E1448

ADDITIONAL FINANCING FOR THE FEDERAL WATER RESOURCES v. 1 MANAGEMENT PROJECT

Public Disclosure Authorized

ENVIRONMENTAL ASSESSMENT AND ENVIRONMENTAL MANAGEMENT FRAMEWORK

Public Disclosure Authorized

Public Disclosure Authorized UGPO – PROJECT MANAGEMENT UNIT FOR CIVIL WORKS AT THE MINISTRY OF NATIONAL INTEGRATION

September 22, 2006 Public Disclosure Authorized 1. Executive summary This Environmental Assessment and Environmental Management Framework refers to the proposed additional financing, in the amount of US$ 100 million (one hundred million US dollars) to the Federative Republic of Brazil, for the continuation of the implementation of the Federal Water Resources Management Project (PROAGUA), P038895, Ln. 4310-BR, approved by the Board on April 2, 1998. This proposed additional loan would help finance the costs associated with scaled-up activities to enhance the impact of a well-performing project in the water sector and, most importantly, to consolidate institutional and legal reforms supported by the project, which require time to mature and be fully integrated into Government processes.

The purpose of the additional loan is to provide continuity to PROAGUA activities, consistent with the project’s original objectives, components, sub-components, and the project’s present expenditure categories. No major changes are being proposed to the original project scope. This additional financing would: (i) support continued implementation of the existing water resources infrastructure component in the Northeast Region of Brazil, and (ii) expand the institutional development component to continue the support to the Northeastern states and also prepare other Brazilian states for a future infrastructure-intense project.

The ongoing project is classified as Category A, and no new safeguard policy will be triggered during implementation of the additional financing phase. From the start of PROAGUA’s implementation until now, adequate planning, a project environmental strategy, and close supervision (field based), have ensured satisfactory compliance with Bank environmental and social safeguard policies. Whenever identified, potential problems were dealt with accordingly.

The environmental, social, indigenous peoples, and resettlement frameworks originally prepared and approved for PROAGUA, especially in reference to the construction of dams and water supply systems, have been recently updated to conform with those safeguard policies that have since been updated. Manuals with environmental guidelines for the construction of dams and water pipelines were also prepared and adopted during project implementation, and would continue to be used during the additional financing phase. These reports are annexes to this EMF.

The subprojects identified so far as potential candidates for implementation during the first year of the proposed additional financing were prepared within the original project’s environmental safeguards eligibility criteria. Additional subprojects, to be selected for implementation during the second and third years, would be developed and analyzed within this updated Environmental Framework..

As part of preparation activities for this proposed additional financing, a study was conducted to review the past and current environmental performance of PROAGUA sub- projects under construction or already in operation. This study revealed that, although subproject preparation was usually satisfactory regarding identification of any necessary mitigation measures, improvements were needed regarding the supervision of the adoption of such measures after the conclusion of construction works and during operation of the subprojects. In order to address this issue, the following have been agreed as additional activities to be carried out by the Ministry of National Integration (MI)’s Unit during the additional financing phase: (i) training of Federal and State Units

2 on methodology for sub-project supervision during the operational phase; (ii) inclusion of a mitigation measures monitoring plan in the administration, operation and maintenance plan (PAOM) for each sub-project; (iii) assistance to the states for implementation of the PAOMs for the subprojects (including the sub-projects built within the original project); and (vi) supervision by MI of the implementation of the measures after subproject construction and throughout its operational phase.

In all cases, sub-project proposals would cover the institutional arrangements and responsibilities for the implementation and supervision of the programmed environmental mitigation measures. The cost of such actions would mandatorily be included in each subproject’s budget, and used for economic and financial evaluation purposes. The future works to be financed, as in the original project, would not cause major negative environmental and/or social impacts. In addition to the environmental assessment, the following documents would also be submitted to the Bank for each sub- project: (i) a plan for the management, operation and maintenance of the proposed work; (ii) evidence that the land and the rights to that land are physically and legally available; (iii) evidence that Participating States hold the rights over the water for the proposed work; (iv) evidence of all corresponding environmental permits; (v) whenever required, presentation of a resettlement plan; (vi) whenever required presentation of an indigenous peoples development plan..

Following the practice for the original project, and to comply with OP 4.37 (Safety of Dams), a Dam Safety Panel would be established to approve the final engineering designs, supervise contracting, and inspect the construction of any large dams that may be financed. In addition, the Panel would be called on to verify the safety of existing large dams that would be the source of water for a new subproject.. The Panel would be hired by the MI Unit and would assist all sub-projects where their participation would be deemed necessary.

2. Policy, legal and administrative framework regarding environmental issues Brazil is probably the developing country with the oldest and most consolidated environmental licensing system, launched in the early 70s. The system is well consolidated and widely disseminated. In addition to having qualified personnel, the environmental licensing procedures, including the more complex environmental impact assessments, are standard and widely disseminated in all states. The CONAMA (National Environmental Counsel), through its resolution nº 237/1997, updated the licensing system, establishing the environmental studies and licensing process to be carried out for any subproject to be implemented. The licensing process includes several stages of licensing: preliminary (LP), for implementation (LI) and for operation (LO). Some states included other stages in the process. For each stage a different set of documents is required, including the environmental studies, such as EIA. For subprojects that can potentially affect the environment, the CONAMA resolution requires that the environmental studies be disclosed and public consultations be carried out.

Regarding the WRM institutional and policy framework, the GOB approved the Water Resources National Policy Law, law nº9433/1997, to establish a new institutional framework and instruments (e.g. Water Resources National Plan - PNRH, bulk water rights and charges, etc.) to address IWRM issues. The National Water Resources Management System (SINGERH) was created by this, with the main objectives of coordinating the integrated water management system and implementing the National

3 Water Resources Policy. The SINGERH comprises the National Water Resources Council (CNRH), the National Water Agency (ANA), State Water Resources Councils, River Basin Committees, federal, state and municipal institutions that deal with water management issues, and water agencies. Similar legislation has been introduced in almost all states. Since 1997, some 50 river basin committees have been established in federal and state river basins and one water agency was created.

The Brazilian National Water Agency (ANA) was created in July 2000, in response to the increasing demands on water resources by conflicting uses (agriculture, industry, urban and recreational). ANA’s mandate is to implement the National Policy on Water Resources (PNRH) and the planning and management of the national water resources, subject to principles, guidelines and instruments defined by the National Policy on Water Resources. ANA is an executive agency of the Ministry of Environment. It is managed by a Board of Directors and has autonomy to regulate the multiple water uses. The National Water Resources Council (CNRH) is composed of representatives from the federal and state administrations, environmental representatives, water users groups and organized civil society. One of its major roles is to define complementary directives for the implementation of the Water Resources National Policy. MMA’s Water Resources Secretariat (SRH), created in 1995, supports the Council with technical work for its decision-making and as its technical secretariat. Its other attributions are the formulation of the National Policy on Water Resources, and the integration of water resources and environmental management. State-level institutions corresponding roughly to SRH, ANA and CNRH exist in virtually all states.

3. Project description The purpose of the proposed additional loan is to provide continuity to PROAGUA activities, consistent with the project’s original objectives, components, sub-components, and the project’s present expenditure categories. No major changes are being proposed to the original project scope. This additional financing would: (i) support continued implementation of the existing water resources infrastructure component in the Northeast Region of Brazil, and (ii) expand the institutional development component to continue the support to the Northeastern states and also prepare other Brazilian states for a future project.

The original PROAGUA Project was composed of five components: (i) water resources management; (ii) infrastructure; (iii) planning, studies and project design; (iv) São Francisco watershed; and (v) management, monitoring and evaluation. During project implementation, two new components were included in the loan agreement to respond to new demands arising from the change in the GoB’s institutional structure for management of water resources: (vi) watershed management models and pilot initiatives; and (vii) complementary studies to support the implementation of water resources infrastructure in the Northeast region.

All activities supported under the original Project would be maintained under the additional financing phase. However, in order to improve the efficiency and efficacy of tasks related to the evaluation and monitoring of project impacts, the first component of the original project would consolidate other components related to planning and elaboration of studies, resulting in only three components for the proposed Additional Financing: (i) Water Resources Management (which would include the original components i, iii, iv, vi and vii); (ii) Priority Works (same as the original component ii);

4 and (iii) Management, Monitoring and Evaluation (same as the original component v). A description of the updated components is indicated below:

Component 1 - Water Resources Management. This component would provide the necessary technical and financial resources to strengthen the Federal and State governments, river basin committees and water user associations to effectively manage water resources in Brazil, through institutional development; planning; specific water and environmental studies; watershed management models; and complementary studies to support the implementation of water resources infrastructure in the Northeast Region.

Component 2 - Priority Works. This component would finance the construction of water storage and conveyance infrastructure in the Brazilian semi-arid region to provide reliable water supplies (in terms of both quality and quantity) for towns and communities with enduring problems of water supply for domestic consumption.

Component 3 - Management, Monitoring and Evaluation. This component would finance three major elements, distinct and autonomous from one another but closely inter-related: (i) project oversight at the highest level (Executive Committee); (ii) project management at federal level, in support of State’s UEGPs; and (iii) project monitoring and evaluation (M&E), as well as auditing. The two main components would focus on: (a) improving water resources management and planning at national level, through studies and technical support; and (b) expanding the benefits of water infrastructure to other areas in the Northeast semi-arid region with works such as bulk water pipelines and conveyance systems, construction of rural water supply systems, construction and/or rehabilitation of dams, and other similar hydraulic infrastructure for multiple uses whereas the rehabilitation of existing systems would be prioritized, as well as additions to or conclusion of unfinished works. Considering that all works to be financed under the additional financing phase would have the same characteristics as those financed under the original loan, such as location in the Semi-Arid region and featuring the same typologies, the experience gained so far indicates that all project implementation procedures adopted to this date remain appropriate. Nevertheless, some improvements have been introduced, as a consequence of the lessons learned from the implementation of PROAGUA from its beginning. The eventual construction of two potential dam subprojects, which are candidates for implementation during the first year of the additional financing, would result in the relocation of some families currently living in the hydraulic basins. Initial studies indicate that 82 families would be potentially affected by the entire proposed project. Existing resettlement plans would be updated in close consultation with the affected families, following the Framework developed for the original project and updated during preparation of the additional financing to conform to the current OP 4.12. In addition, for the additional financing phase of the project, no potential subproject is expected to affect indigenous areas. There are no indigenous groups living in or near areas where works have been proposed for the additional financing. In the event that this policy would be triggered by any new subproject, the borrower would prepare an IPDP following the Framework developed for the original project and updated during preparation of the additional financing to conform with the current OP 4.10.

