Project Information Document (Pid) s35

PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB3171 Project Name Goias State Highway Management Project (APL II) Region LATIN AMERICA AND CARIBBEAN Sector Roads and highways (87%);Sub-national government administration (13%) Project ID P101418 Borrower(s) STATE OF GOIAS Implementing Agency Agencia Goiania de Transportes e Obras Av. Governador Jose Ludovico de Almeida, #20, Conjunto Caicara Goias Brazil CEP 74623 Tel: ++ 55 62 3265-4000 Fax: ++ 55 62 3265 4018 [email protected] Environment Category [] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared June 29, 2007 Date of Appraisal June 28, 2007 Authorization Date of Board Approval November 20, 2007

1. Country and Sector Background

1. At the end of the nineties, the State of Goiás was in a difficult situation resulting from, inter alia: (a) an unsustainable fiscal situation including primary deficit, a high debt compounded by capitalization of large sums of deferred interest, as well as insufficient tax collection and spending control efforts; (b) an oversized public service; and (c) slow economic growth.

2. The state administration which took office in 1999, reacted promptly to the situation at hand by designing and implementing a development strategy for the state encompassing the following main objectives: (a) fiscal sustainability, 1 with a specific focus on debt reduction, tax collection efficiency enhancement and control of personnel expenditures (reduction of the deficit of the public servants’ social security system); (b) improved efficiency of the state administration, including organizational restructuring, increased focus on performance and quality in the provision of public services, and decentralization/privatization, when and where feasible, of provision of services; and (c) sustainable economic growth and social equity, through the strengthening of planning capacity, improved efficiency of key programs (through consolidation of programs, modernization of processes and improved effectiveness in delivery mechanisms, and partnerships with private organizations), selectivity in capital expenditure

1 within the terms provided in the Fiscal Responsibility Law of the Federal Government and in the debt renegotiation agreement signed with the Federal Government (including, inter alia, generation of primary surpluses, decrease of debt levels relatively to revenues, decrease of personnel-related expenditures, and increase of revenues) programs (focusing on high return programs, such as road maintenance and rehabilitation) and strengthening of the state’s environmental capacity.

3. In this context, the state administration approached the Bank and requested support to increase the efficiency of the road transport system (as a mean to foster economic growth) within sustainable environmental and fiscal frameworks. This led, during the 2000-2001 period, to the preparation of the Goiás State Highway Management Program (the Program), to be financed through 2 Adaptable Program Loans (APLs), the first of which was satisfactorily completed by December, 2006, and the second of which is this proposed project.

2. Objectives

1. The project development objective of this second APL remains the same as that of the first APL, namely to increase the efficiency of the state road transport system within sustainable environmental and fiscal frameworks.

3. Rationale for Bank Involvement

1. The proposed project will contribute to the three pillars (equity, sustainability, and competitiveness) of the 2003-2007 Bank’s Country Assistance Strategy, approved by the Bank’s Board of Directors on December 9, 2003. The CAS emphasizes the necessity for the Bank to consider economic growth as an equal priority with social equity and fiscal balance. The CAS notes that without faster and sustained growth it will be increasingly difficult to support these two other important objectives. The CAS progress report, approved by the Board on May 8, 2006, confirmed the validity of the CAS framework, and assessed that Brazil had moved into a higher performance scenario in the upper limit of the base case. The project is also in line with the recommendations of the Bank transport strategy in Brazil, developed as part of the preparation of the new 2008-2012 CAS for Brazil.

4. Description

1. This second APL will remain structured with the same five components as included in the first APL, with added emphasis on the state reform component. The project components would include:

 a highway rehabilitation component (US$83 million), to: (a) support the Government in rehabilitating the state paved road network, by financing the rehabilitation of about 1,200 km of road sections (AGETOP has rehabilitation contracts already bid under the first phase following Bank procurement procedures, covering about 750 km of road sections);

(b) design a strategy to ensure all-weather access on the state non-paved network (essentially by upgrading bridges and drainage structures), an essential strategy to ensure movement of goods and people between the municipalities, economic production areas and the main services centers, job markets and transport corridors; and (c) support the implementation of such strategy on a pilot basis, on about 15% (2,000 km) of the non-paved network, by financing localized upgrading works on about 500 km.

 a highway paving component (US$32 million), to improve links between selected agro- industrial centers and major highway or multimodal corridors. About 200 km of existing state feeder roads would be paved, for which contracts have already been bid under the first phase following Bank procurement rules.

 a highway policy and institutional development component (US$4 million), to: (a) pursue assistance to the state infrastructure secretariat in developing transport policies, through the strengthening of the secretariat’s capacity in formalizing a state transport sector policy, assistance in defining policy and management models to be used in the areas of inter- municipal bus transportation, the consolidation of the state’s freight transport plan, and support to the secretariat’s participation in the structuring of a pilot PPP project; and

