 8 Trains Modernization 16.575 16.575 b. Institutional Policies Management Unit 34.800 34.800 Civil Works Supervision 23.100 23.100 Systems Supervision 20.250 20.250 Trains Supervision 2.520 2.520 Security Analysis 1.400 1.400 Climate Changes and Carbon 0.360 0.360 Methodology Studies Low-Income Population Impact 0.850 0.850 Studies

Total Baseline Cost 568.710 408.850 1,366.270 2,343.830 Physical Contingencies 63.220 72.108 18.742 154.070 Price contingencies 16.844 0.230 17.074 Total Project Costs 648.774 480.958 1,385.242 2,514.974 Front-end Fee IBRD (0.25%) 1.626 1.626

Total Financing Required 650.400 480.958 1,385.242 2,516.600 Other ongoing costs for Line 5: Expropriation costs (State funds) 262.349 262.349 Detailed project design (ongoing 35.000 35.000 IDB Loan 2009-OC-Br) Total Project 650.400 515.958 1,647.591 2,813.949 * The Borrower has completed negotiations with IADB on February 10, 2010 for partial financing of this Project.

44 IBRD Estimated Estimated Estimated Fiscal Year Disbursements Cumulative Cumulative as Semester (millions USD) per Semester Disbursements YOof Total

December 3 1 Jun 30 1.6 1.6

December 3 1 112.8 114.4 17.4 Jun 30 78.8 193.2 29.5

December 3 1 126.7 319.9 49.1 Jun 30 175.8 495.7 76.2

December 3 1 639.5 1 Jun30 1 143'810.5 1 650.0 I 99.9 Year 5 December 3 1 0.2 650.2 99.9 June 30 0.2 650.4 100

Estimated Disbursements in millions USD (Including Contingencies) IBRD Fiscal 2o 201 1 2012 2013 2014 Year ANNUAL 1.6 191.6 302.5 154.3 0.4 CUMULATIVE 1.6 193.2 495.7 650.0 650.4

Percentage of the Loan (Including Contingencies) by main subcomponent % of Total CATEGORY Loan a. Infrastructure and EauiDment Svstems Signaling 132% Platform Doors 6.3% Rolling Stock 26 Trains 76.0% b. Institutional Policies Systems Supervision 3.7% Trains Supervision 0.5% Climate Changes and Carbon Methodology Studies 0.05% Front-end Fee 0.25% Total Financing Required 100%

45 Annex 6: Implementation Arrangements BRAZIL: Si40 Paulo Metro Line 5 Project

State Agency Responsible for the Project 1. The Secretary of Metropolitan Transport of the State of Si50 Paulo (STMSP) is the main Government agency responsible for the project and it will represent the State. To oversee the project on behalf of the State of SBo Paulo, STMSP has established and maintained a Project Coordination Unit (PCU) headed by a Project Coordinator, to follow the implementation of the project and oversee policy issues. This PCU already exists to oversee the SBo Paul0 Metro Line 4 project and its mandate has been extended to cover the proposed project. The actual implementation of the project will be done by Metro which is under the jurisdiction of the Secretary of the STMSP. Metro has implemented Bank-financed projects and have the manpower capacity required to implement the respective subcomponents of the proposed project.

Project Implementation Agents 2. Metro will have the same Project Management Units (PMUs) used in the Line 4 (phase 1) project which will be in charge of’the implementation of all project components. The PMU is headed by a Project Coordinator which will continue to report directly to the Director in charge of the implementation of the project, The PMU is staffed with regular staff from the agency and supported by project management and supervision consultants in charge of providing technical support in areas such as engineering, procurement, environment and financial management. Metro has considerable experience with its PMU unit in ongoing projects (SBo Paulo Metro Line 4 and Sgo Paul0 Trains and Signaling) .

3. Given the importance of quick response to issues that might be faced during the project , the Director to which the PMU reports is required to have sufficient autonomy to decide and, in extreme cases, have quick access to the President of Metro. Metro has strong technical, procurement, environmental and legal staff which will support the implementation of the project.

Assessment of Project Implementation Capacity 4. As mentioned above, Metro has considerable experience with its PMU unit in ongoing projects (Sgo Paul0 Metro Line.4 and Sgo Paulo Trains and Signaling). Their knowledge of procurement, financial, disbursement and safeguards procedures will be an asset for the project implementation. No special launch training is judged necessary. A Project Management Consultant financed by the State will be supporting the PMU as in the phase 1 of the Line 4 project. Supervision consultants for civil works, signaling, train acquisition, energy supply, telecommunications and auxiliary systems will be supporting the Line 5 Implementation Department of Metro which will be providing detailed monitoring data to the PMU.

Legal Agreements 5. There will be a Guarantee agreement between the Federative Republic of Brazil and the Bank, a loan agreement between the State and the Bank, and a subsidiary agreement between the State and Metro.

46 7

P 8m

3 0 mVI 2 E 8 & - * -Y LEGAL AGREEMENTS

Guarantee Agreement Government of Brazil

State of Sa0 Paulo

I Subsidiary Agreement I I I Metro

48 Annex 7: Financial Management and Disbursement Arrangements BRAZIL: Sgo Paulo Metro Line 5 Project

1. This annex is also an update for the latest financial management assessment made for Companhia do Metropolitano de SGo Paulo - METRO upon supervision of loans 46460-BR and 75360-BR, implemented by the same Project Management Unit (PMU).

2. The main objective of the Line 5 project is : To improve the mobility of public transport users in the Capno Redondo-Largo Treze-Chcicara Klabin corridor in a cost-efficient and environmentally-friendly manner. This objective will be achieved by extending the existing Metro (subway) Line 5 by 1 1.7 km from Largo Treze to Chacara Klabin, and by integrating it both physically and tariff-wise with the rest of the subway, commuter rail and bus network, thereby improving the accessibility of major employment, commercial, health, recreation, and educational facilities located in the expanded central area of the city to its users.

3. Conclusion: The conclusion is that the financial management arrangements as set out for this project satisfy the Bank’s minimum requirements and the State Administrative and Financial Management Systems (SIAFEM) to be used by STM together with Metro current Financial Management Systems being used for line four can provide with reasonable assurance, accurate and timely information on the progress of Project implementation. As strengths for the Project, it can be mentioned: a) the commitment of the entity to the Project, b) a strong and supportive Metro internal audit department, which checks all transactions. The overall financial management arrangements were considered SATISFACTORY and the associate risk as MODERATE, mainly due to dependence on external financing as Counterpart Funds and the high value of the bidding processes.

Table 7.1: Summary of Financial Management Arrangements

I Sheets and Records/ SOEs.

49 Risk Risk Rating Risk Issues/Measures Inherent Risk Country Level Low Entitylproject Moderate Project Implementing arrangements involves state and metro specific execution with different FM systems, arrangements and accounting laws. Control Risk Moderate Budget Low Budget will be clearly defined, reflected in an Annual Preparation Operational Plan (AOP) and approved by the Bank. Funds Flow Moderate All funds will flow to a commercial Bank. Transaction based with high amount of contracts and payments. Counterpart Moderate Depends on IADB and State Funds Staffing Low Experienced, professional and trained staff. Accounting Moderate Accounting procedures are adequate, though project funds procedures will be accounted at both SIAFEM and METRO systems applying different accounting laws. External audits Moderate Indenendent auditors to be hired and TOR to be nrenared.

Supervision

4. Financial management supervision will take place at twice a year and will include, among others, the (i) review of quarterly IFRs; (ii) review of the auditors’ reports and follow-up of issues raised by auditors in the management letter, as appropriate; and (iii) follow up on any financial reporting and disbursement issues.

Staffing and Institutional Arrangements

5. Project Management Unit (PMU) is a unit of Companhia do Metropolitano de SZo Paulo - Metro set up to implement Metro Line 4 Project. The unit’s structure as well as the use of streamlined project implementation procedures were deemed adequate to execute the Metro Line 4 Project, and as such will be maintained for the execution of this Line 5 Project. For those activities to be undertaken by STM, the current institutional staffing arrangements will be used.

50 Plrno Basico da Organizaflo - PBO Di&& de FiMI&aS - DF P

pzgq

Gdncia Recum Humnos - GRH AbrnemWlMM8de

6. The organizational structure f the PMU (Metro) will comprise a General Cc hator and Technical-Staff for Engineering, Accounting, Financial Management, and an assistant for administrative support, which daily tasks and routines will be updated on the Operational Manual, which includes carrying out coordination and consolidation of accountancy, internal control, monitoring and reporting. MetrCi staff is currently assigned to carry out the Project implementation and will be complemented with consultants as needed. Refreshment training in Bank financial management and disbursement procedures will be provided to PMU’s and STM’s staff involved in project financial management matters. The Organizational Structure is shown above.

Internal Control

7. The PMU will also maintain all Project’s records and financial statements, for disbursements and reporting, making sure that adequate charge codes are attributed to the

51 upcoming expenses, permitting to identify the origin and use of the funds by category and by component. Currently the entity has an internal control department with operational internal audit functions in place, The internal auditors will perform ex-post controls for the Project. Currently, as part of the internal control procedures of the entity, all payments processes are checked by a financial analyst and reviewed by the financial coordinator. Retroactive financing up to 20% of the proposed loan is proposed. In case of STM, where there is no internal control unit, the internal control procedures will be done according to the operational manual with segregation of functions and reconciliation of data by the PMU.

Accounting Budgeting

8. SIAFEM and Metro current FM systems will be used to account for loan proceeds, monitoring and asset management purposes. The PMU will have the responsibility of preparing the annual budgetary request for project funding. Metro, through the IFRs, will follow the private accounting law 1 1.638, which was updated to adapt to international accounting standards practices and will be made mandatory by 2010. The financial statements have been issued following the new law, as approved by Metro?s council. This is a good practice and in line with the World Bank guidelines. For those expenditures to be made by STM, the public accounting law 4.320 will apply. The different laws will not impact in preparing the IFRs, as it will be prepared on a cash basis, as currently done by Metro and STM for other Bank projects.

Financial Management System

9. SIAFEM is the integrated administrative and financial system used by the State of Sa0 Paulo to execute its budget. SIAFEM was developed to comply with the national regulations regarding budget execution and other fiscal requirements of the National Treasury Secretariat (such as LRF - Lei de Responsabilidade). SIAFEM, together with Metro?s systems fulfill the Bank?s requirement for financial management. SIAFEM will be used for accounting of STM executed activities, while Metro?s current FM systems will be used for accounting of Metro?s executed activities. For controlling and reporting purposes, all costs incurred will be accumulated by components and activities as set forth in the project description in each respective system and the data shall be reconciled by Metro.

Reporting and Monitoring

10. Although the project will be properly accounted at SIAFEM and Metro?s FM systems, Metro will be responsible for reconciling data of both systems and preparing quarterly IFRs for management and reporting purposes. The following IFRs will be issued: 1. IFR 1 - Source and application of funds by cost category as per Loan Agreement, 2. IFR 2 - Statement of Investments by Components and activities, 3. IFR 3 - Designated Account reconciliation, 4. IFR 4 - Disbursements reconciliation with Bank?s Client Connection site.

11. All IFRs will be in loan currency (US$), and expenditures figures will be stated by quarter and accumulated for the Project. IFRs will be submitted to the Bank up to 60 days after the closing of each quarter. Project end IFRs will be used for external auditing purposes. In

52 addition to IFRs the agent will be. responsible in producing physical implementation progress, procurement and contracting reporting. The contents and the formats of the reports have been discussed and will be included in the operational manual.

External Auditing

12. External audit will follow Bank’s audit policy and guidelines issued by the FMSB on June 30, 2003. Project’s accounts and Financial Statements will be audited by an independent audit firm, selected among a pre-approved short list of three to six candidates, and under Terms of Reference previously reviewed and approved by the Bank. It is recommended that the hiring process starts immediately after the signature of the Loan. Auditors report will express a single opinion on Projects’ financial statements which would include the Designated Account, IFRs and SOEs, and a management letter identifying any internal control weaknesses and areas of improvement. Terms of reference of audit will also cover all retroactive financing, if applicable. As mentioned above, the IFRs issued at the end of Project implementation period with cumulative figures will be used by the auditors to express their independent opinion. The auditors’ report must be submitted to the World Bank no later than six months after the end of each calendar year.