5 4. Baseline data The characteristics of the new potential infrastructure subprojects and of the areas where they would be implementetd during the additional financing phase, are similar to those under the original PROAGUA Project. The target population constitutes some of the poorest segments of the Brazilian population, with socio-economic indicators that are significantly lower than for Brazilians living in other regions. Project documentation for the original PROAGUA, as well as technical audits and implementation and monitoring reports containing lessons learned from Project implementation to this date, would continue to provide the framework and guidance for implementation of project activities during the additional financing phase. In addition, the choice of infrastructure to be financed would be guided by existing state water resources management plans, river basin plans, and a recent study of priority strategic works identified by ANA (National Water Agency) for the whole semi-arid region. PROAGUA is a water infrastructure works program (category A) with a limited number of medium size and large subprojects. Most interventions can be classified as being small in size and of reduced potential for pollution or environmental degradation. By August 2006, PROAGUA had financed mostly water pipelines and other water supply systems, and had provided support for the construction of one large dam - Arneiroz, in the State of Ceará. The Serra Preta dam, also supported by the project in the State of Bahia, integrates the Planalto and Barra do Choça water supply system and has a maximum height of 30 meters. However, due to its location in a very narrow valley, construction of this dam flooded an area of only 50 hectares and did not require the resettlement of residents. It is important to highlight that PROAGUA has been acknowledged by the Federal Court of Accounts for adding quality to infrastructure projects as a result of the application of the eligibility criteria adopted by the program. These criteria have been used as a model for the adoption of similar practices that have improved the process through which States and Municipalities may request financial resources for water infrastructure works from the Overall Federal Budget, through the Ministry of Integration (Administrative Rule no. 70/ 2004). Project documentation for both the original and additional financing phases, as well as information on priorities for the semi-arid region, can be found at www.ana.gov.br/proagua. A synthesis of the main outcomes of PROAGUA as of July 2006 is presented below: Component 1 - Water Resource Management • Technical Studies: 45 feasibility studies and basic engineering projects for priority works of PROAGUA; • Specific Studies: 46 environmental studies, water availability studies, etc; • Water resources planning: 10 river basin master plans; • Water user organizations: 254 established and/or strengthened; • Training: 1,322 trained technicians from state and federal agencies affiliated to the National Water Resources System; • Capacity Building for Associations: 144 training events for representatives of water user associations;

6 • Environmental Education Programs: 35 programs (all water pipelines have an associated environmental education program already implemented or under implementation); • Management, Operation and System Maintenance Plans: 23 plans elaborated for water pipelines already completed or under implementation.

Component 2 - Priority Works As of July 2006, PROAGUA had supported the implementation of 24 works, which have all been concluded, plus another 20 still under implementation. Out of the 24 works concluded, 23 underwent environmental audits – including a treatment facility built to deal with the residues from a water treatment station associated with a new water pipeline. Nine out of the 20 works under implementation have already undergone an environmental technical audit, and the other11 will also be submitted to the same procedure. A list of the works concluded and of those under implementation, as well as their status regarding environmental audits, is presented in Appendix 1 - Charts 1 and 2, at the end of this document.

Works Quantity Benefited Population (inhabit.) Extension (km)

Concluded 24 1,335,033 1,464

Under Execution 20 1,736,642 1,082

Being Contracted 03 1,657,222 89

Total 47 4,728,897 2,635

Out of these 47 works, 3 works are being financed exclusively through funds provided by the Japan Bank International Cooperation - JBIC, and federal and state counterpart funds. These works are: the Gavião Pecém/CE System, the SIAA Santana/BA and the Alto Sertão and Sertaneja/SE Water Pipelines.

Component 3 – Project Management, Monitoring and Evaluation Monitoring and evaluation procedures have been adopted during the implementation of the PROAGUA for supervising the implementation of all its subprojects, as well as procedures for ensuring an appropriate analysis of each new proposed subproject. During the analysis and approval of the state proposals for new subprojects, the procedures established in the PROAGUA Project Appraisal Document have been followed. In the implementation stage, specific environmental technical audits were carried out for each infrastructure subproject in order to verify whether the recommended measures were being effectively implemented. The purpose of such audits was to evaluate the subprojects that had already been implemented or were under implementation, regarding: (i) compliance with the Bank's environmental safeguards in the implementation of the mitigation measures defined on the occasion of the subproject's approval; (ii) compliance with the Brazilian legislation

7 applicable to each case; and (iii) need or possibility to improve procedures adopted by the project during the implementation of works.

Technical Audits of PROAGUA implementation activities Technical audit reports are available at the PROAGUA website (www.ana.gov.br/proagua). The Portuguese version of the EA study for the proposed additional financing shows a summary of the technical audits carried out, and the measures undertaken to solve the issues identified. Generally speaking, PROAGUA has complied with the Bank’s safeguards during the preparation and implementation of subprojects. Overall comments on the compliance with Bank safeguards and with the procedures foreseen at the time of preparation of the Original PROAGUA are presented below. • Environmental Assessment - All subprojects have undergone environmental assessments (OP 4.01), four of them were Category A, which included a broad discussion with the communities that were either affected or benefited, and an exchange of information with them. These meetings often contributed to improvements and/or modifications to project design as in the case of subprojects implemented in the states of Rio Grande do Norte, Piauí, and Minas Gerais. Nevertheless, some flaws have been identified after implementation, namely: (i) some subprojects in operation had installation licenses, but not operation licenses; (ii) some subprojects were licensed but were not in full compliance with the requirements of the licenses; (iii) inappropriate implementation of sanitary and environmental education programs; (iv) non-implementation of some mitigation measures set out in the environmental licensing or in the PROAGUA analyses. Such occasional flaws have been pointed out in the audit reports and are being corrected. Appendix 1 - Charts 4 and 5, shows the status of environmental licenses for all works that have been implemented or are under implementation. • Indigenous People - None of the works supported by PROAGUA so far has affected indigenous people or land (OP 4.10). There has been a single proposal (the Pão de Açúcar - Pesqueira Pipeline, in Pernambuco) for which the water collection and part of its pipeline would be located on indigenous land. Negotiations would have been so complex – involving PROAGUA, the Ministry of Integration, the Pernambuco State Secretariats, the indigenous community, FUNAI, IBAMA, and the National Congress - that the state decided to substitute this proposal for another subproject. • Safety of Dams- All subprojects involving either the construction of dams or the utilization of existing dams were assessed by a especially established Safety Panel as required (OP 4.37, reviewed in October 2001). That was the case for the Arneiroz Dam (CE), shown in Box 1 below, as well as the Planalto/Barra do Choça Pipeline (BA), the Serra de Santana Pipeline (RN), the Congo Pipeline (PB), the Petrônio Portela pipeline (PI), the Agreste Pipeline (SE), the Limeira Dam (AL), the Águas Vermelhas System (MG), among many others. In all States - except for Pernambuco, where there is no water collection from dams - audits have been conducted by the Dam’s Safety Panel, composed of independent experts. The experts that compose the Panel were hired by UGPO/MI and are highly qualified professionals, specialized in fields such as hydrology, hydraulics, geotechnics and concrete technology. Their CVs were previously approved by the World Bank and they have been working in all states that participate in PROAGUA, except for Ceará. The latter already had an

8 established Dam Safety Panel, to provide advice to PROURB and PROGERIRH (two State programs supported by the World Bank), which also became advisors to PROAGUA in Ceará. • Resettlement - The only subproject that resulted in involuntary resettlement (OP 4.12) was the Arneiroz dam, where affected families received compensations consistent with the procedures of this OP. Even though there has been some delay in the operationalization of the urban structures available, this problem was assessed during an environmental technical audit and existing issues were solved in a satisfactory manner. • Cultural Properties and Natural Habitats - During a Thematic Review carried out in July 2002, two small simplified projects were found in the Central Water Supply Standard System (Bahia State) for which Bank safeguards OP 4.11 (Cultural Properties) and OP 4.04 (Natural Habitats) were not being observed. These are small water supply systems, designed for collecting water from underground rivers located in a conservation area and in a region of culturally significant caves. The subprojects were being implemented without the undertaking of the appropriate environmental impact assessment and licensing. Once these unconformities were identified, implementation of those subprojects were suspended and their flaws were corrected. A technical audit later confirmed the correction.

Box 1: Example of how the adoption of Dam Safety Panels has beneffited the Project Arneiroz Reservoir: The dam structure is a 1400 m long earth and rock massif, featuring a maximum height of 35 meters. The top of the massif is at 374.4 m level. The Dam Safety Panel established by the State of Ceará has been supervisi ng this sub-project since its executive project phase. The Panel has a consultative function and its recommendations are registered in meeting reports, which are forwarded to the State Secretariat for Water Resource s. At the Pa nel’s 45th Meeting, held in June 2003, Panel members expressed their concern about a potential delay in finalizing the the massif's landfill, which might compromise the safety of the works. The risk was due to the fact that the rainy season was about to start, and the landfill would have to be raised at a very fast pace in order to reach a safe leve l before the start of the more intense rains. The landfill would have to reach the minimum height that would allow a large volume of water to be stored while also directing excess water to the spillway. The concern stemmed from the fact that the dam did not have a specific structure to divert major floods, a design characteristic that is common in dam projects on intermittent rivers such as that one. th At its 46 Meeting, in October 2003, the Panel once again voiced its concern and made some recommendations aimed at avoiding the overflowing of the dam, including the execution of an emergency dyke up to the 367-meter level. Un fortunately, there was no time to fully implement these measures. In early January 2004, the start of intense precipitation at the contributory river basin and at the work site impeded the continuation of the earth-moving works. B etween January 19th and 27th, the heavy rains brought 125 hm3 of water into the reservoir. The water level th th was raise d from 354.0 m on January 19 to 365.6 meters on January 27 , causing the overflowing of the massif, then at a height of 361 meters.

At the imminence of a disaster, those in charge of the work - Supervising Agency, Contractor, SOHIDRA (state company in charge of the implementation of water works in the State of Ceará) - opted for the controlled emptying of the reservoir, thus avoiding the rupture of the dam, which could have resulted in destruction of areas downstream. The Stat e Civil Defense was called in and guided the protection and temporary transfer of the populations located in risk area s. At the same time, technically oriented excavations were carried out in sections of the embankment, in order to allow for the gradual emptying of the reservoir down to safe levels. Within a few days the situation went back to n ormal and, despite some property damages, no fatal accidents were registered.