(b) consolidate AGETOP’s capacity, through the design of a result-based framework, 2 the strengthening of the agency’s technical capacity in the areas of planning, project management and technology, the conclusion of the modernization of management and operational information systems, as well as the definition of a strategy to ensure the sustainability of the decentralization to the municipalities of maintenance responsibilities for the municipal networks.

 an environmental management component (US$5 million), to support: (a) increased efficiency of the State Environmental System (SISEMA), through strengthening of the system’s institutions and M&E structure, enhancements to the state’s environmental fund structure; decentralization of selected environmental responsibilities to municipalities; improved coordination among environmental-related stakeholders;

(b) further progress in developing instruments and public policies to foster public and private sector participation in managing biodiversity and natural resources (such as the Bolsa Florestal, ICMS Ecológico, the Clean Development Mechanism, environmental certification process for producers, etc.) and establish/update environmental quality standards;

(c) development of proposals for more sustainable practices and better respect of environmental legislation in private rural areas, through incentives to implement, monitor and evaluate the use of the environmental management instruments to foster sustainable practices, land reclamation of protected areas, and the creation of corridors to connect such areas; and

(d) further consolidation3 of protected areas to protect the biodiversity of the Cerrado biome.

2 including, in a first phase, the mapping of the agency’s processes, estimates of the processes’ costs on the agency, the identification of possible improvements, the delimitation of the agency’s responsibilities vis-à-vis the other public entities involved in the agency’s business and the definition of performance indicators 3 The creation of a Conservation Unit (UC) in the State of Goiás consists of three steps: (i) creation (involves technical studies, public consultation and legal institution); (ii) implementation (involves land tenure, basic management plan, first phase of the Management Plan and establishment of a Consultative Council); and (iii) management (involves the implementation of the Management Plan and development of phases two and three of the Plan). In this project, it’s been considered that “Consolidation of a UC” refers to the implementation of steps (ii) and (iii), except for land tenure activities. Under this component, a series of complementary activities could be undertaken during the project implementation period, provided the Global Environment Facility (GEF)-funded GEF Sustainable Cerrado Initiative Project (P091827), presently under preparation, is approved both by the Bank and the Federal Government. The GEF Sustainable Cerrado Initiative Project would benefit the Federal Government and selected states in the Cerrado Biome, including the state of Goias. The project would have 3 main objectives at the state level: increased surface of the biome under protection, increased sustainability of the biome’s natural resources, and strengthened institutional and policy framework.

 a state reform component (US$6 million), which will support: (a) the finance secretariat in designing and implementing an institutional strengthening program for the secretariat (including preparation of a strategic plan, restructuring of procedures, centralization and modernization of information systems, and development of training programs) and implementing a series of measures to increase tax collection efficiency (especially with respect to the collection of ICMS-related debts, and improvements of ICMS tax bureaus efficiency), and structuring a pilot PPP project;

(b) capacity strengthening at the level of the planning secretariat at (i) the planning level, through the update of the state long-term strategic plan, the elaboration of a regional development agenda, the consolidation of the monitoring systems for the state programs, (ii) the administration organization level, through the reduction in superposition of responsibilities across entities, the detailing of competencies and obligations between entities in charge of defining policies and those in charge of executing such policies, and the structuring of at least 2 management contracts; and (iii) the level of provision of services to the public, through support to the expansion of the Vapt-Vupt system; and

(c) the consolidation of the state regulatory capacity, through further support to the state regulatory agency, to design a framework for result-based management, improve monitoring of concessionaires’ activities, structure a capacity to monitor hydrological resources use, structure a regulatory framework for provision of inter-municipal passenger transport services, participate to the structuring of a pilot PPP project, and develop training programs for the agency’s staff.

5. Financing Source: ($m.) Borrower 65 International Bank for Reconstruction and Development 65 Total 130

6. Implementation

1. The proposed project phase is expected to be implemented over a five-year-period, with a completion date of December 31, 2012 and a closing date of June 30, 2013. The institutional and implementation arrangements under the first phase revealed as satisfactory and will be maintained. As such, the Borrower of the proposed project will be the State of Goiás, represented by its Finance Secretariat (SEFAZ). The Federative Republic of Brazil will act as Guarantor. SEFAZ will delegate the project coordination and execution responsibility to its Agency for Transport and Public Works (AGETOP), an independent legal entity (autarquia) of the infrastructure secretariat (SEINFRA).