Flow of Funds

13. A designated account DA (US$) will be opened at Banco do Brad S/A in New York. A ceiling of US$ 100.0 million will be established The PMU’s designated account will have a corresponding project local currency account at Banco do Brasil S/A in Silo Paulo. STM or Metro (through transfers from STM) will process payments for works and services from respective accounts, which will be reconciled by Metro and audited. Counterpart funds will be disbursed from the State Treasury’s single account to contractors and service providers through an operative account. A schedule of estimated IBRD disbursements and loan allocation table are provided below.

Loan Allocation

Category Amount of the Loan Percentage of Expenditures to Allocated (expressed in US$) be financed inclusive of Taxes (1) Goods, Works and 648,774,000 100% Consultants’ Services for Parts A.l and B.1 of the Project (2) Front-end Fee 1,626,000 Amount payable pursuant to Section 2.03 of the Loan Agreement in accordance with Section 2.07 (b) of the General Conditions (3) Premia for Interest Rate 0 Amount payable pursuant to Caps and Interest Rate Section 2.07 (c) of the Loan Coilars Agreement TOTAL AMOUNT 650,400,000

53 14. The following disbursement methods will be used: Advance, Reimbursement and Direct Payment. The Minimum Application Size with respect to Direct Payments and Reimbursements (not Advances) will be US$ 10,000,000. Applications documenting expenditure paid from the Designated Account should be submitted by the Borrower ideally once a month but not later than once every three months, and must include reconciled bank statements as well as other appropriate supporting documents. Retroactive financing up to 20% of the proposed loan amount will be provided for to cover payments made 12 months before the loan signing date, but in no case earlier than September 30, 2009.

15. Records, Summary Sheets and SOE's will be used to document eligible expenditures. Records must be provided to all payments for consultants and works under contracts above the limits specified in the Disbursement Letter. Flow of funds will be according to the following flow chart:

54 Information for preparing IFRs and WA

PPLIER

55 Annex 8: Procurement Arrangements BRAZIL: Silo Paulo Metro Line 5 Project

A. General

1. Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement Under IBRD Loans and IDA Credits” dated May 2004 (revised October 2006); and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004 (revised October 2006), and the provisions stipulated in the Legal Agreement. The State will ensure that the project is implemented in accordance with the Guidelines on “Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” dated October 15, 2006. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loadcredit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. Procurement of Works: There is one major bid under the category works for the supply and installation of signaling systems (CBTC) and installation of platform doors for Metro. Experience with other Metro lines suggests that these two systems should be undertaken under one bid to maximize the integration and minimize implementation coordination problems. . The procurement of this bid will be done using the Bank’s SBD for supply and installation with agreed modifications for “turnkey” contract.

3. Procurement of Goods: There will be one bid for procurement of new trains using the Bank’s SBD for goods and allowing for domestic preference as requested by the Borrower.

4. The Borrower requested that procurement process starts as soon as the Bank authorizes it. Given the lead time for delivery of trains and installation of systems advanced procurement will speed up the procurement process as it was done in the case of the Silo Paulo Trains and Signaling project. The bidding documents for trains and signaling systems have been submitted to the Bank for review and clearance and the bidding process should be underway by Board presentation.

5. Selection of Consultants: The project includes the use of Consultants for (a) project supervision consultants and (b) for the study on carbon dioxide emissions. Short lists of consultants for services estimated to cost less than US$ 500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

56 B. Assessment of the agency's capacity to implement procurement

6. Procurement activities will be carried out by Metro, which is staffed by a General ' Superintendent for procurement and contracts and administration of material who oversees, among other departments, the manager of the procurement department. The procurement department is staffed by a very competent group of procurement specialists (about 20) all with large experience of procurement including of complex Bank financed contract such as those financed under Ln. 4646-Br (Line 4) and Ln.7506-Br (SBo Paulo Trains and Signaling).

7. An assessment of the capacity of Metro to implement procurement actions for the project was carried out by the Bank on October 5, 2007 and it still considered adequate because the staff in charge of procurement is the same as for the ongoing Bank operations. The assessment reviewed the organizational structure for implementing the project and the interaction between the project's staff responsible for procurement and the relevant units for administration and finance. Both agencies are very familiar with Bank procedures and procurement guidelines since they had implemented Bank financed projects recently.

8. The overall project risk for procurement is Average.

C. Procurement Plan

9. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Bank on December 2 1,2009and is available in the Project Files. It will also be available in the project's database and in the Bank's external website. The Procurement Plan will be updated in agreement with the Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

D. Frequency of Procurement Supervision

10. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended supervision missions to visit the field to carry out post review of procurement actions every six months during the first year of project implementation and annual visits thereafter.

E. Details of the Procurement Arrangements Involving International Competition

11, Goods and Works

(a) List of contract packages to be procured following ICB and direct contracting a b: I. I I I 1-1 I I I 1 L J 4 3 0 I Estimated Baseline Domestic Review by Contract Procurement Ref. No. To"Cost P-Q Preference Bank (Description) (US% Method Millions) (yesho) (Prior / Post) L5-0 1 Acquisition of 26 trains 483.4 ICB no Yes Yes Supply and Installation of L5-02 CBTC (signaling) and 138.9 ICB no no Yes Platform Doors systems

57 12. Consulting Services

(a) List of consulting services with short-list of international firms a b:

D Total Cost - Include Physical and Prices Contingencies.

(b) The Procurement Plan will define which contracts will be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$500,000 (five hundred thousand US$) equivalent per contract, may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

Description Type of Prior Review Contract Value Procurement Limit 1. Works: ICB All ICB No threshold

2. Goods ICB All ICB No threshold

3. Consulting QCBS To be defined in the To be defined in the Services Firms procurement plan procurement plan

58 7 I- z0 6 N N N6 N i i ci 9 acr, E

n m P 0 E d N + ci z E 0 0 p! 0 NE d Ea $ b

n3 W 0I v) + In z a, W e 3 E tj W p! s 7 s 3 m 4 0 0 CQ N 0 t p! n

7 w m 4 ? 4m 4 4 m -1 Y Y Y Y

7 N m d m Annex 9: Economic and Financial Analysis BRAZIL: Si40 Paulo Metro Line 5 Project

Summary of Cost Benefit-Analysis

1. The main objective of the Line 5 project is to improve the mobility of public transport users in the Cap80 Redondo-Largo Treze-Chacara Klabin corridor in a cost-efficient and environmentally-friendly manner. This objective will be achieved by extending the existing Metro (subway) Line 5 by approximately 12 km from Largo Treze to Chacara Klabin, and by integrating it both physically and tariff-wise with the rest of the subway, commuter rail and bus network, thereby improving the accessibility of major employment, commercial, health, recreation, and educational facilities located in the expanded central area of the city to its users. Finally, by shifting passengers from road to rail-based modes, the project is expected to improve the current trajectory of road accidents and carbon dioxide emissions in the corridor. As to measure the efficiency of such expansion a demand and economics analysis was required.

2. An incremental cost-benefit analysis of the proposed investments on Metro Line 5 was undertaken in order to evaluate the economic feasibility of the project, taking in account modifications incurred of the initial network configuration and location of passenger stations. 3. The basic scenario estimated demand of the Line 5 for 20 12, considering the Largo 13 - Chacara Klabin segment. The demand and transport economics study review involved the following activities: a) Network simulation estimating 626,970 daily trips for the Line 5 with 17 passenger stations in the year 2012 and demand projection of the period 201 1-2037; b) Investment flows including data collection of existing investments carried out since 2008 and assignment of future investments to the period 2009-2013 as reported by the PMU; c) Calculation of internal rate of return, benefit/cost ratio and net present value considering updated unit costs and operational parameters of the transport system.

4. The methodology used consisted in comparing the situation with and without project and quantifying the benefits due to time savings for users of all public modes, operating cost savings for all modes, road maintenance cost savings, accident savings, air pollution savings and the investment and operating costs. The demand for each mode was determined using a demand model which estimated the passenger-hours and passenger-km saved by mode with the project for without and with scenarios.

5. The main benefits considered were: a) Operating cost savings resulting from the lower costs of operating all modes with and without the project through estimates of passenger-km with and without the project which are multiplied by the respective estimated operating costs; b) Travel time savings estimated by determining the passenger-hours saved, by type of trip (home-to-work, business or other) and multiplied by the value of time for each mode according to each scenario with and without project; c) Reduction in road maintenance costs due to the reduction of bus-km with the project (minor); d) Reduction in the bus system managing costs due to avoided costs of expanding the existing public management structure; e) Reduction of air pollution costs due to reduction in bus-km with project (minor). To be conservative the costs of avoided investments in the do-nothing situation were not

60 considered; f) Reduction of accidents costs estimated by multiplying the average cost per accident per 1000 passenger-km with and without project and are a function of the number of bus-km saved (minor).

6. The main costs considered were: a) Investment costs for the acquisition of civil works, expropriation, trains and signaling systems and b) Operating costs including personnel, consumption and maintenance of Metro infrastructure, fleet and systems.

7. The project will decrease the number of bus-km and bus passenger-hour traveled on the urban network through the construction of a new subway line. The bus-km saved per year are estimated by the demand model. The main beneficial impacts of the project under evaluation are reduced congestion (mainly due to less buses on the street), reduction in traffic-related accidents, reduced vehicular air pollution, reduced noise due to less buses on the street and economic savings from reduction of travel time.

8. The above are all quantifiable and were used in the economic analysis. There are, however, a great number of non-quantifiable benefits which cannot be captured in a standard cost-benefit analysis but are worth noting:

a. Improvement of travel level of service: (i) Train occupation rates are expected to decrease due to the expansion of the network and services within the metropolitan area; (ii) Comfort level improvements on Metro services are non-measurable benefits and will certainly lead to higher utility levels of travel consumption and associated benefits. b. Accessibility and creation of new opportunities: (i) Promotes the interconnection between residential and employment areas and social equipment (hospitals, schools) facilities; (ii) Strengthens existing sub-centers and corridors. c. Land Use and Value (i) It increases land values due to lower generalized travel costs by public transport and by auto even without changes in the zoning law; (ii) It increases the dynamics of the real estate market which is reflected by the occupation of empty lots and the renewal of older building in the area of influence of the metro railways. d. Employment Generation: It will promote the creation of jobs with multiplier effects in several sectors of the economy.

9. A detailed economic evaluation report can be found in the Project File.

Traffic Demand Analysis

10. Demand analysis was undertaken by a specialized team based on the data provided by a comprehensive 1997 Origin -Destination Survey which collected data in 389 zones, interviewed close to 26,065 households and 97,760 people.

11. Traffic demand levels for the project life cycle were estimated by the technical staff of Metro through a demand simulation using EMME/:! based model, which tested progressive scenarios with different configurations of passenger stations for phases 1 and 2.

61 12. EMME/2 uses the 4 step approach of the Urban Transport Planning System, namely Traffic Generation, Traffic Distribution, Modal Split and Traffic Assignment, and is one of the most commonly used traffic demand package in the Americas.

13. The without project scenario consisted of simulation of the present urban bus network with the Metro network without the Line 5 operation on the segment Largo 13 - Chacara Klabin. It comprised the following configuration: (i) Metro Line 1: Tucuruvi - Jabaquara; (ii) Metro Line 2: Vila Madalena - Tamanduatei (including the branch Vila Prudente Oratorio); (iii) Metro Line 3: Barra Funda - Itaquera; (iv) Metro Line 4: ButantB - Luz; (v) Metro Line 5: CapBo Redondo-Largo 13; (vi) Rail Line 7: Francisco Morato-Luz; (vii) Rail Line 8: Luz- Itapevi; (viii) Rail Line 9: Osasco-Grajau (ix) Rail Line 10: Luz-Rio Grande da Serra (including ABC Express; Luz - Maua); (x) Rail Line 1 1 : Guaianazes-Estudantes (including East Express: Luz-Guaianazes) ; (xi) Rail Line 12: Bras-Calmon Viana; (xii) Rail Line 13: Guarulhos Pq. CECAP - Bras; (xiii) implantation of the “Bilhet Unico”, an integrated tariff which allows a user to buy a single ticket which costs less than the sum of individual tickets and can be used in several modes within a certain period of time.