9

• Program to Strengthen Environmental Management Skills of Executing Agencies - PROAGUA has strongly contributed to the structuring and strengthening of state and federal water resources agencies. The noteworthy work of PROAGUA includes: 1. promotion of the establishment and strengthening of institutions aimed at water resource management, HR capacity building, awareness raising and public participation in the decision-making process; 2. complementation of the sector's institutional reform, by participating in the structuring and implementation of the National Water Resource Management System, River Basin Committees, National Water Resource Council and state councils; 3. contribution to the design of a water resource management strategy for the sustainable development of the semi-arid, based on public involvement, and in the expansion and dissemination of know-how; 4. working towards the establishment of ANA - National Water Agency, and the definition and improvement of its internal structure; 5. provision for the establishment and strengthening of the regulatory framework regarding the management of water resources in the States, as well as the organizational development of the corresponding Management Bodies and other State Executing Agents, in spite of the weaknesses of some states, which have not consolidated some of the achievements. However, the results of the capacity building efforts in the area of environmental management, directed at water managing agencies, have not been as successful. During the initial years of project implementation, all states participated in seminars focused at improving the integration between the agencies responsible for implementing the sub-projects and those responsible for environmental regulation/enforcement. A technical document was drafted, which proposed the joint action of management and environmental agencies in common issues. Nevertheless, the institutions' specific interests and divergences have yet to be overcome. Progress has been made, though, and the state Secretariats for Water Resources or sanitation companies presently have in-house technical staff capable of carrying out the environmental analysis and follow up of the works. But the majority of states preferred to continue working in the traditional way: the licensing agency addresses only environmental issues, whereas the water resource agency remains a client. • Environmental Education and Public Information Programs. Field technical audits have shown that PROAGUA has achieved most of its social objectives. Components related to community participation and environmental education of beneficiary populations have not been implemented as planned, even though major progress has been achieved, as was the case of PEACS - Environmental Education and Social Communication Program, implemented in 20 municipalities in the State of Bahia. Sanitary and environmental education campaigns were carried out in all communities benefiting from the works, but there is still no evidence of effective awareness, which is observed in some cases in which the pipeline system units (water meter boxes or valve boxes) are damaged in order to facilitate irregular diverting of water.

10 • Environmental Guidelines for Projects and for the Construction of Water Collection, Treatment and Pipeline Systems. This document was prepared by UGPO consultants and, after being discussed at seminars that included participants from all states involved in the Program – was published by the Ministry of Integration, under the title "Diretrizes Ambientais para Projeto e Construção de Sistemas de Captação, Tratamento e Adução de Água" (Environmental Guidelines for Projects and for the Construction of Water Collection, Treatment and Pipeline Systems). The document addresses the legal and normative federal environmental framework, applicable to the project and to the construction of water pipeline systems and their specific works; lists the main environmental impacts that may result from the implementation of water pipeline systems in the semi-arid; presents the structure and the sequence of studies required by PROAGUA; describes the environmental considerations to be made during each of the phases that make up the study and project design stages of typical supply systems. It also presents the environmental considerations recommended for the work stage, as well as recommendations for the operation of the water pipeline systems. It recommends social communication activities to be carried out throughout the several phases of subproject development and presents environmental specifications for the construction of pipeline systems; deforestation, cleaning and recuperation plans for the pipeline path area; control and recuperation plans for borrow pits and works’ waste areas. • Environmental Guidelines for Dam Projects and the Construction and Operation of Reservoirs. Similarly to the above, a document was drafted and published on Environmental Guidelines for Dam Projects and Construction and the Operation of Reservoirs. In addition to the overall aspects regarding the legislation and the project stages of PROAGUA, it also addresses the following specific aspects of dams: Environmental planning of the construction; Typical problems to be addressed; Risk management and emergency actions during construction; Environmental education of workers; Health and safety at work sites; Waste management; Evaluation and protection of archeological assets; Solutions for interferences in mining activities; Deforestation plan and cleaning of flooded areas; Fauna protection plan; Control and recuperation plan for borrowed and works’ waste areas; Environmental auditing; Environmental specifications for dam construction; Safety of dams; Environmental considerations for the operation stage; Maintaining water availability; Water quality monitoring and control; Salinity control; Water pollution control and eutrophication; Conservation plan and plan for the use of the reservoir’s surrounding area; Environmental education of the population; and Social communication. • Monitoring and Control of Schistosomiasis. During the environmental assessment carried out for the subprojects that had been pre-selected for the initial implementation of the original PROAGUA Program, the most efficient intermediary host of schistosomiasis (Biomphalaria glabrata) was identified at Águas Vermelhas subproject location. The swamps and flooded areas close to the springs were the species most likely habitats. The environmental analysis that was carried out in the field, and research based on secondary data, identified the need for keeping schistosomiasis under control in the Mosquito river basin (northern Minas Gerais). That demanded a comprehensive integrated control program, involving the following activities, among others: previous diagnosis for assessing the area's infectivity and the percentage of infected snails in each reservoir within the basin; diagnosis and specific treatment of the sick; implementation of laboratory units capable of carrying

11 out feces exams for the diagnosis and treatment of schistosomiasis patients; health education campaigns, aiming at raising awareness among the population regarding the destination of feces, the use of springs, and their participation in the fight against the endemics; building of community laundry rooms as a way of discouraging access to the lake by the population; weeding, cleaning and maintenance of reservoir, river and channel margins; and the annual follow up of the population's infection rates. The results of this intervention have been greatly satisfactory. Schistosomiasis was eradicated and the environmental sanitation program received an award from the Brazilian Association of Sanitary and Environmental Engineering.

Lessons Learned The implementation of the Original PROAGUA has allowed for some major findings summarized below: 1 - Need for more capacity building on World Bank’s safeguards and on federal and state environmental legislation. Compliance with safeguards may only be assured if project teams are capable of identifying and mitigating related issues. All project participants are responsible for complying with Bank safeguards, as well as with the Brazilian environmental legislation. The project must promote the dissemination of knowledge on Bank safeguards and on the relevant environmental legislation to the whole project technical team, at all levels, as well as civil society affected by the project. Updating workshops must be held periodically, since both the safeguards and environmental legislation often undergo revisions and modifications. Technical teams that carry out routine audits on the execution of works must periodically submit evaluations on the implementation of safeguards and compliance with the legislation. If these technicians receive appropriate capacity building on the subject, they may identify non-conformities before they become serious problems. If the UGPO coordinator is notified in time, he/she may undertake more efficient measures. Additionally, independent evaluations on compliance with environmental requirements must be carried out on a sample of all sub-projects (both implemented and under implementation). In addition, a close supervision of ex-post implementation of the civil works and mitigating measures has to be carried out to assure the compliance with the safeguards and the legislation. 2 - The implementation of environmental and social activities must be linked to the execution of works. Programs on the strengthening of environmental management and on social development must be properly designed and implemented. Whenever possible, social and environmental indicators must be developed and included during the subprojects design stage, aiming at assuring the appropriate implementation of such programs. A link must be established between the subprojects' environmental and social activities and the execution of the works, in order to ensure their implementation. Civil society involvement in the process is essential. A focal point will be identified for each subproject to facilitate the interaction between the affected community and the project implementation team. 3 - Need to insert environmental guidelines into the works’ bidding documents.

12 The elaboration and dissemination of manuals containing environmental guidelines for the preparation of studies and for the execution of works does not in itself assure the effective incorporation of such guidelines into the subprojects. In addition to providing specific training to the Project technical teams, it must be mandatory that the works' call for bids incorporate the identified environmental measures, with the appropriate adaptations to be made by the proposing State team and approved by the UGPO. Such environmental measures must be made explicit, and their unitary and total costs must be defined in the works' cost spreadsheets, so that the contractor will be fully aware and interested in carrying them out.

5. Potential environmental impacts The proposed additional financing to the PROAGUA would extend the implementation period of this successful project. Project implementation would follow the same procedures that have been used so far, with the addition and adoption of new measures that address the few issues identified in the analysis of Project past environmental performance and other lessons learned.

To this date, the main overall positive environmental of PROAGUA has been the establishment of a culture of planning for sustainable use of water resources at federal government agencies and in the beneficiary states. At the local level, the positive impact most frequently identified by beneficiaries in technical audit reports is the improvement in people’s well being, especially women, as a result of the decrease in intensive labor needed to haul water everyday. The decrease in intestinal diseases, especially in children, is also a notable positive impact.

For the additional financing phase, the overall potential project impacts are expected to be similar to those of the original PROAGUA, as addressed in the respective original Environmental Assessment. However, the subprojects already identified as having potential for implementation during the first year of the additional financing have undergone preliminary individual environmental screenings and/or environmental assessments, and a summary of the findings is presented below. For some project works, particularly any new large dams, these impacts could potentially be significant if not adequately minimized and mitigated, thus warranting the Category A level classification. However, the application of this revised Environmental Framework would ensure minimization and adequate management of all potential impacts.

For the first year of the Additional Financing, 14 (fourteen) works have been listed as potential candidates for financing, all of which are located in the Semi-Arid region: 1. The Coqueiro Seco Water Supply and Sanitary Sewage System (AL); 2. The Pedro Alexandre Pipeline System (BA); 3. The Jacobina Pipeline System (BA); 4. The Planalto and Barra do Choça WTS Mud Treatment Stations (BA); 5. The Missi Dam (CE); 6. The Riacho da Serra Dam (CE); 7. The Ibaretama Pipeline System (CE);

13 8. The Northern System - the Janúba, Januária, Mato Verde and Rio Pardo sub- systems (MG); 9. The Expansion of the Congo Pipeline System (PB); 10. The Expansion of the Limoeiro Water Supply System (PE); 11. The Agrestina, Altinho, Ibirajuba and Cachoeirinha Water Supply System (PE); 12. The Reinforcement of the Belo Jardim Water Supply System (PE); 13. The Bocaina Pipeline System (PI); 14. The Expansion of the Serra de Santana Pipeline System (RN).