7. Sustainability

1. The project will be undertaken within a broader Government agenda aiming at ensuring the sustainability of economic and social progress achieved over the last 8 years. In addition, the project will build upon the achievements under the first APL, with the objective of consolidating the progress made so far by the State in: (i) managing its state road network in an effective manner; and (ii) strengthening its capacity to protect biodiversity and efficiently manage its natural resources. Finally, the project will: (i) step up support to the State reform efforts, in the areas of long-term development planning and management of public resources, and (ii) allow to sustain a longer term technical dialogue between the State and the Bank. These elements constitute a set of key necessary conditions to ensure project sustainability.

8. Lessons Learned from Past Operations in the Country/Sector

1. It is important to factor in fiscal conditions to ensure successful project implementation. Despite the fact that this project was undertaken under difficult fiscal conditions, it did not suffer much from this, with the exception of the two-year delay in project completion. The comprehensive fiscal analysis carried out at appraisal helped the government to understand the trade-offs that the implementation of the project implied, and so to set its priorities and realistically determine the project size. It also permitted the Bank to more accurately assess the riskiness of the operation and to device mitigation measures, including the APL structure, which alleviated the project's burden on the State's fiscal situation.

2. Broad consensus, government commitment and realistic targets are some of the elements that help to speed up institutional reforms. This operation was very successful in institutional terms, with most reforms under discussion at appraisal and some taking place already in the early stages of implementation. This success is attributable to the fact that during project preparation broad consensus existed on the need for a road transport sector reform and that a number of important steps had already been taken, such as the liquidation and termination of the previous road agencies and the creation of a new entity (AGETOP). Such level of commitment was maintained during project implementation, thanks in particular to the good relationship that the government and the Bank built over the years. In addition to these external circumstances, an operation can gain much if project targets are set realistically, for instance, focusing on pilots instead of envisaging a full scale implementation, and the path to implement the reforms is clearly traced.

3. A necessary condition to succeed in the decentralization of municipal road maintenance to municipalities is to create a framework of positive incentives for both parties. For the State of Goiás the decentralization meant that AGETOP could become more efficient and focus on its core business. It also meant that the State could make good use of the equipment, machinery, and staff used prior to the conclusion of the road transport sector reorganization to carry out road maintenance through force account. For a large number of municipalities to adhere to the inter- municipal work consortia (CIMOS) meant satisfying their road maintenance needs in a more systematic and relatively inexpensive way, and decreasing the need for political favors. In addition to these incentives, the decentralization process in Goiás through the CIMOS was facilitated by (i) the existence of an associative spirit among municipalities, (ii) a committed government with a strong champion, (iii) a well-structured process, with clearly defined rights and obligations and the formalization and respect of respective agreements, and (iv) the existence within AGETOP of small unit that provides technical assistance to the CIMOS on a continuous basis.

4. There are certain elements that are likely to facilitate the successful implementation of an APL approach. According to a 2005 OPCS report, only slightly more than 50% of programs through APLs continue beyond the first phase. Some of the factors that in this project helped to successfully complete the first phase and allowed moving toward the second one are (i) a solid program, anchored around a politically non-controversial core investment component of high relevance to the Borrower, (ii) the identification of policy and institutional bottlenecks to a successful project implementation and the inclusion of project support to avoid/remove such bottlenecks, (iii) the establishment of a strong working relationship with the different beneficiaries, (iv) a thorough understanding of the medium-term objectives of the different project beneficiaries and the framework within which they operate, a key factor to design the project structure, components and triggers in a sufficiently flexible fashion to allow beneficiaries reaching their objectives through more than one possible path, (v) the existence of a strong champion, and (vi) the continuity at political level.

9. Safeguard Policies

1. Environmental Assessment (OP/BP 4.01): as for the first phase, environmental impacts resulting from civil works on existing road sections are expected to be relatively minor, and mostly related to civil works’ execution. It is proposed that such impacts be identified and mitigated in accordance with the provisions of the framework designed during the preparation of the first APL and updated during the preparation of this second operation.

2. Natural Habitats (OP/BP 4.04): as was the case during the preparation of the first APL, it is not expected that the implementation of the second APL will have any negative impact on natural habitats. Specific Environmental Management Plans (EMPs) must exist for road rehabilitation works and improvements of critical points under the proposed project, and these plans have been or will be used by AGMA as the basis to issue the environmental licenses. In the case of road paving works, Environmental Impact Assessments and EMPs have been prepared and approved by the Bank before bidding processes started. The respective environmental licenses were issued or are about to be issued. 3. Physical Cultural Resources (OP/BP 4.11): as was the case during the preparation of the first APL, it is not expected that the implementation of the second APL will have any negative impact on physical cultural resources, as the project civil works will be normally located within the existing right-of-ways of road sections. However, "chance findings" during paving works are possible, and to handle such findings, Brazil has a well-developed legislative and normative framework, which is under the oversight of the National Institute for Protection of Historical and Archeological Sites (IPHAN). Additionally, AGETOP and AGMA have proven experience and appropriate procedures to recover “chance findings” in line with these procedures and rules. These procedures are described and highlighted in the updated Sectoral Environment Assessment.