14. The with project scenario in the year 2010 added Line 5 in the Metro network with 11 passenger stations and a subway segment of 1 1.4 Km linking the stations of Largo 13 and Chacara Klabin.

15. The with project scenario in the year 2013 added Line 4 in the Metro network with 11 stations considered for the Phase 2 of the project: Vila SBnia, Morumbi, ButantB, Pinheiros, Faria Lima, Fradique Coutinho, Oscar Freire, Paulista, Higienopolis, Republica e Luz. As for the rail network in the year 2013, the with project scenario includes: (i) Rail Line 7: Francisco Morato-Luz; (ii) Rail Line 8: Luz-Itapevi; (iii) Rail Line 9: Osasco-Grajau (iv) Rail Line 10: ABC Express: Luz-Maua; (v) Rail Line 11 East Express: Luz-Guaianazes; (vi) Rail Line 11 Guaianazes-Estudantes; (vii) Rail Line 12: Bras-Calmon Viana; (vii) Rail Line 13: Trem Guarulhos: Parque CECAP-Bras.

16. In the year 2009 the daily traffic for the Line 5 was estimated to be 150,050 passengers (present configuration) increasing to 626,970 (complete configuration) in the year 20 12.

17. In the year 2012 the daily traffic for Metro systems was estimated to be 4,816,690 passengers in the do-nothing scenario increasing to 4,272,390 in the with project scenario, increasing 544,330 passengers. Estimations for the Train system decreased 59,120 passengers from a daily frequency of 2,68 1,050 do-nothing to 2,62 1,930 with project.

18. Metro and CPTM (Train System Operator) maintain an updated database of demand income surveys applied on each service line. On the other hand the bus system demand is also monitored by SPTRANS. Value of time is then calculated for each transport system providing different wagehour average rates of US$ 2.24 to US$ 15.46 for Metro demand, US$ 1.3 1 to US$ 9.02 Rail and US$1.70 to US$ 11.76 for Bus.

62 Table 9.1: Value of Time Distribution (US$)

I Work I 2.24 I 1.70 I 1.31 I Business 15.46 11.76 9.02 Other 2.24 1.70 1.31

19. Trip distribution by purpose is derived for each transport' system according to Origin / Destination data. Metro system presents a significant proportion of 60.6% commuting trips and the highest participation of business trips accounting for 15.3%. Bus system presents a significant share of other purpose trips with 31.9% which includes journey to school and access to other social urban activities. Table 9.1 presents the trip purpose distribution for each system. Table 9.2: Travel Purpose Distribution (YO)

Work 60.59 52.94 74.08 Business 15.29 15.18 13.27 Other 24.12 3 1.88 12.65

20. According to the model results the main indicators for the peak hour simulation can be summarized as showed in the Table 9.2. Basically there was an increase of trips by metro and train and a decrease of bus trips which implied corresponding variations of pass-hour and pass-km for each transport modes. Operating speeds showed a positive change for metro, and bus systems.

Table 9.3: Variation of Peak Hour Indicators for Tested Scenarios

63 Critical Analysis of Demand Estimation and Empirical Validity of Modeling Results and Growth Assumptions

21. Bus system statistics and bus passenger mobility data were collected as to proceed the verification of the main results concerning the future participation of Line 5 in the public transport demand of its catchment area. The potential area for the Largo Treze-Chacara Klabin segment of Line 5 consists of two main bus corridors operating along the main arterial system comprising Av. Adolfo Pinheiro / Av. Santo Amaro / Av. Nove de Julho and Av. Vereador Jose Diniz / Av. Ibirapuera.

22. According to the Traffic System Performance Report for the year 2006 released by the Traffic Engineering Company of the city of Silo Paul0 (CET) those two corridors are currently served by totally or partially segregated bus lanes. Those medium capacity lines integrate bus collector services and the existing segment of Line 5 to the subway network and the city central business district, Presently the maximum vehicle loads occur in Av. Santo Amaro with 287 vehhour and Av. Ibirapuera with 337 veh. / hour, totaling 644 buses moving in both directions during the morning peak hour.

23. Estimations carried out by the Metr8 Company account for a directional bus frequency of 4 1 1 vehicle / hour towards the city center during the morning peak hour in the year 20 12 for the non-project situation. This figure is consistent with the present frequencies as show in the CET report incremented by 21 % to account for the growth predicted for the period 2006- 2012. Considering the average parameters of bus utilization provided by Metra and SPTRANS, the total demand of the Line 5 catchment area can be estimated in 1.2 million passengers per day.

24. A Bus System Reorganization Plan that was formulated by Metr8 and SPTRANS and generated a basic alternative for bus operation that includes a 41% reduction of bus frequency in the morning peak hour for those corridors. That reduction is based in the following operational measures that were also simulated in the network model:

(a) Bus services terminated bus lines with same route as of Largo Treze-Chacara Klabin segment of Line 5 will be cancelled.

(b) Sectioning: bus lines serving the area of Santo Amaro and sharing the same route of Line 5 will be split at the existing municipal bus terminals.

(c) Bus services reduced bus lines serving partially the Line 5 catchment area will have frequencies reduced by a 20% average.

25. In the light of the information exposed above, the attraction by the Metr6 Line 5 of 5 1% of the public transport demand seems to be attainable under the operational as well as strategic viewpoints.

64 26. The demand growth rate of 1% applied on the cost benefit flows sought to represent the smoothed long term growth of subway passenger demand sorting out specific ramp up events such as introduction of new lines and single ticket charge.

Metro Economic Costs

27. Total Investment Costs estimations resulted in a total of US$ 2,560.489 million including the following components: (i) Civil Works, Signaling and Control System Costs and Project design: investment requirements amount to US$ 2,485.180 million for the Metro system; (ii) Fleet Acquisition Costs: additional fleet required was estimated in US$ 372.555 million; (iii) Expropriation costs amounting to US$ 65.758 million; (iv) Consulting costs amounting to US$ 81.318 million (v) Taxes on Financial Operations summing up US$ 2.241 million.

28. Total Economic Costs were estimated after applying a 91.35% conversion factor on Civil Works, Systems and Consulting Costs that accounts for transfer payments due to Municipal and Federal Taxes.

Table 9.3: Investment Components for Line 4

Exchange Rate: R$1.77/US$ referred to 2008

29. Investment Maintenance Costs were estimated in US$ 132.5 million to account for the technology upgrade that is likely to occur within the project lifetime, which considered baseline data gathered from the activities related to systems modernization carried out in Lines 1 and 3.

30. Operational Costs: Metro provided an estimation of operating costs for the fleet and system during partial and full project operation period from 201 1 to 2037. The breakdown of operational costs basically involved two types of expenses: (i) personnel expenses involving resources for operating trains including wages and labor costs, and (ii) general expenses involving fleet maintenance, operating systems maintenance and electrical energy consumption costs. Costs were expected to grow from a yearly value of US$ 5.293 million in 2011 to US$ 58.225 million in 2013 and staying in the average of US$ 58 million from 2013 to 2036.

65 Table 9.4-: Operational Costs for Additional Trains and Signaling (US$ 1,000)

2011 I 4,155 I 1,138 I 5,293 2012 I 34.277 I 9.392 I 43.669 I 2013 I 45,702 I 12,523 I 58,225 I

Exchange Rate: R$I .77/US$ referred to 2008

3 1. Salvage Value and Depreciation: depreciation assumptions were made for investment of the components of civil works, rolling stock and systems amounting to an economic value of US$1,099,619 after a project useful life of 25 years. According to information received from Metro Civil works, Fleet and Systems have a full depreciation period of 40 years.

Public Transport Economic Benefits

32. Direct economic benefits were derived from the application of unit values of operating costs, passenger travel time cost, bus system management cost and road maintenance costs considered for each scenario (w or w/o project) on network performance indicators. Indirect benefits were similarly derived from estimated pollution and accident costs applied on network indicators. Table 9.5 summarizes basic unit values which were adopted. As for the travel time valuation it was assumed that to work and other purposes were assigned 33% of the average hourly income estimate and to business purpose a 100% factor were used.

Table 9.5: Unit Cost Values Applied to Network Data (US$)

Exchange Rate: R$1.77/US$ referred to 2008

33. Expansion factors of 7.68 and 13.68 were adopted to convert peak hour results to daily indicators of time and distance traveled. Daily results were multiplied by a constant of 3 10 working days to obtain yearly results. Basic estimators used for accident and pollution valuation are referred to the Sao Paulo Metropolitan Region.

Economic Cost Benefit Analysis

34. The general cost-benefit evaluation methodology adopted was that of comparing the situation with the proposed project implemented, with the situation that would occur without

66 implementation of the project. This implies that operating savings, travel time savings and avoided road conservation and accident and pollution costs for the proposed project are considered to be the incremental: with-project costs minus without-project costs.

3 5, Project Development and Growth Rationale: according to information based in sources from existing studies such as PITU 2020 (Metropolitan Transport Master Plan) and the internal estimates of the Planning Department of Metro it was adopted a demand growth rate of 1% during the project period. The trend adopted was also consistent with official demographic and income projections carried out by federal and state level.

3 6. Civil works, expropriation, fleet and systems acquisition are considered non separable components for the purposes of this evaluation. Metro acquisitions were evaluated together vis a vis a stream of net benefits. Transfer payments such as taxes and subsidies were withdrawn from the project profile and the adopted value for the exchange rate was R$1.77 13/US$ referred to 2008.

37. The project flows are presented in the Table 9.6, discounted to present values at a rate of 10% per year for the basic alternative studied. As may be seen the simulated scenario present positive net present value of US$ 1,209 million and benefitlcost ratio of 1.56. The economic internal rate of return of 16.72% was obtained for the basic alternative.

38. Travel time savings are the most significant benefits obtained, accounting for 81 % of total benefit. Operating costs saved by the decrease of bus and train services showed a sufficient amount to compensate additional metro operating costs generated by the Line 4 and account for 4% of total benefits.

39. Road maintenance and bus system managing avoided costs amounting to 10% and environmental benefits were estimated in 5% of total benefits.

Sensitivity Analysis

40. The general sensitivity analysis is showed in Table 9.7 where effects on the performance indicators were tested from changes in the cost and benefit of selected items referred to the base case. The base case accounts for a standard discount rate of lo%, and demand growth of 1% during the project life cycle.

41. Significant variations were observed for value of time benefits and investment costs. The switching cases for discount rate of 10% of each one of those attributes resulted in a reduction of 42.6% for value of time and a 67% increase for construction costs. Variation due to environmental benefits can be assumed irrelevant for the purposes of the present analysis. The Project is robust under assumed delays of 2 and 3 years with estimated EIRR at around 14%.

67

Table 9.7 Benefits and Costs of Metro Line 5 (US%1000)

8% 4,309,258.05 2,342,833.47 1,966,424.58 1.84 9% 3,801,869.56 2,250,568.52 1,551,301.05 1.69 10% 3,371,623.32 2,162,799.10 1,208,824.22 1.56 11% 3,004,687.64 2,079,582.60 925,105 -04 1.44 12% 2,690,000.64 2,000,839.82 689,160.81 1.34 13% 2,418,670.07 1,926,408.06 492,262.0 1 1.26 14% I 2,183,5 1 1.23 I 1,856,076.96 327,434.27 I 1.18 15% I 1,978,689.61 I 1,789,612.50 189,077.1 1 I 1.11

BASE CASE Discount Rate

Value of Time

(Discount Rate =lo%)

70

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-I f 9 (3 sHU W f K W (3z a 0I ds Annex 9a: Impact of Line 5 Extension on Low-Income Population Brazil: Si30 Paulo Metro Line 5 Project

Objective

1. The main objective of this annex is to summarize the impacts of the implementation of the proposed Line 5 extension on the quality of life and travel conditions of the low-income population in its area of influence. A detailed assessment can be found in the Project Files.