A preliminary environmental screening and/or environmental assessment has been conducted for each one of these works, based on technical documents prepared by the proposing states and consulting firms contracted. These works were pre-assessed by consultants from the UGPO/MI team - the Program Management Unit of the Ministry of Integration, also based on the experience obtained from the implementation of the Original PROAGUA. An Environmental Report Card was drafted for each work that was analyzed, as per model adopted by the Original PROAGUA. Before any of these subprojects can receive final approval for implementation, additional environmental, social, technical and economic studies would be carried out. The UGPO/MI team and the Bank would use the information from these studies in the decision-making process for giving the final approval to any of the pre-identified subprojects. Afterwards, before funds can be released to any one of the approved works, technical field audits would be carried out by UGPO to confirm all reported information. Both direct and indirect impacts would be considered in the analysis of each subproject, to ensure that possible negative impacts are identified during the early stages of subproject design and that adequate mitigation plans are developed and accounted for as integral part of the subproject. The subprojects listed as potential candidates for implementation during the first year of the Additional Financing were analyzed and developed within the original project’s environmental safeguards eligibility criteria. Additional subprojects, to be proposed for implementation during the second and third years, would be developed and analyzed within the same environmental framework updated and prepared for the additional financing phase. A table, in appendix iii, shows the list of the potential subprojects, the main characteristics of which may be viewed in the preliminary Environmental Reports Cards (available in the Portuguese version of the EA).

Natural Habitats: although the initial environmental screening and/or assessment for the potential first year subprojects did not identify potential large scale, significant and/or irreversible impacts to natural habitats, it’s expected that an area of about 1.7 thousand hectares would be inundated by the two potential dam subprojects. Most of these areas are already heavily modified by agriculture and cattle grazing. For additional works to be implemented after the first year, in the unlikely event of negative impacts to critical natural habitats, appropriate environmental compensation measures would be agreed with and carried out by the borrower, including an environmental compensation in the amount of 0.5% of the total infrastructure cost (foreseen under Law 9985/2000). In the case of the two potential dam subprojects, a positive impact would be the creation of a

14 permanent protection area (APP) around each reservoir, as required by the national legislation.

Cultural Property: no high valued cultural property is expected to be affected by the eventual construction of two potential dam subprojects, or by any other potential project supported works. In the event that a high valued cultural property would be found to be potentially affected, the state historical society (existent in all states) would be informed and involved to evaluate the case and resolve the issue with the project team in order to preserve that cultural property. Indigenous peoples: During the original PROAGUA preparation, a TOR model has been developed for adoption in assessment processes of any sub-project that may affect indigenous areas. This TOR, designed in compliance with the former OP 4.20 - Indigenous People (now revised as OP 4.10), involves the consideration of eventual impacts of sub-projects upon indigenous people and the development of measures capable of assuring benefits that are compatible with their culture, such as: anthropological research; support to land demarcation and ownership; basic needs definition and support actions, such as for health, education, sanitation and transportation, production, etc. Presently, due to the review of this OP and its substitution for OP 4.10, in January 2005, the framework was revised to the present safeguard version. Nevertheless, for the additional financing phase of the project, no subproject candidate to be implemented in the first year is expected to affect any indigenous area. There are no indigenous groups living in or near areas where works have been proposed for the additional financing. Current Brazilian legislation is quite restrictive in relation to interventions on indigenous land. The use of water resources located on indigenous land, according to the Brazilian Constitution (Article 231), depends on approval by the National Congress, which demands a quite lengthy process. Serving indigenous populations with basic sanitation is a specific attribution of FUNASA - the National Health Foundation, affiliated to the Ministry of Health, as per Provisionary Measure 1911/99, of July 1999. Any project whose implementation may cause any interference on indigenous land will require prior environmental licensing by the federal environment agency (IBAMA), which obligatorily will have to consult with FUNAI - the National Foundation for Indigenous People, in accordance with Resolution no. 237/97 issued by CONAMA, the National Environment Council. If this policy is triggered by any proposed subproject, the borrower will prepare an IPDP following the Framework developed for the original project and updated during preparation of the additional financing, based on the revised OP. Safety of dams: two subprojects have been listed as potential candidates for implementation during the first year of the project (17m and 18m high), as well as some proposed water supply systems which would capture water from existing reservoirs. As was required for the first phase, a Dam Safety Panel would be established to approve the final engineering designs, supervise contracting and inspect the construction of any large dams that may be financed and dams to be used as sources for water supply systems. The initial designs for the two potential dams, Missi and Riacho da Serra, have been reviewed by the Ceará Dam Safety Panel, and have received their preliminary approval. Involuntary resettlement. Some of the potential works call for special attention regarding the need to develop resettlement plans. Such concern is especially true for

15 dams that demand discharge regulation, but they may also be true for certain pipelines, water pumping stations, and water and sewage treatment stations. The subprojects listed as potential candidates for implementation during the first year basically involve: • Construction of two regulation dams (Missi and Riacho da Serra, both in the State of Ceará); • Implementation of pipelines along existing roads; • Construction of water intake and pumping stations at existing reservoirs; • Implementation of simplified water supply systems (wells, simple disinfection treatment, pipelines, distribution reservoirs) in small communities; • Sanitary sewage systems in strategic communities, in order to guarantee the quality of relevant springs. Except for the two potential dams, the other potential subprojects do not involve any resettlement. Resettlement plans for the potential dam subprojects have already started to be developed, specifying relocation policies, planning principles, household registration, evaluation of assets that would be lost, definition of benefits, criteria for eligibility and support to the resettled population for reestablishing income generating activities. Such Resettlement Plans are being developed based on Terms of Reference for existing plans approved under other World Bank projects, specifically the works carried out under PGRH - the Water Resources Management Project of Bahia State and PROGERIRH - the Water Resources Management and Integration Project of the State of Ceará. These TOR also have been used in the development of studies that have led to the implementation of the Arneiroz dam (State of Ceará), financed by the Original PROAGUA, which led to the resettlement of 37 families. Out of these families, 15 were resettled in a rural village where they received urbanized residential lots, with brick houses, piped water, electricity, roads, a public square, school, a building and support for the organization of a community association, in addition to farming lots. The other families that had to move out received financial compensation, according to their preference, in amounts considered sufficient for their self-resettlement. The updating of Policy OP 4.12 - Involuntary Resettlement, in December 2001, has not implied significant changes in the text of the TORs which are guiding the studies for the the two potential dams. However, a revised Resettlement Framework has been developed for the Additional Financing phase, and based on this new IRPF, the initial plans developed for the two potential dams will be revised and updated accordantly.. The outcomes of the draft Resettlement Plans for the two dams, which counted with the effective participation of the communities that would potentially be affected by the works, may be summarized as follows: • In the case of the Missi dam, 66 families would be moved out for the construction of the works and the establishment of the reservoir and its permanent protection area (APP). In accordance with each family's socio-economic condition and the compensation amounts agreed, the following solutions would be adopted: (a) 31 families would be resettled in a rural village, in 52-square-meter houses, to be built on 450-square-meter residential lots each, plus an additional 5.0-hectare farming lot for each family, and community spaces such as vegetable garden, school, health center, church, community association, road system, water supply,

16 sewage system and public electricity; (b) 15 families would receive additional financial support for their self-resettlement; and (c) the other families would receive compensation for their assets, sufficient for them to purchase another home and/or farming lot at a location of their choice. • In the case of the Riacho da Serra dam, which would potentially move out 16 families: (a) 15 families would be resettled at a rural village on an agreed upon location, and (b) the other family would receive financial compensation for its self-resettlement. The rural village would contain 15 urban lots of 15 x 45 meters, containing single family houses, and areas for the implementation of services infrastructure. It would also count with an area for fifteen 8.0-hectare lots for cattle raising, totaling 120.0 ha. in rural area.

No resettlements would be required for the other potential works. Nevertheless, should that be necessary, PROAGUA would follow procedures based on the revised framework. This framework would be an integral part of the Additional Financing Operation Manual. Cumulative impacts. No cumulative impacts are expected in this project. For each subproject, an EA (or EIA in the case of category A subprojects) would be prepared, taking into consideration the overall context of the respective sub-basin. For water supply systems, the EA/EIA would charcterize the potential interferences with other water uses in the same sub-basin, through a quantitative water balance and, if required, evaluation of the discharge reduction effect on the self-depuration capacity of the downstream water course and reservoir. In the case of dams, in addition to the characterization of the immediate interferences in the water course and sub-basin in a smaller scale, an evaluation of the dam’s interference with other reservoirs, both existing and planned, with the water basin should be undertaken through an evaluation of cumulative water balance.

Risks of Disseminating Waterborne Diseases. The possibility for PROAGUA works to raise the risk for the proliferation of contagious disease vectors has been a concern since the beginning of the Project design. In fact, one of the foreseeable effects of supplying water for human consumption in appropriate conditions of quality and quantity is the increase in the amount of generated liquid effluents. In a region that lacks public services, where consumed water was expensive and obtained through much personal effort, the volumes allotted to each inhabitant were just the minimum for survival. Once people could count with an appropriate public water supply system, the per capita consumption would certainly increase significantly, thus generating a corresponding greater volume of sewage. Sanitary sewage systems were (and still are) rare in towns throughout the region served by PROAGUA. On the other hand, the building of dams and their reservoirs also creates favorable conditions for the transmission of water-borne diseases, especially schistosomiasis, due to its widespread occurrence in the Semi-Arid Region. The Águas Vermelhas subproject, implemented during the Original PROAGUA phase, implemented a comprehensive integrated schistosomiasis control program, involving the following activities, among others: previous diagnosis for assessing the area's infectivity and the percentage of infected snails in each reservoir within the basin; diagnosis and specific treatment of the sick; implementation of laboratory units capable of carrying out feces exams for the diagnosis and treatment of schistosomiasis patients; health education campaigns, aiming at raising awareness among the population regarding the destination of feces,

17 the use of springs, and their participation in the fight against the endemics; building of community laundry rooms as way of discouraging access to the lake by the population; weeding, cleaning and maintenance of reservoir, river and channel margins, and annual follow up of the population's infection rates. The results of this control program have been greatly satisfactory and, if necessary, the Terms of Reference developed for the Águas Vermelhas schistosomiasis control program are available for use during the implementation of the PROAGUA - Additional Financing in other areas which might be found to have similar problems. In the event that the risk of an increase in water-borne or endemic diseases is identified in the environment report cards filled out by the proposing states, whether the proposed work is a dam or a water supply system, the costs of developing and implementing a control plan would be included as part of the proposed work.