4. Indigenous Peoples (OP/BP 4.10): as was the case during the preparation of the first APL, it is not expected that the second APL's implementation will impact indigenous peoples in the state (the implementation of the first APL did not generate such impact). Indeed: (a) the state counts only an estimated 340 indigenous people mostly located in two areas (around the municipalities of Nova America and Aruana), as well as a few Quilombos communities in the northern part of the state; and (b) as stated above, civil works will be located within the right-of- ways of state roads, usually quite distant from indigenous peoples' areas or Quilombos' communities. The protected areas to be consolidated are also not expected to affect the livelihood of indigenous people, except for one protected area of sustainable use (APA Pouso Alto), where the indigenous and traditional peoples living in the buffer zone could benefit from a technical assistance program to be included in the respective management plan. For cases like this and for any other possible case not yet foreseeable, an indigenous people development framework was prepared for this second operation and will be used, as necessary.

5. Involuntary Resettlement (OP/BP 4.12): as was the case during the preparation of the first APL, it is not expected that involuntary resettlement will occur as a result of the second APL's implementation (no involuntary resettlement was undertaken during the implementation of the first APL). Indeed, as stated above, civil works will normally take place within the roads' right- of-ways, which are very much free of settlement. No involuntary resettlements are necessary in the protection areas to be consolidated under this project because in those areas that do not allow private property to coexist the state already owns the respective land. Few cases of land acquisitions happened along the roads' right-of-ways during the first phase and were resolved in on of the following two ways: (i) the owner of the land donated it to the state; or (ii) the state entered into negotiations with the owner based on the replacement value of the land. However, as it is not possible to a priori be 100% sure that work implementation and the consolidation of protected areas will not result in relocation of people and/or restriction of access to legally designated parks and protected areas, the involuntary resettlement framework prepared for civil works during the preparation of the first phase was revised/updated and a process framework prepared. These frameworks will be used, if appropriate. Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [ X] [ ] Natural Habitats (OP/BP 4.04) [X] [ ] Pest Management (OP 4.09) [ ] [X ] Physical Cultural Resources (OP/BP 4.11) [X ] [ ] Involuntary Resettlement (OP/BP 4.12) [X ] [ ] Indigenous Peoples (OP/BP 4.10) [X ] [ ] Forests (OP/BP 4.36) [ ] [ X] Safety of Dams (OP/BP 4.37) [ ] [ X] Projects in Disputed Areas (OP/BP 7.60)* [ ] [X ] Projects on International Waterways (OP/BP 7.50) [ ] [X ]

10. List of Factual Technical Documents

Operational Documents:  Procurement Plan for the first 18 months of project implementation  Procurement Capacity Assessment dated March 16, 2007  Financial Management Capacity Assessment dated April 2007  Sectoral Environmental Assessment dated March 21, 2007 (updated in June 8, 2007)  AGETOP Resettlement Framework dated March 21, 2007 (updated in May 7, 2007)  AGMA Resettlement Framework dated March 21, 2007 (updated in June 6, 2007)  Indigenous People Planning Framework dated March 21, 2007 (updated in May 31, 2007)  Public Consultations Manual dated March 21, 2007 (updated in May 7, 2007)  Assessment of the environmental and social impacts of the first APL dated March 21, 2007 (updated in May 7, 2007)  Economic Analysis dated April 2007  Aide Memoires of preparation missions

Background documents:  Basic Economic Statistical Indicators, in Economia & Desenvolvimento, Conjuntura Socioeconomica de Goias, Year VII, no. 23 April/June 2006  Restructuring and Fiscal Adjustment Program, State of Goias, Period 2002-2004  Restructuring and Fiscal Adjustment Program, State of Goias, Period 2001-2003  Brazilian Law of Fiscal Responsibility, Supplementary Law 101 of May 4, 2000  Multi-year plans (PPA) 2000-2003, Goiás 21st Century, SEPLAN  Multi-year plans (PPA) 2004-2007, Goiás 21st Century, Avancar Mais, SEPLAN  Multi-year plans (PPA) 2004/2007, in Gestao Publica, October - December 2003  World Bank Country Assistance Strategy for the Federative Republic of Brazil FY2004-2007  World Bank Country Assistance Strategy Progress Report FY2004-2007, May 2006  Goiás State Highway Management Program Staff Appraisal Report of July 19, 2001  Implementation Completion and Results Report for the First APL of a Goias State Highway Management Program of October 31, 2006

* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas 11. Contact point Contact: Aymeric-Albin Meyer Title: Transport. Spec. Tel: (202) 473-7101 Fax: Email: [email protected]

12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: [email protected] Web: http://www.worldbank.org/infoshop