Background

2. Characteristics of the areas of influence of the Line 5 extension: Line 5 is located in the southwest region of the Silo Paulo municipality and includes districts of the capital and four more municipalities of the Silo Paulo Metropolitan Region: Taboilo da Serra, Embu, Itapecerica da Serra and Embu-Guaqu. For the purposes of this work, the same areas of influence identified in the preliminary project design for the Line 5 extension which establishes the Area of Direct Influence of the line were used. The Direct Area ofInJluence is composed by Origin-Destination zones which are part of the surroundings of the existing Line 5 link which is already in operation (Capilo Redondo-Largo Treze) hereon designated as Link 1; and the surroundings of the proposed extension (Largo Treze-Chacara Klabin) hereon designated as Link 2. The Indirect Area ofInJluence includes the zones covered by the bus integration network which will be in operation once the proposed Line 5 extension is inaugurated. It is formed by portions of the south region of Ssio Paulo and by the zones which are part of the four peripheral municipalities indicated above.

3. Low-Income Population in the Area of Influence of Line 5: The area of influence of Line 5 has about 1 million inhabitants with incomes below the poverty line (27% of total population). There is still an income class of low middle-income, very close to the low-income class, of about 619,000 inhabitants, who may be considered as recently coming out of poverty, adding to about 45% of the area population. When aggregated to the low-income class, the total of low-income inhabitants in the area under study is about 1.5 million.

4. Profile of Resident Population The population of the Area under study shows a very homogeneous profile insofar as income is concerned: While in the more peripheral zones, Link 1 (Indirect Area of Influence), the low-income segments and low-middle income population predominate and are more than 50% of the population, in the area of influence of Link 2 (Direct Area of Influence), there is middle income population (30%) and middle high income (52%).

5. Real Estate Development in the Area Surrounding Line 5 : The analysis of the data bank of real estate developments in the SPMR show that the area around the proposed Line 5 extension is one of the most attractive for the present real estate market, both residential and commercial, either because it is close to the main front of commercial and services developments-namely the axis Marginal/Berrini/Faria Lima- or because its surroundings congregate the south /southwest sector districts which were chosen by the real estate promoters as the location of some of most expensive residential developments of the city such as the

75 Ibirapuera//Moema/Nova Cachoeirinha axis. This area has also the highest concentration of non residential launchings (commercial and services buildings) because about 50% of the developments of this type in the metropolitan area are located there. The accelerated concentration and dynamics of the market for offices in the areas neighboring the new Line 5 explain why this area is becoming recently one of the most important poles of employment in the metropolitan area.

6. It is important to note the decisive influence of the use of urban instruments for urban renewal such as the Joint Urban Operations of Faria Lima and Aguas Espraiadas - located in the areas around Line 5- in the acceleration of the real estate development in the area. With the already planned Santo Amaro Urban Operation which allows building coefficients (Land Use Coefficients and Occupation Rates) higher than those allowed by the present legislation, there are new incentives for the expansion and intensification of real estate developments along Line 5 thereby further increasing the employment opportunities. Conclusions of the Study on Impacts of Line 5 extension on Low-Income Population

7. By 2013 it is forecast that the SBo Paulo Metro’s network ridership will increase by 544,000 passengers per day of which 448,000 alone in Line 5 once the extension from Largo Treze to Chacara Klabin is completed.

8. By 2013, about thirty percent of the daily ridership in Si30 Paulo Metro network as a whole will be passengers with household incomes of less than 3 minimum salaries (3 MS). By 2013, the increase in low-income users in Line 5 will be 147,800 per day. Adding to that estimate the users who earn between 3 and 4 MS (users that are just above the poverty line), the estimate for low-income ridership increment in Line 5 after the extension is about 220,000 passengers per day. Line 5 is and will continue to be the SBo Paulo Metro line that transports more low-income users.

9. Expected Benefits: The benefits expected from this extension of Line 5 for low-income users in particular are: Improvement in travel conditions, lower travel times, trip comfort, affordability, accessibility to public transport, availability and acceptability; easier accessibility to urban facilities, particularly, secondary and university education facilities, hospitals and health centers and leisure facilities’; urban impacts on the residential neighborhoods and increase in real estate values. These benefits will have a significant impact on the low-income population who live in the area of influence of Line 5.

10. Trip Time Savings: One important benefit of Line 5 extension will be the travel time reduction for its users. Estimates suggest that by 2013 assuming that the extension will be in operation, the travel time between Largo Treze and Chacara Klabin stations will decrease from 72 minutes (trip time by bus) to 21 minutes, that is, a reduction of about 5 1 minutes. If the trip is from Capiio Redondo to PraGa da SC the reduction will amount to about 55 minutes. 1 1, Increase in Accessibility to Employment: The proposed Line 5 extension crosses one of the most dynamic areas of the SPMR in terms of economic activity. In 2007, in the area of influence of Line 5 there were 1.6 million jobs of which 874,000 jobs, in the area surrounding the extension. The majority of these jobs require medium qualifications. However, about 18% of

76 the jobs in the area of influence of the new extension require low qualifications and will be readily accessible to the low-income population. The number of jobs forecast for 2013 is about 1.9 million of which about 980,000 are conservatively estimated for 201 3 in the area of influence of the proposed extension. The accelerated dynamics of the real estate market in the area suggests that by 201 3, the concentration of employment could be even higher.

12. Interconnectivity within the metropolitan area: The trip time reduction, which will allow any user of Line 5 to interconnect with the rest of the network, will have a major impact in the overall accessibility matrix of the metropolitan area. This will happen because in less than 20 minutes, the user will be able to interconnect with any of the other metrorail lines in the East, West, North, South or Southwest of the SPMR.

13, Affordability and impacts on quality of life: The Line 5 user has access to a number of tariff mechanisms which were designed to enhance low-income class tariff affordability. They are: Free integration between five intermunicipal lines which connect with the Capgo Redondo and Santo Amaro stations bringing users of the Indirect Area of Influence, in its majority low-income users. 0 Discounted Ticket - ?Bilhete Unitario Lilas? - which offers a lower tariff to the users of this Line 5 recognizing that the majority of the users are low-income.

At the new link all these advantages will be maintained to benefit the low-income users.

14. Better Quality of Life due to higher accessibility of users to public infrastructure facilities: Given the poor availability of urban facilities in the Indirect Area of Influence, it is estimated that the use of Line 5 extension by the population residing in the peripheral areas will also bring a significant gain in the accessibility to those facilities located around the extension, by low-income families. Facilities such as kindergartens, primary and secondary schools, health posts, hospitals and sports and cultural centers are located around the new stations within a 600 meter radius, particularly hospitals and heath posts.

15. Strategic Factors To Ensure Positive Impacts: Based on its experience with the introduction of the Bilhete-Unico Integrado, the State is convinced that it is very important to adopt specific strategies to increase the chances that the benefits of infrastructure investments are spread more evenly by all income classes. In metrorail investments it is important to design strategies which enhance social inclusion in the ridership of new lines. Low income classes and users in general are benefitted when

Modal integration policies are introduced ensuring bus-rail physical integration; 0 Integrated tariffs such as the Bilhete Unico Integrado are introduced and in this case extended if possible to the intermunicipal buses; The urban development plans in the areas around the line and particularly the stations are designed in a way as to create employment and minimize the exit of the low- income population residing in the area using urban instruments that allow for social diversity.

77 Annex 9b: Fiscal Analysis of Silo Paulo State Government, 2003-2008 BRAZIL: Silo Paulo Metro Line 5 Project

1. The full fiscal analysis is included in the Project File and contains five sections. The first describes the evolution of the fiscal balances and fiscal revenues and expenditure for the period 2003-08. The second section analyzes the evolution and composition of the state debt. The third relates the evolution of the main Fiscal Responsibility Law indicators of Silo Paulo and the accomplishment of the state fiscal accounts with the legal ceilings and the targets of the Fiscal Adjustment Agreement agreed with the STN. The fourth part exhibits the projection exercises which depict scenarios for the evolution of fiscal accounts and estimate the impact of the World Bank lending operation on the state fiscal accounts. The fifth section performs a sensitivity analysis to illustrate the effects of changes in the determinants of fiscal accounts on them. A summary is provided below.

Summary

2. Silo Paulo State government exhibited a responsible fiscal performance during 2003 to 2008. The State government has achieved increasing and substantial positive gross operating and primary balances which led to positive net lending results, except in 2004. Substantial operating balances allowed the State to sustain considerable levels of public investment and to reduce indebtedness.

3. The good fiscal performance resulted from the strong performance of State revenue and the control of expenses, in particular, personnel expenses which have been maintained practically constant in the last years. As a result of its sound fiscal performance, Silo Paulo complied with all of the fiscal requirements established by the Fiscal Responsibility Law (FRL). Even more important, the FRL indicators improved as a consequence of the strong fiscal discipline. Net consolidated debt, used for compliance with the Fiscal Responsibility Law, fell from 224 percent of net current revenue in 2003 to 163 percent of net current revenue in 2008, below the legal ceiling for state governments of 200%. In 2003-2008, personnel costs to net current revenue ratio fell from 54.57 percent to 47.46 percent of net current revenue, below the ceiling of 60%. Despite the high debt service payments, debt services to net current revenues reached 10.68 percent (against the FRL ceiling of 11.5% of net current revenue).

4. In addition to the Fiscal Responsibility Law requirements, the Silo Paulo State government achieved most of the targets of the Fiscal Adjustment Program agreed with the National Treasury Secretariat (STN). Given the good performance of the last year and the reduction of indebtedness ratio, the STN authorized the State to contract new credit operations for the period 2009- 1 1, in addition to the previous authorization given in 2007 and 2008.

5. Projections for the period 2008-2025, depict a favorable evolution of the main fiscal and financial indicators showing that the continuity of responsible fiscal behavior should guarantee State debt sustainability. The substantial fiscal balances obtained over the past few years, together with projections based on realistic assumptions, indicate that the Silo Paulo State government is able to assume new loans from the World Bank without risking its fiscal health.

78 6. Despite the general improvement of the fiscal conditions in Siio Paulo and its favorable medium term fiscal scenario, there exit remaining vulnerabilities that could put under pressure the public finances of the State. The most important source of fiscal risks is the high level of indebtedness and its composition characterized by its extreme concentration on debt instruments indexed to the Wholesale Price Index (IGP) which is closely linked to the exchange rate and commodities traded internationally. Therefore, an exchange rate shock could lead to the resumption of an increasing trajectory of State indebtedness.

7. In addition, the State would need to maintain the high performance of revenue collection observed in the previous years. As revenue collection depends on economic activity, the favorable fiscal trends will depend on the economic activity. On the expenditure side, despite its comfortable situation, a major source of vulnerability is the upward trend of pensiordsocial security benefits for retired public employees (RPPS). The State employees’ social security system is a pay as you go system and demands frequent transfers from the State Treasury to cover its current deficits. This indicates a potential increase in personnel expenditures that can deteriorate the financial situation of Siio Paulo. However, it is important to mention that social security imbalance is a reality for the public sector in general in Brazil at all levels of government.

8. The Project itself, and the other loans under preparation, would have a minor impact on the State finances. Counterpart financing would equal 11% of projected capital spending during the implementation period. Annual interest on the two loans (Bank and IADB) in nominal terms would total about 445 million Reais (about US$251 million) once they are fully disbursed, or less than 0.5% of net current revenues.

79 Annex 10: Safeguard Policy Issues BRAZIL: Si40 Paulo Metro Line 5 Project

Project Objectives

1. The Project Development Objective is to improve the mobility of public transport users in the CapBo Redondo-Largo Treze-Chacara Klabin corridor in a cost-efficient and environmentally-friendly manner. The Bank will finance, however, only a portion of the overall project, related to the provision of trains and signaling equipment. This objective will be achieved by extending the existing Metro (subway) Line 5 by approximately 12 km from Largo Treze to Chacara Klabin, and by integrating it both physically and tariff-wise with the rest of the subway, commuter rail and bus network, thereby improving the accessibility of major employment, commercial, health, recreation, and educational facilities located in the expanded central area of the city to its users. Finally, by shifting passengers from road to rail-based modes, the project is expected to improve the current trajectory of road accidents and carbon dioxide emissions in the corridor.