The implementation of sanitary sewage systems is always recommended by the PROAGUA team when support to the implementation of a water supply system is analyzed, but such services are the responsibility of other government institutions (Ministry of Cities, Ministry of Health, state agencies). Nevertheless, whenever such institutions are not in a condition of implementing the appropriate systems and there is risk of dissemination of water-borne diseases, then PROAGUA shall exceptionally provide the financial support required, as was the case with the Águas Vermelhas System and the Diamantina System, whose sanitary sewage systems have already been implemented. One example, among potential listed works to be developed in the first year of the Additional Financing, is the sanitary sewage system for Coqueiro Seco town which has been listed for implementation in the year 2007, along with its water supply system, and integrated to those of two other towns (whose sewage system/solution is the responsibility of the Federal Government).

Pest Management. No pesticides would be used during the implementation of the proposed Additional Financing.

Consultation The original EA for the original PROAGUA has been disclosed and consulted with accordantly with Bank’s safeguards. For the Additional Financing phase, all potential works for implementation during the first year integrate government plans that have already been made public. In addition, significant amount of work has already been carried out regarding the environmental assessment of some of those works, and this information has also been made public (www.ana.gov.br/proagua).

Project implementation is highly participatory involving both state agencies as well as water users and beneficiaries. Consultation takes place both upstream when watershed and state water resources plans are developed as well as downstream during the development, prior to and during implementation of sub-projects. Beneficiaries have the opportunity to provide inputs and suggestions and often project design are adjusted to respond to such inputs.

The subproject preparation cycle involves upstream consultation with the affected population to assure their awareness of the project and that their needs are reflected in the design. This consultation would include a discussion with affected people during PTR and EA preparation for all Category A and B subprojects and of the TORs for the environmental assessment of Category A subprojects. During consultation proposals are

18 often adjusted to address suggestions and inputs received. As an example, the original concept for the Mossoró Pipeline in Rio Grande do Norte was revised to include pipeline links to settlements (Hipólito) where existing water distribution system used groundwater supplies with high concentration of salts. Similarly, in the Águas Vermelhas Project the inclusion of wastewater treatment and solid waste management activities was decided through consultation.

Whenever a work involves the involuntary resettlement of families, the communities are contacted right at the beginning of the planning stage, when land ownership issues and occupants are surveyed. Afterwards, socio-economic studies are prepared with the participation of the population that eventually may be moved out. Later on, more formal meetings are scheduled with the community, when community members are asked to participate in the definition of the several solutions, specific for each family, according to their legal rights: compensation and self-resettlement, option for an urban/rural lot, additional compensation, or indemnity and permanence on the partially affected property. When the work involves water supply for small communities, the potential beneficiaries would be consulted in advance about their intention to become linked (or not) to the new system. In case of larger towns, the environmental licensing process requires the preparation of environmental studies which would be made available to the public. Public hearings would also be held for the discussion of the project and the results of the environmental assessment. In any case, during the preparation of the Final Feasibility Report (FFR), the community must be consulted, either directly or through their leadership, as established under the "Environmental Guidelines for Projects and Construction of Water Collection, Treatment and Pipeline Systems". During the implementation of the works and at the beginning of their operation, sanitary and environmental education campaigns for each work shall be carried out, and once again the issues associated to the work and their relationship with the users are discussed with the community. All important documents guiding PROAGUA activities or that have been produced by the Project and that may be used for disseminating "good practices" are available through the webpage on the Internet that can be accessed through the ANA - National Water Agency website (www.ana.gov.br/proagua). The objective of this webpage is to provide project and subproject environmental and social information to the public at large. Such information has been prepared through diagnoses, studies, monitoring or evaluation reports on activities within the Project’s coverage area. The objective is to provide for greater transparency on Project actions in this area, and to make project information available to the general public. The information available refers to the following studies and reports: (A) Baseline Reports are reference diagnoses prepared for each of the supply systems built by PROAGUA Semi-Arid, containing a basic set of information regarding the initial basic sanitation conditions and the socio-economic status of the population served by the pipeline systems funded by PROAGUA. The Report contains information on the rural communities affected by the pipeline systems, obtained through direct visits and interviews with representative families belonging to groups

19 supplied by different water springs and with different storage capacities. Secondary data have also been used in the preparation of the diagnosis. A set of information has been obtained that has provided for priority indicators and indexes that are common to the Northeastern Region, to the States and Municipalities benefited with the works. (B) Impact Evaluation Assessment of PROAGUA Semi-Arid Actions The information contained in these studies refers to the evaluation of some of the outcomes achieved by PROAGUA Semi-Arid upon the conclusion of eleven raw and treated water distribution works for communities located in the Brazilian northeastern semi-arid, as well as the performance evaluation of the water resource management of the states of Piauí and Paraíba from the beginning of the Program until year 2004. The purpose of the evaluation was to orient decision-makers, providing guidance on the continuity and need for improvements in how the Program is conducted. This report presents the evaluation carried out at 11 raw and treated water distribution systems for communities in the Brazilian northeastern semi-arid, located in the states of Bahia, Ceará, Pernambuco, Paraíba and Rio Grande do Norte. It is made up by the following documents: • Work Methodology, aiming at performance evaluations of the 11 water supply systems; • Institutional Evolution of the States of Paraíba and Piauí: The main objective of the study is to evaluate the contribution of PROAGUA Semi-Arid to the institutional evolution process for the water resources management in the States of Paraíba and Piauí, between 1997 and the present. • Result of the evaluation of 5 raw water and treated water systems for communities in the Brazilian northeastern semi-arid, located in the states of Bahia, Ceará, Paraíba and Rio Grande do Norte; • Impact Evaluation of 6 raw water and treated water distribution systems for communities in the Brazilian Northeastern Semi-Arid, located in the states of Bahia, Ceará and Pernambuco and a comparative analysis of the implementation costs of the PROAGUA works with works financed by other funding sources. (C) Environmental Guidelines for Projects and for the Construction of Water Collection, Treatment and Pipeline Systems. This previously mentioned document features a synthesis of the federal legal and normative environmental framework applicable to the project and to the construction of water pipeline systems; the main environmental impacts deriving from the implementation of such systems; recommendations for several stages of the project; works and operation of water pipeline systems. The annex is made up by: Annex I - Environmental specifications for the construction of pipeline systems; Annex II - Deforestation, cleaning and recuperation plan for the pipeline path area; Annex III - Control and recuperation plan for borrowed and works’ waste areas; Annex IV - Models for environment report cards. The consulted bibliography is indicated at the end. (D) Environmental Guidelines for Dam Projects and Construction and Operation of Reservoirs. This document has the same objective and a structure similar to the previous document, but this one focuses on dam projects and construction and the operation of reservoirs, based on environmental criteria.

20 (E) Environmental Reports of PROAGUA Semi-Arid Infrastructure Works These documents present a set of qualified information and a relevant photographic record of the environmental reality of the works visited. It contains several technical opinions and recommendations on environmental issues related to the works and interventions of strategic relevance within the PROAGUA Semi-Arid coverage area. Such reports may provide subsidies to the State Water Resource Management Units in the implementation of actions that may solve some of the identified problems, as well as alert their experts and other professionals involved in the implementation of such works regarding the need to be alert to avoidable environmental issues, in case they are noticed in time. (F) PROAGUA - Additional Financing Environmental Information Refers to the present document, whose main objective is to present a review and updating of the PROAGUA Semi-Arid environmental framework, to be used by the PROAGUA - Additional Financing; describe and evaluate how the implementation of the procedures established during Project design stage have worked, in order to assure compliance with Brazilian environmental legislation and to World Bank’s safeguards; what are the lessons learned from Project implementation and what new measures shall be adopted. Also features a preliminary environmental assessment of the works selected for the first year of the Additional Financing. (G) Official documents of PROAGUA Semi-Arid Starting on the ANA website, the following official documents regarding Loan Agreement 4310-BR may be accessed:

• Loan Agreement 4310-BR; • PAD - Project Appraisal Document; • Operations Manual; • Steering Committee Deliberations; AOP - Annual Operation Plans (POA, in Portuguese) for all states integrating the Project and the federal level.

6. Subproject preparation and approval process, and analysis of alternatives

The procedures developed during the preparation of the Original PROAGUA, and improved during its implementation to reflect lessons learned, would also be adopted during the Implementation of PROAGUA - Additional Financing. Some additional modifications were necessary in view of the present division of responsibilities between ANA and MI in terms of Project implementation. Any subproject pre-identified for financing under the PROAGUA must necessarily be part of an existing river basin or state water development plan. This is the initial instance where discussions (both technical and political) take place regarding the individual worth of implementing or not a subproject. At that stage, the relevance of a subproject is evaluated in relation to the existing needs and to other possible alternatives to address such needs.

21 The States submit subproject proposals to the Managing Committee, for inclusion in the Annual Operation Plan (Plano Operativo Annual - POA). Upon inclusion in the POA, all subprojects identified as potential candidates for financing under the PROAGUA must undergo the following steps and procedures under the PROAGUA subproject preparation and approval process: Step 1: The first document to be prepared and submitted to the PROAGUA UGPO by the proposing State is the Work Identification Report - WIR (RIO, in Portuguese). In this document, the environmental information is restricted to the identification of potential impacts that could severely affect the possibility of approval for financing under the PROAGUA, or that would require such major modifications to the initial plans that might result in not allowing the PROAGUA meet its deadlines. An example would be a subproject proposing to use water from an indigenous land. This possibility would depend on authorization by the National Congress, as per the Brazilian Constitution. However, the process for obtaining such authorization is a very slow one per se, and there would be no certainty whether such authorization would be granted or not. Such an alternative may not be of interest to the developer, if the demand for the water use calls for urgent action. Another example would be a subproject which would depend on water resources from an Integral Protection Protected Area, as defined in Law 9985, of 18 July 2000, which established the National System of Conservation Units. It is practically impossible to obtain such a permit from the environmental agencies. Therefore, once such case is identified in the WIR, an alternative must be sought for meeting the demand that would be otherwise supplied by the proposed water supply system. Other interferences, either with properties or residents, may represent such huge costs in order to properly address social or environmental issues that such an initial assessment may be enough for discouraging the developer, leading him/her to look for other alternatives before continuing with the studies and engineering projects. Step 2: Preparation of the Preliminary Technical Report - PTR (RTP, in Portuguese) would be the next stage after a subproject receives approval at the WIR stage. During the PTR stage, a much more detailed environmental assessment is carried out, including the identification, analysis and assessment of the development's most significant impacts and identification of the main mitigating and/or compensatory measures. Such analysis must include the different technical alternatives proposed under the engineering studies, and shall help - or even condition - the selection of the alternative or alternatives to be developed in more detail during the full feasibility stage. Such alternatives, including the possibility of non-execution of the subproject, must be conceived and assessed according to their capacity to achieve the main objective of the proposed subproject. During the PTR preparation, a consultation with potential affected communities would be carried out and any recommendation would be evaluated and considered in the alternatives and in the subproject design.

