5. the Rio Commuter Rail Concession
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Document of The World Bank Public Disclosure Authorized FOR OFFICIAL USE ONLY Report No. 24795 PROJECT PERFORMANCE ASSESSMENT REPORT BRAZIL Public Disclosure Authorized SAO PAULO METROPOLITAN DECENTRALIZATION PROJECT (LOAN 3457-BR) RIO DE JANEIRO METROPOLITAN DECENTRALIZATION PROJECT (LOAN 3633-BR) September 3, 2002 Public Disclosure Authorized Sector and Thematic Evaluation Group OperationsEvaluation Department This document has a restricted distribution and may be used by recipients only in the Public Disclosure Authorized performance of their official duties. Its contents may not otherwise be disclosed without Bank authorization Currency Equivalents Currency Unit = Brazilian Cruzeiros (Cr$) US$1 = Cr$ 280 (April 20, 1991) US$1 = BRL 2.3 (December 2001) Fiscal Year January 1-December 31 Abbreviations and Acronyms AMTU-RJ Metropolitan Agency for Urban Transport of Rio de Janeiro BNDES Banco Nacional de Desenvolvimento Economico e Social (National Economic and Social Development Bank) CBTU Companhia Brasileira de Trens Urbanos (Brazilian Urban Train Company) EBTU Empress Brasileira de Transportes Urbanos (Brazilian Urban Transport Enterprise), FEPASA Ferrovias Paulistas S.A. (SAo Paulo State Railways) GOB Federal Government of Brazil (Governo Federal) GEIPOT Empresa Brasileira de Planejamento dos Transportes (National Transport Planning Agency) RFFSA Rede Ferroviaria Federal S.A. (Federal Railways) SP Governo Estadual do Slo Paulo (State of Slo Paulo) RJMTD Rio de Janeiro Metropolitan Transport Decentralization Project OED Operations Evaluation Department SAR Staff Appraisal Report STM Secretary Metropolitan Transportation RTCC Regional Transport Coordination Commission ANTP National Association of Public Transport SPMTD Slo Paulo Metropolitan Transport Decentralization CBTU-RJ Rio de Janeiro Subdivision of CBTU CBTU-SP Brazilian Urban Train Company, Slo Paulo Subdivision Companhia Brasileira de Trens Urbanos FLUMITRENS Companhia Fluminense de Trens Urbanos SUPERVIA Concessionaria de Transportes Ferroviarios S.A. CPTM Metropolitan Train Company of Slo Paulo Companhia Paulista de Trens Metropolitanos Director-General, Operations Evaluation : Mr. Robert Picciotto Director, Operations Evaluation Department : Mr. Gregory K. Ingram Manager, Sector and Thematic Evaluation : Mr. Alain Barbu Task Manager : Mr. Binyam Reja The World Bank Washington, D.C. 20433 U.S.A. Office of the Director-General Operations Evaluation September 3, 2002 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Assessment Report on Brazil Slo Paulo Metropolitan Decentralization Project (Loan 3457-BR) Rio De Janeiro Metropolitan Decentralization Project (Loan 3633-BR) Attached is the Project Performance Assessment Report (PPAR) on two urban transport projects in Brazil. Sao Paulo Metropolitan Transport Decentralization (SPMTD; L3457-BR) was approved in fiscal 1992 for US$126 million; it closed, fully disbursed, on March 31, 1998, two years behind schedule. The total project cost was US$293 million, with the balance provided by the borrower. Rio de Janeiro Metropolitan Transport Decentralization (RJMTD; L3633-BR) was approved in fiscal 1993 for US$128.5 million; it closed, fully disbursed, on December 31, 2000, three years behind schedule. The total project cost was US$311 million, with the balance provided by the borrower. The objectives of the two projects were the same: to assist the government with (i) decentralization of the Brazilian Urban Train Company (CBTU); (ii) institutional and organizational strengthening; (iii) financial and operational sustainability of the commuter rail systems; (iii) contributing to poverty alleviation; and (iv) improvements in traffic congestion, air pollution, and safety. OED rates the outcome of the SPMTD project satisfactory and the outcome of the RJMTD project moderately satisfactory. Both projects are substantially relevant to Brazil's current development priorities and consistent with the Bank's sector and country strategy. The strategy embodied in the projects, of first refurbishing and then transferring the system to state governments, is relevant to the political and economic reforms that have been undertaken in Brazil. The willingness of the state governments to assume financial responsibility for the commuter rail systems was the key issue facing the federal government in divesting its responsibility for the CBTU commuter rail systems. The efficacy and efficiency of the Sio Paulo project was substantial, while they were modest for the Rio project. Responsibility for the commuter rail systems was successfully transferred in both cases. In 1994, CBTU-Sdo Paulo assets and operations were transferred to the state of Sio Paulo, which formed a new company, CPTM, to operate commuter rail service. Similarly, CBTU-Rio de Janeiro was transferred to the state of Rio in 1994, and the commuter rail company it created, Flumitrens, was privatized in a concession program supported by the Rio de Janeiro State Reform-Privatization Project. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. 2 Improved condition of the commuter rail system in Sao Paulo has helped increase ridership from 503,000 passengers per weekday in 1993 to a little over one million per weekday in 200lagainst a revised SAR target of 830,000 passenger trips per day by project completion. In contrast, ridership in the Rio commuter rail system, despite physical improvements to the system, decreased from about 500,000 passengers a day in 1992 to 168,000 a day in 1998. It has increased since the concessionaire took over in 1998, reaching 330,000 in 2001, but remains well below the revised SAR target of 900,000 passengers a day by project completion. This contrasted performance is largely explained by institutional factors. The institutional development impact achieved by the Slo Paolo project is rated substantial. The State Secretary for Metropolitan Transport, created as a condition of the loan, has improved transportation planning and is responsible for part of the institutional strength observed in Sao Paulo. The formation of the Regional Transport Coordination Commission brings the prospect of building metropolitan-wide institutions that can overcome some of the fractured governance structure of the large metropolitan area, which consists of many municipal governments. The institutional development impact of the Rio project is rated substantial. The project achieved important institutional changes, including the decentralization and concessioning of the system, and provided initial support for the concessioning of the Rio Metro and the ferryboat, and the dissolution of the state-owned bus operator. The project also supported the creation of a regional coordination body. However, the institutional framework within which urban transport is provided in Rio de Janeiro remains weak and fragmented. The sustainability of the Sao Paulo project is rated likely. The commuter rail system has shown remarkable improvements in recent years, and the state government continues to make investments in the system, improve management techniques, and integrate the system with other urban transport modes. All these point to a well-established institutional and financial basis for sustaining the project benefits. The sustainability of the Rio project is non-evaluable. The basis for sustaining project benefits is still being put in place and faces a variety of difficulties: problems with the concession contract, lack of investment in the sector, sluggish ridership, and a lack of progress in modal integration. This suggests that the sustainability of the commuter rail system will come under intense pressure, though recent progress on the contractual impasse and modal integration should help improve the likelihood of sustainability. Bank performance for both projects is rated satisfactory. Both projects were prepared and supervised very diligently and professionally. The Bank's role in the project is highly appreciated within Brazil, especially the policy advice and sector dialogue. Borrower performance for both projects is rated satisfactory. The federal government showed commitment for the decentralization program, and CBTU, the implementing agency for both projects, excelled in implementing the projects. The performance of the state governments was mixed. The state government of Slo Paulo, through STM and CPTM, performed well, provided effective leadership in implementing the project in a timely fashion, and carried out the agreed institutional reforms. The performance of the state government of Rio de Janeiro was deficient, however. The leadership of the Rio STM changed frequently, resulting in discontinuity of policy and project ownership. Flumitrens and the Rio regulatory agency ASEP also performed poorly. 3 Experience with these projects confirms some key OED lessons for private sector development: . * Transferring inherently unprofitable operations to the private sector is best addressed by the use of negative concessions. Yet, negative concessions must be approached with caution * Concessions are likely to succeed if they are not too dependent on government actions. * Strong regulatory institutions are essential for the success of concessions. * Effective dispute resolution is an essential component of successful private sector development. * Simple performance measures are preferable to complex