Project Description

2. The proposed Project is described in detail in Annex 4.

Project Location

3. The approximately 12 km metrorail line extension will be entirely underground in the City of SBo Paulo, capital of the State of SBo Paulo, Brazil, extending from Largo Treze Station (current terminus of the initial 8 km metrorail segment in operation) in southwest part of the city to the expanded city center at Chacara Klabin Station. The project will include 11 stations providing access to some of the most important employment, educational, recreational, and health centers in SPMR, such as: Largo Treze, Av. Santo Amaro, Av. Jose Diniz, Av. Roque Petroni, Av. Morumbi, Moema, Ibirapuera, Vila Clementino, Vila Mariana, numerous universities, and seven hospitals (Santa Casa de Santo Amaro, Evaldo Foz, Gastroclinica, Servidor, A.A.C.D., SBo Paulo, and Santa Cruz). The project will also interconnect with existing Metro Line 1 at Santa Cruz and Line 2 at Chacara Klabin facilitating access to other sectors and employment centers of SPMR. It will also support improved pedestrian and universal accessibility features in and around stations, the rationalization of bus lines to feed the Metro stations and integration with complementary investments, such as a planned busway between Morumbi and Diadema, and a planned LRT serving Congonhas Airport.

Borrower’s Institutional Capacity for Safeguard Policies

4. The Borrower (State of SBo Paulo) has had experience with Metro Line 4 (Phases 1 and 2) successfully managing a Category “A” Project that required Environmental Assessment and Involuntary Resettlement policies consistent with Bank policies. As an example, the Metro Line 4 Phase 1 Project had a full environmental assessment which was approved by local authorities and the Board prior to its appraisal. As a public authority, Metro works closely with the State Secretary of the Environment (SMA), and its own staff to monitor the environmental and social

80 impact of its operations, particularly during the planning and construction phases. Metro has been successful in preventing and mitigating direct environmental and social impacts and in improving its overall technical capacity for addressing safeguards issues. In Line 4 regular Environmental Progress Reports are prepared by the contractor and supervised by Metro and SMA and/or CETESB. The procedures and supervision given to the Line 4 were adequate and several aspects were improved, including: (i) air quality control and effluent monitoring, (ii) improved noise management plan, (iii) environmental data reporting and benchmarking (including providing the Bank with periodic reports on vibration, dust, noise, wastewater, etc.), and (iv) action on non-compliance and enforcement systems.

5. During project implementation of Line 4 (Phase 1) in January 2007, an accident occurred in which 7 people died due to the collapse of the tunnel at Pinheiros station which was being excavated. This led to additional involuntary resettlement due to damage to homes and to the need to evacuate other dwellings and businesses until their safety could be assured. Following the accident, the Bank reviewed the design and implementation of the required resettlement and found it to be satisfactory. The resettlement and compensation of affected parties is now complete, with no cases pending. Additionally, the Bank discussed the Borrower’s environmental monitoring system and made several recommendations for strengthening the use of monitoring data during implementation. The Bank’s recommendations have been followed and the Borrower’s performance was satisfactory.

Social Safeguards

6. Social outreach and planning for resettlement is under the responsibility of the Community Relations Department in Metro, which has also contracted specialized consulting services to help with the preparation of a detailed resettlement plan. The civil works for the proposed Line 5 project will be financed and executed by the Borrower and will involve the expropriation and resettlement of roughly 400 properties, triggering the involuntary resettlement policy (OP/BP 4.12). These properties include a significant number of commercial buildings near the proposed Adolfo Pinheiro station. Originally 146 properties were to be expropriated, but Metro made specific adjustments in the project design to minimize the amount of displacement in this area at the requested of the business owners and with the support of local authorities. The revised plan avoids the displacement of some 75 small businesses in the Galeria Borba Gato, a shopping arcade of small retail businesses, and allows most of other businesses to remain in place or to move to nearby temporary quarters. For the underground segments between stations, the basic perimeter of the affected areas has been defined and a preliminary field survey of the properties has been conducted. The most recent summary of this survey is presented in the table below.

Expropriation Locations Type of Properties Affected Current Status Guido Caloi Yard 5 commercial, industrial, and Legal expropriation service occupancies procedures initiated Adolfo Pinheiro Station 62 mostly commercial and Most properties in service occupancies possession under revised project design Poco Delmiro Sampaio 6 commercial, 3 service Legal expropriation I occupancies I procedures initiated

81 Segment 1: Between Adolfo Approximately 150 Metro is conducting a Pinheiro and Poco occupancies, mostly detailed census, including Bandeirantes (5.791 km) residential, but also demographic and commercial, and service socioeconomic Segment 2: Between Poco Approximately 125 residential, characteristics of the Bkdeirantes and Chacara commercial, and service occupants Klabin Station occupancies (5.960 km) 7. The Borrower is completing a detailed census of the occupants (both residential and commercial) of the properties that will be displaced in order to determine the need for special services. The survey will identify persons and families with special needs such as elderly and disabled residents, small marginal business, businesses highly dependent on a local clientele, etc. The Borrower will also survey the area to ascertain whether any historic structures or monuments are affected by the project.

8. Based on currently available information, the total number of properties expropriated for the purpose of constructing Line 5 is 400. Of these, some 50 properties have already been expropriated as part of construction that already begun. The 50 properties previously expropriated (associated with the Patio Guido Caloi, Estaqgo Adolfo Pinheiro and Poco Delmiro Sampaio segments) were acquired in anticipation of the proposed project and for the same project objectives, a follow-up study was done to ensure that the affected parties were accorded benefits compatible with World Bank policy. Of the remaining 350 properties, there are 281 occupied properties, 39 vacant properties, and 30 open lots. In the 281 occupied properties, there are 135 occupied residences and 2 16 non-residential uses including businesses, industry, public agencies or NGOs (yielding a total of 351 occupancies). It is important to note that there may be multiple occupancies in some properties (such as two residences or businesses in the same property). Sixteen families have tentatively been identified as “vulnerable.” The various companies and businesses operating in the affected buildings employ approximately 5,600 people. These persons would also be affected by the relocation of their place of employment.

9. Metro has presented the proposed Project in several public meetings, most recently on August 6,2008 and May 7,2009 as open hearings in the general area of the proposed Project. The main comments received during the last public meeting related to (i) improving the timing and form of communications with the project affected people, (ii) the criteria used to select the project alignment and design, and (iii) potential impacts on local and cultural resources of concern to the community.

10. A draft Resettlement Action Plan (RAP) was prepared in accordance with the requirements of OPBP 4.12 and submitted to the Infoshop on November 25, 2009 in accordance with the Bank’s disclosure policy. The RAP was made available on Metro’s website on the same day. Metro will conduct meetings with the affected people to discuss the proposed plans. The entitlement afforded to displaced residents and businesses will be cash compensation for the replacement value of housing and business places. Special provisions will be made for renters and businesses that may be eligible for compensation for foregone profits. Renters will receive the difference between their current rents paid and the new rent, if any, for three-months. Special

82 arrangements will be made to provide assistance needed by very poor and vulnerable people. All affected occupants will receive assistance with moving expenses. The Bank has reviewed all safeguards documentation prepared by independent specialized consultants hired by Metro.

11. Impact of the proposed project on Land Use: The proposed Line 5 extension will impact the land use surrounding the corridor it serves in different ways. First, bus traffic congestion will decrease because a substantial number of present bus riders will shift to metro since the extension will vastly increase the connectivity with other lines of the Metro system. It is expected also that a number of middle income auto users will also shift to metro particularly if, at peak-hours, the trains will not be too full and the ride will be comfortable. The impact on real estate is expected to be higher on the areas surrounding the existing link because the extension will again provide more value to buildings which nowadays are close to the end of Link l(Cap5o Redondo-Largo Treze) and have not yet appreciated because the line ended there. The impact on the area surrounding the stations of Link 2 (Largo Treze-Chacara Klabin) will be important particularly because Metro station accesses will be designed in a way as to facilitate access to pedestrians and non-motorized modes and the integration with buses. However, given that the real estate around Link 2 has already appreciated, it is not expected that the impact of the extension on property values will be substantial. A detailed analysis of the impact of the project on low-income population is available in the Project File and summarized in Annex 9a. Overall, it is expected that the impact of Line 5 on land use will be beneficial to quality of life and will offer an opportunity for renewal of apartment buildings and leisure facilities in the areas around the stations.

Environmental Assessment

12. Overall and in the long-term, the project is expected to have a positive impact on the environment. Congestion and air pollution are currently some of the most important environmental problems facing the metropolitan region. Providing a high quality and safe transport alternative, especially for long trips, will help contain the rapid increase in motorized trips and related environmental impacts. The project will help quantify these long-term environmental impacts in terms of modal ‘retention’ or shift and the associated emission benefits.

13. The most substantial negative environmental impacts will occur during the construction phase and are temporary. They affect the local physical environment around 11 future underground stations and 11 km tunnel, in particular creating an increase in emissions, effluents, noise and vibration levels, and can also compromise buildings located in the immediately surrounding area. The disturbance caused by excavation and pumping works on the tunnels, shafts and underground station facilities could significantly impact neighboring buildings.

14. The Borrower and Metro have good institutional capacity to evaluate and propose safeguard plans to manage these impacts through the Environment and Sustainability division of the Department of Planning To ensure thorough environmental oversight for the proposed Project, the implementing agency will be assisted by environmental specialists of the project management and supervision consultants who will assist the Department for Implementation of Line 5 and the PMU. These consultants will supervise the implementation of environmental

83 management plans (and thus compliance with environmental norms and standards) by the construction firms as it was done successfully with Line 4. 15. In the State of Siio Paulo, the environmental licensing occurs in the SMA (Secretariat of the Environment) by means of DAIA (Department of Environmental Impact Assessment), which analyzes . the environmental studies of projects potentially or effectively causing significant environmental impact, subject to licensing with an environmental study, according to CONAMA Resolutions 01/86 and 237/97.

16. Following the Federal and State Legislation, Siio Paulo Metro is required to obtain the three different environmental licenses prior to operation: (i) Preliminary License (Licenca Pre‘via - LP) is granted in the planning stage of the project and contains basic requirements for site selection, installation and operation; (ii) Installation License (Licenca de Instalacdo - Ll) authorizes the establishment of the business, according to the specifications of the approved executive project; and (iii) Operation License (Licenca de Operacdo - LO) authorizes the start of the operation of each Line, as well as for the functioning of the required equipment after the environmental authorities verify the fulfillment of the requirements in the Installation License.

Compliance with World Bank environmental safeguard policy

17. The proposed Metro Line 5 extension Project has received an Environmental Category “A” rating in accordance with OP 4.01 (Environmental Assessment), as was the case with Line 4 Project. The Environmental Assessment and Environmental Management Plan were prepared and submitted to the Infoshop for review on November 25,2009. An Executive Summary of the Environmental Assessment was submitted prior to appraisal to the Board on December 15, 2009. Independent environmental consultants prepared an Environmental Assessment (EIA-Rima and EMP) that were reviewed by the relevant State environmental agencies (Secretaria do Meio Ambiente and CETESB) and was received the “preliminary license” (Licenqa Pre‘via) on February 2, 2010. The Bank reviewed and disclosed the full set of environmental documentation prepared by Metro consultants. It was found to be satisfactory and the Bank will supervise the proper implementation of the proposed actions by Metro. Metro also prepared an Environmental Management Plan, which adequately incorporates the lessons learned from the implementation of Line 4 Project and Metro’s vast experience with the following aspects: Environmental Control Program during construction including solid and liquid wastes, surface drainage, safety issues, contaminated soils, vegetation, impact to the surrounding community, public utilities and buildings, transport of materials and equipment, traffic management, and disposal Environmental Education Program including training of professionals to implement the EMP Monitoring Program of environmental quality and impact including air, noise, and vibration, settlement due to tunneling works Emergency Action Plan Social Communications Program Cultural Resources Program Environmental Control Program during Operations including previous experiences, certifications, description of activities, and recommendations

84 0 Institutional Program including institutional interactions, public transport and traffic integration, monitoring of mobility and land use impact from the Project, 0 Environmental Compensation Plan

18. Brazilian federal legislation requires an environmental compensation for this Line 5 extension project. The EIA-Rima recommended specific compensations measures and Metro is discussing with the competent authorities the areas which will receive the proposed compensation. All areas to be protected or created as a result of the project (including the parks) are not expected to lead to any physical displacement or changes in access to natural resources. Any other economic or physical displacement not yet explicitly identified, but that may become apparent during implementation, will be addressed using the same principles as those defined in this Resettlement Action Plan and consistent with World Bank safeguard policies.