During the PTR - especially in the case of regional pipelines, but also in the case of pipelines serving a single municipality - all communities located along the pipeline path must be identified, the number of inhabitants must be quantified, and the main springs used for water supply must be registered, even if these communities are not the main object of the studies that justify the proposal under analysis. During this stage, the possibility of serving these communities must not be discarded, which can be made either through fountains (if the main pipeline carries drinking water), or through compact WTSs (water treatment stations) in case the pipeline carries raw water. Even though,

22 from the technical point of view, there is a common trend not to consider benefiting sparse populations under these types of subprojects, from an environmental and social perspective, frustrating the expectations of a set of families, that see a pipeline passing by their front door without benefiting them, should be considered as a negative impact. Step 3: The next and last stage in the subproject preparation and approval process is the elaboration of the Full Feasibility Report – FFR (RFV, in Portuguese). At this stage, additional technical, economic, environmental and social studies, including preparation of detailed engineering designs and the final EA/EIA, would allow for due consideration of the costs and benefits of the several proposed alternatives of service. For example, this in depth analysis would prevent the Project from approving the construction of a pipeline that would pass through a community, with no access to water, without including an alternative for water supply to this community. This requirement would prevent a situation where the said community would have no better option than making clandestine perforations in the pipes passing by their front door. Upon evaluation of the FFR by UGPO/MI, this report, as well as the positive opinion of UGPO/MI (if that is the result of the evaluation) would be forwarded to UGPG/ANA, for verification of compliance with Project eligibility criteria. Upon approval by UGPG/ANA and by the Bank, the proposing state drafts the Basic Project that shall allow for the bidding of the contracts, after receiving approval from UGPO and a no-objection from the World Bank.

7. Environmental Management Framework (EMF). 7.1 Subproject preparation and approval process

Project implementation during the additional financing phase would continue to follow the existing procedures described in the previous section. These procedures include steps and activities aimed at ensuring compliance with the World Bank’s environmental and social safeguard policies. Regarding the environmental aspects, the subprojects to be supported under the Additional Financing belong to the same typology of those financed by the original PROAGUA, and may be divided into three types depending on their potential to cause negative impacts: (1) "Type a" subprojects are those with potential for causing a significant set of negative environmental impacts, such as, for example, works involving resettlement or that might potentially affect areas of environmental importance (e.g. critical natural habitats) or conservation units. Examples: the Planalto/Barra do Choça Pipeline System and the Arneiroz dam, already implemented, and the Missi and Riacho da Serra dams potential subprojects to be supported under the Additional Financing; (2) "Type b" subprojects are those that might cause a moderate set of negative environmental impacts, such as the need to establish a protection plan for a determined water spring, including aspects of land use regulation, reforestation, monitoring of water quality and quantity, and rules for operation. Examples: Congo, Cariri, Piritiba/Mundo Novo, Agreste, Piauitinga (pipelines already implemented), and the proposed Jacobina, Bocaina and Ibaretama pipelines. (3) "Type c" subprojects might result in a set of small, localized and temporary negative environmental impacts, such as those from the construction phase of a secondary

23 pipeline that follows the domain strip of a certain road, or the rehabilitation of an existing pipeline. Examples: rehabilitation of the Acarape pipeline, the Umburanas syphon, the Diamantina System, already implemented, and the majority of the extension of the proposed Northern System. The extent and depth of the EA work to be required for each subproject would be based on the severity of the subproject’s potential negative impacts, which would also determine the level of follow-up activities by the UGPO (including technical site audits) during the subproject preparation and approval process. As described in section 6, the preparation and approval process for any subproject to be financed under the Additional Financing phase has three mandatory steps: (a) Work Identification Report; (b) Preliminary Technical Report; and (c) Final Feasibility Report. The sequence of environmental studies and consultations that is required by PROAGUA, from the moment a State expresses interest in receiving funding for a certain work until it obtains a favorable opinion from UGPO/MI and from UGPG/ANA, reflects the Project’s concerns in trying to avoid or mitigate major potential negative impacts. During the PTR preparation, a consultation with potential affected communities would be carried out and any recommendation would be evaluated and considered in the alternatives and in the subproject design. Environmental studies are specific for each phase. In cases where a proposal for a subproject is submitted for initial consideration by the UGPO with a level of preparation that is more advanced than expected at the WIR stage, the environmental assessments to be conducted for that subproject would still have to address all those issues normally addressed in the initial stages of subproject processing. During the final approval stage, or Final Feasibility Report, the mitigation and compensation measures recommended by the PTR must be detailed into specific programs for their implementation (which will make up the subproject’s Environmental Management Plan), including targets and objectives, the action strategy, executing bodies, clearly defined responsibilities, schedule and costs. The costs of actions included in the Environmental Management Plan must be and integral part of the project budget, as well an explicit cost for each of the subproject’s proposed alternatives. The main measures recommended must be translated into specific programs, to be included in an overall concept that may allow for reasonably precise cost estimates to be included in the subproject economic and financial feasibility analysis. These environmental programs will, later on, be described in greater detail on the occasion of the design of the development's Basic Project. One of the aspects to be considered is the requirement for environmental compensation, for some infrastructure works, foreseen under Law 9985, of 18 July 2000. The amount of such compensation would be established through a negotiation process involving the proposing State and the relevant environmental licensing agency (state or federal, depending on the subproject). When required, PROAGUA must include in the FFR a cost equivalent to 0.5 % (half percent) of the work's total amount as an additional cost inherent to each subproject. The application of such funds, as established by law, shall be foreseen in a clause of the agreement to be signed between PROAGUA and the State, which shall be specific for each work in which such compensation is due. It is important to highlight that, according to PROAGUA and World Bank criteria, the environmental assessment of a project that uses water resources deriving from a dam must also include the assessment of the environmental conditions of the existing dam or

24 of the dam being implemented. Therefore, a pipeline project whose spring is an existing reservoir or a reservoir under implementation must, in addition to the environmental assessment inherent to the proposed pipeline system, promote the environmental assessment of the conditions of the existing reservoir and/or reservoir under implementation, pointing out the main environmental issues involved and their corresponding measures/solutions, including the mechanisms that may guarantee their implementation. During the preparation of the FFR, public consultations and interviews with municipal managers (mayors, city councils), community leaders, church representatives and residents located close the future works must be held. Such contacts play a double role: to inform the beneficiary and/or affected population about the proposed work; and to welcome suggestions and subsidies from this population that may contribute to the improvement of the project, as well as of the compensatory and mitigating measures. Such contacts must be made both by the consulting technicians that prepare the studies - and mainly – by PROAGUA technical staff. The content of each type of study, including the environmental report cards to be prepared during each stage of the analysis, is specified in the "Environmental Guidelines for Projects and Construction of Water Collection, Treatment and Pipelines”, and in the “Environmental Guidelines for Projects and Construction of Dams and Operation of Reservoirs", which may be accessed through the Project's webpage. Field technical audits may be necessary during any of the three stages of subproject analysis and approval, depending on the information registered in the documents presented by the State. Such information is frequently confronted with state plans or river basin plans for compatibility checks. At a minimum, final approval of any individual subproject proposal would only take place after at least one technical and environmental audit is carried out by UGPO members, jointly with technicians from the proposing State, and after consultation with the environment and water resource agencies of the proposing state, or with IBAMA - in case of federal licensing - and ANA - in case the project demands an authorization for a river under Federal domain. In addition, final approval for the first Category “A” subproject to reach an advanced FFR stage would be conditional to a no-objection from the World Bank Safeguards Advisory Team for the Latin America and Caribbean Region (SAT). To this end, the following documentation would be submitted for analysis and approval of the SAT: (i) the subproject EIA-RIMA, and (ii) Terms of Reference for the supplementary environmental analysis to be prepared before final Bank no-objection to that subproject, covering any additional safeguards-related issues not already covered in the EIA document itself. Subsequent Category “A” subprojects would be subject to similar Bank review prior to their approval, but this review would be undertaken by the environmental specialist on the Bank’s Task Team rather than by the SAT. Finally, each works' call for bids would incorporate the required environmental measures, with the appropriate adaptations to be made by the proposing State team and approved by the UGPO. Such environmental measures must be made explicit, and their unitary and total costs must be defined in the works' cost spreadsheets, so that the contractor would be fully aware and interested in carrying them out. Figure 1, in annex A, shows a diagram of the subproject evaluation cycle.

25 7.2 Mitigation, monitoring and training

• Capacity for environmental analysis of the works proposed. Procedures for the local and regional environmental analysis of the proposed works are now well established within the routine of the PROAGUA UGPO, including the evaluation of the environmental management capacity of the respective proponent State and Agency. A study conducted during preparation of the Additional Financing indicated that subproject preparation has usually been satisfactory regarding identification of the necessary mitigation measures. • Environmental management strengthening program for federal and state executing agencies. The implementation of an institutional strengthening plan for the water resources sector within PROAGUA’s participant states had been planned, and includes proposals for mainstreaming environmental issues into the water resources state agencies. A closer relationship between such agencies and the state environmental institutions had been foreseen as well, aiming at simplifying procedures that are common to both entities, such as, for example, simplified procedures for the licensing of water works. This capacity building work would continue to be implemented under the Additional Financing phase, with a stronger focus on the capacity and procedures for environmental monitoring during each subproject’s operation phase. • Resettlement plans. The need to develop specific resettlement plans has deserved special attention, due to the characteristics of the potential works listed for Project support. A Resettlement Framework has been drafted for the development of resettlement plans, specifying relocation policies, planning principles, institutional and project criteria. This revised framework will be included in the Additional Financing Operational Manual. • Environmental guidelines - Manual for the Construction of Dams and Operation of Reservoirs, and Manual for the Construction of Water Supply Systems. These two manuals, which include environmental guidelines, parameters and criteria for the several stages of preparation and construction of works, have been developed and adopted during implementation of the original PROAGUA. These manuals would continue to be used during the additional financing phase, and can be downloaded from the website www.ana.gov.br/proagua/biblioteca. • Indigenous Development Plan. A revised framework to be adopted in the evaluation process of any sub-project that may affect indigenous land or populations has been drafted and will be included in the Additional Financing Operational Manual. This IPDF takes into account the development of compensatory measures, such as: anthropological research; land ownership and demarcation; definition of basic needs, such as health, education, sanitation and transportation, production, etc. • Program for the Monitoring and Control of Endemic Areas for Schistosomiasis. A Terms of Reference was drafted, establishing the conditions for the design of the Monitoring Program and for the Proposal for Schistosomiasis Control in the Mosquito River Basin, comprising the area of the Águas Vermelhas System, in the State of Minas Gerais (work selected for the first year of the original PROAGUA). This TOR could be adapted and applied to other areas featuring similar problems if necessary. • Environmental Education and Public Information Programs. The development of a component for Participatory Management and Education is foreseen, involving incentives for the establishment of River Basin Committees and Water User

26 Associations, with the participation of beneficiaries of the works and a special water resource education program for elementary and high school students.