Environmental Management System

19. A Project Management Unit already established by the Borrower will coordinate the environmental management activities of the project. As mentioned above, the civil works and trains and systems contractors will be responsible for the implementation of mitigation measures that are included in the EMP and these are included in the bidding documents and overall budget of the project. To ensure the adequate management of social and environmental impacts, the PMU/Line 5 Implementation department will be supported by project management and supervision consultants, which will include environmental specialists. The environmental supervision will ensure that the contractors implement requirements of the environmental licenses and of the environmental management programs. Regular monitoring reports will allow for identifying problems, further improve quality of work and ensure timely correction of any issues that might arise. Compensation measures will be implemented directly by Metro under supervision of the Municipal Secretary of Environment.

20. The Project will continue to help Metro in implementing a set of management tools and principles designed to guide the allocation of resources, assignment of responsibilities and ongoing evaluation of practices, procedures, and processes to integrate environmental concerns into its daily business practices, as well as outreach and improve user-satisfaction to address specific concerns and continuously improve environmental and social management practices.

21. The extent and nature of the civil work to be undertaken for Line 5 (approximately 12 km of tunneling and 11 new stations), although not financed by the Bank, will trigger the environmental assessment policy to include the careful evaluation of noise, vibration, dust and ' traffic management. A draft Environmental Assessment (EA) for Line 5, including all civil works (underground and aboveground) and road access, has been undertaken by independent specialized consultants and has been shared with the Bank. The EA (EIA-Rima and EMP) was reviewed by the Bank and was submitted to Infoshop on November 25,2009. Metro has received a preliminary environmental license (Licenqa Pre'via) from SMA for Line 5 between Adolfo Pinheiro and Chacara Klabin Stations, including Guido Caloi Yard. Metro has also received a preliminary license for the short segment between Largo Treze and Adolfo Pinheiro Station. An Environmental Management Plan was also prepared for the preliminary license (Licenqa Pre'via)

85 and submitted to the Infoshop on November 25, 2009. This Plan benefits from the previous experiences and describes all social and environmental management programs. An addendum to this Plan describes the planned resources, responsible units, and implementing units for each social and environmental program to ensure that construction impacts are properly mitigated. The following table presents the most current information available.

86 Em ironmental nd Social Management ProeramsPrograms for Line 5 Approx. Budget Responsible Implementing Agency cost Source Agency or . or Department ’ (million Departmenl US%) Social PCS 0.25 Project’s Metro GMS Metro’s Office of Communications civil works and PMU Community Relations Program budget Environmental PCPA 6.94 Project’s Metro GMS Metro’s Department of Compensation civil works and PMU Environment and Program budget Sustainability Cultural Heritage PPA Metro’s Department of Program civil works and PMU Community Relations budget Environmental PCA 1.39 Project’s Metro GC5 Civil Works Contractor Control Program civil works and PMU during budget Construction Environmental PCO 0.33 /yr Metro’s Metro GOP Metro’s Department of Control Program operational and PMU Environment and during budget Sustainability Operations Institutional PA1 0.17 /yr Metro’s Metro GC5 Metro’s Office of Articulation operational and PMU Transport Planning and Program budget Civil Works Contractor Action Plan for PAE 0.08 /yr Project’s Metro GC5 Civil Works Contractor Emergencies civil works and PMU budget Resettlement PARR 0.19 IProject’s IMetro GMS Metro’s Office of Action Plan civil works and PMU Community Relations Ex propriati budget on I Notes: GC5: Metro Line 5 Office of Construction Management PMU: Metro Project Management Unit GMS: Metro OfJe of Environmental Management and Community Affairs GOP: Metro Office of Operation Management I US Dollar is approximately 1.8 Brazilian Real (November 2009)

87 22. Physical Cultural Resources: Most of the works for Line 5 will be carried out deep underground by specialized tunneling equipment, There are some 25 sites on the surface where station entrances and ventilation shafts will be built. These sites have been selected to minimize interference with existing infrastructure. No large buildings and no cultural landmarks of any kind are expected to be affected by these works. All contractors on the project have agreed to special conditions regarding the possibility of chance finds of archaeological materials. If such materials are found, the local authorities responsible for historical preservation (National Institute for Historical and Artistic Heritage, IPHAN) will be notified and work will be suspended until such findings can be investigated by experts and a determination can be made regarding how to manage such finds.

23. Pest Management: Since the implementation of civil works requires the demolition of existing structures, it is common practice to spray the debris with pesticides to prevent the spread and infestation of rodents. Metro’s have procedures, detailed in IC 5.00.00.00/3N4-00 1 (Control of Environmental Impacts) and IC 5.00.00.00/3C9-001 (Workers Safety and Medicine) that describe which pesticides might be used, the application method and the necessary equipment to protect the health of the workers. When necessary, Metro provides training to those applying the pesticides and awareness to the neighboring community. The procedures follow the Bank’s pest management guidelines and Metro will be monitoring compliance to these practices.

24. Worker Safety: Metro has a Workers and Public Safety Program that ensures that its contractors monitor the safety of their construction workers,. Health and safety procedures are employed to minimize exposure to workers and the public. Specific regulations and training program exist for handling, stockpiling, loading, transporting and disposing dangerous materials. The procedures taken by the contractors on Metro projects to date seem adequate to mitigate risks during construction as inspections have not found major issues.

25. The Program also deals with the overall safety of users and protects the system from accidents during operation. Amenities have been included in metro stations to improve safety and accessibility of disabled and other people with special needs, such as tactile pavement tiles, lighting, signage and audible signals. An Emergency Plan is in place and there is staff assigned to follow up. Lessons from the Line 4 accident were incorporated in Metro’s policies to ensure quick and safe evacuation of workers and public in case of accidents. Training is provided to staff to ensure they are aware of their responsibilities and roles during emergencies or guide users to improve overall safety of the system.

Public Consultation

26. The environmental and resettlement plans call for a series of actions with the aim of providing information about the works and to clarify doubts for the different segments of the population involved in this process. Key stakeholders include the resettled families and businesses, the population living in the vicinity of the project, the residents of the city, and future users of the system. The following is a list of actions aimed at providing information to and getting feedback from the population at different stages of project preparation and implementation: a. Prior to commencement of works

88 - A survey of the profile of the population (including preparation of a register) and economic activities in the area affected by the works; - Communication with the affected population and responding to queries from members of public; - Communication with the currently resident population and those engaged in economic activities in the area; - Communication with the population of the wider city. b. Construction phase (implementation and progress of works) - Campaigns directed to the city population; - Communication with commercial establishments affected negatively by the works; - Technical follow-up; - The “Turma do Metro” project; - Readjustment of public services; c. Final stage of works execution - Public and technical visits to the work sites - Organized train rides for affected groups and other potential metro users d. Grievance mechanisms

Bank Supervision

27. The Bank’s supervision plan will include supervision of the entire Line 5 project, and in particular of the safeguard aspects. To ensure the compliance with Bank safeguard related covenants and also to assist the Borrower in its institutional strengthening activities, the Bank will carry out at least two supervision missions per year which include a safeguard specialist. The Bank will review quarterly reports of Line 5 environmental management and supervision to be provided by Metro in order to be informed of any relevant social and environmental issues regarding the development of civil works in advance of the missions. If needed the Bank will request additional information on any issues pointed out by the environmental supervision reports and schedule additional missions to follow-up on these issues.

89 Annex 11: Project Preparation and Supervision BRAZIL: Siio Paulo Metro Line 5 Project

Planned Actual PCN review 08/26/2009 08/26/2009 Initial PID to PIC 10/23/2009 Initial ISDS to PIC 10/28/2009 Appraisal 12/17/2009 12/17/2009 Negotiations 02/10/20 10 02/10/20 10 Board/RVP approval 04/20/2009 Planned date of effectiveness Planned date of mid-term review Planned closing date

Key institutions responsible for preparation of the project: Companhia do Metropolitano de 5'60 Paulo (Metro), Secretaria de Transportes Metropolitanos, World Bank staff and consultants.

Bank Team Members Quality Assurance Jorge Rebelo, TTL, Lead Transport Specialist Juan Gaviria, Sector Leader, AFTTR Georges Darido, Transport Specialist Martha Lawrence, Sr. Railway Specialist, Armando Araujo, Consultant, Procurement ECSSD Specialist Gregoire Gauthier, Sr. Transport Engineer, Luis Prada, Procurement Specialist LCSTR Bernard0 Alvim, Consultant, Transport Shomik Mehndiratta, Sr. Transport Specialist, Economics and Demand Analysis EASTE Ralf-Michael Kaltheier, Sr. Transport Economist Daniel Gross, Consultant, Safeguards Specialist Paul Procee, Sr Environmental Specialist Flavio Chaves, Environmental Specialist Harvey Van Veldhuizen, Lead Environmental Specialist, OPCQC Sergio Wanderley, Rolling Stock Consultant Carlos Sanchez, Signaling Consultant Susana Amaral, FM Specialist Solange Van Veldhuizen, Program Assistant

Bank funds expended to date on project preparation: Bank resources: US$250,000 1. US$220,000 (committed) 2. Trust funds: 3. Total: US$220,000

Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$30,000 2. Estimated annual supervision cost: US$l00,000/year = US$500,000

90 Annex 12: Documents in the Project File BRAZIL: Si0 Paulo Metro Line 5 Project

1. Project Implementation Plan, Companhia do Metropolitano de Sdo Paulo, December 22, 2009.

2. Impact of Metro Line 5 extension on Low-Income Users in Silo Paulo, October 2009, Companhia do Metropolitano de Sdo Paulo.

3. Abbreviated Resettlement Plan for Line 4 Phase 2 (Extension to Vila SBnia), June 2009, Companhia do Metropolitano de Sdo Paulo.

4. . Demand Analysis Report for Line 5, October 2009, Bernard0 Alvim, Demand and Economic Evaluation Consultant.

5. Economic Analysis Report for Line 5, October 2009 (version lea), Companhia do Metropolitano de SGo Paulo.

6. Environmental Assessment for Line 5 Volumes 1-3 (dated February 2009), Systran Consultants ICompanhia do Metropolitano de SGo Paulo.

7. Environmental Management Plan and Work Plan (October 2009), Systran Consultants/ Companhia do Metropolitano de Sdo Paulo.

8. Fiscal Analysis of Silo Paulo State Government, 2003-2008, July 2009.

9. Preliminary Environmental License for Adolfo Pinheiro station (Licenqa Ambiental Pre'via), February 2008, Secretaria de Estado de Meio Ambiente.

10. Programa de Reestruturaqiio e Ajuste Fiscal do Estado de Silo Paulo (PAF) 2009-201 1, June 2009, Estado de Sdo Paulo.

11. Evaluation of Specifications of CBTC System for Metro Line 5, October 2009, Carlos Rodriguez Sanchez, Systems Consultant

12. Evaluation of Technical Specifications for the 26 New trains and Rehabilitation of 8 trains for Line 5, September 2009, Sergio Wanderley, Rolling Stock Consultant.

13. Ex-Post Survey of Resettled People in the Largo Treze-Adolfo Pinheiro Segment of Line 5, Companhia do Metropolitano de Sdo Paulo, January 20 10.

14. Companhia do Metropolitano de Sdo Paulo, Official Letter and Annexes, CT.P 025 dated February 9,20 10.

91 Annex 13: Statement of Loans and Credits BRAZIL: Slo Paulo Metro Line 5 Project

Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PO 1 17244 2010 BR - Fiscal Sust. Human Dev. Comp. RJ 485.00 0.00 0.00 0.00 0.00 485.00 485.00 0.00 PI01508 2010 BR-RJ Sustainable Rural Development 39.50 0.00 0.00 0.00 0.00 39.50 1.17 0.00 PI08654 2010 BR Pernambuco Sustainable Water 190.00 0.00 0.00 0.00 0.00 190.00 0.00 0.00 PO99469 2010 BR (APL2) 2nd National Environmental 24.30 0.00 0.00 0.00 0.00 24.30 0.00 0.00 PI03770 2010 BR ALAGOAS Fiscal & Public Mgmt 195.45 0.00 0.00 0.00 0.00 74.96 -120.00 0.00 Reform P 106663 2010 BR Sao Paulo Feeder Roads Project 166.65 0.00 0.00 0.00 0.00 83.90 -82.34 0.00 P 104995 2010 BR Municipal APLS: Santos 44.00 0.00 0.00 0.00 0.00 44.00 0.00 0.00 PO06553 2010 BR SP APL Integrated Wtr Mgmt 104.00 0.00 0.00 0.00 0.00 104.00 1.89 0.00 PI 1 I996 2010 BR RJ Mass Transit I1 211.70 0.00 0.00 0.00 0.00 211.17 0.00 0.00 PI 04752 2009 BR Paraiba 2nd Rural Pov Reduction 20.90 0.00 0.00 0.00 0.00 20.90 0.00 0.00 PO99369 2009 BR Ceara Regional Development 46.00 0.00 0.00 0.00 0.00 46.00 0.03 0.00 PO95205 2009 BR 1st Prog. DPL for Sust. Env Mgmt 1,300.00 0.00 0.00 0.00 0.00 1,300.00 1.30 0.00 PO943 I5 2009 BR Municipal APL4: Sao Luis 35.64 0.00 0.00 0.00 0.00 33.49 -1.93 0.00 PI06208 2009 BR Pernambuco Educ Results& Account. 154.00 0.00 0.00 0.00 0.00 97.84 -55.77 0.00 PI06765 2009 BR Ceara lnclusive Growth (SWAp 11) 240.00 0.00 0.00 0.00 0.00 137.05 27.04 0.00 PI 06767 2009 BR RGS Fiscal Sustainability DPL 1,100.00 0.00 0.00 0.00 0.00 450.00 0.00 0.00 P107146 2009 BR Acre Social Economic Inclusion Sust 120.00 0.00 0.00 0.00 0.00 104.00 -1.95 0.00 D P 107843 2009 BR Fed District Multisector Manag. Proj. 130.00 0.00 0.00 0.00 0.00 129.68 25.57 0.00 PI10614 2009 BR: Sergipe State Int. Proj.: Rural Pov 20.80 0.00 0.00 0.00 0.00 18.99 3.74 0.00 PO88716 2009 BR Health Network Formation & Quality 235.00 0.00 0.00 0.00 0.00 235.00 3.23 0.00 Im PI06038 2008 BR Sao Paulo Trains and Signalling 550.00 0.00 0.00 0.00 0.00 315.99 26.83 0.00 PO83997 2008 BR Alto Solimoes Basic Services and Sust 24.25 0.00 0.00 0.00 0.00 21.59 4.51 0.00 PI 01 324 2008 BR-Second Minas Gerais Dev't 976.00 0.00 0.00 0.00 0.00 235.40 -19.16 0.00 PArtnership PO95626 2008 BR (APL2)Family Health Extension 2nd 83.45 0.00 0.00 0.00 0.00 83.24 23.30 0.00 APL PO88966 2008 BR Municipal APL3: Teresina 31.13 0.00 0.00 0.00 0.00 28.64 3.75 0.00 PO89929 2008 BR RGN State Integrated Water Res Mgmt 35.90 0.00 0.00 0.00 0.00 32.78 21.63 0.00 PO94 199 2008 BR-(APL) RS (Pelotas) Integr. Mun. Dev.' 54.38 0.00 0.00 0.00 0.00 39.36 4.27 0.00 PO89013 2008 BR Municipal APL: Recife 32.76 0.00 0.00 0.00 0 00 32.68 13.12 0.00 PO89793 2007 BR State Pension Reform TAL II 5.00 0.00 0.00 0.00 0.00 4.99 3.08 0.00 PO8901 I 2007 BR Municipal APLl : Uberaba 17.27 0.00 0.00 0.00 0.00 13.21 9.31 0.00 PO82651 2007 BR APL 1 Para Integrated Rural Dev 60.00 0.00 0.00 0.00 0.00 54.23 47.23 0.00 PO95460 2007 BR-Bahia Integr.Hway Mngmt. 100.00 0.00 0.00 0.00 0.00 90.26 24.13 0.00 PO89440 2006 BR-Brasilia Environmentally Sustainable 57.64 0.00 0.00 0.00 0.00 24.68 22.27 0.00 PO93787 2006 BR Bahia State Integ Proj Rur Pov 84.35 0.00 0.00 0.00 0.00 30.72 -0.28 0.00 PO8 1436 2006 BR-Bahia Poor Urban Areas Integrated 49.30 0.00 0.00 0.00 0.00 42.66 42.66 0.00 Dev PO90041 2006 BR ENVIRONMENTAL SUST. 8.00 0.00 0.00 0.00 0.00 5.04 5.00 0.49 AGENDA TAL

92 PO50761 2006 BR-Housing Sector TAL 4.00 0.00 0.00 0.00 2.70 1.13 3.83 -0.13 PO92990 2006 BR - Road Transport Project 501.25 0.00 0.00 0.00 0.00 228.70 205.45 0.00 PO69934 2005 BR-PERNAMBUCO NTEG DEVT 31.50 0.00 0.00 0.00 0.00 9.15 9.15 0.00 EDUC QUAL IMPR PO87711 2005 BR Espirito Santo Wtr & Coastal Pollu 107.50 0.00 0.00 0.00 0.00 31.06 -40.26 -19.59 PO76924 2005 BR- Amapa Sustainable Communities 4.80 0.00 0.00 0.00 0.23 2.35 2.58 1.86 PO83533 2005 BR TA-Sustain & Equit Growth 12.12 0.00 0.00 0.00 0.00 7.78 7:78 0.00 PO60573 2004 BR Tocantins Sustainable Regional Dev 60.00 0.00 0.00 0.00 0.00 20.83 20.83 0.00 PO76977 2003 BR-Energy Sector TA Project 12.12 0.00 0.00 0.00 0.00 5.63 5.63 0.00 PO49265 2003 BR-RECIFE URBAN UPGRADING 46.00 0.00 0.00 0.00 0.00 9.43 9.43 0.00 PROJECT PO66170 2002 BR-RGN Rural Poverty Reduction 45.00 0.00 0.00 0.00 0.00 17.96 -4.48 18.02 PO60221 2002 BR FORTALEZA METROPOLITAN 85.00 0.00 0.00 0.00 62.60 11.33 67.82 16.11 TRANSPORT PROJ PO51696 2002 BR SA0 PAUL0 METRO LINE 4 304.00 0.00 0.00 0.00 0.00 52.06 -42.70 52.30 PROJECT PO06449 2000 BR CEARA WTR MGT PROGERIRH 239.00 0.00 0.00 0.00 0.00 102.74 0.00 5.00 S IM Total: 8,484.66 0.00 0.00 0.00 65.53 5,385.40 278.69 74.06

BRAZIL STATEMENT OF IFC's Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. ABN AMRO REAL 98.00 0.00 0.00 0.00 15.77 0.00 0.00 0.00 2005 2005 ABN AMRO REAL 98.00 0.00 0.00 0.00 15.77 0.00 0.00 0.00 2001 AG Concession 0.00 30.00 0.00 0.00 0.00 30.00 0.00 0.00 2002 Amaggi 17.14 0.00 0.00 0.00 17.14 0.00 0.00 0.00 2005 Amaggi 30.00 0.00 0.00 0.00 30.00 0.00 0.00 0.00 2002 Andrade G. SA 22.00 0.00 10.00 12.12 22.00 0.00 10.00 12.12

200 1 Apolo 6.04 0.00 ' 0.00 0.00 3.54 0.00 0.00 0.00 1998 Arteb 20.00 0.00 0.00 18.33 20.00 0.00 0.00 18.33 2006 BBM 49.40 0.00 0.00 0.00 49.40 0.00 0.00 0.00 2001 Brazil CGFund 0.00 19.75 0.00 0.00 0.00 18.15 0.00 0.00 2004 CGTF 54.01 0.00 7.00 65.12 54.01 0.00 7.00 65.12 1994 CHAF'ECO 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 1996 CHAPECO 1 SO 0.00 0.00 5.26 1 SO 0.00 0.00 5.26 2003 CPFL Energia 0.00 40.00 0.00 0.00 0.00 40.00 0.00 0.00 1996 CTBC Telecom 3.00 8.00 0.00 0.00 3.00 8.00 0.00 0.00 1997 CTBC Telecom 0.00 6.54 0.00 0.00 0.00 6.54 0.00 0.00 1999 Cibrasec 0.00 3.27 0.00 0.00 0.00 3.27 0.00 0.00 2004 Comgas 11.90 0.00 0.00 11.54 11.90 0.00 0.00 11.54 2005 Cosan S.A. 50.00 5.00 15.00 0.00 50.00 5.00 15.00 0.00

93 Coteminas 0.00 1.84 0.00 0.00 0.00 1.84 0.00 0.00 1997 Coteminas 1.85 1.25 0.00 0.00 1.85 1.25 0.00 0.00 2000 Coteminas 0.00 0.18 0.00 0.00 0.00 0.18 0.00 0.00 1980 DENPASA 0.00 0.52 0.00 0.00 0.00 0.48 0.00 0.00 1992 DENPASA 0.00 0.06 0.00 0.00 0.00 0.06 0.00 0.00 Dixie Toga 0.00 0.34 0.00 0.00 0.00 0.34 0.00 0.00 I998 Dixie Toga 0.00 10.03 0.00 0.00 0.00 10.03 0.00 0.00 I997 Duratex I .36 0.00 3.00 0.57 1.36 0.00 3.00 0.57 2005 EMBRAER 35.00 0.00 0.00 145.00 35.00 0.00 0.00 145.00 I999 Eliane 14.93 0.00 13.00 0.00 14.93 0.00 13.00 0.00 1998 Empesca 1.33 0.00 2.67 0.00 I .33 0.00 2.67 0.00 2006 Endesa Brasil 0.00 50.00 0.00 0.00 0.00 50.00 0.00 0.00 2006 Enerbrasil Ltda 0.00 5.50 0.00 0.00 0.00 0.00 0.00 0.00 2006 FEBR 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2000 Fleury 0.00 0.00 6.00 0.00 0.00 0.00 6.00 0.00 1998 Fras-le 4.00 0.00 9.34 0.00 4.00 0.00 6.04 0.00 2006 GOL 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2005 GP Capital 111 0.00 14.00 0.00 0.00 0.00 0.14 0.00 0.00 GP Cptl Rstrctd 0.00 2.22 0.00 0.00 0.00 2.16 0.00 0.00 200 1 GPC 0.00 0.00 9.00 0.00 0.00 0.00 9.00 0.00 GTFP BIC Banco 44.91 0.00 0.00 0.00 44.91 0.00 0.00 0.00 GTFP BM Brazil 4.22 0.00 0.00 0.00 4.22 0.00 0.00 0.00 GTFP lndusval 5.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 1997 Guilman-Amorim 18.08 0.00 0.00 14.37 18.08 0.00 0.00 14.37 1998 Icatu Equity 0.00 5.46 0.00 0.00 0.00 4.16 0.00 0.00 1999 lnnova SA 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 1980 lpiranga 0.00 2.87 0.00 0.00 0.00 2.87 0.00 0.00 1987 lpiranga 0.00 0.54 0.00 0.00 0.00 0.54 0.00 0.00 2006 lpiranga 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2006 ltambe 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Itau-BBA 12.86 0.00 0 00 0.00 12.86 0.00 0.00 0.00 2002 Itau-BBA 70.61 0.00 0.00 0.00 38.47 0.00 0.00 0.00 I999 JOSAPAR 7.57 0.00 7.00 0.00 2.57 0.00 7.00 0.00 2005 LOJ~SAmericana 35.00 0.00 0.00 0.00 35.00 0.00 0.00 0.00 1992 MBR 0.00 0.00 10.00 0.00 0.00 0.00 10.00 0.00 2006 MRS 50.00 0.00 0.00 50.00 0.00 0.00 0.00 0.00 2002 Microinvest 0.00 1.25 0.00 0.00 0.00 0.82 0.00 0.00 Net Servicos 0.00 10.93 0.00 0.00 0.00 10.93 0.00 0.00 2002 Net Servicos 0.00 1.60 0.00 0.00 0.00 1.60 0.00 0.00 2005 Net Servicos 0.00 5.08 0.00 0.00 0.00 5.08 0.00 0.00 1994 Para Pigmentos 2.15 0.00 9.00 0.00 2.15 0.00 9.00 0.00 I994 Portobello 0.00 0.59 0.00 0.00 0.00 0.59 0.00 0.00 2000 Portobello 4.28 0.00 7.00 0.00 4.28 0.00 7.00 0.00 2002 Portobello 0.00 0.90 0.00 0.00 0.00 0.90 0.00 0.00 2000 Pura 0.00 0.00 1 .oo 0.00 0.00 0.00 1 .oo 0.00 2003 Queiroz Galvao 26.67 0.00 10.00 0.00 26.67 0.00 10.00 0.00 2004 Queiroz Galvao 0.60 0.00 0.00 0.00 0.08 0.00 0.00 0.00 2006 RBSec 22.83 1.51 0.00 0.00 0.00 1.51 0.00 0.00 Randon Imp1 Part 2.33 0.00 3.00 0.00 2.33 0.00 3.00 0.00