All subproject proposals must address the institutional arrangements and responsibilities for the implementation and supervision of the programmed environmental mitigation measures, and the cost of such actions must be included in each sub-project’s budget, and used for economic and financial evaluation purposes. The future works to be financed, as in the original project, would not cause major negative environmental and/or social impacts. For each subproject, in addition to the environmental assessment, the following documents would also be submitted to the Bank: (i) a plan for the management, operation and maintenance of the proposed work; (ii) evidence that the land and the rights to that land are physically and legally available; (iii) evidence that Participating States hold the rights over the water for the proposed work; (iv) evidence of all corresponding environmental permits; and (v) whenever required, presentation of a resettlement plan and/or an IPDP.

As part of preparation activities for this proposed additional financing, a study was conducted to review the past and current environmental performance of PROAGUA sub- projects under construction or already in operation. This study revealed that, although subproject preparation was usually satisfactory regarding identification of any necessary mitigation measures, improvements were needed regarding the supervision of the adoption of such measures after the conclusion of construction works and during operation of the subprojects.

Based on the results of this study, and on other lessons learned from implementation of PROAGUA to this date, the borrower has agreed on the following additional measures and procedures to be adopted and implemented by the Ministry of Integration during the additional financing phase:

(a) Provision of targeted training for Federal and State Units on Bank environmental and social safeguards, as well as on federal and state environmental legislation. Compliance with safeguards may only be assured if project teams are capable of identifying and mitigating potential environmental and social impacts. All project participants are responsible for complying with Bank safeguards, as well as with the Brazilian environmental legislation. The project must promote the dissemination of knowledge on Bank safeguards and on the relevant environmental legislation to the whole project technical team, at all levels, as well as to civil society affected by the project. Training workshops must be held periodically since safeguards and environmental legislation often undergo revisions and modifications, and the composition of project teams usually changes throughout project implementation. The Priority Works component will have specific resources allocated to this end.

(b) Provision of training for Federal and State Units on methodology, procedures, and responsibilities for subproject supervision during a subproject’s operational phase. Technical teams that carry out routine audits on the execution of works must periodically submit evaluations on the implementation of safeguards and compliance with the legislation. If these technicians receive appropriate capacity building on the subject, they may identify non-conformities before they become serious problems. If the UGPO coordinator is notified in time, he/she may undertake more efficient measures. In

27 addition, independent evaluations on compliance with environmental requirements would be carried out on a sample of all subprojects (both completed and under construction). A capacity building plan would be developed at the beginning of project implementation. The Priority Works component will have specific resources allocated to this end.

(c) Inclusion of a mitigation measures monitoring plan in the administration, operation and maintenance plan (PAOM) for each subproject, and provision of assistance to the states for implementation of the PAOMs for the subprojects (including subprojects financed under the original project).

(d) Condition the execution of all sub-projects to the proper implementation of the respective environmental management plan. Programs on the strengthening of environmental management and on social development must be properly designed and implemented. Whenever possible, social and environmental indicators must be developed and included during the projects design stage, aiming at assuring the appropriate implementation of such programs. A link must be established between the projects' environmental and social actions and the execution of the works, in order to ensure their implementation. Civil society involvement in the process is essential. A focal point would be identified in each subproject to facilitate the interaction between the affected community and the project implementation team.

(e) Insert into all relevant bidding documents, clear references to PROAGUA’s environmental guidelines for contractors and to the need for bidders to follow them. The elaboration and dissemination of manuals containing environmental guidelines for the preparation of studies and for the execution of works does not assure – by itself, the effective incorporation of such guidelines into the sub-projects. In addition to providing specific training to the Project technical teams, it would be mandatory that the works' call for bids incorporate the identified environmental measures, with the appropriate adaptations to be made by the proposing State team and approved by the UGPO. Such environmental measures must be made explicit, and their unitary and total costs must be defined in the works' cost spreadsheets, so that the contractor would be fully aware and interested in carrying them out.

(f) Mandatory supervision, by the Ministry of Integration, of the implementation status of all environmental mitigation measures, right after subproject construction and throughout its operational phase. Close supervision of ex-post implementation of the civil works and mitigating measures has to be carried out to assure the compliance with the safeguards and the national and state legislations.

Roles and Responsabilities. The implementation of a subproject is the responsibility of the proponent State which (i) would contract a consultant firm to supervise the daily construction work and is based in the construction site during the full construction period and is responsible to design the subproject’s as built” and (ii) would have one or two technical staff accompanying subproject implementation with site visits being carried out two-three times a month. The State agency reports directly to the UGPO at MI. UGPO is responsible for the macro supervision and for controlling the financial balance and

28 schedule with close contact with the State and would carry out supervision and technical audit missions to the field every 30-40 days.

During project operation and maintenance, the State is responsible for supervising the O&M of the subproject (if the community is operating the system) or actually operating the system through its water utility. UGPO would be trained to supervise the O&M and would carry out site visits, at least, twice a year.

8. Appendixes

(i) EA report preparers: • Alexandre Camarano (coordinator at the Federal level – SIH/MI); • César Pimentel (environmental specialist - consultant) • Daniel Vilani (consultant)

(ii) References (most are available through the link http://www.ana.gov.br/proagua/biblioteca.asp):

• Environmental Assessment of the Original PROAGUA (http://www.ana.gov.br/proagua/docs/Informe_Ambiental_4310-BR.pdf) • Baseline Reports (http://www.ana.gov.br/proagua/biblioteca/estudos/marcoZero.asp) • Impact Evaluation Assessment of the Original PROAGUA Actions (http://www.ana.gov.br/proagua/biblioteca/Monitoramento/avaliacao.asp) • Environmental Guidelines for Projects and for the Construction of Water Collection, Treatment and Pipeline Systems (http://www.ana.gov.br/proagua/biblioteca/estudos/diretrizes/DIRETRIZES_AMBI ENTAIS_ADUTORAS.pdf) • Environmental Guidelines for Dam Projects and Construction and Operation of Reservoirs (http://www.ana.gov.br/proagua/biblioteca/estudos/diretrizes/DIRETRIZES_AMBI ENTAIS_BARRAGENS.pdf) • Environmental Reports of the Original PROAGUA Infrastructure Works (http://www.ana.gov.br/proagua/biblioteca/estudos/relatoriosAmbientais.asp) • Loan Agreement 4310-BR and amendments (http://www.ana.gov.br/proagua/biblioteca/Documentos/acordo.asp); • PAD - Project Appraisal Document (http://www.ana.gov.br/proagua/biblioteca/Documentos/pad.asp); • Operations Manual (http://www.ana.gov.br/proagua/biblioteca/Documentos/mog.asp);

29 • Steering Committee Deliberations (http://www.ana.gov.br/proagua/biblioteca/Documentos/comite.asp); • Operation, Management and Maintenance Plans for the Water Supply Systems; • Preliminary environmental assessment and technical studies for the subprojects selected to be implemented in the first year: o The Coqueiro Seco Water Supply and Sewage System (AL); o The Pedro Alexandre Pipeline System (BA); o The Jacobina Pipeline System (BA); o The Planalto and Barra do Choça WTS Mud Treatment Stations (BA); o The Missi Dam (CE); o The Riacho da Serra Dam (CE); o The Ibaretama Pipeline System (CE); o The Northern System - the Janúba, Januária, Mato Verde and Rio Pardo sub-systems (MG); o The Expansion of the Congo Pipeline System (PB); o The Expansion of the Limoeiro Water Supply System (PE); o The Agrestina, Altinho, Ibirajuba and Cachoeirinha Water Supply System (PE); o The Reinforcement of the Belo Jardim Water Supply System (PE); o The Bocaina Pipeline System (PI); o The Expansion of the Serra de Santana Pipeline System (RN). • Environmental cards based on site visits to: o The Missi Dam (CE) http://www.ana.gov.br/proagua/biblioteca/Estudos/outros/AvaliacaoAmbie ntalBarragemMISSI.pdf) ; o The Ibaretama Pipeline System (CE) (http://www.ana.gov.br/proagua/biblioteca/Estudos/outros/AvaliacaoAmbi ental_AdutoraIbaretama.pdf); o The Expansion of the Congo Pipeline System (PB) (http://www.ana.gov.br/proagua/biblioteca/Estudos/outros/Relatorio_Ambi ental_da_Adutora_do_Congo-Ampliacao.pdf); o The Expansion of the Serra de Santana Pipeline System (RN) (http://www.ana.gov.br/proagua/biblioteca/Estudos/outros/Relatorio_Ambi ental_da_Adutora_Serra_de_Santana-Ampliacao.pdf).

(iii) Summary of environmental pre-assessment for subprojects pre-identified as potential candidates for financing in the first year of the Additional Financing

State Work Main Characteristics Mitigating Measures

30 Recommended The Coqueiro WSS for 19,000 people; Sanitary and Environmental Seco Water SSS for 7,000 people. Education Program; Alagoas Supply and Collection from a Information Campaigns; Use Sanitary natural stream; works of "Environmental Sewage System without any meaningful Guidelines for Projects and impact. Construction of Water Collection, Treatment and Pipeline Systems" in the call for bids of the works.