94 1997 Sadia 2.55 0.00 2.33 3.28 2.55 0.00 2.33 3.28 1997 Samarco 3.60 0.00 0.00 0.00 3.60 0.00 0.00 0.00 1998 S arai v a 0.00 1.24 0.00 0.00 0.00 1.24 0.00 0.00 2000 Sepetiba 26.24 0.00 5.00 0.00 11.24 0.00 5.00 0.00 2002 Suape ICT 6.00 0.00 0.00 0.00 6.00 0.00 0.00 0.00 1999 Sudamerica 0.00 7.35 0.00 0.00 0.00 7.35 0.00 0.00 2006 Suzano petroq 50.00 0.00 10.00 140.00 39.50 0.00 10.00 110.50 2001 Synteko 11.57 0.00 0.00 0.00 11.57 0.00 0.00 0.00 2006 TAM 50.00 0.00 0.00 0.00 17.00 0.00 0.00 0.00 1998 Tecon Rio Grande 3.55 0.00 5.50 3.71 3.55 0.00 5.50 3.71 2004 Tecon Rio Grande 7.87 0.00 0.00 7.76 7.59 0.00 0.00 7.48 2001 Tecon Salvador 2.95 1 .oo 0.00 3.10 2.95 0.77 0.00 3.10 2003 Tecon Salvador 0.00 0.55 0.00 0.00 0.00 0.55 0.00 0.00 2004 TriBanco IO 00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 2006 TriBanco 0.35 0 00 0.00 0.00 0.35 0.00 0.00 0.00 2002 UP Offshore 9.01 9.51 0.00 23.29 0.00 2.51 0.00 0.00 2002 Unibanco 16.89 0.00 0.00 0.00 16.89 0.00 0.00 0.00 Total portfolio: 1,164.15 253.88 144.84 503.45 703.91 223.86 141.54 400.38

Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 2000 BBA 0 01 0 00 0 00 0 00 I999 Cibrasec 0 00 0 00 0 00 0 00 2006 lpiranga II 0 00 0 00 0 00 0 IO 2002 Banco Itau-BBA 0 00 0 00 0 00 0 IO Total pending commitment 0 01 0 00 0 00 0 20

95 Annex 14: Country at a Glance BRAZIL: Si40 Paulo Metro 5 Project Brazil at a glance 118109

Lath Upper. POVERTY and SOCIAL America middle- Brazil & Carib. income Developmntdlanond' 2008 Population mid-year (millions) 192 0 561 624 GNI per capita (Alas mefhod US$) 7 300 5,801 7,07 Life expectancy GNI (Atlas melhod US$ billions) 14013 3,252 5,854 - Average annual growth, 2002.08 Population (%) 12 13 07 Labor force (%) 22 23 14 GNI Gross per primary Most recent estimate (latest year available, 2002-08) capita nrollment Poverty (%of populalion bebw nalfonalpovertylfne) 22 Urban population (%of fofalpopulalion) 86 78 75 Life expectancy a1 birth (years) 73 73 71 I Infant mortality (per 1M)Olive bidhs) 20 22 21 Childmalnutrition (%ofchildrenunder5) 2 4 Access to improved water source Access to an improvedwtersource (%ofpopulation) 91 91 95 Literacy (%ofpopulaffon age SY 86 91 94 Gross primaryenro llment (%of school-age population) DO 18 ni -Braul Male 04 QO lQ Upper-mddleinwm grcup Female Q5 16 09 -

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1988 1998 2007 2008 ' Economicratios' GDP (US$ billions) 3304 8438 1333 3 1575 2 Gross capital formationlGDP 227 70 77 89 Exports of goods and serviceslGDP 09 69 07 143 Trade Gross domestic savingslGDP 279 '60 193 191 Gross national savings1GDP 75 69 T Current account balancelGDP 13 01 -18 40 Domestic Capital Interest payments1GDP 19 17 11 10 savings formation Total debl1GDP 307 266 7.3 82 Total debt servicelexports 259 758 27 2 22 8 Present valueof debt1GDP 86 156 Present valueof debtlexports D19 TI11 Indebtedness 1988-98 1998.08 2007 2008 2008-12 (average annualgrorrlh) GDP 23 33 57 5.1 3.3 -Brazil GDP percapila 07 20 48 4.1 25 Upper-m'ddleinwm gmrp Exports of goods and Services 54 91 67 -06 14.2 -

STRUCTURE of the ECONOMY ' 1988 1998 2007 ' 2008 Growth ofcapltal and GDP (Oh) (%ofGDP) I I Agriculture 01 55 60 67 Industry 438 257 281 260 Manufacturing 310 '57 74 60 services 462 688 660 653 Household final consumption expenditure 595 643 608 607 General gov't final consumption expenditure 126 208 199 202 Imports Of goods and SeNlCeS 57 89 a1 142 -0CF -0DP I 1988-98 1998-08 2007' 2008 Growth of exports and lmpolts (Oh) (average annualgrowth) II Agriculture 25 44 59 58 Industry 15 28 48 43 Manufacturing 26 30 47 32 services 33 40 60 53 Household final consumption expenditure 39 30 88 General gov t final consumption expenditure 07 29 47

Gross capital formation 26 28 D5 a8 -x~Expons -C. lmpoiia Imports of goods and services 146 55 208 85zi

Note 2008data arepreliminaryestimates 'Thediamonds showfourkeyindicators in thecountry(in bo1d)comparedwith its income-groupaverage If dataaremissing thediamondwill be incomplete 96 - Brazil ~~~

PRICES and GOVERNMENT FINANCE ' 1980 1998 2007 ' 2008 Domestic prices (Xchange) Consumer prices 980.2 17 4.5 7.1 lmpilcrt GDP deflator 8511 4.2 3.7 5.9 Government finance (%of GDP, includes current grants) Current revenue 0.8 0.0 23.9 24.8 04 os oe Current budget balance -2.0 0.0 2.3 3.0 03 07 OOP deflator -C CPI Overall surplus/deficit 4.0 -0.8 -2.3 -18 I -

TRADE 1988 1998 2007 2008 ' ExportandImportlevels(USmlll.) (US$ millions) Totaiexports (fob) 32,809 50,736 130,649 87,942 11250 000 Coffee 2,091 3,253 0.558 13,539 Soybeans 3.75 2,78 6,709 0,952 200.000 I M anufactures 18,389 29,387 83,943 92,683 150,000 Total imports (cif) 14,605 57,714 PO622 73,727 Food 376 2,514 2,082 2,812 100,000 Fuel and energy 4,734 4,00 20,085 31,463 50,000 Capitalgoods 4,185 13,02 25,P5 35,929 0 Export price index (200O=WO) 88 99 114 P8 02 03 04 05 OB 07 08 Import price Index (2000=WO) 44 04 94 00 I .Exports WIrnpons Terms of trade (2000=WO) 89 95 P1 P7

BALANCE of PAYMENTS 1988 I998 2007 2008 ' ' Current account bclance toGDP(%) (US$ millions) I Exports of goods and services 35,650 59,037 184,603 228,393 imports of goods and services 7,500 75,722 157,795 220,247 Resource balance 18,150 -13,685 26,808 8,146 Net income -0,776 -18,138 -29,291 -40,562 Net current transfers -20 1458 4,029 4,224 Current account balance 4,180 -33,413 1,551 -28,82 Financing items (net) -2,931 25,446 85,933 31131 Changes in net reserves -1,249 7,970 -87,484 -2,969 Memo: Reserves including gold (US$millions) 9,140 44,556 180,334 206,806 Conversion rate (DEC, local/US$) 9.53E-8 12 19 1.8

EXTERNAL DEBT and RESOURCE FLOWS 1988 1998 2007 2008 Cornposklonof 2008 debt (US$ mlll.) (US$millions) Total debt outstanding and disbursed 01295 224,632 231032 255,614 IBRD 1,824 71 6,704 8,150 IDA

Total debt service 9 448 48,465 53,941 55,420 E 4571 IBRD 429 77 480 48 1 IDA 0 0 0 0 Composition of net resource flows Official grants 46 03 155 Off tc ial creditors -340 3,632 -754 2,076 P rivate creditors 3 84 15.728 8,05 27,188 Foreign direct investment (net inflows) 2 604 3190 34,585 45,058 Portfolio equity(net inflows) 189 -1768 26,2l7 -7,565 World Bank program Commrtments 0 0 0 0 F Disbursements 0 0 374 1,606 A- IBRD 195,817 E. Bilateral Principal repayments 268 81 115 146 B - IDA D - Other multilateral F - Private C - IMF .Shart-term Net flows -268 -61 258 1,459 G Interest payments 131 15 364 335 -Net transfers -429 -77- -06 1,P5 Development Economics 1v 18/09

97

0 E! R.B. DE GUYANA French VENEZUELA Guiana SURINAME (Fr.) ATLANTIC BRAZIL COLOMBIA BoaBoa VistaVista METROPOLITAN REGION OCEAN AMAPÁAMAPÁ RORAIMARORAIMA OF SÃO PAULO

MacapáMacapá STATE CAPITALS BelémBelém NATIONAL CAPITAL

ManausManaus SãoSão LuísLuís STATE BOUNDARIES FortalezaFortaleza INTERNATIONAL BOUNDARIES PARÁP A R Á MARANHÃOMARANHÃO TeresinaTeresina RIORIO GGRANDERANDE AMAZONASA M A Z O N A S CEARÁCEARÁ DODO NNORTEORTE NatalNatal

PARAÍBAPARAÍBA JoãoJoão PIAUIP I A U I PessoaPessoa PERNAMBUCOPERN ACREACRE PortoPorto VelhoVelho AMBUCO RecifeRecife MaceióMaceió RioRio BrancoBranco RONDÔNIARONDÔNIA PalmaPalma ALAGOASALAGOAS AracajuAracaju TOCANTINSTOCANTINS SERGIPESERGIPE MATOM A T O BAHIAB A H I A PERU GROSSOG R O S S O SalvadorSalvador

CuiabáCuiabá F.D.F.D. BRASBBRASÍLIARASÍLIAÍLIA BOLIVIA GoiâniaGoiânia GOIASGOIAS MINASMINAS GGERAISERAIS MATOMATO GROSSOGROSSO BeloBelo ESPÍRITOESPÍRITO DODO SULSUL HorizonteHorizonte CampoCampo SANTOSANTO GrandeGrande VitóriaVitória SÃOSÃO PPAULOAULO RIORIO DEDE BRAZIL PARAGUAY SãoSão PauloPaulo JANEIROJANEIRO CHILE RioRio ddee PACIFIC PARANÁPARANÁ JaneiroJaneiro CuritabaCuritaba OCEAN Metropolitan Region STASTA CATARINACATARINA of São Paulo FlorianópolisFlorianópolis

ARGENTINA RIORIO GRANDEGRANDE DODO SULSUL PortoPorto AAlegrelegre

FEBRUARY 2009 ATLANTIC IBRD 36790 This map was produced by the Map Design Unit of The World Bank. OCEAN The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank URUGUAY Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.