Pedro Alexandre WSS for 9,000 people. Sanitary and Environmental Pipeline Collection from a deep Education Program; Bahia well; works without any Information Campaigns; Use meaningful impact. of "Water System Guidelines" in call for bids of WSS for 120,000 the works (for all works). people. Collection from Jacobina existing dam; WTS with Pipeline recirculation and treatment of all mud; works without any meaningful impact.

Improvements at Implementation of the the Barra do recirculation of filter Choça and washing waters and Planalto WTSs mud treatment.

Dam with a maximum Sanitary and Environmental Missi Dam height of 17.3 meters; Education Program; Ceará reservoir with 65.3 hm3 Information Campaigns (for and 1285 ha. of flooded everyone); area; 66 families to be Use of "Environmental resettled. Already Guidelines for Projects and analyzed by the Safety Construction of Dams" in the Panel. call for bids of the works. Resettlement, Archeological Dam with a maximum Protection, Reservoir Riacho da Serra height of 18.7 meters; Protection, Degraded Area Dam reservoir with 23.5 hm3 Recuperation, Deforestation and 471 ha. of flooded and Water Basin Cleaning, area; 16 families to be Fauna Protection, resettled. To be Relocation of Affected analyzed by the Safety Infrastructure Programs. Panel. Analysis of the Macacos Ibaretama WSS for 7,500 people. dam by the Safety Panel; Pipeline Collection from existing Use of "Guidelines for Water dam; works without any Systems" in call for bids for

31 meaningful impact. the works. Northern System Expansion of the WSS 1 - Januária to the municipal Sanitary and Environmental Minas Gerais Northern System headquarters (75,000 Education Program; 2 - Janaúba inhabitants in Januária; Information Campaigns; Use Northern System 55,000 in Janaúba; of "Water System 3 - Mato Verde 13,000 in Mato Verde Guidelines" in call for bids of Northern System and 17,000 in Rio the works (for all works). 4 - Rio Pardo Pardo) and another 65 localities with small systems, almost all of which are made up by tubular wells, chloride process and distribution. Without any meaningful impacts.

WSS for 4,000 people. Sanitary and Environmental Expansion of the Education Program; system implemented by Information Campaigns; Use Paraíba Congo Pipeline PROAGUA. Works of "Guidelines for Water (Expansion) without any meaningful Systems" in call for bids for impact. WTS with the works. recirculation and treatment. WSS for 62,500 people. Sanitary and Environmental Collection from existing Education Program; dam; works without any Information Campaigns; Use Limoeiro WSS meaningful impact. of "Water System Expansion of WTS and Guidelines" in call for bids of insertion of recirculation the works (for all works). Pernambuco and treatment. Verify analysis of dam by the Safety Panel. WSS for 48,000 people. Collection from existing Agrestina WSS pipeline; works without Insert recirculation of any meaningful impact. washing water and mud WTS with recirculation treatment. and treatment.

WSS for 50,000 people. Check analysis of dam by Belo Jardim Collection from existing the Safety Panel. WSS dam; works without any meaningful impact. Will Insert recirculation of use existing WTS, washing water and mud without recirculation and treatment. treatment.

Bocaina Pipeline WSS for 38,000 people. Sanitary and Environmental Collection from existing Education Program;

32 Piauí dam; works without any Information Campaigns; Use meaningful impact. of "Guidelines for Water WTS with recirculation Systems" in call for bids for of water and mud the works. treatment.

Serra de WSS for 6,100 people. Sanitary and Environmental Santana Expansion of the Education Program; Rio Grande Pipeline system implemented by Information Campaigns; Use do Norte (Expansion) PROAGUA. Works of "Guidelines for Water without any meaningful Systems" in call for bids for impact. the works.

(iv) Associated reports • Involuntary Resettlement Framework (http://www.ana.gov.br/proagua/biblioteca/Estudos/outros/Marco_Politica_para_ Reassentamento_Involuntario.pdf); • Indigenous Peoples Development Framework http://www.ana.gov.br/proagua/biblioteca/Estudos/outros/Marco_Politicas_para_ Eventualidade_Impactos_PROAGUA_sobre_Povos_Indigenas.pdf

33 List of Annexes:

1. Flowchart – Environmental Assessment Cycle for subproject approval 2. Involuntary Resettlement Policy Framework; 3. Policy Framework for Eventual Impacts of PROAGUA on Indigenous People; 4. Terms of Reference for the Control of Schistossomosis; 5. Environmental Guidelines for Projects and for the Construction of Water Collection, Treatment and Pipeline Systems; 6. Environmental Guidelines for Dam Projects and Construction and Operation of Reservoirs. 7. List of subprojects and related Environmental Category

34 ANNEX 1

FLOWCHART – ENVIRONMENTAL ASSESSMENT CYCLE FOR SUBPROJECTS

35 Subproject prepared by Request clarification Proponent (includes from Proponent environmental scoping)

y Submit to PROAGUA for NO NO NO s r Type C? Type B? Type A? e a s s

n initial analysis (WIR s e e c c i l e

l n

a t r n o f e

s YES YES YES m t s n e o r u i v q Draft Local Local Audit and n e e R Environmental Audit Meeting with Cards Environmental

Draft TOR for Draft TOR for Environmental Environmental Studies Studies

Prepare Final Prepare EA Consultation with Environmental Card Affected Groups

YES Approval for Request Prepare EIA/RIMA NO Financing Additional Studies

Consultation of Final Improve Environmental Work EA/EIA submit Analysis by PROAGUA and WB Team 36 Final EA/EIA (FFR stage) submit documents ANNEX 2

INVOLUNTARY RESETTLEMENT POLICY FRAMEWORK

37 ANNEX 3

POLICY FRAMEWORK FOR EVENTUAL IMPACTS OF PROAGUA ON INDIGENOUS PEOPLE

38 ANNEX 4

TERMS OF REFERENCE FOR THE CONTROL OF SCHISTOSSOMOSIS

39 ANNEX 5

ENVIRONMENTAL GUIDELINES FOR PROJECTS AND FOR THE CONSTRUCTION OF WATER COLLECTION, TREATMENT AND PIPELINE SYSTEMS

40 ANNEX 6

ENVIRONMENTAL GUIDELINES FOR DAM PROJECTS AND CONSTRUCTION AND OPERATION OF RESERVOIRS.

41 ANNEX 7

LIST OF SUBPROJECTS AND RELATED ENVIRONMENTAL CATEGORY

CLASSIFICAÇÃO AMBIENTAL DAS OBRAS DO PROÁGUA/SEMI-ÁRIDO

Quadro – Obras Concluídas e Sua Categoria Ambiental

Nº ESTADO NOME Categoria Ambiental

1 AL Adutora Estrela de Alagoas / Minador do Negrão B

2 BA Adutora de Amélia Rodrigues / Conceição do Jacuípe B

3 BA Adutora do Feijão – 2ª etapa B

4 BA ETLodo do Sistema PIRITIBA/MUNDO NOVO C

5 BA Sistema Padrão Central (1ª etapa) A

6 BA Sistema Adutor de Piritiba / Mundo Novo B

7 CE Sistema Adutor Iguatu B

8 CE Sistema Adutor Chaval / Barroquinha B

9 CE Sistema Adutor Lima Campos / Icó B

10 CE Recuperação e Automação da Adutora do Acarape C

11 CE Adutora de São Gonçalo do Amarante B

12 CE Adutora de Baturité / Aracoiaba B

13 CE Adutora de Cascavel B

14 CE Adutora de Trici-Tauá B

15 CE Barragem de Arneiroz II A

16 MG Sistema Águas Vermelhas A B 17 PB Sistema Adutor do Cariri B 18 PB Sistema Adutor do Congo B 19 PE Sistema Adutor de Afrânio / Dormentes B 20 PE Adutora de Arcoverde

42 B 21 RN Adutora de Mossoró B 22 RN Sistema Adutor Serra de Santana (2ª etapa) B 23 SE Sistema Adutor do Agreste B 24 SE Sistema Adutor do Piauitinga

43 Quadro - Sistemas em Implantação e Sua Categoria Ambiental

Nº ESTADO Denominação Categoria Ambiental

1 AL Adutora Estrela de Alagoas / Minador do Negrão - B Obras Complementares

2 BA Adutora do Feijão – 3ª etapa B

3 BA Adutora do Planalto/Barra do Choça A

4 BA Sistema Padrão Central (2ª etapa) B

5 CE Adutora de Catarina B

6 CE Adutora de Lavras da Mangabeira B

7 CE Adutora Serra do Félix/Boqueirão do Cesário B

8 CE Sifão Umburanas C

9 CE Sistema Adutora Graça/Pacujá/Mucambo B

10 CE Adutora de Catunda B

11 CE Adutora de Pires Ferreira B

12 MG Sistema Araçuaí 1A (sedes de Araçuaí e Carbonita) B

13 MG Sistema Araçuaí 1B (localidades) C

14 MG Sistema Araçuaí 1C (localidades) C

15 MG Sistema Diamantina (localidades) C

16 PE Adutora Luiz Gonzaga (Ramal II da Adutora do Oeste) B

17 PE Sistema Adutor de Afogados da Ingazeira B

18 PI Adutora de Garrincho B

44 CLASSIFICAÇÃO AMBIENTAL DAS OBRAS DO PROÁGUA/SEMI-ÁRIDO 2ª ETAPA

PROÁGUA NACIONAL

Quadro - Lista de Obras Potenciais para Implantar e Sua Categoria Ambiental

Nº ESTADO Denominação Categoria Ambiental

1 AL Sistema de Abastecimento de Água e Esgotamento B Sanitário de Coqueiro Seco (AL)

2 BA Sistema Adutor de Pedro Alexandre B

3 BA Sistema Adutor de Jacobina B

4 BA Estações de Tratamento de Lodo das ETAs de Planalto C e Barra do Choça

5 CE Barragem Missi A

6 CE Barragem Riacho da Serra A

7 CE Sistema Adutor de Ibaretama B

8 MG Sistema Norte B

9 PB Sistema Adutor do Congo – Ampliação B

10 PE Sistema de Abastecimento de Água de Limoeiro – B Ampliação

11 PE Sistema de Abastecimento de Água de Agrestina, B Altinho, Ibirajuba e Cachoeirinha

12 PE Sistema de Abastecimento de Água de Belo Jardim – B Reforço

13 PI Sistema Adutor de Bocaina B

14 RN Sistema Adutor Serra de Santana – Ampliação B

45